AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1996
REGISTRATION NO. 333-04841
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
SIMMONS COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2515 06-1007444
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
organization)
</TABLE>
-------------------
ONE CONCOURSE PARKWAY, SUITE 600
ATLANTA, GEORGIA 30328
(770) 512-7700
(Address, including zip code, and telephone number,
including area code, of registrant's and co-registrant's principal executive
offices)
-------------------
JONATHAN C. DAIKER
EXECUTIVE VICE PRESIDENT-FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER
SIMMONS COMPANY
ONE CONCOURSE PARKWAY, SUITE 600
ATLANTA, GEORGIA 30328
(770) 512-7700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------
WITH COPIES TO:
CHARLES K. MARQUIS, ESQ.
J. KEITH MORGAN, ESQ.
GIBSON, DUNN & CRUTCHER
200 PARK AVENUE
NEW YORK, NEW YORK 10166
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 3/4% Series A Senior
Subordinated Notes due
2006......................... $100,000,000 100% $100,000,000 $34,485.00
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SIMMONS COMPANY
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
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FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Forepart of the Registration Statement;
Outside Front Cover Page of the
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Summary; Risk Factors; Selected Historical
and Pro Forma Financial Data
4. Terms of the Transaction.................. The Exchange Offer; Description of Notes;
Certain Federal Income Tax
Considerations; Plan of Distribution
5. Pro Forma Financial Information........... Selected Historical and Pro Forma
Financial Data; Financial Statements
6. Material Contacts with the Company Being
Acquired.................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of Named Experts and Counsel.... Not Applicable
9. Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................. Not Applicable
12. Information With Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants......... Summary; Risk Factors; The Acquisition;
The Simmons ESOP; Capitalization;
Selected Historical and Pro Forma
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Managment; Ownership of Voting
Securities; Certain Transactions;
Capital Structure; Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies................................. Not Applicable
16. Information with Respect to S-2 or S-3
Companies................................. Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies........... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations Are to be Solicited........ Not Applicable
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited,
or in an Exchange Offer................. The Exchange Offer; Management; Ownership
of Voting Securities; Certain
Transactions
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 31, 1996
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 3/4% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR 10 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2006 OF
Simmons Company
The Exchange Offer will expire at 5:00 p.m.,
New York City time on , 1996, unless extended
Simmons Company, a Delaware corporation (the "Company"), hereby offers to
exchange an aggregate principal amount of up to $100,000,000 of its 10 3/4%
Series A Senior Subordinated Notes due 2006 (the "New Notes") for a like
principal amount of its 10 3/4% Senior Subordinated Notes due 2006 (the "Old
Notes") outstanding on the date hereof upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"). The New Notes and
the Old Notes are collectively hereinafter referred to as the "Notes." The terms
of the New Notes are identical in all material respects to those of the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. The New Notes will be issued pursuant to, and entitled to the
benefits of, the Indenture (as defined) governing the Old Notes.
The New Notes will be unsecured, will be subordinated to all existing and future
Senior Indebtedness (as defined) of the Company and will be effectively
subordinated to all obligations of any subsidiaries of the Company as may exist
from time to time. The New Notes will rank pari passu with all future Senior
Subordinated Indebtedness (as defined) of the Company and will rank senior to
all other subordinated indebtedness of the Company. The Indenture permits the
Company to incur additional indebtedness, including Senior Indebtedness under
its $115.0 million Senior Credit Facility (as defined), subject to certain
limitations. See "Description of Notes." As of March 30, 1996, on an adjusted
basis after giving effect to the issuance of the Old Notes and the application
of the net proceeds therefrom, the aggregate amount of the Company's Senior
Indebtedness would have been $95.2 million (exclusive of unused commitments),
and the Company would have had no Senior Subordinated Indebtedness outstanding
other than the Notes.
The New Notes will bear interest from and including the date of consummation of
the Exchange Offer. Interest on the New Notes will be payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1996. Additionally,
interest on the New Notes will accrue from the last interest payment date on
which interest was paid on the Old Notes surrendered in exchange therefor or, if
no interest has been paid on the Old Notes, from the date of original issue of
the Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated April 18, 1996 (the "Registration Rights Agreement"), between
the Company and the Initial Purchaser (as defined), with respect to the initial
sale of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the Holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivery of a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 90 days after the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
----------------------------------------------------------------
Prior to the Exchange Offer, there has been no public market for the Old Notes.
If a market for the New Notes should develop, such New Notes could trade at a
discount from their principal amount. The Company currently does not intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system and no active public market for the New
Notes is currently anticipated. There can be no assurance that an active public
market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
----------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
INFORMATION HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES OR OLD NOTES BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
EXCHANGE PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. Pursuant to the Indenture, the
Company has agreed to file with the Securities and Exchange Commission (the
"Commission") and provide to the holders of the Notes annual reports and the
information, documents and other reports that are specified in Sections 13 and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company has filed with the Commission a Registration Statement (which
term includes any amendments thereto) on Form S-4 under the Securities Act with
respect to the New Notes offered by this Prospectus. This Prospectus does not
contain all information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made. Statements made in this Prospectus
as to the contents of any contract, agreement, or other document are not
necessarily complete. With respect to each such contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. For purposes of this Prospectus, the "Company" shall refer to
Simmons Company and all of its consolidated subsidiaries, unless the context
otherwise requires. The fiscal year of the Company ends on the last Saturday of
the calendar year.
THE COMPANY
The Company, founded in 1871, is the second largest bedding manufacturer in
the United States. The Company manufactures and distributes a broad range of
mattresses, box springs, bedding frames and sleep accessories under
well-recognized brand names, including Beautyrest(R), Simmons(R), Maxipedic(R),
Beautysleep(R) and three newly introduced lines, Connoisseur(R), BackCare(R) and
Equation of Sleep(R). Sales of conventional bedding, which includes fully
assembled mattresses and box springs, accounted for approximately 98% of the
Company's 1995 net sales. Beautyrest(R), the Company's premier brand, accounted
for approximately 72% of net sales and approximately 58% of unit volume in 1995.
The Company's net sales and EBITDA (as defined elsewhere herein) increased to
$489.8 million and $39.6 million, respectively, in 1995 from $313.2 million and
$18.3 million, respectively, in 1991. Net sales for the combined first quarter
of 1996 have increased $10.7 million or 9.8% from the first quarter of 1995.
EBITDA for the pro forma first quarter of 1996 remained constant with EBITDA for
the first quarter of 1995.
The Company manufactures and supplies conventional bedding to over 5,000
retail outlets, representing more than 2,500 customers, including furniture
stores, department stores, specialty sleep shops and warehouse showrooms. The
Company operates 18 manufacturing facilities, which are strategically located in
15 states and Puerto Rico in proximity to its customers, thereby reducing
transportation costs, facilitating just-in-time delivery and enhancing the
Company's ability to service large national accounts. The Company believes that
operating each of its manufacturing facilities affords a number of advantages
over several of its national, brand-name competitors that operate as a group of
independent licensees, including: (i) producing consistently high-quality
merchandise across all facilities; (ii) allowing the Company to share its best
practices among manufacturing facilities; (iii) ensuring consistency of local
marketing for national accounts; and (iv) permitting efficient allocation of
production among manufacturing facilities to accommodate variations in regional
demand.
Wholesale revenues for the domestic conventional bedding industry have grown
at a compound annual rate of 6.8% to approximately $3.2 billion in 1995 from
approximately $860.4 million in 1975, according to industry wholesale revenue
data compiled by the International Sleep Products Association ("ISPA"), a
bedding industry trade group. During this 20-year period, wholesale revenues
increased each year, with the exception of 1982, when such revenues declined by
1.9%. The Company estimates that its share of the domestic conventional bedding
market has grown to approximately 15.1% in 1995 from approximately 13.1% in
1992, based on industry wholesale revenue data published by ISPA. The Company
believes that its recent performance is primarily attributable to five key
elements, including its (i) experienced management team, (ii) well-known brand
names, (iii) strong and extensive customer relationships, (iv) recently launched
national advertising campaign and (v) new product innovations and enhancements.
The Company's primary strategic objectives are to maximize profitability and
cash flow by continuing to increase its market share and by improving its
operating efficiency. To achieve these objectives, the Company has implemented a
strategy that includes: (i) increasing penetration of existing and new accounts,
primarily by emphasizing higher-end and more profitable products and by
continuing to introduce new and innovative products; and (ii) improving
operating performance
3
<PAGE>
and profitability by re-engineering the Company's manufacturing facilities and
upgrading the Company's information systems.
THE ACQUISITION
On March 22, 1996 (the "Acquisition Closing Date"), Simmons Holdings, Inc.
("Holdings"), a company organized on behalf of INVESTCORP S.A. ("Investcorp"),
management and certain other investors, acquired 100% of the outstanding common
stock of the Company from affiliates of Merrill Lynch Capital Partners Inc.
("MLCP"), the Simmons Company Employee Stock Ownership Plan (together with a
trust forming a part thereof, the "Simmons ESOP") and certain management
stockholders (collectively, the "Sellers") for (i) a purchase price of $253.2
million (including the refinancing or assumption of existing indebtedness and
the purchase of management stock options, and excluding the payment of fees,
expenses and compensation payable to management) plus (ii) the issuance to the
Simmons ESOP of 5,670,406 shares of the Company's Series A Preferred Stock,
having one vote per share and a liquidation preference of $5.00 per share (the
"Series A Preferred Stock") (together with the financing thereof, the
"Acquisition"). Financing for the Acquisition was provided by (i) $85.0 million
of capital provided by affiliates of Investcorp, management and certain other
investors, (ii) $80.4 million of borrowings under a $115.0 million Senior Credit
Facility among the Company, certain lenders and Chemical Bank, as administrative
agent (the "Senior Credit Facility") and (iii) $100.0 million of borrowings
under a Subordinated Loan Facility among the Company, certain lenders (including
an affiliate of Investcorp) and Chemical Bank, as administrative agent (the
"Subordinated Loan Facility"). The Subordinated Loan Facility was repaid on
April 18, 1996 with the net proceeds of the issuance of the Old Notes, together
with borrowings under the Senior Credit Facility. See "Risk Factors--Substantial
Leverage and Debt Service Obligations," "The Acquisition" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Series A Preferred Stock issued to the Simmons ESOP in connection with
the Acquisition may be converted into common stock of the Company on a
one-for-one basis and, under certain circumstances, may be redeemed for cash or
exchanged for shares of Holdings' capital stock. If so converted into common
stock of the Company or Holdings, the common stock received by the Simmons ESOP
upon conversion would represent direct or indirect ownership of 15.1% of the
common stock of the Company, after giving effect to such conversion (exclusive
of stock options granted under the Company's management stock incentive plan).
See "Management--Retirement Plans--Simmons ESOP," "Ownership of Voting
Securities--Stockholders' Agreement" and "Capital Structure--Preferred Stock."
Immediately prior to the Acquisition, the Simmons ESOP owned 11,671,663 shares
of common stock of the Company, of which 6,001,257 were allocated to participant
accounts as of the Acquisition Closing Date and 5,670,406 were unallocated as of
such date. The Simmons ESOP acquired such shares in January 1989 in connection
with its purchase of all of the Company's then outstanding common stock. See
"The Simmons ESOP."
The Company and Holdings are Delaware corporations. The principal executive
offices of the Company and Holdings are located at One Concourse Parkway, Suite
600, Atlanta, Georgia 30328, and their telephone number is (770) 512-7700.
4
<PAGE>
THE EXCHANGE OFFER
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Securities Offered......... Up to $100,000,000 aggregate principal amount of 10 3/4% Series
A Senior Subordinated Notes due 2006 (the "New Notes"). The
terms of the New Notes and Old Notes are identical in all
material respects, except for certain transfer restrictions and
registration rights relating to the Old Notes.
The Exchange Offer......... The New Notes are being offered in exchange for a like principal
amount of Old Notes. Old Notes may be exchanged only in integral
multiples of $1,000. The issuance of the New Notes is intended
to satisfy obligations of the Company contained in the
Registration Rights Agreement.
Expiration Date; With-
drawal of Tender........... The Exchange Offer will expire 5:00 p.m. New York City time, on
1996, or such later date and time to which it is extended by the
Company. The tender of Old Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the Expiration Date. Any
Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof as
promptly as practicable after the expiration or termination of
the Exchange Offer.
Certain Conditions to the
Exchange Offer............. The Company's obligation to accept for exchange, or to issue New
Notes in exchange for, any Old Notes is subject to certain
customary conditions relating to compliance with any applicable
law, order of any governmental agency or any applicable
interpretation by any staff of the Commission, which may be
waived by the Company in its reasonable discretion. The Company
currently expects that each of the conditions will be satisfied
and that no waivers will be necessary. See "The Exchange
Offer--Certain Conditions to the Exchange Offer."
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Old Notes and
any other required documentation, to the Exchange Agent (as
defined) at the address set forth herein. See "The Exchange
Offer--Procedures for Tendering Old Notes."
Use of Proceeds............ There will be no proceeds to the Company from the exchange of
Notes pursuant to the Exchange Offer.
Exchange Agent............. SunTrust Bank, Atlanta is serving as the Exchange Agent in
connection with the Exchange Offer.
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5
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Federal Income Tax
Consequences............... The exchange of Notes pursuant to the Exchange Offer will not be
a taxable event for federal income tax purposes. See "Certain
Federal Income Tax Considerations."
</TABLE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer generally may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
such New Notes are acquired in the ordinary course of the holder's business and
such holders have no arrangement with any person to participate in a
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdiction or an
exemption from registration or qualification is available and is complied with.
The Company has agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the New
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing. If a
holder of Old Notes does not exchange such Old Notes for New Notes pursuant to
the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Holders of Old Notes do not
have any appraisal or dissenters' rights under Delaware General Corporation Law
in connection with the Exchange Offer. See "The Exchange Offer--Consequences of
Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. For purposes of this Prospectus, the term "Notes" shall refer
collectively to the New Notes and the Old Notes.
<TABLE>
<S> <C>
Issuer..................... Simmons Company.
Securities Offered......... $100,000,000 principal amount of 103/4% Series A Senior Subordi-
nated Notes due 2006 (the "New Notes").
Maturity................... April 15, 2006.
Interest Payment Dates..... April 15 and October 15 of each year, commencing on October 15,
1996.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Optional Redemption........ Except as described below, the Company may not redeem the New
Notes prior to April 15, 2001. On or after such date, the
Company may redeem the New Notes, in whole or in part, at the
redemption prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In addition,
at any time on or prior to April 15, 1999, the Company may
redeem up to 33 1/3% of the original aggregate principal amount
of the Notes with the net cash proceeds of one or more Public
Equity Offerings (as defined) by the Company or Holdings
following which there is a Public Market (as defined) at a
redemption price equal to 110.75% of the principal amount to be
redeemed, together with accrued and unpaid interest, if any, to
the date of redemption, provided that at least 66 2/3% of the
original aggregate principal amount of the Notes remains
outstanding immediately after each such redemption. See
"Description of Notes-- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as defined), (i) the
Company will have the option, at any time on or prior to April
15, 2001, to redeem the New Notes in whole but not in part at a
redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid
interest, if any, to, the date of redemption, and (ii) if the
Company does not so redeem the New Notes or if such Change of
Control occurs after April 15, 2001, the Company will be
required to make an offer to repurchase the New Notes at a price
equal to 101% of the principal amount thereof, together with
accrued and unpaid interest, if any, to the date of purchase.
The Senior Credit Facility prohibits the purchase of the New
Notes by the Company in the event of a Change of Control, unless
and until such time as the indebtedness under the Senior Credit
Facility is repaid in full, and there can be no assurance that
the Company would have sufficient assets to satisfy all of its
obligations under the Senior Credit Facility and the New Notes.
See "Description of Notes--Change of Control."
Ranking.................... The New Notes will be unsecured and will be subordinated to all
existing and future Senior Indebtedness (as defined) of the
Company, including indebtedness under the Senior Credit
Facility. The New Notes will rank pari passu with any future
Senior Subordinated Indebtedness (as defined) of the Company and
will rank senior to all other subordinated indebtedness of the
Company. The New Notes will be effectively subordinated to the
claims of creditors, including trade creditors and preferred
shareholders (if any), of the Company's existing subsidiaries
and any subsidiary formed by the Company in the future. See
"Description of Notes--Ranking."
Restrictive Covenants...... The indenture under which the New Notes will be issued (the
"Indenture") will limit (i) the incurrence of additional
indebtedness by the Company, (ii) the payment of dividends on,
and redemption of, capital stock of the Company and the
redemption of certain subordinated obligations of the Company,
(iii) investments, (iv) sales of assets and subsidiary stock,
(v) transactions with affiliates, (vi) the creation of liens,
(vii) the lines of business in which the Company may operate and
(viii) consolidations, mergers and transfers of all or
substantially
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
all of the Company's assets. The Indenture also will prohibit
certain restrictions on distributions from subsidiaries.
However, all of these limitations and prohibitions are subject
to a number of important qualifications and exceptions. See
"Description of Notes--Certain Covenants."
Absence of a
Public Market for the
New Notes................ The New Notes are new securities and there is currently no
established market for the New Notes. Accordingly, there can be
no assurance as to the development or liquidity of any market
for the New Notes. The Company does not intend to apply for
listing of the New Notes on a securities exchange.
</TABLE>
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors set forth under "Risk Factors" in connection with the Exchange Offer.
8
<PAGE>
SUMMARY FINANCIAL AND OTHER DATA
The following table sets forth summary historical financial and other data
of the Company for the five years ended December 30,1995 and for the quarters
ended April 1, 1995 and March 30, 1996 and certain pro forma financial and other
data for the year ended December 30, 1995 and quarter ended March 30, 1996. The
pro forma statement of operations data assume that the Acquisition and the
Offering of Notes (the "Offering") occurred on January 1, 1995. The pro forma
financial and other data do not purport to represent what the Company's results
of operations would actually have been had the Transactions (as defined in the
Pro Forma Condensed Consolidated Financial Data included elsewhere in this
Prospectus) in fact occurred on the assumed dates or to project the Company's
results of operations for any future date or period. For additional information,
see the Consolidated Financial Statements and Pro Forma Condensed Consolidated
Financial Data included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Selected Historical and Pro Forma Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------------------------------------------- QUARTER
ENDED
PREDECESSOR -----------
------------------------------------------------------------------------ PRO FORMA PREDECESSOR
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 30, APRIL 1,
1991 (A) 1992 (A) 1993 (A) 1994 (A) 1995 1995 (B) 1995
------------ ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales.......... $313,180 $336,949 $391,382 $439,689 $489,815 $489,815 $ 108,653
Cost of products
sold............... ]198,904 209,189 240,125 269,741 292,825 292,750(c) 67,104
Gross profit....... 114,276 127,760 151,257 169,948 196,990 197,065 41,549
Selling, general
and administrative
expenses........... 98,531 102,943 124,452 137,791 161,202 161,202 37,518
Non-cash ESOP
expense(d)......... 12,541 14,007 14,000 4,463 4,533 4,625 1,133
Amortization of
intangible
assets............. 5,734 5,732 5,724 5,753 5,753 7,648 1,438
Interest expense,
net(e)............. 15,308 10,352 8,105 8,197 8,185 19,068 1,929
Income (loss)
before taxes,
extraordinary item
and change in
accounting
principle.......... (18,635) (6,786) (1,784) 11,227 16,917 2,952(f) (666)
Net income
(loss)............. (17,991) (12,469) (3,319) 7,994 9,411 636(g) (370)
OTHER DATA:
Gross margin....... 36.5% 37.9% 38.6% 38.7% 40.2% 40.2% 38.2%
EBITDA(h).......... $ 18,326 $ 26,720 $ 29,236 $ 33,981 $ 39,577 $ 39,407 $ 4,847
EBITDA margin...... 5.9% 7.9% 7.5% 7.7% 8.1% 8.0% 4.5%
Depreciation....... $ 3,168 $ 3,227 $ 3,141 $ 3,496 $ 4,027 $ 4,327 $ 973
Capital
expenditures....... 2,602 3,659 4,972 4,496 5,834 5,834 163
Cash interest
expense(i)......... 13,942 8,564 6,158 7,093 6,488 18,297 1,688
Ratio of EBITDA to
cash interest
expense(i)......... 1.3x 3.1x 4.7x 4.8x 6.1x 2.2x (i)
Ratio of EBITDA
less capital
expenditures to
cash interest
expense(i)......... 1.1x 2.7x 3.9x 4.2x 5.2x 1.8x (i)
Ratio of earnings
to fixed
charges(j)......... (j) (j) (j) 1.9x 2.4x 1.1x (j)
Inventory
turnover(k)........ 12.3x 15.5x 16.3x 16.8x 17.2x 17.2x 4.0x
STATEMENT OF CASH
FLOWS DATA(L):
Net cash provided
by (used in)
operating
activities......... $ 8,118 $ 13,559 $ 18,002 $ 34,380 $ 28,513 $ 13,471
Net cash provided
by (used in)
investing
activities......... (2,433) 2,628 (4,718) (4,195) (5,834) (163)
Net cash provided
by (used in)
financing
activities......... (4,045) (10,620) (9,508) (32,864) (22,030) (14,813)
<CAPTION>
COMBINED PRO FORMA
MARCH 30, MARCH 30,
1996(B) 1996(B)
--------- ------------
<S> <C> <C>
STATEMENT OF OPERAT
Net sales.......... $ 119,317 $119,317
Cost of products
sold............... 75,672 74,655(c)
Gross profit....... 43,645 44,662
Selling, general
and administrative
expenses........... 40,472 40,472
Non-cash ESOP
expense(d)......... 1,312 1,312
Amortization of
intangible
assets............. 1,442 1,897
Interest expense,
net(e)............. 1,950 4,761
Income (loss)
before taxes,
extraordinary item
and change in
accounting
principle.......... (5,936) (4,367)(f)
Net income
(loss)............. (3,907) (3,079)(g)
OTHER DATA:
Gross margin....... 36.6% 37.4%
EBITDA(h).......... $ 4,945 $ 4,845
EBITDA margin...... 4.1% 4.1%
Depreciation....... $ 970 $ 1,038
Capital
expenditures....... 1,567 1,567
Cash interest
expense(i)......... 1,583 4,566
Ratio of EBITDA to
cash interest
expense(i)......... (i) (i)
Ratio of EBITDA
less capital
expenditures to
cash interest
expense(i)......... (i) (i)
Ratio of earnings
to fixed
charges(j)......... (j) (j)
Inventory
turnover(k)........ 4.2x 4.2x
STATEMENT OF CASH
FLOWS DATA(L):
Net cash provided
by (used in)
operating
activities......... $ (7,848)
Net cash provided
by (used in)
investing
activities......... (176,182)
Net cash provided
by (used in)
financing
activities......... 182,947
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR
AS OF
MARCH 30,
PREDECESSOR AS OF 1996
------------------------------------------------------------------------ ---------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30,
1991 1992 1993 1994 1995 ACTUAL
------------ ------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 2,205 $ 7,581 $ 11,280 $ 8,477 $ 9,185 $ 8,111
Working capital, excluding current
maturities of long-term debt and
capitalized lease obligations(m)...... 8,955 10,366 25,460 23,077 20,171 27,176
Total assets.......................... 246,634 245,158 272,533 249,891 254,492 349,706
Total debt, including current
maturities............................ 164,104 149,421 141,976 109,435 93,768 191,229
Redeemable preferred stock(n)......... 500 548 592 641 680 --
Series A Preferred Stock--ESOP(o)..... -- -- -- -- -- 28,352
Unearned compensation--ESOP(o)........ -- -- -- -- -- (28,243)
Redeemable common stock--ESOP, net of
related unearned compensation(p)..... 2,887 4,720 11,418 23,238 32,272 --
Total common stockholders' equity..... 32,714 34,042 37,878 41,936 44,372 81,530
<CAPTION>
ADJUSTED FOR
THE OFFERING
------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 8,111
Working capital, excluding current
maturities of long-term debt and
capitalized lease obligations(m)...... 27,176
Total assets.......................... 350,925
Total debt, including current
maturities............................ 195,229
Redeemable preferred stock(n)......... --
Series A Preferred Stock--ESOP(o)..... 28,352
Unearned compensation--ESOP(o)........ (28,243)
Redeemable common stock--ESOP, net of
related unearned compensation(p)..... --
Total common stockholders' equity..... 79,863(q)
</TABLE>
See Notes to Summary Financial and Other Data.
9
<PAGE>
NOTES TO SUMMARY FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
(a) Certain amounts have been reclassified to be consistent with the Company's current reporting
format.
(b) As a result of the Acquisition, the Company's assets and liabilities were adjusted to reflect their
preliminary estimated fair values as of March 22, 1996. In addition, the Company entered into new
financing arrangements and has changed its capital structure. Accordingly, the results of future
periods will not be comparable to the prior historical periods presented. The pro forma financial
data reflects these changes as if the Transactions (as defined) had been consummated on January 1,
1995. The Combined period for 1996 represents the mathematical addition of the historical amounts
for the Predecessor period (December 31, 1995 to March 21, 1996) and the Successor period (March
22, 1996 to March 30, 1996) and are not indicative of results that would have been obtained had the
Acquisition occurred on December 31, 1995. For information regarding these periods separately, see
the Condensed Consolidated Financial Statements included elsewhere in this Prospectus.
(c) Excludes the charge of $1,000 related to the write-up of inventory to its estimated fair value as a
result of the Acquisition.
(d) Represents the non-cash charge resulting from the allocation of shares held by the Simmons ESOP to
participant accounts as they are earned. Amounts charged in 1991, 1992 and 1993 were based on the
1989 acquisition price. In 1994, the Company changed its method of accounting, resulting in the
fair value of the underlying stock becoming the basis for the annual expense as opposed to the
original cost. (See "The Simmons ESOP" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations.")
(e) Interest expense, net includes the amortization of deferred debt issuance costs and is net of
interest income of $210, $188, $50, $845 and $162 for 1991, 1992, 1993, 1994 and 1995,
respectively, $162 for the pro forma year ended December 30, 1995, $40 and $39 for the first
quarter ended 1995 and 1996, respectively and $39 for the pro forma first quarter 1996.
(f) Excludes a compensation charge of $3,735 for amounts payable to management in connection with the
Acquisition. See "Certain Transactions."
(g) Excludes the following incurred in connection with the Acquisition: (i) the compensation charge of
$3,735 for amounts payable to management, (ii) the charge of $1,000 related to the write-up of
inventory to its estimated fair value, (iii) the charge of $350 for non-recurring fees, (iv) the
$2,781 write-off of the Subordinated Loan Facility financing fees as a result of the Offering and
(v) the related income tax benefits of $3,146.
(h) EBITDA represents earnings before interest expense, income tax expense, non-cash ESOP expense,
depreciation and amortization, cumulative effect of change in accounting principle and
extraordinary item, and, for the pro forma year ended December 30, 1995 and for the combined and
pro forma quarters ended March 30, 1996, excludes amortization of the prepaid management fee of
$1,000, $83 and $250, respectively, in connection with the Acquisition, excludes the effect of the
purchase accounting inventory write-up of $1,000, the compensation charge of $3,735 for amounts
payable to management, and the charge of $350 for non-recurring fees, and excludes the credit of
$375, $0 and $85, respectively, for the amortization of the reserve for unfavorable lease
commitments. The Company has included information concerning EBITDA as it is relevant for covenant
analysis under the Indenture, which defines EBITDA as set forth above for the periods shown. See
"Description of Notes--Certain Definitions." In addition, management believes that EBITDA is
generally accepted as providing useful information regarding a company's ability to service and/or
incur debt. EBITDA should not be considered in isolation or as a substitute for net income, cash
flows or other consolidated net income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability or liquidity.
(i) Cash interest expense is defined as interest expense less amortization of debt issuance costs and
other non-cash interest expense for 1991, 1992, 1993, 1994, 1995 and for the first quarters ended
1995 and 1996. This calculation of interest expense differs from that specified for Consolidated
Interest Expense under the Indenture, which includes amortization of debt issuance costs and
non-cash interest expense. Similarly, the ratio of EBITDA to cash interest expense differs from the
Consolidated Coverage Ratio under the indenture, which utilizes Consolidated Interest Expense as
its denominator. See "Description of Notes--Certain Definitions." Management believes that the
ratio of EBITDA to cash interest expense and the ratio of EBITDA less capital expenditures to cash
interest expense are generally accepted as useful information regarding a company's ability to
service and/or incur debt. The ratio of EBITDA to cash interest expense and the ratio of EBITDA
less capital expenditures to cash interest expense are not applicable to the quarterly periods.
(j) For the purpose of determining the ratio of earnings to fixed charges, earnings consist of income
before income taxes and fixed charges. Fixed charges consist of interest expense, which includes
the amortization of deferred debt issuance costs and the interest portion of the Company's rent
expense (assumed to be one-third of total rent expense). Earnings were insufficient to cover fixed
charges for 1991, 1992, 1993, first quarter 1995, combined first quarter 1996 and pro forma first
quarter 1996 by $18,688, $6,856, $1,861, $666, $5,936 and $4,717, respectively.
(k) Inventory turnover is defined as cost of products sold divided by average inventory.
(l) For more information regarding the Statement of Cash Flows Data see the Consolidated Financial
Statements included elsewhere in this Prospectus.
(m) Represents total current assets (excluding cash and cash equivalents) less total current
liabilities, excluding current maturities of long-term debt and capital lease obligations.
(n) This stock was issued in connection with the recapitalization of the Company in 1991 and was called
for redemption in connection with the Acquisition.
(o) The Series A Preferred Stock was issued to the Simmons ESOP in connection with the Acquisition (See
"The Acquisition"). The Series A Preferred Stock is required to be recorded at the greater of
redemption value or fair value. The Series A Preferred Stock will be recorded at its redemption
value. In addition, unearned compensation was recorded on the Acquisition Closing Date in an amount
representing the redemption value of the Series A Preferred Stock that will be allocated to
participant accounts over future periods. The unearned compensation is classified outside of common
stockholder's equity since it is related to the Series A Preferred Stock. (See "Managment's
Discussion and Analysis of Financial Condition and Results of Operations.")
(p) Historically, under the terms of the Simmons ESOP, the participants had the right to put their
common stock to the Company under certain circumstances. Accordingly, the fair market value of the
common stock that could have been put to the Company, along with the related amount of unearned
compensation, are classified outside of common stockholders' equity in the predecessor financial
statements.
(q) Includes the following charges incurred in connection with the Transactions: (i) the compensation
charge of $3,735 for amounts payable to management, (ii) the charge of $350 for non-recurring fees,
(iii) the $2,781 write-off of the Subordinated Loan Facility financing fees as a result of the
Offering and (iv) the related tax benefits of $2,746.
</TABLE>
10
<PAGE>
RISK FACTORS
In evaluating an investment in the New Notes, prospective investors should
carefully consider the following risk factors as well as the other information
set forth elsewhere in this Prospectus.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
The Company incurred substantial indebtedness in connection with the
Acquisition. As adjusted for the offering of the Notes (the "Offering") and the
application of the net proceeds therefrom, at March 30, 1996, the Company's
total indebtedness would have been $195.2 million (exclusive of unused
commitments), and the Company would have had common stockholder's equity of
$79.9 million. The degree to which the Company is leveraged could have important
consequences to holders of the New Notes, including the following: (i) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest on the New Notes and its other existing indebtedness,
thereby reducing the funds available to the Company for other purposes; (iii)
the agreements governing the Company's long-term indebtedness contain certain
restrictive financial and operating covenants; (iv) all of the indebtedness
outstanding under the Senior Credit Facility will be secured by substantially
all the assets of the Company and will become due prior to the time the
principal on the New Notes will become due; (v) the Company is substantially
more leveraged than certain of its competitors, which might place the Company at
a competitive disadvantage; (vi) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; and (vii) the Company's
substantial degree of leverage could make it more vulnerable in the event of a
downturn in general economic conditions or in its business. In addition,
approximately $35.0 million of term loan indebtedness and all amounts
outstanding under the revolving credit facility under the Senior Credit Facility
currently bear interest at variable rates. The Company has effectively fixed the
interest rate on approximately $40.0 million of term loan indebtedness under the
Senior Credit Facility pursuant to interest rate swap agreements that expire in
approximately two years. As a result, the Company could be vulnerable to
increases in interest rates.
The Company may be required to refinance all or a portion of the Senior
Credit Facility at or prior to its maturity, which is prior to the maturity of
the New Notes. Potential measures to raise cash may include the sale of assets
or equity. However, the Company's ability to raise funds by selling assets is
restricted by the Senior Credit Facility, and its ability to effect equity
financings is dependent on results of operations and market conditions. In the
event that the Company is unable to refinance the Senior Credit Facility or
raise funds through asset sales, sales of equity or otherwise, its ability to
pay principal of and interest on the New Notes would be adversely affected.
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
At March 30, 1996, as adjusted for the Offering (including the application
of net proceeds therefrom), the Company would have had $95.2 million of Senior
Indebtedness outstanding (exclusive of unused commitments), including $84.4
million of Senior Indebtedness that will be incurred under the Senior Credit
Facility. The Indenture permits the Company to incur additional Senior
Indebtedness, provided certain financial or other conditions are met. The New
Notes will be subordinated in right of payment to all existing and future Senior
Indebtedness, including the principal, premium (if any) and interest with
respect to the Senior Indebtedness under the Senior Credit Facility. The New
Notes will rank pari passu with all future Senior Subordinated Indebtedness of
the Company and will rank senior to all other subordinated indebtedness (if any)
of the Company. However, the New Notes will be effectively subordinated to the
claims of creditors, including trade creditors and preferred shareholders (if
any), of the Company's existing subsidiaries and any subsidiary formed by the
Company in the future.
11
<PAGE>
The Company may not pay principal of, premium on (if any), or interest on,
the New Notes, make any deposit pursuant to defeasance provisions or repurchase
or redeem or otherwise retire any New Notes (i) if any Senior Indebtedness is
not paid when due or (ii) if any other default on Senior Indebtedness occurs and
the maturity of such Senior Indebtedness is accelerated in accordance with its
terms, unless, in either case, the default has been cured or waived, any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full, except that the Company may pay the New Notes upon the approval of the
Representative of the relevant Designated Senior Indebtedness (as defined in the
Indenture). In addition, if any other default exists with respect to the
Designated Senior Indebtedness and certain other conditions are satisfied, the
Company may not make any payments on the New Notes for up to 179 days. Upon any
payment or distribution of the assets of the Company in connection with a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company, the holders of Senior Indebtedness will be entitled to
receive payment in full before the holders of the Notes are entitled to receive
any payment. See "Description of Notes--Ranking."
The New Notes are also unsecured and thus, in effect, will rank junior to
any secured indebtedness of the Company. The indebtedness outstanding under the
Senior Credit Facility will be secured by liens on substantially all of the
assets of the Company. The ability of the Company to comply with the provisions
of the Senior Credit Facility may be affected by events beyond the Company's
control. The breach of any of these covenants could result in a default under
the Senior Credit Facility, in which case, depending on the actions taken by the
lenders thereunder or their successors or assignees, such lenders could elect to
declare all amounts borrowed under the Senior Credit Facility, together with
accrued interest, to be due and payable, and the Company could be prohibited
from making payments of interest and principal on the New Notes until the
default is cured or all Senior Indebtedness is paid or satisfied in full. If the
Company were unable to repay such borrowings, such lenders could proceed against
their collateral. If the indebtedness under the Senior Credit Facility were to
be accelerated, there can be no assurance that the assets of the Company would
be sufficient to repay in full such indebtedness and the other indebtedness of
the Company, including the New Notes. See "Capital Structure--Senior Credit
Facility" and "Description of Notes--Ranking."
RESTRICTIVE COVENANTS IN SENIOR CREDIT FACILITY; SUBORDINATION OF NOTES
The Senior Credit Facility includes certain covenants that, among other
things, restrict (i) the making of investments, loans and advances and the
paying of dividends and other restricted payments; (ii) the incurrence of
additional indebtedness; (iii) the granting of liens, other than liens created
pursuant to the Senior Credit Facility and certain permitted liens; (iv)
mergers, consolidations, and sales of all or a substantial part of the Company's
business or property; (v) the sale of assets; and (vi) the making of capital
expenditures. The Senior Credit Facility also requires the Company to maintain
certain financial ratios, including maintaining (i) a minimum Interest Coverage
Ratio (as defined in the Senior Credit Facility) that increases from 1.80 to 1
in the third fiscal quarter of 1996 to 4.00 to 1 in the fourth fiscal quarter of
2002, (ii) a maximum Leverage Ratio that decreases from 5.50 to 1 in the third
fiscal quarter of 1996 to 2.50 to 1 in the fourth fiscal quarter of 2002 and
(iii) a minimum Consolidated Cash Flow that increases from $37,500,000 for the
four fiscal quarters ended with the third fiscal quarter of 1996 to $67,500,000
for the four fiscal quarters ended with the fourth fiscal quarter of 2002.
"Leverage Ratio" is the ratio of Consolidated Funded Indebtedness (as defined
in the Senior Credit Facility) to Consolidated EBITDA (as defined in the Senior
Credit Facility) for the four fiscal quarters ending with the respective fiscal
quarter, and "Consolidated Cash Flow" is Consolidated EBITDA. There can be no
assurance that these requirements will be met in the future. If they are not,
the holders of the indebtedness under the Senior Credit Facility would be
entitled to declare such indebtedness immediately due and payable. See "Capital
Structure--Senior Credit Facility."
CONTROL BY CIP LIMITED, INVESTCORP AND ITS AFFILIATES
The outstanding voting stock of Holdings is 92% controlled by CIP Limited
through revocable proxies with respect to companies that indirectly own Holdings
stock, and 8% controlled by SIPCO Limited through its control of Investcorp. CIP
Limited and SIPCO Limited are affiliates of Investcorp. Accordingly, CIP Limited
and its affiliates indirectly control the power to vote approximately 84.9% of
the outstanding voting stock of the Company and thereby, subject to certain
rights of the Simmons ESOP, are entitled to elect all directors of the Company,
approve all amendments to the
12
<PAGE>
Company's Certificate of Incorporation and effect fundamental corporate
transactions such as mergers and asset sales. In addition, Investcorp or its
affiliates have revocable management services or similar agreements with
Holdings and with entities controlled by CIP Limited that together control
Holdings, pursuant to which Investcorp or its affiliates may be deemed to share
control of the Company. See "Ownership of Voting Securities."
CHANGE OF CONTROL: OBLIGATION TO REPURCHASE NOTES; DEFAULT UNDER SENIOR CREDIT
FACILITY
A Change of Control (as defined in the Indenture) could require the Company
to refinance substantial amounts of indebtedness. Upon the occurrence of a
Change of Control, the holders of the New Notes would be entitled to require the
Company to repurchase the New Notes at a purchase price equal to 101% of the
principal amount of such New Notes, plus accrued and unpaid interest, if any, to
the date of purchase. However, the Senior Credit Facility prohibits the purchase
of the New Notes by the Company in the event of a Change of Control, unless and
until such time as the indebtedness under the Senior Credit Facility is repaid
in full. The Company's failure to purchase the New Notes would result in a
default under the Indenture and the Senior Credit Facility. The inability to
repay the indebtedness under the Senior Credit Facility, if accelerated, would
also constitute an event of default under the Indenture, which could have
adverse consequences to the Company and the holders of the New Notes. In the
event of a Change of Control, there can be no assurance that the Company would
have sufficient assets to satisfy all of its obligations under the Senior Credit
Facility and the New Notes. See "Capital Structure--Senior Credit Facility" and
"Description of Notes--Change of Control."
As defined in the Indenture, a "Change of Control" includes (i) prior to the
first public offering of Voting Stock (as defined) of the Company or Holdings,
the Permitted Holders (as defined) ceasing to be the "beneficial owner" (as
defined) of a majority of the voting power of the Voting Stock of Holdings or
Holdings ceasing to own 84% of the Voting Stock of the Company and (ii)
following the first public offering of the Voting Stock of the Company or
Holdings, any "person" (as defined) becomes the beneficial owner of more than
35% of the total voting power of the Voting Stock of the Company or Holdings
and the Permitted Holders own a lesser percentage of such Voting Stock or any
person nominates one or more individuals to the board of directors of the
Company or Holdings, solicits proxies, authorizations or consents in
connection therewith and such nominees are elected to serve and constitute a
majority of the board of directors of the Company or Holdings, as the case
may be, following such election.
FRAUDULENT CONVEYANCE
If the court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as a
debtor-in-possession, were to find under relevant federal or state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring certain of the indebtedness, including
the Old Notes and the New Notes exchanged therefore, incurred by the Company in
connection with the Acquisition, and that, at the time of such incurrence, the
Company (i) was insolvent, (ii) was rendered insolvent by reason of such
incurrence or grant, (iii) was engaged in a business or transaction for which
the assets remaining with the Company constituted unreasonably small capital or
(iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court, subject to applicable
statutes of limitation, could void the Company's obligations under the Notes,
subordinate the Notes to other indebtedness of the Company or take other action
detrimental to the holders of the Notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property, or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured. Moreover, regardless of solvency, a court could void an
incurrence of indebtedness, including the Notes, if it determined that such
transaction was made with intent to hinder, delay or defraud creditors, or a
court could subordinate the indebtedness, including the Notes, to the claims of
all existing and future creditors on similar grounds.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon consummation of the
Acquisition or the sale of the Old Notes or that, regardless of the method of
valuation, a court would not determine that the Company was insolvent upon
consummation of the Acquisition.
13
<PAGE>
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success is largely dependent upon the
abilities and experience of its Chairman of the Board of Directors and Chief
Executive Officer, Zenon Nie. The loss of the services of Mr. Nie could have a
material adverse effect on the Company's business and future operations. The
Company and Mr. Nie have entered into a three-year employment agreement (which
renews automatically on a daily basis, subject to termination upon three years'
notice). In addition, the Company maintains a $10 million key man life insurance
policy with respect to Mr. Nie and is the beneficiary of this policy. See
"Management -- Employment Arrangements."
DEPENDENCE ON MAJOR SUPPLIER
The Company purchases certain components used in the manufacture of its
products from Leggett & Platt ("L&P"). L&P, which supplies spring components as
well as other metal and wood components used in the manufacturing of mattresses
by the Company, provided approximately one-third of the Company's total
estimated raw material requirements in 1995 and is expected to provide a
comparable portion of such requirements in 1996. For certain continuous wire and
foundation components, alternative sources may not be readily available and the
loss of this vendor as a supplier could result in an interruption of supply,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Suppliers."
IMPACT OF HIGHLY COMPETITIVE MARKET
The domestic conventional bedding market is highly competitive. Competition
in conventional bedding generally is based upon product quality, brand name
recognition, price, service and prompt delivery. The Company's principal
competitors include Sealy Corporation, Serta, Inc. and Spring Air Company. The
Company also competes with Restonic Sleep Products, King Koil Bedding,
Englander, Bassett and many small, local manufacturers. Certain of the Company's
competitors have greater financial resources than the Company, have larger
customer bases and are less leveraged. See "Business--Industry and Competition."
UNION NEGOTIATIONS
As of March 30, 1996, the Company had approximately 2,600 employees, of
which approximately 1,140 were represented by labor unions. Employees at nine of
the Company's 18 manufacturing facilities are represented by unions.
Manufacturing employees at seven of the unionized plants are covered by a master
collective bargaining agreement with the Upholstery Division of the United
Steelworkers. There are also agreements with other unions. A majority of the
Company's current labor contracts expire in 1997. Union contracts typically are
negotiated for three-year terms. Since 1980, the Company has opened eight new
plants, none of which is unionized. There can be no assurance, however, that any
labor union efforts to organize employees at facilities that are not currently
unionized might not be successful.
The Company is phasing in a re-engineering project at each of the Company's
conventional manufacturing facilities to increase overall efficiency and improve
the flow of production by changing the layout of the factory floor, changing
certain factory job descriptions and providing incentive compensation for
factory workers. The Company expects to complete the project by early 1998. The
implementation of the changes associated with this project will raise issues
regarding job descriptions and incentive compensation that will require
negotiation with the labor unions that represent employees at nine of the
Company's 18 manufacturing facilities. Although the Company's labor relations
historically have been good, there can be no assurance that the Company will
succeed in obtaining the labor unions' cooperation in implementing the
re-engineering project or that disagreements with unions in connection with the
re-engineering project or otherwise will not arise. See "Business--Manufacturing
and Facilities" and "--Employees."
14
<PAGE>
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The New Notes are new securities for which there currently is no market.
Although the Initial Purchaser has been making a market in the Old Notes and has
informed the Company that it currently intends to make a market in the New
Notes, it is not obligated to do so and any such market making may be
discontinued at any time without notice. In addition, such market making
activity may be limited during the pendency of the Exchange Offer. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Notes. The Old Notes currently are eligible for trading by qualified
buyers in the PORTAL market and the Company does not intend to apply for listing
of the New Notes on any securities exchange or for quotation through the
National Association of Securities Dealers Automated Quotation System.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
SEASONALITY
The volume of the Company's sales is somewhat seasonal with generally lower
sales occurring during the first quarter of each fiscal year when compared to
the remaining three quarters of the year. The Company also experiences a
seasonal fluctuation in its profitability, with a slightly lower gross profit
percentage occurring during the first quarter of each fiscal year when compared
to margin percentages obtained in the remaining part of the year.
THE ACQUISITION
On the Acquisition Closing Date, Holdings, a company organized on behalf of
Investcorp, management and certain other investors, acquired 100% of the
outstanding common stock of the Company from the Sellers for (i) a purchase
price of $253.2 (including the refinancing or assumption of existing
indebtedness and the purchase of management stock options, and excluding the
payment of fees, expenses and compensation payable to management) plus (ii) the
issuance to the Simmons ESOP of 5,670,406 shares of the Company's Series A
Preferred Stock, having one vote per share and a liquidation preference of $5.00
per share. Financing for the Acquisition was provided by (i) $85.0 million of
capital provided by affiliates of Investcorp, management and other investors;
and (ii) borrowings in an aggregate amount equal to $180.4 million, consisting
of $80.4 million under the Senior Credit Facility and all the proceeds of the
$100.0 million Subordinated Loan Facility, a portion of which was provided by an
affiliate of the Initial Purchaser and an affiliate of Investcorp. See "Certain
Transactions." Holdings has no assets or investments other than the shares of
common stock of the Company. The Subordinated Loan Facility was repaid on April
18, 1996 with the net proceeds of the issuance of the Old Notes, together with
borrowings under the Senior Credit Facility.
In connection with the Acquisition, the Simmons ESOP sold 6,001,257 shares
of common stock of the Company for $31.2 million in cash, and converted each of
the remaining 5,670,406 shares of common stock of the Company into one share of
Series A Preferred Stock. Each share of Series A Preferred Stock is entitled to
one vote, is convertible into one share of common stock of the Company at any
time at the option of the holders thereof and is entitled to a liquidation
preference of $5.00 per share. Upon the occurrence of certain events, the Series
A Preferred Stock, at the option of the holders thereof, may be redeemed for
$5.00 per share or, following conversion into common stock of the Company,
exchanged for shares of Holdings' capital stock. In addition, upon the
occurrence of certain events, Holdings or the Company may cause the Series A
Preferred Stock to be converted into common stock of the Company and, following
such conversion, to be exchanged for shares of Holdings' capital stock. If so
converted into common stock of the
15
<PAGE>
Company or Holdings, the common stock received by the Simmons ESOP upon
conversion would represent direct or indirect ownership of 15.1% of the common
stock of the Company, after giving effect to such conversion (exclusive of stock
options granted under the Company's management stock incentive plan). See
"Ownership of Voting Securities--Stockholders' Agreement" and "Capital
Structure--Preferred Stock." In certain circumstances and subject to certain
limitations, the Simmons ESOP also has a statutory right, upon termination of a
participant's employment, to require the Company to redeem stock that has been
allocated to such participant. See "Management--Retirement Plans--Simmons ESOP."
THE SIMMONS ESOP
In January 1989, the Simmons ESOP was established to purchase all of the
Company's then outstanding common stock (the "ESOP Purchase"). The ESOP Purchase
was funded through $249.0 million of debt and preferred stock issued by the
Company (the "Company ESOP Obligation"). Of this amount, the Company loaned the
Simmons ESOP $241.5 million for the purchase of all of the Company's common
stock then outstanding (the "ESOP Loan"). The $249.0 million Company ESOP
Obligation was an "external" obligation of the Company and the $241.5 million
ESOP Loan was an "internal" obligation that the Simmons ESOP owed to the
Company. As of the Acquisition Closing Date, the internal ESOP Loan had been
reduced to approximately $61.2 million, in part due to forgiveness in 1992 of a
substantial portion of the internal obligation. Any outstanding amounts with
respect to the external Company ESOP Obligation were repaid in connection with
the Acquisition.
The Company will make annual cash contributions to the Simmons ESOP in an
amount up to 25% of eligible participant compensation, subject to certain
limitations and conditions. The Simmons ESOP will then use all such cash to
repay the internal ESOP Loan to the Company. As a result, there is no cash cost
to the Company associated with the contributions to the Simmons ESOP. As the
internal ESOP Loan is repaid, a portion of the Series A Preferred Stock will be
allocated to participant accounts and non-cash compensation expense equal to the
fair value of the allocated shares will be charged to non-cash ESOP expense. At
such time as the internal ESOP Loan is repaid in full (in approximately six
years), all shares of Series A Preferred Stock held by the Simmons ESOP will
have been allocated to plan participants. See "Management--Retirement
Plans--Simmons ESOP."
Approximately 1,400 of the Company's current and former employees are
participants in the Simmons ESOP. On the Acquisition Closing Date, the Simmons
ESOP sold 6,001,257 of its shares to Holdings (representing all the shares held
by the Simmons ESOP that had been allocated to plan participants as of such
date) for $31.2 million in the aggregate, which amount was reinvested in
diversified investments in the respective accounts of such plan participants in
the Simmons ESOP. See "Management--Retirement Plans--Simmons ESOP."
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
30, 1996 as reported in the unaudited condensed consolidated financial
statements and as adjusted to give effect to the Offering and the application of
the net proceeds therefrom, as described under "Use of Proceeds." This table
should be read in conjunction with the "Selected Historical and Pro Forma
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 30, 1996
-------------------------
ADJUSTED
FOR
ACTUAL THE OFFERING
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.......................................... $ 8,111 $ 8,111
-------- ------------
-------- ------------
Debt:
Revolving credit facility (a)(b)................................. $ -- $ 9,408
Term loans, including current maturities (a)(b).................. 60,000 75,000
103/4% Series A Senior Subordinated Notes due 2006............... -- 100,000
Subordinated Loan Facility....................................... 100,000 --
Adjustable rate subordinated notes (a)........................... 20,408 --
Industrial revenue bonds due 2017 (c)............................ 9,700 9,700
Other, including capital lease obligations....................... 1,121 1,121
-------- ------------
Total debt..................................................... 191,229 195,229
-------- ------------
Series A Preferred Stock issued to the Simmons ESOP (d)............ 28,352 28,352
-------- ------------
Unearned compensation under ESOP (e)............................... (28,243) (28,243)
-------- ------------
Common stockholder's equity:
Common stock, $.01 par value, 50,000,000 shares authorized;
31,964,452 outstanding............................................. 320 320
Additional paid-in capital....................................... 84,680 84,680
Accumulated deficit.............................................. (3,468) (5,137)(f)
Foreign currency translation adjustment.......................... (2) (2)
-------- ------------
Total common stockholder's equity.............................. 81,530 79,863
-------- ------------
Total capitalization........................................... $272,868 $275,207
-------- ------------
-------- ------------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Reflects the redemption of the adjustable rate subordinated notes subsequent to March
30, 1996 with the proceeds of an additional $15 million in term loan borrowings under
the Senior Credit Facility and funds from the revolving credit facility under the
Senior Credit Facility.
(b) See "Capital Structure--Senior Credit Facility" for a description of the revolving
credit facility and term loans under the Senior Credit Facility.
(c) The industrial revenue bonds bear interest at a fixed rate of 7.0% per annum and mature
on October 1, 2017.
(d) See "Capital Structure--Preferred Stock" for a description of the Series A Preferred
Stock.
(e) Represents the redemption value of the unallocated shares of Series A Preferred Stock
issued in connection with the Acquisition held by the Simmons ESOP, which will be
recognized as compensation expense as such shares are earned and allocated to
participant accounts. See "The Simmons ESOP" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for further description.
(f) Reflects the write-off of $2,781,000 of deferred financing costs directly related to
the Subordinated Loan Facility that is being refinanced with the proceeds of the
Offering and the related income tax benefit of $1,112,000.
</TABLE>
17
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth selected historical financial and other data
of the Company for the five years ended December 30, 1995 and for the quarters
ended April 1, 1995 and March 30, 1996 and certain pro forma financial and other
data for the year ended December 30, 1995 and quarter ended March 30, 1996. The
pro forma statement of operations data assume that the Acquisition and the
Offering occurred on January 1, 1995.
The selected historical financial data for the five years ended December 30,
1995 and for the quarters ended April 1, 1995 and March 30, 1996 were derived
from the Company's Consolidated Financial Statements. The pro forma financial
and other data were derived from Pro Forma Condensed Consolidated Financial Data
included elsewhere in this Prospectus that give effect to the Transactions (as
defined in the Pro Forma Condensed Consolidated Financial Data included
elsewhere in this Prospectus). The pro forma adjustments were based upon
available information and certain assumptions that management believes are
reasonable. The pro forma financial information does not purport to represent
what the Company's results of operations would actually have been had the
Transactions in fact occurred on such date or to project the Company's results
of operations for any future date or period. The pro forma adjustments are based
on the purchase method of accounting and reflect a preliminary estimate of the
allocation of the purchase cost incurred in connection with the Acquisition to
the assets and liabilities of the Company.
For additional information, see the Pro Forma Condensed Consolidated
Financial Data included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Capitalization" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." For the reports
by the Company's independent accountants with respect to historical financial
information, see "Index to Consolidated Financial Statements."
18
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
YEAR ENDED ENDED
--------------------------------------------------------------------------------------- -----------
PREDECESSOR
------------------------------------------------------------------------
PRO FORMA PREDECESSOR
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30, DECEMBER 30, APRIL 1,
1991 (A) 1992 (A) 1993 (A) 1994 (A) 1995 1995 (B) 1995
------------ ------------ ------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............. $313,180 $336,949 $391,382 $439,689 $489,815 $489,815 $ 108,653
Cost of products
sold................... 198,904 209,189 240,125 269,741 292,825 292,750(c) 67,104
------------ ------------ ------------ ------------ ------------ ------------ -----------
Gross profit........... 114,276 127,760 151,257 169,948 196,990 197,065 41,549
Selling, general and
administrative
expenses............... 98,531 102,943 124,452 137,791 161,202 161,202 37,518
Non-cash ESOP expense
(d).................... 12,541 14,007 14,000 4,463 4,533 4,625 1,133
Amortization of
intangible assets...... 5,734 5,732 5,724 5,753 5,753 7,648 1,438
Interest expense, net
(e).................... 15,308 10,352 8,105 8,197 8,185 19,068 1,929
Other deductions,
net.................... 797 1,512 760 2,517 400 1,570(f) 197
------------ ------------ ------------ ------------ ------------ ------------ -----------
Income (loss) before
taxes, extraordinary
item and change in
accounting principle... (18,635) (6,786) (1,784) 11,227 16,917 2,952 (666)
Provision for income
taxes (benefit)....... -- 483 1,043 3,233 7,506 2,316 (296)
------------ ------------ ------------ ------------ ------------ ------------ -----------
Income (loss) before
extraordinary item and
change in accounting
principle.............. (18,635) (7,269) (2,827) 7,994 9,411 636 (370)
Extraordinary item..... 644 -- -- -- -- -- --
Cumulative effect of
change in accounting
principle (g).......... -- (5,200) (492) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------ -----------
Net income (loss)...... $(17,991) $(12,469) $ (3,319) $ 7,994 $ 9,411 $ 636(h) $ (370)
------------ ------------ ------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ ------------ ------------ -----------
OTHER DATA:
Gross margin........... 36.5% 37.9% 38.6% 38.7% 40.2% 40.2% 38.2%
EBITDA (i)............. $ 18,326 $ 26,720 $ 29,236 $ 33,981 $ 39,577 $ 39,407 $ 4,847
EBITDA margin.......... 5.9% 7.99% 7.5% 7.7% 8.1% 8.0% 4.5%
Depreciation........... $ 3,168 $ 3,227 $ 3,141 $ 3,496 $ 4,027 $ 4,327 $ 973
Capital expenditures... 2,602 3,659 4,972 4,496 5,834 5,834 163
Cash interest expense
(j).................... 13,942 8,564 6,158 7,093 6,488 18,297 1,688
Ratio of EBITDA to cash
interest expense
(j).................... 1.3x 3.1x 4.7x 4.8x 6.1x 2.2x (j)
Ratio of EBITDA less
capital expenditures
to cash interest
expense (j)............ 1.1x 2.7x 3.9x 4.2x 5.2x 1.8x (j)
Ratio of earnings to
fixed charges (k)..... (k) (k) (k) 1.9x 2.4x 1.1x (k)
Inventory turnover
(l).................... 12.3x 15.5x 16.3x 16.8x 17.2x 17.2x 4.0x
STATEMENT OF CASH FLOWS
DATA (M):
Net cash provided by
(used in) operating
activities............. $ 8,118 $ 13,559 $ 18,002 $ 34,380 $ 28,513 $ 13,471
Net cash provided by
(used in) investing
activities............. (2,433) 2,628 (4,718) (4,195) (5,834) (163)
Net cash provided by
(used in) financing
activities............. (4,045) (10,620) (9,508) (32,864) (22,030) (14,813)
<CAPTION>
COMBINED PRO FORMA
MARCH 30, MARCH 30,
1996 (B) 1996 (B)
--------- ---------
<S> <C> <C>
STATEMENT OF OPERATIONS
Net sales.............. $ 119,317 $119,317
Cost of products
sold................... 75,672 74,655 (c)
--------- ---------
Gross profit........... 43,645 44,662
Selling, general and
administrative
expenses............... 40,472 40,472
Non-cash ESOP expense
(d).................... 1,312 1,312
Amortization of
intangible assets...... 1,442 1,897
Interest expense, net
(e).................... 1,950 4,761
Other deductions,
net.................... 4,405 587 (f)
--------- ---------
Income (loss) before
taxes, extraordinary
item and change in
accounting principle... (5,936) (4,367 )
Provision for income
taxes (benefit)....... (2,029) (1,288 )
--------- ---------
Income (loss) before
extraordinary item and
change in accounting
principle.............. (3,907) (3,079 )
Extraordinary item..... -- --
Cumulative effect of
change in accounting
principle (g).......... -- --
--------- ---------
Net income (loss)...... $ (3,907) $ (3,079 )(h)
--------- ---------
--------- ---------
OTHER DATA:
Gross margin........... 36.6% 37.4 %
EBITDA (i)............. $ 4,945 $ 4,845
EBITDA margin.......... 4.1% 4.1 %
Depreciation........... $ 970 $ 1,038
Capital expenditures... 1,567 1,567
Cash interest expense
(j).................... 1,583 4,566
Ratio of EBITDA to cash
interest expense
(j).................... (j) (j )
Ratio of EBITDA less
capital expenditures
to cash interest
expense (j)............ (j) (j )
Ratio of earnings to
fixed charges (k)..... (k) (k )
Inventory turnover
(l).................... 4.2x 4.2x
STATEMENT OF CASH FLOWS
DATA (M):
Net cash provided by
(used in) operating
activities............. $ (7,848)
Net cash provided by
(used in) investing
activities............. (176,182)
Net cash provided by
(used in) financing
activities............. 182,947
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR
AS OF
MARCH
PREDECESSOR AS OF 30, 1996
---------------------------------------------------------------------------- --------
DECEMBER 28, DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 30,
1991 1992 1993 1994 1995 ACTUAL
------------ ------------ ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 2,205 $ 7,581 $ 11,280 $ 8,477 $ 9,185 $ 8,111
Working capital, excluding current
maturities of long-term debt and
capitalized lease obligations
(n)............................... 8,955 10,366 25,460 23,077 20,171 27,176
Total assets...................... 246,634 245,158 272,533 249,891 254,492 349,706
Total debt, including current
maturities........................ 164,104 149,421 141,976 109,435 93,768 191,229
Redeemable preferred stock (o).... 500 548 592 641 680 --
Series A Preferred Stock - ESOP
(p)............................... -- -- -- -- -- 28,352
Unearned compensation - ESOP
(p)............................... -- -- -- -- -- (28,243)
Redeemable common stock - ESOP,
net of related unearned
compensation (q).................. 2,887 4,720 11,418 23,238 32,272 --
Total common stockholders'
equity............................ 32,714 34,042 37,878 41,936 44,372 81,530
<CAPTION>
ADJUSTED FOR
THE OFFERING
------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 8,111
Working capital, excluding current
maturities of long-term debt and
capitalized lease obligations
(n)............................... 27,176
Total assets...................... 350,925
Total debt, including current
maturities........................ 195,229
Redeemable preferred stock (o).... --
Series A Preferred Stock - ESOP
(p)............................... 28,352
Unearned compensation - ESOP
(p)............................... (28,243)
Redeemable common stock - ESOP,
net of related unearned
compensation (q).................. --
Total common stockholders'
equity............................ 79,863(r)
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Data.
19
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
(a) Certain amounts have been reclassified to be consistent with the Company's current reporting
format.
(b) As a result of the Acquisition, the Company's assets and liabilities were adjusted to reflect their
preliminary estimated fair values as of March 22, 1996. In addition, the Company entered into new
financing arrangements and has changed its capital structure. Accordingly, the results of future
periods will not be comparable to the prior historical periods presented. The pro forma financial
data reflects these changes as if the Transactions (as defined) had been consummated on January 1,
1995. The Combined period for 1996 represents the mathematical addition of the historical amounts
for the Predecessor period (December 31, 1995 to March 21, 1996) and the Successor period (March
22, 1996 to March 30, 1996) and are not indicative of results that would have been obtained had the
Acquisition occurred on December 31, 1995. For information regarding these periods separately, see
the Financial Statements included elsewhere in this Prospectus.
(c) Excludes the charge of $1,000 related to the write-up of inventory to its estimated fair value as a
result of the Acquisition.
(d) Represents the non-cash charge resulting from the allocation of shares held by the Simmons ESOP to
participant accounts as they are earned. Amounts charged in 1991, 1992 and 1993 were based on the
1989 acquisition price. In 1994, the Company changed its method of accounting, resulting in the
fair value of the underlying stock becoming the basis for the annual expense as opposed to the
original cost. (See "The Simmons ESOP" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations.")
(e) Interest expense, net includes the amortization of deferred debt issuance costs and is net of
interest income of $210, $188, $50, $845 and $162, for 1991, 1992, 1993, 1994 and 1995,
respectively, $162 for the pro forma year ended December 30, 1995, $40 and $39 for the first
quarter ended 1995 and 1996, respectively and $39 for the pro forma first quarter 1996.
(f) Excludes a compensation charge of $3,735 for amounts payable to management in connection with the
Acquisition. See "Certain Transactions."
(g) Results from the adoption of Statement of Financial Accounting Standards No. 106 in 1992 relating
to post-retirement benefits, and Statement of Financial Accounting Standards No. 109 in 1993
relating to income taxes.
(h) Excludes the following incurred in connection with the Acquisition: (i) the compensation charge of
$3,735 for amounts payable to management, (ii) the charge of $1,000 related to the write-up of
inventory to its estimated fair value, (iii) the charge of $350 for non-recurring fees, (iv) the
$2,781 write-off of the Subordinated Loan Facility financing fees as a result of the Offering and
(v) the related income tax benefits of $3,146.
(i) EBITDA represents earnings before interest expense, income tax expense, non-cash ESOP expense,
depreciation and amortization, cumulative effect of change in accounting principle and
extraordinary item, and, for the pro forma year ended December 30, 1995 and for the combined and
pro forma quarters ended March 30, 1996, excludes amortization of the prepaid management fee of
$1,000, $83 and $250, respectively, in connection with the Acquisition, excludes the effect of the
purchase accounting inventory write-up of $1,000, the compensation charge of $3,735 for amounts
payable to management, and the charge of $350 for non-recurring fees, and excludes the credit of
$375, $0 and $85, respectively, for the amortization of the reserve for unfavorable lease
commitments. The Company has included information concerning EBITDA as it is relevant for covenant
analysis under the Indenture, which defines EBITDA as set forth above for the periods shown. See
"Description of Notes--Certain Definitions." In addition, management believes that EBITDA is
generally accepted as providing useful information regarding a company's ability to service and/or
incur debt. EBITDA should not be considered in isolation or as a substitute for net income, cash
flows or other consolidated net income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability or liquidity.
(j) Cash interest expense is defined as interest expense less amortization of debt issuance costs and
other non-cash interest expense for 1991, 1992, 1993, 1994, 1995 and for the first quarters ended
1995 and 1996. This calculation of interest expense differs from that specified for Consolidated
Interest Expense under the Indenture, which includes amortization of debt issuance costs and
non-cash interest expense. Similarly, the ratio of EBITDA to cash interest expense differs from the
Consolidated Coverage Ratio under the indenture, which utilizes Consolidated Interest Expense as
its denominator. See "Description of Notes--Certain Definitions." Management believes that the
ratio of EBITDA to cash interest expense and the ratio of EBITDA less capital expenditures to cash
interest expense are generally accepted as useful information regarding a company's ability to
service and/or incur debt. The ratio of EBITDA to cash interest expense and the ratio of EBITDA
less capital expenditures to cash interest expense are not applicable to the quarterly periods.
(k) For the purpose of determining the ratio of earnings to fixed charges, earnings consist of income
before income taxes and fixed charges. Fixed charges consist of interest expense, which includes
the amortization of deferred debt issuance costs and the interest portion of the Company's rent
expense (assumed to be one-third of total rent expense). Earnings were insufficient to cover fixed
charges for 1991, 1992, 1993, first quarter 1995, combined first quarter 1996 and pro forma first
quarter 1996 by $18,688, $6,856, $1,861, $666, $5,936 and $4,717, respectively.
(l) Inventory turnover is defined as cost of products sold divided by average inventory.
(m) For more information regarding the Statement of Cash Flows Data, see the Consolidated Financial
Statements included elsewhere in this Prospectus.
(n) Represents total current assets (excluding cash and cash equivalents) less total current
liabilities, excluding current maturities of long-term debt and capital lease obligations.
(o) This stock was issued in connection with the recapitalization of the Company in 1991 and was called
for redemption in connection with the Acquisition.
(p) The Series A Preferred Stock was issued to the Simmons ESOP in connection with the Acquisition (see
"The Acquisition"). The Series A Preferred Stock is required to be recorded at the greater of
redemption value or fair value. The Series A Preferred Stock will be recorded at its redemption
value. In addition, unearned compensation was recorded on the Acquisition Closing Date in an amount
representing the redemption value of the Series A Preferred stock that will be allocated to
participant accounts over future periods. The unearned compensation is classified outside of common
stockholder's equity since it is related to the Series A Preferred Stock (See "The Simmons ESOP"
and "Management's Discussion and Analysis of Financial Condition and Results of Operations.")
(q) Historically, under the terms of the Simmons ESOP, the participants had the right to put their
common stock to the Company under certain circumstances. Accordingly, the fair market value of the
common stock that could have been put to the Company, along with the related amount of unearned
compensation, are classified outside of common stockholders' equity in the predecessor financial
statements.
(r) Includes the following charges incurred in connection with the Transactions: (i) the compensation
charge of $3,735 for amounts payable to management, (ii) the charge of $350 for non-recurring fees
(iii) the $2,781 write-off of the Subordinated Loan Facility financing fees as a result of the
Offering and (iv) the related tax benefits of $2,746.
</TABLE>
20
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
The following unaudited Pro Forma Condensed Consolidated Financial Data are
based on the consolidated financial statements included elsewhere in this
Prospectus, adjusted to give effect to (i) the Acquisition and (ii) the Offering
of the Notes and the application of the net proceeds therefrom to repay the
Subordinated Loan Facility (collectively, the "Transactions").
The unaudited Pro Forma Condensed Consolidated Statement of Operations for
the quarter ended March 30, 1996 is derived from the unaudited Condensed
Consolidated Statement of Operations for the periods December 31, 1995 to March
21, 1996 for the Predecessor and March 22, 1996 to March 30, 1996 for the
Successor included elsewhere in this Prospectus. The unaudited Pro Forma
Condensed Consolidated Statement of Operations for the year ended December 30,
1995, is derived from the Consolidated Statement of Operations for the year
ended December 30, 1995, included elsewhere in this Prospectus. Both of these
Pro Forma Condensed Consolidated Statements of Operations assume that the
Transactions were consummated as of January 1, 1995. The unaudited Pro Forma
Condensed Consolidated Financial Data should be read in conjunction with the
Consolidated Financial Statements of the Company, included elsewhere in this
Prospectus.
The unaudited Pro Forma Condensed Consolidated Financial Data do not purport
to be indicative of the results that would actually have been obtained if the
Transactions had occurred on the date indicated or of the results that may be
obtained in the future. The unaudited Pro Forma Condensed Consolidated Financial
Data are presented for comparative purposes only. The pro forma adjustments, as
described in the accompanying data, are based on available information and
certain assumptions that management believes are reasonable.
The unaudited pro forma information with respect to the Acquisition is based
on the historical financial statements of the business acquired. The Acquisition
has been accounted for under the purchase method of accounting. The purchase
price for the Acquisition, including the related fees and expenses, has been
allocated to the tangible and identifiable intangible assets and liabilities of
the acquired business based upon the Company's preliminary estimates of their
fair value with the remainder allocated to goodwill. The allocation of purchase
price for the Acquisition is subject to revision when additional information
concerning asset and liability valuation becomes available. Such additional
information will include the finalized results of property appraisals and
certain lease analyses which are anticipated to be available during July or
August 1996. Management believes that the actual purchase price allocation will
not differ materially from the preliminary purchase price allocation. The pro
forma adjustments directly attributable to the Transactions include adjustments
to interest expense related to the financing, changes in amortization of
intangible assets relating to the allocation of the purchase price, management
fees, and the related tax effects.
21
<PAGE>
SIMMONS COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ACQUISITION OFFERING ADJUSTED
RESULTS ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
-------- ----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $489,815 -- $ 489,815 -- $ 489,815
Cost of products sold.................. 292,825 $ (75)(a) 292,750 -- 292,750
-------- ----------- --------- ----------- ---------
Gross profit........................... 196,990 75 197,065 -- 197,065
Selling, general and administrative
expenses.............................. 161,202 -- 161,202 -- 161,202
Non-cash ESOP expense.................. 4,533 92(b) 4,625 -- 4,625
Amortization of intangible assets...... 5,753 1,895(c) 7,648 -- 7,648
Interest expense, net.................. 8,185 12,701(d) 20,886 $(1,818)(e) 19,068
Other deductions, net.................. 400 1,170(f) 1,570 -- 1,570
-------- ----------- --------- ----------- ---------
Income before income taxes............. 16,917 (15,783) 1,134 1,818 2,952
Provision for income taxes............. 7,506 (5,917)(g) 1,589 727(g) 2,316
-------- ----------- --------- ----------- ---------
Net income (loss)...................... $ 9,411 $(9,866) $ (455)(h) $ 1,091 $ 636(i)
-------- ----------- --------- ----------- ---------
-------- ----------- --------- ----------- ---------
</TABLE>
See Notes to Pro Forma Condensed Consolidated Statements of Operations.
22
<PAGE>
SIMMONS COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
COMBINED ACQUISITION OFFERING ADJUSTED
RESULTS ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
-------- ----------- --------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $119,317 -- $ 119,317 -- $ 119,317
Cost of products sold.................. 75,672 $(1,017)(a) 74,655 -- 74,655
-------- ----------- --------- ----------- ---------
Gross profit........................... 43,645 1,017 44,662 -- 44,662
Selling, general and administrative
expenses............................... 40,472 -- 40,472 -- 40,472
Non-cash ESOP expense.................. 1,312 -- 1,312 -- 1,312
Amortization of intangible assets...... 1,442 455(c) 1,897 -- 1,897
Interest expense, net.................. 1,950 3,078(d) 5,028 $ (267)(e) 4,761
Other deductions, net.................. 4,405 (3,818)(f) 587 -- 587
-------- ----------- --------- ----------- ---------
Loss before income tax benefit......... (5,936) 1,302 (4,634) 267 (4,367)
Provision for income tax benefit....... (2,029) 634(g) (1,395) 107(g) (1,288)
-------- ----------- --------- ----------- ---------
Net loss............................... $ (3,907) $ 668 $ (3,239)(h) $ 160 $ (3,079)(i)
-------- ----------- --------- ----------- ---------
-------- ----------- --------- ----------- ---------
</TABLE>
- ------------
For purposes of the above analysis, the combined amounts represent the
mathematical addition of the historical amounts for the Predecessor period
(December 31, 1995 to March 21, 1996) and the Successor period (March 22, 1996
to March 30, 1996).
See Notes to Pro Forma Condensed Consolidated Statements of Operations.
23
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 30, 1995 and the quarter ended March 30, 1996 reflect the
Transactions as if they had occurred on January 1, 1995 as follows:
<TABLE>
<C> <S>
(a) The adjustment includes the following:
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Elimination of non-recurring charge resulting from write-up
of inventory at Acquisition............................... $ -- ($1,000)
Increase in depreciation expense........................... 300 68
Decrease in rent expense resulting from the recording of
leases at market.......................................... (375) (85)
-------- -------
($ 75) ($1,017)
-------- -------
-------- -------
</TABLE>
<TABLE>
<C> <S>
(b) Increase in ESOP expense for 1995 is due to the pro forma effect of recording such
shares at their redemption value ($5.00 per share).
(c) The adjustment includes the following:
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Increase in goodwill amortization.......................... $ 991 $ 282
Increase in patent amortization............................ 904 173
-------- -------
$ 1,895 $ 455
-------- -------
-------- -------
</TABLE>
<TABLE>
<C> <S>
(d) Net increase in interest expense, net, resulting from the Acquisition as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Elimination of historical interest expense................. ($ 8,347) ($1,980)
Interest resulting from Subordinated Loan Facility of $100
million at an assumed interest rate of 13% and 12.25%..... 13,000 3,063
Interest resulting from senior credit facility term loans:
Tranche A--$40,000 at 7.75%............................... 3,100 775
Tranche B--$35,000 at 8.25%............................... 2,888 722
Interest resulting from Senior Credit Facility revolving
loan with a maximum of $40 million at an assumed interest
rate of 7.75%.............................................. 453 113
Interest resulting from industrial revenue bonds and other
borrowings................................................. 796 181
Amortization of the $5,704 million estimated deferred
financing cost related to the above....................... 811 204
-------- -------
$ 12,701 $ 3,078
-------- -------
-------- -------
</TABLE>
<TABLE>
<C> <S>
(e) Net decrease in interest expense resulting from Offering of the $100.0 million Series A
Senior Subordinated Notes due 2006 and the application of the net proceeds therefrom of
$96 million, reflecting the following (dollars in thousands):
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Elimination of interest on the Subordinated Loan Facility
of $100 million............................................ $(13,000) $(3,063)
Interest resulting from additional borrowings under
revolving loan of $4 million required to repay a portion
of the Subordinated Loan Facility.......................... 310 78
Interest resulting from the $100 million Series A Senior
Subordinated Notes due 2006 at an assumed interest rate at
10.75%..................................................... 10,750 2,688
Elimination of amortization of Subordinated Loan Facility
deferred financing costs.................................. (278) (70)
Amortization of the $4 million deferred financing costs
related to the Series A Senior Subordinated Notes due
2006....................................................... 400 100
-------- -------
$ (1,818) $ (267)
-------- -------
-------- -------
</TABLE>
<TABLE>
<C> <S>
Management believes that a 1/8 percent variance in interest rates will not have any
material effect on the Company's operations.
(f) The adjustment includes the following:
</TABLE>
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Amortization of annual management fee, three years of which
was prepaid at Acquisition................................ $ 1,000 $ 225
Increase in annual agent's fee and unused revolver
commitment fee............................................. 170 42
Elimination of non-recurring compensation charge........... -- (3,735)
Elimination of non-recurring fees.......................... -- (350)
-------- -------
$ 1,170 ($3,818)
-------- -------
-------- -------
</TABLE>
<TABLE>
<C> <S>
(g) Net decrease in provision for income taxes as a result of all above items, except
goodwill amortization at an assumed tax rate of 40%.
(h) Excludes (i) the compensation charge of $3,735 for amounts payable to management in
connection with the Acquisition, (ii) the charge of $1,000 related to the write-up of
inventory to its estimated fair value (iii) the charge of $350 for non-recurring fees
and (iv) the related income tax benefits of $2,034.
(i) Excludes the $2,781 write-off of the Subordinated Loan Facility financing fees and
expenses as a result of the offering and the related income benefit of $1,112.
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Historical and Pro Forma Financial Data" and the Financial Statements of the
Company and the notes thereto included elsewhere in this Prospectus.
GENERAL
On March 22, 1996, Simmons Holdings, Inc., a company organized on behalf of
Investcorp, management and certain other investors, acquired 100% of the
outstanding common stock of the Company from the Sellers for (i) a purchase
price of $253.2 (including the refinancing or assumption of existing
indebtedness and the purchase of management stock options, and excluding the
payment of fees, expenses and compensation payable to management) plus (ii) the
issuance to the Simmons ESOP of 5,670,406 shares of the Company's Series A
Preferred Stock, having one vote per share and a liquidation preference of $5.00
per share. Financing for the Acquisition was provided by (i) $85.0 million of
capital provided by affiliates of Investcorp, management and other investors;
and (ii) borrowings in an aggregate amount equal to $180.4 million, consisting
of $80.4 million under the Senior Credit Facility and all the proceeds of the
$100.0 million Subordinated Loan Facility, a portion of which was provided by an
affiliate of the Initial Purchaser and an affiliate of Investcorp. The
Subordinated Loan Facility was repaid on April 18, 1996 with net proceeds of the
issuance to the Old Notes together with borrowings under the Senior Credit
Facility.
The Company is the second largest bedding manufacturer in the United States.
Approximately 98% of the Company's 1995 net sales were derived from the
manufacture and sale of conventional bedding, which includes innerspring
mattresses and box springs. The Company also manufactures and sells bedding
accessories such as waterbeds, bed frames and upper bunk supports, which
accounted for the other 2.0% of the Company's 1995 net sales. Over the last four
years, the Company's net sales have grown at a compound annual rate of 11.8%,
from $313.2 million in 1991 to $489.8 million in 1995. The Company also licenses
the Simmons name and manufacturing processes to third party manufacturers abroad
to produce and distribute conventional bedding products within their designated
territories and licenses to third party manufacturers domestically the Simmons
name, which is used on adjustable beds, down comforters, pillows, bed sheets,
bed pads and linens. The Company records license and royalty fees received from
these licenses as an offset to selling, general and administrative expenses.
License and royalty fees received for 1993, 1994 and 1995 were $4.3 million,
$5.4 million, and $5.8 million, respectively.
The Company's costs and expenses include manufacturing (approximately 59.8%
of 1995 net sales), selling (approximately 25.3% of 1995 net sales) and general
and administrative (approximately 7.6% of 1995 net sales). Over the last four
years, the Company's gross profit has grown at a compound annual rate of 14.6%,
from $114.3 million in 1991 to $197.0 million in 1995. As a percentage of net
sales, gross profit has increased from 36.5% in 1991 to 40.2% in 1995. Over the
last four years, the Company's EBITDA has increased at a compound annual rate of
21.2% from $18.3 million in 1991 to $39.6 million in 1995, while the Company
experienced a net loss of $18.0 million in 1991 and net income of $9.4 million
in 1995. As a percentage of net sales, EBITDA and net income (loss) have
improved from 5.9% and (5.7%) in 1991 to 8.1% and 1.9% in 1995, respectively.
In January 1989, the Simmons ESOP was established to purchase all of the
Company's then outstanding common stock (the "ESOP Purchase"). The ESOP Purchase
was funded through $249.0 million of debt and preferred stock issued by the
Company (the "Company ESOP Obligation"). Of this amount, the Company loaned the
Simmons ESOP $241.5 million for the purchase of all of the Company's common
stock then outstanding (the "ESOP Loan"). The $249.0 million Company ESOP
Obligation was an "external" obligation of the Company and the $241.5 million
25
<PAGE>
ESOP Loan was an "internal" obligation that the Simmons ESOP owed to the
Company. Initially, the Company recorded the shares of common stock issued to
the Simmons ESOP and recorded a corresponding offset for unearned compensation
as capital. Because these shares held by the Simmons ESOP were subject to
certain redemption requirements, the Company recorded outside of common
stockholders' equity an amount equal to the fair value of such shares, net of a
related amount of unearned compensation. As the internal ESOP Loan was repaid,
non-cash ESOP expense was recorded and unearned compensation was reduced. As of
the Acquisition Closing Date, the internal ESOP Loan had been reduced to
approximately $61.2 million, in part due to forgiveness in 1992 of a substantial
portion of the internal obligation. Any outstanding amounts with respect to the
external Company ESOP Obligation were repaid in connection with the Acquisition.
The Company will make annual cash contributions to the Simmons ESOP in an
amount up to 25% of eligible participant compensation, subject to certain
limitations and conditions. The Simmons ESOP will then use all such cash to
repay the internal ESOP Loan to the Company. As a result, there is no cash cost
to the Company associated with the contributions to the Simmons ESOP. The Series
A Preferred Stock issued to the Simmons ESOP will be recorded at its aggregate
redemption value of $28.4 million and a corresponding amount of unearned
compensation will be recorded. The Series A Preferred Stock is required to be
recorded at the greater of redemption value or fair value. These amounts are
classified outside of common stockholder's equity since the participants have
the right to put the stock to the Company under certain circumstances. As the
internal ESOP Loan is repaid (over approximately six years), a portion of the
Series A Preferred Stock will be allocated to participant accounts and non-cash
ESOP expense will be recorded based on the number of shares allocated to
participant accounts at the greater of the redemption value ($5.00 per share) or
the fair value of the Series A Preferred Stock.
Prior to 1994, the annual charge to non-cash ESOP expense represented the
number of shares allocated to participant accounts resulting from the repayment
of the internal ESOP Loan valued at the original cost of the shares acquired in
1989. In 1994, the Company changed its method of accounting and began using the
fair value of the shares. This resulted in a significant reduction in the annual
expenses. The difference between the original price per share and the
corresponding reduction in unearned compensation and the fair-value based,
non-cash ESOP expense was charged or credited to additional paid-in capital.
RESULTS OF OPERATIONS
For ease of reference in the following table and discussion below, the
results of operations for 1996 represent the mathematical addition of the
historical amounts for the Predecessor period (December 31, 1995 to March 21,
1996) and the Successor period (March 22, 1996 to March 30, 1996) and are not
indicative of results that would actually have been obtained if the Acquisition
had occurred on December 31, 1995.
26
<PAGE>
The following table sets forth certain components of the Company's
Consolidated Statement of Operations data expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
-------------------------------------------- ---------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------------ ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales....................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold........... 61.4 61.3 59.8 61.8 63.4
------ ------ ------ -------- ---------
Gross profit.................... 38.6 38.7 40.2 38.2 36.6
Selling, general and
administrative expenses(a)...... 31.8 31.3 32.9 34.5 33.9
Non-cash ESOP expense........... 3.6 1.0 0.9 1.0 1.1
Amortization of intangible
assets.......................... 1.5 1.3 1.2 1.3 1.2
Interest expense, net(b)........ 2.0 1.9 1.6 1.8 1.7
Other deductions, net........... 0.2 0.6 0.1 0.2 3.7
------ ------ ------ -------- ---------
Income (loss) before income
taxes and cumulative effect of
change in accounting principle.. (0.5) 2.6 3.5 (0.6) (5.0)
Provision for income taxes
(benefit)....................... 0.3 0.8 1.6 (0.3) (1.7)
------ ------ ------ -------- ---------
Income (loss) before cumulative
effect of change in accounting
principle....................... (0.8)% 1.8% 1.9% (0.3)% (3.3)%
------ ------ ------ -------- ---------
------ ------ ------ -------- ---------
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Selling, general and administrative expense is net of royalty income.
(b) Includes amortization of deferred financing costs.
</TABLE>
FIRST QUARTER ENDED MARCH 30, 1996 AS COMPARED TO FIRST QUARTER ENDED APRIL 1,
1995
Net Sales. Net sales for the quarter ended March 30, 1996 increased 9.8%, or
$10.7 million, from $108.6 million in 1995 to $119.3 million in 1996. This
increase was due primarily to a 9.1% increase in unit sales volume and a slight
increase in average unit selling price. The growth in unit sales volume resulted
from increased contract bedding sales and continued retail market acceptance of
the BackCare(R) line launched in June 1995. The slight increase in average unit
selling price is attributable to a shift in product mix to the Company's higher
priced Beautyrest(R) and BackCare(R) products.
Gross Profit. As a percentage of net sales, gross profit for the quarter
ended March 30, 1996 declined 1.6 percentage points from 38.2% in 1995 to 36.6%
in 1996. Of the decline, approximately 0.8 percentage point is attributable to
the sale of finished goods inventory which had been written up, as required by
generally accepted accounting principles, to estimated market value, less costs
to sell, as of the date of the Acquisition. The remaining decline in gross
profit percentage resulted primarily from the increased unit sales volume of
lower margin contract and promotional bedding.
Selling, General and Administrative Expenses. As a percentage of net sales,
selling, general and administrative expenses improved 0.6 percentage point, from
34.5% in 1995 to 33.9% in 1996. The improvement was attributable to the
following: (i) $0.4 million or 0.3 percentage point was due to non-recurring
expenditures related to a special national sales meeting held during the first
quarter of 1995; (ii) $0.2 million or 0.2 percentage point was due to the
centralization of the Company's consumer sales support organization; (iii) $0.2
million or 0.2 percentage point was due to higher royalty income; and (iv) $0.6
million or 0.5 percentage point was due to higher total revenues which increased
at a slightly greater rate than selling, general and administrative
27
<PAGE>
expenses. These improvements were offset, in part, by an increase of $0.7
million, or 0.6 percentage point, in expenditures related to the Company's
reengineering program, referred to elsewhere herein as UNITE.
Interest Expense, Net. Interest expense, net for the first quarter ended
March 30, 1996 remained constant at approximately $1.9 million, as slightly
lower debt balances were offset by slightly higher average interest rates.
Non-Cash ESOP Expense. Non-cash ESOP expense for the first quarter of 1996
increased slightly to approximately $1.3 million as compared to $1.1 million in
1995 due to an increase in the estimated fair value of shares to be allocated to
participant accounts.
Other Deductions, Net. Non-recurring expenses of $4.3 million were incurred
in the quarter ended March 30, 1996 in connection with the Acquisition.
Approximately $3.8 million was attributable to special compensation agreements
entered into by the Company with certain members of management of the Company.
The remaining $0.5 million is comprised of fees related to an agreement with
Investcorp International, Inc. for management advisory, consulting services and
certain other fees. See "Certain Transactions."
Provision (Benefit) for Income Taxes. The Company's effective income tax
rates for the quarters ended March 30, 1996 and April 1, 1995 differ from the
federal statutory rate because of non tax-deductible amortization of goodwill
and the utilization, in 1995, of net operating loss carryforwards.
Net Loss. For the reasons set forth above, net loss for the quarter ended
March 30, 1996 increased $3.5 million from net loss for the quarter ended April
1, 1995.
FISCAL 1995 AS COMPARED TO FISCAL 1994
Net Sales. Net sales increased 11.4%, or $50.1 million, from $439.7 million
in 1994 to $489.8 million in 1995. This increase was due to a 4.3% increase in
average unit selling price and a 6.6% increase in unit volume. This average unit
selling price increase resulted primarily from a shift in product mix to the
Company's higher-priced Beautyrest(R) products. The increase in unit volume
resulted from increased sales to existing accounts and the addition of new
customers. In 1995, the Company embarked on a new national advertising campaign
to reinforce brand awareness and also initiated a program to increase its
account base, all of which together resulted in a 10% increase in its account
base in 1995.
Gross Profit. Gross profit increased 15.9%, or $27.1 million, from $169.9
million in 1994 to $197.0 million in 1995. Approximately $19.0 million of the
increase in gross profit resulted from the increase in net sales in 1995. The
remaining increase in gross profit resulted from improved efficiencies resulting
from (i) the increased efficiencies resulting from second shifts at 14 of the
Company's manufacturing facilities and (ii) the leveraging of fixed costs as a
result of the increase in production volume in 1995. As a percentage of net
sales, gross profit increased 1.5 percentage points, from 38.7% in 1994 to 40.2%
in 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1995 increased 17.0%, or $23.4 million, from $137.8
million in 1994 to $161.2 million in 1995. This increase was the result of a
$16.2 million increase in selling expenses and a $7.2 million increase in
general and administrative expenses. The increase in selling expenses was due
to: (i) an increase in selling support expenses due to higher sales volume and
the introduction of a program to grow the Company's account base; (ii) an
increase in salesforce compensation due to higher net sales; (iii) an increase
in national advertising related to the rollout in 1995 of a new advertising
program;
28
<PAGE>
and (iv) an increase in cooperative advertising expenses. The increase in
general and administrative expenses was a result of: (i) $1.3 million in
expenditures related to the Company's UNITE program, a manufacturing design and
re-engineering project initiated in 1995; (ii) an increased provision for bad
debts; and (iii) increased bonuses related to the Company's strong 1995 results.
The Company expects its expenditures related to the UNITE program to increase in
1996 by approximately $3 million in connection with its plans to implement the
program at six additional manufacturing facilities. As a percentage of net
sales, selling, general and administrative expenses increased 1.6 percentage
points, from 31.3% in 1994 to 32.9% in 1995.
Interest Expense, Net. Interest expense, net remained constant at
approximately $8.2 million in 1994 and 1995, as a result of lower debt levels
that were offset by higher interest rates.
Non-Cash ESOP Expense. Non-cash ESOP expense in 1995 remained relatively
constant at approximately $4.5 million as compared to 1994.
Provision for Income Taxes. Provision for income taxes increased 132.2%, or
$4.3 million, from $3.2 million in 1994 to $7.5 million in 1995. The effective
income tax rates for both periods differ from the federal statutory rate of
35.0% principally due to the utilization of net operating loss carryforwards and
the high levels of non tax-deductible amortization of goodwill. The increase in
the effective rate from 1994 to 1995 results from a decline in the amount of net
operating loss carryforwards available to be utilized in 1995 compared to 1994.
FISCAL 1994 AS COMPARED TO FISCAL 1993
Net Sales. Net sales increased 12.3%, or $48.3 million, from $391.4 million
in 1993 to $439.7 million in 1994. This increase was due to a 2.3% increase in
the average unit selling price and a 9.8% increase in unit volume. The average
unit selling price increase resulted primarily from standard price increases
realized in 1994 coupled with a slight shift in the Company's product mix
towards higher-priced products. The increase in unit volume was primarily a
function of increased sales to existing accounts.
Gross Profit. Gross profit increased 12.4% or $18.7 million, from $151.3
million in 1993 to $169.9 million in 1994. This increase was primarily the
result of an increase in sales and a reduction in the cost of raw materials,
which was partially offset by labor inefficiencies resulting from the
introduction of second shifts at most of the Company's manufacturing facilities.
As a percentage of net sales, gross profit increased 0.1 percentage points, from
38.6% in 1993 to 38.7% in 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 10.7% or $13.3 million, from $124.5 million in
1993 to $137.8 million in 1994. This increase was the result of a $7.5 million
increase in selling expenses and a $7.0 million increase in general and
administrative expenses, and partially offset by an increase in royalty income
of $1.2 million. The increase in selling expenses resulted from greater spending
on all forms of advertising coupled with an increase in salesforce compensation
resulting from increased net sales. The increase in general and administrative
expenses was a result of (i) an increase in overhead costs relating to the new
plant opened in Charlotte late in 1993 and (ii) increases in provision for
bonuses and workers' compensation insurance. As a percentage of net sales,
selling, general and administrative expense decreased 0.5 percentage points from
31.8% in 1993 to 31.3% in 1994.
Interest Expense, Net. Interest expense, net increased 1.1%, or $0.1
million, from $8.1 million in 1993 to $8.2 million in 1994, as a result of
higher interest rates which were partially offset by lower debt levels.
Other Deductions, Net. Other deductions, net of $2.5 million in 1994 is
comprised of a non-cash charge of $2.8 million in connection with the sale of an
idle plant facility and other normal non-
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operating expenses of $0.6 million offset, in part, by a $0.9 million gain on
the sale of a parcel of land.
Non-Cash ESOP Expense. Non-cash ESOP expense decreased 67.9%, or $9.5
million, from $14.0 million in 1993 to $4.5 million in 1994, primarily as a
result of the adoption of Statement of Position No. 93-6 of the American
Institute of Certified Public Accounts, Employers' Accounting for Employee Stock
Ownership Plans. This Statement of Position requires non-cash ESOP expense
contributions to be recorded as expense in the statement of operations based on
the fair value of the shares allocated to participant accounts versus historical
cost, which was used in prior years.
Provision for Income Taxes. Provision for income taxes increased 220.0%, or
$2.2 million, from $1.0 million in 1993 to $3.2 million in 1994. The effective
income tax rate for 1994 differs from the federal statutory rate of 35%
principally due to the utilization of net operating loss carryforwards offset by
high levels of non tax-deductible amortization of goodwill. The effective rate
in 1993 differs from the federal statutory rate principally due to the high
level of non tax-deductible amortization of goodwill. The decline in effective
tax rate in 1994 from 1993 principally results from the utilization of net
operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs will arise primarily from debt service on
indebtedness incurred in connection with the Acquisition and the funding of
capital expenditures. The Company incurred substantial indebtedness in
connection with the Acquisition, which will result in an increase in interest
expense of approximately $10.0 million per year compared to interest expense
prior to the Acquisition. As of March 30, 1996, as adjusted to give effect to
the Offering (including the application of the net proceeds therefrom), the
Company would have had outstanding approximately $195.2 million of indebtedness,
consisting of $100.0 million of Notes, $75.0 million in term loan borrowings and
approximately $9.4 million in revolving credit borrowings under the Senior
Credit Facility, $9.7 million of industrial revenue bonds and $1.1 million of
certain other debt and capital lease obligations. The degree to which the
Company is leveraged could have a significant effect on its results of
operations. For example, the funds available to the Company for purposes other
than debt service will be reduced; the Company may be more vulnerable to
increases in interest rates or downturns in economic conditions; and the
Company's ability to obtain additional financing in the future may be impaired.
While the Company believes that it should be able to satisfy its obligations and
maintain historical levels of capital expenditures and operations from cash
provided by operations, available credit facilities and appropriate financings,
no assurance to that effect can be given. See "Risk Factors--Substantial
Leverage and Debt Service Obligations."
Principal and interest payments under the Senior Credit Facility and
interest payments on the Notes will represent significant liquidity requirements
for the Company. With respect to the $75.0 million borrowed under the term loan
portion of the Senior Credit Facility, the Company must make scheduled
semi-annual principal payments totaling $2.1 million in 1996, $5.2 million in
1997, $7.2 million in 1998 and $9.2 million in 1999. The loans under the Senior
Credit Facility will bear interest at floating rates based upon the interest
rate option selected by the Company. Under the Senior Credit Facility, the
Company is obligated to enter into arrangements to fix an effective maximum rate
of interest with respect to not less than $37.5 million of the term loan portion
of the Senior Credit Facility within 90 days of the Acquisition Closing Date.
For a description of the Senior Credit Facility, see "Capital Structure--Senior
Credit Facility."
The Company's capital expenditures were $5.0 million, $4.5 million, $5.8
million and $1.6 million in 1993, 1994, 1995 and the first quarter 1996,
respectively. These capital expenditures consisted primarily of maintenance
capital expenditures and in 1995 and 1996 also included capitalized expenditures
related to SWIFT, a systems upgrade project. The Company estimates
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<PAGE>
that total maintenance capital expenditures will be approximately $5.0 million
in 1996. In addition, total expenditures for completing the SWIFT project are
expected to be approximately $7.0 million in 1996. The Company may seek to make
selective acquisitions in the bedding industry. Although the Company has
discussions from time to time with potential acquisition candidates, the Company
currently has no commitments with respect to any such acquisitions. The
Company's ability to make capital expenditures and acquisitions is subject to
certain restrictions under the Senior Credit Facility. See "Capital
Structure--Senior Credit Facility."
The Company's principal source of cash to fund its liquidity needs is net
cash provided by operating activities. The components of net cash provided by
operating activities are detailed on the Statements of Cash Flows on pages F-7
and F-23 of this Prospectus and include net income or loss adjusted for (i)
depreciation and amortization, (ii) non-cash interest expense, (iii) gains and
losses on the sale of fixed assets, (iv) non-cash ESOP expense, and (v) the
effect of changes in certain operating assets and liabilities. Net cash from
operating activities was $13.5 million in the first quarter 1995 compared to
$(7.8) million in the first quarter 1996 (combined), due primarily to the timing
of payments of accounts payable. Additionally, in the first quarter 1996
(combined), certain cash compensation expenses were incurred in connection with
the Acquisition. Net cash provided by operating activities in 1995 decreased
17.1%, or $5.9 million, to $28.5 million from $34.4 million in 1994. This
decrease resulted primarily from an increase in accounts receivable and
inventories, partially offset by an increase in accounts payable, reflecting
increased sales levels and lower than normal balances of accounts payable at the
end of 1994. Net cash provided by operating activities increased 91.0% or $16.4
million, from $18.0 million in 1993 to $34.4 million in 1994. This increase
resulted primarily from improved operating results, as well as a decrease in
accounts receivable and inventories, partially offset by a decrease in accounts
payable. The decrease in accounts receivable reflects an increased focus by the
Company on timely collections. Accounts payable levels were lower than normal at
the end of 1994, reflecting differences in timing of payments at year-end
compared to 1993 and 1995.
At March 30, 1996 as adjusted for the Offering (including the application of
the net proceeds therefrom), the amount under the revolving credit portion of
the Senior Credit Facility that was available to be drawn was approximately
$24.4 million, after giving effect to $9.4 million of outstanding borrowings and
$6.2 million that was reserved in respect of the Company's reimbursement
obligations with respect to outstanding letters of credit. Amounts available
under the revolving credit portion of the Senior Credit Facility may be used for
working capital and general corporate purposes, including acquisitions and
capital expenditures, subject to certain limitations under the Senior Credit
Facility. Pursuant to the terms of the Senior Credit Facility: (i) the Company
may make capital expenditures in an amount not to exceed $6.5 million in each of
1996 (commencing March 22, 1996) and 1997, and escalating thereafter; and (ii)
to the extent that acquisitions are not permitted as capital expenditures under
the Senior Credit Facility, the Company may make acquisitions in an amount that
is the lesser of (A) $30.0 million or (B) $15.0 million plus 50% of cumulative
Excess Cash Flow (as defined in the Senior Credit Facility). The Company
believes that cash generated from operations, together with the amounts
available under the revolving credit facility, will be adequate to meet its debt
service requirements, capital expenditures and working capital needs for the
foreseeable future, although no assurance can be given in this regard. The
Company's future operating performance and ability to service or refinance the
New Notes and to extend or refinance the Senior Credit Facility will be subject
to future economic conditions and to financial, business and other factors, many
of which are beyond the Company's control.
In addition to the foregoing capital expenditures, the Company anticipates
that its total expenditures for UNITE, its re-engineering project to improve
overall efficiency by changing the layout of its factory floors, will be
approximately $6.0 million in 1996. While the expenditures for UNITE will have
an adverse impact on results of operations for 1996, the Company believes that
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future benefits, which should commence in the fourth quarter of 1996, will
offset implementation costs. See "Business--Manufacturing and Facilities."
SEASONALITY
The volume of the Company's sales is somewhat seasonal with generally lower
sales occurring during the first quarter of each fiscal year when compared to
the remaining three quarters of the year. The Company also experiences a
seasonal fluctuation in its profitability, with a slightly lower gross profit
percentage occurring during the first quarter of each fiscal year when compared
to margin percentages obtained in the remaining part of the year. The Company
believes that seasonality of profitability is a factor that affects the
conventional bedding industry generally and is primarily due to retailers'
emphasis in the first quarter on price reductions and promotional bedding and
manufacturers' emphasis on close outs of the prior year's product lines, which
together result in lower profit margins.
ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
which the Company is required to adopt in 1996. SFAS No. 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill. The adoption of SFAS No. 121 is not
expected to have a material impact on the Company's financial position, annual
operating results or cash flows.
In October 1995, FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which the Company is required to adopt in 1996. SFAS No. 123
establishes optional alternative accounting methods for stock-based compensation
as well as new required disclosures. The Company intends to account for
stock-based compensation under previously existing accounting guidance. As such,
SFAS No. 123 will be adopted for disclosure purposes only and will not impact
the Company's financial position, annual operating results or cash flows.
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<PAGE>
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER, PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1996; provided, however, that if the
Company has extended the period of time for which the Exchange Offer is open,
the term "Expiration Date" means the latest time and date to which the Exchange
Offer is extended.
As of the date of this Prospectus, $100.0 million aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996, to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under " -- Certain Conditions to the Exchange Offer"
below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving notice of such
extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Delaware General Corporation Law in connection with the Exchange Offer.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to SunTrust Bank, Atlanta (the "Exchange
Agent") at one of the addresses set forth below under "Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such Old
Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT
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REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE
COMPANY. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instruction" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each broker-dealer holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a
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<PAGE>
broker-dealer, the holder must represent that it is not engaged in nor does it
intend to engage in a distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral and
written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be deposited
by
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<PAGE>
the Eligible Institution with the Exchange Agent and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Old Notes" above
at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA"). In any such event the Company is required to use every reasonable effort
to obtain the withdrawal of any stop order at the earliest possible time.
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EXCHANGE AGENT
SunTrust Bank, Atlanta has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<CAPTION>
BY HAND/OVERNIGHT EXPRESS: BY MAIL: BY OVERNIGHT DELIVERY:
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
(insured if registered (insured if registered (insured if registered
recommended) recommended) recommended)
SunTrust Bank, Atlanta SunTrust Bank, Atlanta SunTrust Bank, Atlanta
Corporate Trust Department Corporate Trust Department Corporate Trust Department
58 Edgewood Avenue 58 Edgewood Avenue 58 Edgewood Avenue
Room 400 Room 400 Room 400
Atlanta, Georgia 30303 Atlanta, Georgia 30303 Atlanta, Georgia 30303
VIA FACSIMILE:
(404) 332-3966
FOR INFORMATION CALL:
M. Russell Smith, Jr.
(404) 588-7811
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ , which includes fees and expenses of the Trustee,
accounting, legal, printing and related fees and expenses.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 10 3/4% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Old
Notes do not have any appraisal or dissenters' rights under Delaware General
Corporation Law in connection with the Exchange Offer. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. However, (i) if the Initial Purchaser so requests with respect to Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by it
following consummation of the Exchange Offer or (ii) if any holder of Old Notes
is not eligible to participate in the Exchange Offer or, in the case of any
holder of Old Notes that participates in the Exchange Offer, does not receive
freely tradable New Notes in exchange for Old Notes, the Company is obligated to
file a registration statement on the appropriate form under the Securities Act
relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than (i) any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or (ii) any
broker-dealer that purchases Notes from the Company to resell pursuant to Rule
144A or any other available exemption) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. A broker-dealer who holds Old
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of New Notes.
Each such broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." While the Company
has an obligation under the Registration Rights Agreement to update this
Prospectus by amendment or supplement for a period of 90 days following
consummation of the Exchange Offer, the Company has no obligation thereafter to
update the Prospectus and, therefore, holders required to deliver a prospectus
may not thereafter be able to resell because they may be unable to comply with
the prospectus delivery requirements described above.
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
38
<PAGE>
BUSINESS
HISTORY OF THE COMPANY
Founded in 1871, the Company was privately held by the Simmons family for
many years and later was publicly traded. Historically, the Company was a
worldwide mattress manufacturer; in 1977 over 20% of the Company's net sales
came from international sales. In 1978, Gulf & Western Industries, Inc., which
later became Paramount Communications, Inc. ("Paramount"), acquired the Company
via a tender offer. In September 1985, Paramount sold the Company to Wickes
Companies, Inc., which in turn sold the stock to a group of private investors
led by Wesray Capital through a leveraged buyout in October 1986. During 1987
and 1988, the Company sold its European and Asian subsidiaries and several
parcels of real estate in order to pay down debt incurred to finance the
leveraged buyout.
In January 1989, 100% of the Company's stock was acquired by the
newly-created Simmons ESOP for approximately $250 million. Between 1989 and
1991, the Company sold additional real estate as well as its Canadian and
Mexican subsidiaries, the proceeds of which were used to repay a portion of the
Company's debt. In conjunction with a financial restructuring completed in 1991,
MLCP provided the Company with a $32.2 million equity investment, the proceeds
of which were used to reduce further the Company's debt, giving MLCP an
approximately 60% interest in the Company. As a result of the Acquisition, 100%
of the Company's common stock is owned by Holdings. The Simmons ESOP holds all
of the Series A Preferred Stock, which upon conversion into common stock of the
Company or Holdings would represent direct or indirect ownership of 15.1% of the
common stock of the Company (exclusive of stock options granted under the
Company's management stock incentive plan).
GENERAL
The Company is the second largest bedding manufacturer in the United States.
The Company manufactures and distributes a broad range of mattresses, box
springs, bedding frames and sleep accessories under well-recognized brand names,
including Beautyrest(R), Simmons(R), Maxipedic(R), Beautysleep(R) and three
newly introduced lines, Connoisseur(R), BackCare(R) and Equation of Sleep(R).
Sales of conventional bedding, which includes fully assembled mattresses and box
springs, accounted for approximately 98% of the Company's 1995 net sales.
Beautyrest(R), the Company's premier brand, accounted for approximately 72% of
net sales and approximately 58% of unit volume in 1995.
The Company manufactures and supplies conventional bedding to over 5,000
retail outlets, representing more than 2,500 customers, including furniture
stores, department stores, specialty sleep shops and warehouse showrooms. The
Company operates 18 manufacturing facilities, which are strategically located in
15 states and Puerto Rico in proximity to its customers, thereby reducing
transportation costs, facilitating just-in-time delivery and enhancing the
Company's ability to service large national accounts. The Company believes that
operating each of its manufacturing facilities affords a number of advantages
over several of its national, brand-name competitors that operate as a group of
independent licensees, including (i) producing consistently high-quality
merchandise across all facilities; (ii) allowing the Company to share its best
practices among manufacturing facilities; (iii) ensuring consistency of local
marketing for national accounts; and (iv) permitting efficient allocation of
production among manufacturing facilities to accommodate variations in regional
demand.
STRATEGY
The Company's strategic objectives are to maximize profitability and cash
flow by continuing to increase its market share and by improving its operating
efficiency. To achieve these objectives, the Company has implemented a strategy
that includes: (i) increasing penetration of existing and
39
<PAGE>
new accounts, primarily by emphasizing higher-end and more profitable products
and by continuing to introduce new and innovative products; and (ii) improving
operating performance and profitability by re-engineering the Company's
manufacturing facilities through changing the layout of the manufacturing
process and by upgrading the Company's information systems.
INCREASE PENETRATION OF EXISTING AND NEW ACCOUNTS. The Company believes
there is significant opportunity to improve its unit volume and market share by
increasing its penetration of existing and new accounts.
Existing Accounts. The Company believes that it can most effectively
increase net sales by increasing sales to existing customers. The Company
plans to achieve such increases primarily by: (i) emphasizing higher-end,
more profitable products; and (ii) increasing the number of slots it has on
its customers' floors through the introduction of new and innovative
products. The Company will continue to help its retailers to remerchandise
their showrooms and to actively market more profitable lines of bedding
through ongoing marketing initiatives and retailer sales force training. The
premium Beautyrest(R) mattresses are more profitable for both the Company
and its retailers, and management believes that a significant opportunity
exists to capture additional sales at the higher-end price points by
educating consumers about the benefits of these models. In addition, the
Company has a staff of engineers dedicated to designing and testing
innovative new products that differentiate the Company's products from those
of its competitors. Management believes that new products, such as the
BackCare(R) open coil product and the ready-to-assemble Equation of Sleep(R)
product, will enable it to increase the number of slots it has on retail
floors and displace marginal competitors, thereby enhancing its share of its
customers' bedding business. The BackCare(R) product line, which was
launched in June 1995, is being sold by 25% of the Company's customers
without any significant displacement of its existing product lines.
New Accounts. Management also is focusing on increasing the number of
accounts and expects that the Company will be able to continue to add a
substantial number of new accounts to its retailer base. The Company
recently has developed an extensive training program for its sales
representatives that focuses on marketing to prospective accounts and has
assigned sales representatives to target specific prospective accounts. The
Company also has devoted more resources to its national advertising program,
which builds brand awareness and emphasizes the various features and
benefits of the Company's products which differentiate them from other
brands. As a result of these initiatives, the Company added approximately
250 net new accounts during 1995 and approximately 60 net new accounts
during the first quarter of 1996, increasing its customer base to over 2,500
accounts.
IMPROVE OPERATING PERFORMANCE AND PROFITABILITY. Management has identified
several potential areas of improvement that are expected to result in increased
efficiency and profitability, including re-engineering the Company's
manufacturing facilities and upgrading the Company's information systems.
Re-engineering Manufacturing Facilities. The Company is working with a
nationally recognized management consulting firm on a re-engineering
project, internally referred to as UNITE, which is expected to be
implemented in each of the Company's conventional manufacturing facilities
and is expected to improve the flow of production and overall efficiency by
changing the layout of the factory floor. In December 1995, the Company
substantially completed the re-engineering of its Fredericksburg, Virginia
facility, which included reorganizing the manufacturing processes into cell
configurations and implementing a self-replenishing raw materials purchasing
system. The Company intends to re-engineer six additional plants to similar
specifications during 1996, with the remaining 10 conventional facilities to
be converted by early 1998. Based upon the initial results of the
re-engineering of the Fredericksburg facility,
40
<PAGE>
management believes that, upon completion of the scheduled re-engineering of
its manufacturing facilities, the Company will realize a significant
increase in manufacturing productivity (measured in units produced per
labor-hour), and an increase in manufacturing space available for future
expansion.
Upgrading Systems. The Company is in the process of implementing a major
upgrade of its computer systems, internally referred to as SWIFT, that is
intended to enable the Company to better analyze account profitability and
identify areas where pricing or margin improvements are available. This
system upgrade, which will consolidate the Company's existing systems into
one integrated system, also is expected to enhance customer service and
order taking by facilitating the more efficient exchange of information
between the Company and its customers. The Company expects this system
upgrade to be completed by June 1997 and believes it will improve operating
performance and profitability.
INDUSTRY AND COMPETITION
Wholesale revenues in the domestic conventional bedding industry have grown
at a compound annual rate of 6.8% to approximately $3.2 billion in 1995 from
approximately $860.4 million in 1975, according to industry sales data compiled
by ISPA. During this 20-year period, wholesale revenues increased each year,
with the exception of 1982, when such revenues declined by 1.9%. The domestic
conventional bedding industry accounts for over 90% of wholesale revenues for
the entire domestic bedding market, according to ISPA. Non-conventional bedding
products, such as flotation bedding ("waterbeds"), futons and electric
adjustable beds, account for the remainder of industry wholesale revenues. The
graph below depicts the growth of the domestic conventional bedding industry
from 1975 to 1995:
DOMESTIC CONVENTIONAL BEDDING REVENUES: 1975-1995
YEAR WHOLESALE REVENUES
- ---- ------------------
1975 $860.4 Million
1976 946.6 Million
1977 966.2 Million
1978 1.06 Billion
1979 1.2 Billion
1980 1.3 Billion
1981 1.4 Billion
1982 1.368 Billion
1983 1.6 Billion
1984 1.7 Billion
1985 1.8 Billion
1986 1.9 Billion
1987 2.09 Billion
1988 2.26 Billion
1989 2.3 Billion
1990 2.3 Billion
1991 2.38 Billion
1992 2.56 Billion
1993 2.76 Billion
1994 3 Billion
1995 3.2 Billion
-----------------------
Source: ISPA
The domestic bedding industry consists of over 800 bedding manufacturers,
ranging from small, family-owned plants to large factory-direct producers. The
four largest bedding manufacturers (the Company, Sealy Corporation, Serta, Inc.,
and Spring Air Company), accounted for approximately 58% of the industry's
estimated 1995 wholesale revenues of $3.2 billion. The 10 largest bedding
manufacturers accounted for an estimated 73% of the industry's estimated 1995
wholesale revenues, with the remaining revenues attributable to the hundreds of
small regional and local manufacturers.
The Company estimates that its share of the conventional bedding market has
grown to approximately 15.1% in 1995 from approximately 13.1% in 1992, based on
wholesale revenue data
41
<PAGE>
published by ISPA. The following table sets forth certain information regarding
management's most recent estimates of the domestic market shares of major
producers of conventional bedding, and is principally based on a report
published in the March 18, 1996 edition of Furniture/Today:
<TABLE>
<CAPTION>
1995
MARKET SHARE
COMPANY/LICENSING GROUP (ESTIMATED) MAJOR BRANDS
- --------------------------------- ------------ ---------------------------------
<S> <C> <C>
Sealy Corporation................ 17.4% Posturepedic, Correct Comfort,
Stearns & Foster
SIMMONS COMPANY.................. 15.1% BEAUTYREST, MAXIPEDIC, BACKCARE
Serta, Inc.*..................... 14.3% Perfect Sleeper, Sertapedic
Spring Air Company*.............. 11.3% Back Supporter, Spring-O-Pedic
King Koil*....................... 3.3% Posture Bond, Spinal Guard
Restonic Sleep Products*......... 2.7% Marvelous Middle, Sup-R-Posture
Englander*....................... 2.6% Lady Englander, Comfort Seal
Therapedic Division of the
International Bedding Corp....... 2.4% Medi-Coil
Springwall*...................... 2.2% Chiropractic
E.B. Malone Corp. d/b/a Bassett
Bedding.......................... 1.9% Dreammaker
All others....................... 26.8%
------
100.0%
------
------
</TABLE>
----------------
* Operates as a group of independent licensees.
ISPA estimates that approximately 70% of conventional bedding is sold for
replacement purposes and that the average time between consumer purchases of
conventional mattresses is approximately 11 years. Manufacturers compete on the
basis of product quality, brand-name recognition, price, service and prompt
delivery. Approximately 75% of conventional bedding is sold to furniture stores
and specialty sleep shops. Most of the remaining conventional bedding is sold to
department stores, national mass merchandisers and contract customers, such as
motels, hotels and hospitals.
The economics of selling conventional bedding products are attractive to
retailers for a number of reasons. Conventional bedding products produce higher
sales per square foot than most other products sold in furniture stores.
Furthermore, conventional bedding products generally provide higher gross margin
return on inventory relative to other products in furniture stores because: (i)
retailers generally carry little, if any, conventional bedding inventory other
than floor samples; and (ii) bedding products are consistently among retailers'
highest gross margin products. Furthermore, manufacturers generally share the
cost of cooperative advertising and consumer promotions with retailers.
According to a study conducted by ISPA, households headed by people 45 to 64
years old tend to purchase bedding sets in the premium price segments.
Statistics published by the United States government indicate that the number of
households in this category is expected to grow from 30.4 million in 1995 to
39.8 million in 2000, an increase of 31%, and to 42.2 million in 2005, an
additional increase of 6%. Management expects these demographic trends to result
in an increase in demand for premium priced bedding, the segment of the market
in which the Company predominantly competes.
42
<PAGE>
PRODUCTS
Overview. The Company's conventional bedding, which accounted for
approximately 98% of the Company's net sales in 1995, consists primarily of
brand name bedding that varies in price, design, material and size. Retail
prices for the Company's products range from under $200 for a twin-size
promotional bedding set to approximately $3,000 for a king-size luxury set. The
Company predominantly competes in the $499 and up retail price segment, which
accounts for the top 40% of the market in terms of units sold. The Company also
manufactures and sells waterbeds, licenses the Simmons name and manufacturing
processes to third-party manufacturers abroad to produce and distribute
conventional bedding products within their designated territories and licenses
the Simmons name to third-party manufacturers domestically for use on adjustable
beds, down comforters, pillows, bed sheets, bed pads and linens.
Pocketed Coil. The Company is the only national manufacturer that produces
conventional bedding using pocketed coil construction. The Company's
Beautyrest(R) and Connoisseur(R) lines, which employ pocketed coil innersprings,
are designed to be among the most comfortable and durable premium mattresses in
the market. Unlike open coil mattresses, in which each innerspring coil is
joined to adjacent coils at the top and the bottom, pocketed coil mattresses are
constructed so that each row of innerspring coils is joined to adjacent rows of
coils in the center third of each coil's pocket, thereby permitting the top and
bottom of each coil to respond independently to pressure applied to the surface
of the mattress. With each coil capable of moving independently, this design
allows the mattress to contour to the user's body, reducing excess movement.
Beautyrest(R) is the Company's flagship product in the pocketed coil line of
bedding, accounting for approximately 72% of the Company's net sales and
approximately 58% of its unit volume in 1995. In the fall of 1995, the Company's
pocketed coil construction was incorporated into the new Connoisseur(R) line in
response to the increasing demand for top-of-the-line premium bedding. The
Connoisseur(R) line is intended to offer high-end customers a luxurious product
that is durable and that contains variable pressure foam for maximum comfort and
support. The Company expects the Connoisseur(R) line to yield higher profit
margins and further elevate the Company's image as a producer of top quality
premium bedding.
Open Coil. To provide a broad product offering, the Company manufactures the
Maxipedic(R), Beautysleep(R) and BackCare(R) product lines, which use
traditional open coil technology. The Maxipedic(R) product line, which features
non-skid quilting and a steel grid that anchors the coils and reduces lateral
motion, is intended to provide the Company's customers with a moderately priced
open coil product. Beautysleep(R) is an exclusive-label product line for
customers interested in a brand-name open coil product.
The newly introduced BackCare(R) mattresses are designed for today's
health-conscious consumers who seek superior support and comfort in the open
coil mattress category. This line combines anatomic foam with a five-zone
system, two for support and three for comfort. The foam responds to the user's
need for support under the lower back and thighs, while offering comfort under
the calves, upper shoulders and buttocks. Thus, the five-zone system is designed
to keep the back in a natural position and ensure proper alignment and comfort
as the user changes position. The BackCare(R) product line, which was introduced
in June 1995, is being sold by 25% of the Company's customers without any
significant displacement of its existing product lines.
Specialty Sleep Products. The Company manufactures waterbeds in a limited
number of its conventional bedding plants. Sold under the name Flotation
Beautyrest(R), waterbeds accounted for approximately 1% of the Company's bedding
sales in 1995. The Company, the only major domestic bedding manufacturer that
produces waterbeds, sells waterbeds to specialty retailers and other customers
throughout the United States.
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<PAGE>
The Company currently is introducing a line of ready-to-assemble ("RTA")
bedding, which the Company believes is a potentially high-growth segment of the
bedding market. RTA will come on the market in early 1996 under the Equation of
Sleep(R) product line. This new product developed by the Company, which is
expected to be shipped to the customer in two to four boxes via United Parcel
Service or Federal Express, is intended to increase customer and retailer
convenience, require less retail and inventory floor space, and allow access to
non-traditional distribution channels such as QVC Inc. and catalogs.
CUSTOMERS
The Company manufactures and supplies conventional bedding to over 5,000
retail outlets, representing more than 2,500 customers including furniture
stores, department stores, specialty sleep shops and warehouse showrooms. In
1995, the Company was the exclusive supplier to over 200 of these customers. The
Company's 10 largest customers accounted for approximately 46% of 1995 net
sales, while no single customer accounted for more than 8% of such net sales.
The majority of the Company's net sales are to furniture stores, department
stores, sleep shops and warehouse showrooms. The following table sets forth the
customer profile for the Company's conventional bedding sales, the percentage of
total net sales made to each category of customers in 1995 and the names of
representative customers:
<TABLE>
<CAPTION>
ESTIMATED
PERCENTAGE OF
CHANNEL OF DISTRIBUTION NET SALES REPRESENTATIVE CUSTOMERS
- --------------------------------------- ------------- ---------------------------------------
<S> <C> <C>
Furniture stores....................... 50% Art Van Furniture, Inc.; Heilig-Meyers
Company; Levitz Furniture Inc.;
Rhodes Furniture
Department stores...................... 25% Federated Department Stores, Inc.; May
Department Stores Company; Montgomery
Ward & Co. Inc.; Sears, Roebuck and
Company
Specialty sleep shops.................. 17% Mattress Discounters; Nationwide Sleep
Centers; Sleepy's Bedding Centers
Warehouse showrooms.................... 5% American Furniture Warehouse; Wickes
Furniture Company Inc.
Other (membership clubs, jobbers and
contract customers).................... 3% Price/Costco Inc.; Rent-A-Center
------
100%
------
------
</TABLE>
SALES, MARKETING AND ADVERTISING
The Company's products are sold by approximately 150 field sales
representatives and a national sales staff consisting of eight people. Field
sales representatives visit individual retailers on a regular basis to assist
showroom floor sales people with product presentation, point-of-purchase signage
and sales techniques, while the national sales staff is responsible for national
marketing and national accounts. Over its 125-year history, the Company has
grown to its current market position by providing high-quality products that
appeal to consumers and a high level of service to its retailing customers.
The Company's advertising program focuses on two areas: (i) cooperative
promotional advertising, which complements and is designed around individual
retailers' marketing programs; and (ii) national advertising, which is designed
to establish and build brand awareness with end users. With cooperative
advertising, the Company shares the costs of advertising with retailers in the
form of rebates, merchandising funds and local advertising. Management believes
cooperative advertising fosters strong relationships with its retailers, who
exert significant influence on the consumer's
44
<PAGE>
purchasing decision. The Company seeks to build long-term brand awareness
through regular national advertising and achieve short-term sales objectives
through individual commercials. One of the Company's most successful campaigns,
the "Do Not Disturb" campaign, which is ongoing, was launched in the spring of
1995. This campaign was designed to build awareness of the Company and of its
competitive points of differentiation, especially the advantages of the
Company's use of pocketed coil technology, which was demonstrated by the
Company's "Bowling Ball" commercial that was initially aired in April 1995.
Retailers greatly influence the bedding business through the allocation of
floor space and through the advice of the retail floor sales person, who often
has the ability to exert significant impact on customer purchase decisions.
Typically, retail floor sales people are motivated primarily by high commission
rates and by proceeds from promotions. However, the Company has found that
educating and working in partnership with sales people can increase their
awareness of the value of the Company's products. To this end, the Company has
developed programs in the Company's Atlanta offices and on-site at its retailers
that are designed to teach retail floor sales people how to match customers with
their mattress comfort preference by improving the retail floor sales person's
product knowledge and sales skills. The Company's sales force is trained in
advertising, merchandising and salesmanship. Management believes that its
attention and focus on the training of its sales representatives and its
customers' retail floor sales people is one area where the Company
differentiates itself from most of its largest competitors.
The Company also has implemented an automated system for analysis of
marketing data. The Simmons Market Analysis of Retail Trends ("SMART") system
combines geographically-organized sales and demographic data to provide needed
information for the analysis of the bedding business at the retail level. This
computerized system helps the Company analyze demographic, lifestyle and sales
data and provides guidelines for increasing bedding sales. The demographic and
regional lifestyle data set forth in each SMART report provided by the Company
is used by retailers to identify and target customers in high potential sales
areas.
SUPPLIERS
The Company purchases substantially all of its conventional bedding raw
materials (i.e., spring components, wire, lumber, foam and ticking) centrally in
order to maximize economies of scale and volume discounts. The Company sourced
approximately 80% of its 1995 raw material needs from 10 suppliers. The Company
has long-term supply agreements with each of Leggett & Platt ("L&P"), Foamex
International, Inc. and Amoco Fabrics and Fiber Company for certain components.
L&P supplies the majority of certain components (including spring components,
insular pads, wire, fiber, quilt backing and flange material) to the bedding
industry. With the exception of L&P, the Company believes it can replace its
other suppliers because it already has identified and currently uses alternative
sources. L&P currently provides the Company with certain continuous wire and
foundation components for which alternative sources may not be readily
available. Interruption in the supply of these components could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company has not experienced any interruption in supply and does
not currently expect such an interruption to occur.
During 1995, L&P provided approximately one-third of the Company's total raw
material needs. The Company expects that L&P will provide a comparable portion
of the Company's 1996 total estimated raw material needs. To ensure a long-term
adequate supply of certain components, the Company and L&P have entered into
agreements, generally expiring in the year 2010, for the supply of grid tops,
innersprings and wire. Among other things, these agreements generally require
the Company to purchase a majority of its requirements of certain components
from L&P and in return, L&P will provide the Company with certain sales
allowances depending upon the volume of its purchases.
45
<PAGE>
MANUFACTURING AND FACILITIES
The Company operates 18 manufacturing facilities in 15 states and Puerto
Rico. These manufacturing facilities yield a combined practical capacity of over
20,000 units per day, assuming two eight-hour shifts daily. In 1995, the Company
produced a daily average of 15,250 bedding units per day, although average daily
production was as high as 17,700 units per day during peak periods. Currently,
13 of the Company's 18 facilities operate two shifts a day, four facilities
operate a single shift and one operates three shifts per day. Each facility is
managed by a Vice President-- General Manager who reports to one of three
Divisional Executive Vice Presidents. Each plant operates as a separate profit
center and maintains certain administrative functions, primarily sales and order
entry, accounting and payroll. The corporate headquarters oversees national
purchasing and marketing, the management of national accounts, credit
administration, accounts receivable collection, cash management and personnel
functions.
The manufacturing facilities are strategically located to service major
metropolitan areas and consist of an average of approximately 120,000 square
feet of manufacturing space, most of which is devoted to production. Most raw
materials inventory is received through "just-in-time" delivery from the
Company's major suppliers. Finished goods inventory is minimized through
made-to-order production, with most orders being scheduled, produced and shipped
within 24 to 72 hours of receipt.
The Company is working with a nationally recognized management consulting
firm on a re-engineering project, internally referred to as UNITE, which is
expected to be implemented in each of the Company's conventional manufacturing
facilities and is expected to improve the flow of production and overall
efficiency by changing the layout of the factory floor. In December 1995, the
Company substantially completed the re-engineering of its Fredericksburg,
Virginia facility, which included grouping each phase of the manufacturing
processes into cell configurations and implementing a self-replenishing raw
materials system. The Company intends to re-engineer six additional plants to
similar specifications during 1996, with the remaining 10 conventional
facilities to be converted by early 1998. Based upon the initial results of the
re-engineering of the Fredericksburg facility, management believes that, upon
completion of the scheduled re-engineering of its manufacturing facilities, the
Company will realize a significant increase in its manufacturing productivity
(measured in units produced per labor-hour), and an increase in manufacturing
space available for future expansion.
ENGINEERING AND DEVELOPMENT
The Company seeks to maintain close contact with bedding industry
developments through sleep research conducted by industry groups and by the
Company's engineering department, as well as through participation in the Better
Sleep Council, an industry association that promotes awareness of sleep issues,
and ISPA. The Company's marketing and manufacturing departments work closely
with the engineering staff to develop and to test new products for marketability
and durability.
In September 1995, the Company completed the construction of the Simmons
Institute of Technology and Education ("SITE"), a state-of-the-art 38,000 square
foot research center in Atlanta, Georgia. Approximately 25 engineers and
technicians are employed full-time at SITE. These employees conduct product and
materials testing, design manufacturing facilities and equipment, improve
process engineering and development, and ensure high-quality products.
Management believes that the Company's engineering staff gives the Company a
competitive advantage over certain of its competitors who do not have
significant in-house engineering departments.
46
<PAGE>
WARRANTIES; PRODUCT RETURNS
The Company's conventional bedding products generally offer limited
warranties of 10 years against manufacturing defects, with certain bedding
manufactured to dealer specifications for promotional purposes carrying
warranties of one year. Management believes that its warranty terms are
generally consistent with those of its primary national competitors. The
Company's historic costs of honoring warranty claims have been an immaterial
percentage of net sales. The Company, consistent with industry practice, also
experiences non-warranty returns for reasons generally related to retailer
accommodations and order entry errors, the costs of which also are considered to
be immaterial. The Company is continuing to train its retailers' sales force
personnel on merchandising and salesmanship in order to minimize non-warranty
returns. The Company resells its returned products primarily through as-is
furniture vendors. In addition, the Company has recently begun to market its
returned products and factory overruns in Company outlets located in or near
factory outlet malls.
PATENTS, TRADEMARKS AND LICENSES
The Company owns many trademarks, including Simmons(R), Beautyrest(R),
Maxipedic(R), Connoisseur(R), Beautysleep(R), BackCare(R) and Equation of
Sleep(R), as well as patents, most of which are registered in the United States
and in many foreign countries. The Company considers its trademarks,
particularly Simmons(R) and Beautyrest(R), to be of material importance to the
business of the Company since they have the effect of developing brand
identification and maintaining consumer loyalty. Management is not aware of any
fact that would negatively impact the continuing use of any of the Company's
material patents, licenses, trademarks or trade names. As a result of the
disposition of certain of the Company's foreign operations through the early
1990s, the Company now licenses the Simmons name and many of its trademarks,
processes and patents to third party manufacturers abroad to produce and
distribute conventional bedding products within their designated territories,
primarily on perpetual or automatically renewable terms. In addition, the
Company has licensed the Simmons name and certain trademarks, generally for
limited terms, to domestic third party manufacturers of adjustable beds, down
comforters, pillows, bedsheets, bed pads and linens.
EMPLOYEES
As of March 30, 1996, the Company had approximately 2,600 employees, of
which approximately 1,140 were represented by labor unions. Employees at nine of
the Company's 18 manufacturing facilities are represented by unions.
Manufacturing employees at seven of the unionized plants are under a master
contract with the Upholstery Division of the United Steelworkers. There are also
agreements with Teamsters, United Furniture Workers, Longshoremen and
International Association of Machinists. Labor relations historically have been
good, with no labor-related work stoppages in over 20 years. Union contracts
typically are negotiated for three-year terms. A majority of the Company's
current contracts were negotiated in 1994 and are due for renegotiation in 1997.
Since 1980, the Company has opened eight new plants, none of which is unionized.
Approximately 1,400 of the Company's current and former employees are
participants in the Simmons ESOP.
REGULATORY MATTERS
As a manufacturer of bedding and related products, the Company uses and
disposes of a number of substances, such as glue, lubricating oil, solvents, and
other petroleum products, that may cause the Company to be subject to regulation
under numerous federal and state statutes governing the environment. Among other
statutes, the Company is subject to the Federal Water Pollution Control Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Clean Air Act and related state
statutes and
47
<PAGE>
regulations. The Company believes that it is in material compliance with all
applicable federal and state environmental statutes and regulations. Compliance
with all such provisions which have been enacted relating to the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, is not expected to have any material adverse effect upon the
Company's business, financial condition or results of operations. The Company is
not aware of any pending federal environmental legislation which would have a
material adverse effect on the Company's financial condition or results of
operations.
The Company's conventional bedding and other product lines are subject to
various federal and state laws and regulations relating to flammability,
sanitation and other standards. The Company believes that it is in material
compliance with all such laws and regulations.
PROPERTIES
The offices of the Company are located at One Concourse Parkway, Suite 600,
Atlanta, Georgia 30328.
The following table sets forth certain information regarding manufacturing
and certain other facilities operated by the Company as of March 30, 1996:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FOOTAGE
- -------------------------------------------------------------- -----------
<S> <C>
MANUFACTURING FACILITIES
Atlanta, Georgia.............................................. 148,300
Atlanta, Georgia*............................................. 30,960
Charlotte, North Carolina..................................... 113,400
Columbus, Ohio................................................ 190,000
Dallas, Texas................................................. 106,140
Denver, Colorado.............................................. 98,090
Fredericksburg, Virginia...................................... 128,500
Honolulu, Hawaii.............................................. 58,530
Jacksonville, Florida......................................... 205,729
Janesville, Wisconsin......................................... 195,340
Kansas City, Missouri......................................... 85,165
Los Angeles, California....................................... 223,382
Phoenix, Arizona.............................................. 54,000
Piscataway, New Jersey........................................ 200,908
San Leandro, California....................................... 260,500
Seattle, Washington........................................... 133,610
Springfield, Massachusetts.................................... 129,000
Toa Baja, Puerto Rico......................................... 24,500
-----------
Sub Total................................................. 2,386,054
OTHER FACILITIES
Corporate Headquarters (Atlanta, Georgia)..................... 37,500
SITE (Atlanta, Georgia)....................................... 38,000
-----------
TOTAL..................................................... 2,461,554
-----------
-----------
</TABLE>
- ------------
* This facility is not scheduled to be re-engineered pursuant to UNITE.
The Company leases all of its facilities with the exception of its
Janesville, Wisconsin manufacturing facility, which the Company owns. The
average term until final lease expiration, including renewals, is approximately
12 years. While four of the 17 leased manufacturing facilities
48
<PAGE>
have leases expiring within five years, management either is planning to
relocate to a larger facility or expects that a new lease will be signed.
The Company leases all of its facilities with the exception of its
Janesville, Wisconsin manufacturing facility, which the Company owns. The
average term until final lease expiration, including renewals, currently is
approximately 12 years. While four of the 17 leased manufacturing facilities
have leases expiring within five years, management either is planning to
relocate to a larger facility or expects that a new lease will be signed.
The Company's manufacturing facilities yield a combined practical capacity
of over 20,000 units per day, assuming two eight hour shifts daily.
In 1995, Management estimates that the Company's manufacturing facilities
operated at approximately 75-80% of capacity, based upon 13 of the Company's
18 facilities operating two shifts per day, four facilities operating a
single shift and one operating three shifts per day. Management believes
that the Company's facilities, taken as a whole, have adequate productive
capacity and sufficient manufacturing equipment to conduct business at
levels meeting current demand.
LEGAL PROCEEDINGS
From time to time, the Company has been involved in various legal
proceedings. Management believes that all of such litigation is routine in
nature and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Company, would have material adverse
effect on the financial condition or results of operations of the Company.
On May 7, 1996, an action was filed against the Company in federal district
court in Puerto Rico alleging breach of a lease and purchase option agreement
and seeking damages of $300,000 in incurred costs and $2.2 million in lost
earnings to date. The action arises out of the Company subsidiary's termination
of the agreement with the plaintiff and others. The Company believes that the
actions of its subsidiary were in accordance with its rights under the agreement
and intends to vigorously defend the asserted claims. In the event of an
unfavorable outcome, the Company believes that any ensuing liability would not
have a material adverse effect on the Company's financial condition.
49
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of the Company. Each director of the Company
will hold office until the next annual meeting of shareholders of the Company or
until his successor has been elected and qualified. Officers of the Company are
elected by the Board of Directors of the Company and serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------------ ---- ------------------------------------------
<S> <C> <C>
Zenon S. Nie.............................. 45 Chairman of the Board of Directors, Chief
Executive Officer and Director.
Martin R. Passaglia....................... 47 Senior Executive Vice President and
Director.
Jonathan C. Daiker........................ 48 Executive Vice President-Finance and
Administration, Chief Financial Officer
and Director.
William L. Ayers, IV...................... 50 Executive Vice President-Marketing and
Sales.
Joseph Ulicny............................. 53 Executive Vice President-Market
Development.
Robert K. Barton.......................... 55 Senior Vice President-Human Resources.
Gary G. Pleasant.......................... 53 Divisional Executive Vice President.
Cleve B. Murphy........................... 45 Divisional Executive Vice President.
James P. Maher............................ 60 Divisional Executive Vice President.
Leo T. Brennan............................ 61 Vice President-Materials Management.
Roger W. Franklin......................... 40 Vice President-Finance and Treasurer.
Savio W. Tung............................. 45 Director.
Christopher J. O'Brien.................... 37 Director.
Charles J. Philippin...................... 45 Director.
Jon P. Hedley............................. 35 Director.
</TABLE>
Zenon S. Nie joined the Company in 1993 as Chief Executive Officer and was
appointed Chairman in January 1994. Prior to joining the Company, Mr. Nie served
as President of the Consumer Home Fashions Division of Bibb Companies, a linen
manufacturer, from 1991 to 1993. From 1981 through 1991, Mr. Nie held several
senior management positions at Serta, Inc., a bedding manufacturer, including
President, Executive Vice President, Chief Operating Officer, Senior Vice
President-Manufacturing Finance and Administrative and Vice President-Strategic
Planning. Mr. Nie's previous experience includes several marketing positions at
Sealy Corporation, a bedding manufacturer.
Martin R. Passaglia joined the Company in 1973 as a Sales Representative. He
has held various positions during his tenure including Regional Sales Manager,
Vice President and General Manager-Hawaii, Executive Vice President-Account
Development and Executive Vice President-Marketing and was promoted to Senior
Executive Vice President in January 1994.
Jonathan C. Daiker joined the Company in April 1995 as Executive Vice
President-Finance and Administration, Chief Financial Officer. Prior to joining
the Company, Mr. Daiker held a number of directorships in the corporate offices
of Philips Electronics North America Corporation, a consumer
50
<PAGE>
electronics manufacturer, as well as operating positions within its divisional
structure from 1981 to 1995. Most recently, he was Senior Vice President and
Chief Financial Officer for Philips Lighting Company, a manufacturer of
commercial and residential electrical lighting fixtures. Prior to Philips, he
was a senior manager with Price Waterhouse, an accounting firm, from 1971 to
1981 and is a Certified Public Accountant.
William L. Ayers, IV joined the Company in 1973. He has held several sales
management positions including Vice President and General Manager-Los Angeles
and Divisional Executive Vice President, and recently was promoted to Executive
Vice President-Sales and Marketing.
Joseph Ulicny joined the Company in 1992 as Executive Vice President-Finance
and Chief Financial Officer. In Spring 1995, he assumed his current position as
Executive Vice Present-- Market Development. Prior to joining the Company, Mr.
Ulicny served with Dannon Company, a yogurt wholesaler, for over seven years
from 1985 to 1992.
Robert K. Barton joined the Company in February 1982 as Director of Dealer
Financial Services. He served as Vice President-Dealer Financial Services, Vice
President-Administration and Vice President-Human Resources prior to assuming
his current position as Senior Vice President-Human Resources.
Gary G. Pleasant rejoined the Company in 1991 as Vice President and General
Manager-Seattle and was promoted to his current position, Divisional Executive
Vice President, in January 1995. Mr. Pleasant had been previously employed by
the Company from 1966 to 1985 in various sales management positions. From 1985
to 1991, Mr. Pleasant worked for Sealy Corporation, first as Vice
President-Sales-Ohio-Sealy and then as National Vice President-Marketing and
Sales.
Cleve B. Murphy joined the Company in May 1995 as Divisional Executive Vice
President. Mr. Murphy's background includes twelve years at Sealy, Inc., a
bedding manufacturer, where he started as Sales Manager and became one of four
Regional Vice Presidents, from 1983 to 1995. Prior to his employment with Sealy,
Mr. Murphy served eight years as General Manager for Englander, a bedding
manufacturer, from 1975 to 1983 and two years with Serta, Inc. from 1973 to
1975.
James P. Maher joined the Company in 1989 and has served as Vice President
and General Manager-Jacksonville and Vice President and General Manager-San
Leandro prior to his current position as Divisional Executive Vice President.
Before joining the Company, Mr. Maher held senior management positions with
Nachman Corporation, a wire and bedding components manufacturer, Leggett &
Platt, Inc., a manufacturer of bedding components, and May & Company, a bedding
manufacturer, from 1965 to 1984.
Leo T. Brennan joined the Company in 1978 as Director of Purchasing and was
promoted to his current position as Vice President-Materials Management in 1985.
Roger W. Franklin joined the Company in November 1986 as Director of Taxes.
He served as Vice President-Controller prior to assuming his current position as
Vice President-Finance and Treasurer. Prior to joining the Company, Mr. Franklin
spent almost nine years with Price Waterhouse, an accounting firm, in both the
audit and tax areas from 1978 to 1986 and is a Certified Public Accountant.
Savio W. Tung became a director of the Company upon its creation in March
1996. He has been an executive of Investcorp, its predecessor or one or more of
its wholly-owned subsidiaries since September 1984. Mr. Tung is a director of
Saks Holdings, Inc.
Christopher J. O'Brien became a director of the Company upon its creation in
March 1996. He has been an executive of Investcorp, its predecessor or one or
more of its wholly owned subsidiaries since December 1993. Prior to joining
Investcorp, Mr. O'Brien was a Managing Director of Mancuso & Company, a
commercial lending institution, for four years.
51
<PAGE>
Charles J. Philippin became a director of the Company upon its creation in
March 1996. He has been an executive of Investcorp, its predecessor or one or
more of its wholly owned subsidiaries since July 1994. Prior to joining
Investcorp, Mr. Philippin was a partner of Coopers & Lybrand L.L.P., an
accounting firm. Mr. Philippin is a director of Saks Holdings, Inc. and The
Circle K Corporation.
Jon P. Hedley became a director of the Company upon its creation in March
1996. He has been an executive of Investcorp, its predecessor or one or more of
its wholly owned subsidiaries since April 1990. Mr. Hedley is a director of Saks
Holdings, Inc.
DIRECTOR COMPENSATION
The Company pays no additional remuneration to its employees or to
executives of Investcorp for serving as directors. See "--Executive
Compensation." There are no family relationships among any of the directors or
executive officers.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in the previous
three years by the Company's Chief Executive Officer and each of the other four
most highly compensated executive officers whose remuneration exceeded $100,000.
The current compensation arrangements for each of these officers are described
in "Employment Arrangements" below. In connection with the Acquisition, the
Company intends to adopt new compensation arrangements, the terms of which have
not yet been finalized.
52
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION-
AWARDS
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
--------------------- OPTIONS/ ALL OTHER
NAME AND SALARY BONUS (A) SARS (B) COMPENSATION (C)
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- ------------------------------- ---- -------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Zenon S. Nie................... 1995 $404,167 $ 474,896 300,000 $ 7,774
Chairman & Chief Executive 1994 377,203 412,702 350,000 3,598
Officer 1993 48,295 30,000 350,000 --
Martin R. Passaglia............ 1995 250,000 262,500 71,306 4,719
Senior Executive Vice 1994 250,000 242,880 -- 19,909
President 1993 172,613 104,075 -- 21,688
Joseph Ulicny.................. 1995 167,200 175,962 -- 4,628
Executive Vice President-- 1994 160,210 155,383 -- 18,292
Market Development 1993 150,000 66,608 -- 26,207
Robert K. Barton............... 1995 165,500 173,775 70,500 4,061
Senior Vice President-- Human 1994 151,831 146,878 -- 18,894
Resources 1993 127,084 62,445 -- 17,932
Jonathan C. Daiker............. 1995 150,000 182,500 150,500 24,144
Executive Vice President-- 1994 -- -- -- --
Finance & Admininstration, 1993 -- -- -- --
Chief Financial Officer
</TABLE>
- ------------
(a) Earned in year shown but paid in subsequent year.
(b) The amounts shown are the number of shares underlying options granted in the
respective years. In connection with the Acquisition, all outstanding
options were purchased for an aggregate of $6,950,000, representing the
value of such options based on their exercise prices. Messrs. Nie,
Passaglia, Ulicny, Barton and Daiker received $1,812,800, $364,496,
$308,856, $363,867 and $117,435, respectively, for their options, which
amounts were invested in Class C Stock of Holdings.
(c) Consists of (i) contributions to defined contribution plans in 1994 and
1993, respectively, in the amounts of $0 and $0 for Mr. Nie, $18,220 and
$21,216 for Mr. Passaglia, $17,483 and $10,276 for Mr. Ulicny, $18,220 and
$17,764 for Mr. Barton, and $0 and $0 for Mr. Daiker (1995 contributions
have not been established as of this date); (ii) premiums for term life
insurance and long-term disability insurance in 1995, 1994 and 1993,
respectively, in the amounts of $7,774, $3,598 and $0 for Mr. Nie, $4,719,
$1,689 and $472 for Mr. Passaglia, $4,628, $809 and $1,036 for Mr. Ulicny,
$4,061, $674 and $168 for Mr. Barton, and $5,334, $0 and $0 for Mr. Daiker,
respectively; and (iii) relocation assistance in the amounts of $14,895 in
1993 for Mr. Ulicny and $18,810 in 1995 for Mr. Daiker.
53
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR*
<TABLE><CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------- VALUE AT
PERCENT OF ASSUMED ANNUAL RATES
TOTAL OF STOCK
NUMBER OF OPTIONS/ PRICE APPRECIATION
SECURITIES SARS GRANTED FOR OPTION
UNDERLYING TO EMPLOYEES EXERCISE OR TERMS
OPTION/SARS IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#) YEAR(C) ($/SH) DATE 5% ($) 10% ($)
- ------------------------ ----------- -------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Zenon S. Nie............ 300,000 28.8% $4.50 2005 $849,000 $2,151,000
Martin R. Passaglia..... 71,306 6.8% $4.50 2005 $201,796 $ 511,264
Robert K. Barton........ 70,500 6.8% $4.50 2005 $199,515 $ 505,485
Jonathan C. Daiker...... 150,500 14.4% $4.50 2005 $425,915 $1,079,085
</TABLE>
* All Company options outstanding on March 22, 1996 were purchased by Holdings
in connection with the Acquisition.
Aggregate Option Exercises and
Fiscal Year-End Option Value Table
Number of Shares of
Common Stock Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1995 at December 31, 1995 *
---------------------- ---------------------
Name Vested Unvested Vested Unvested
- ---- ------ -------- ------ --------
Zenon S. Nie 60,000 240,000 535,500 497,000
Martin R. Passalgia 14,261 57,045 160,181 86,251
Robert K. Barton 14,100 56,400 160,181 86,251
Jonathan C. Daiker 30,100 120,400 0 0
* For all unexercised in-the-money options, the value presented assumes a
fair market value at December 31, 1995 of $4.50 per share of Common Stock,
which is the then current fair value required to be paid by the Company
during 1995 for repurchases of its shares from the ESOP. In 1995, there was
no established trading market for the Company's Common Stock. All Company
options outstanding on March 22, 1996 were purchased by Holdings in
connection with the Acquisition.
RETIREMENT PLANS
The Company has one single employer defined benefit plan and two single
employer defined contribution plans (the Simmons ESOP and a 401(k) plan), and
makes contributions to multi-employer pension plans. In the aggregate, these
plans cover substantially all permanent employees.
Qualified Retirement Plans.
The Company maintains several single employer retirement plans which are
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The Company also participates in a number of
multi-employer pension plans, from which it has no present intention to
withdraw.
Defined Contribution Plans. The Company sponsors two single employer defined
contribution pension plans; the Simmons Retirement Savings Plan and the Simmons
ESOP.
____Simmons Retirement Savings Plan. The Simmons Retirement Savings Plan
contains a cash or deferred arrangement under Section 401(k) of the Code.
Employees with 12 weeks of employment who have reached age 21 are permitted to
participate in the plan, and generally employees covered by collective
bargaining agreements are not permitted to participate, unless the agreement
expressly provides for participation.
As a result of forming the Simmons ESOP in January 1989, the Company
suspended all employer and employee contributions to this defined contribution
plan during 1989 and 1990. Effective during the 1991 plan year, eligible
participants could again make limited contributions to this defined contribution
plan; however, no employer contributions were allowed. The status of plan
participants was not affected.
Presently, there are approximately 634 participants in this plan, and
participants have the ability to direct the investment of their account
balances. Eligible employees may defer the receipt of a portion of their covered
compensation up to 6% of compensation on a pre-tax basis, subject to various
limitations. Participants are fully vested in their contributions at all times.
The Company did not make any contributions to the plan during plan year 1994
(other than the pre-tax deferrals mentioned above).
____Simmons ESOP. The Simmons ESOP is a defined contribution pension benefit
plan that is designed to qualify as a leveraged employee stock ownership plan
within the meaning of Section 4975(e)(7) of the Code. Assets of the Simmons ESOP
are held in a trust with respect to which NationsBank, N.A. (South) (the "ESOP
Trustee") serves as trustee. The Simmons ESOP covers
54
<PAGE>
otherwise eligible employees of the Company who have completed at least one year
of service for the Company, and have reached age 21. As of December 30, 1995,
approximately 1,400 employees participated in the Simmons ESOP.
The Simmons ESOP provides benefits to each participating employee based on
the value of Company stock allocated to such participant's account over the
period of such participant's participation in the plan. In general, benefits
become payable to participants only following retirement or other separation
from employment.
Leveraged ESOPs differ from other defined contribution employee pension
benefit plans due to their ability to borrow funds from the employer sponsoring
the plan or from other parties in order to acquire company stock for allocation
to participants' accounts as such indebtedness is repaid. Pending such
allocation, as described below, company stock acquired by the ESOP is held by
the trustee in a suspense account. In connection with the establishment of the
Simmons ESOP in 1989, the Simmons ESOP borrowed funds from the Company for the
purpose of acquiring Company stock. As of May 24, 1996, the Simmons ESOP was
indebted to the Company in the approximate principal amount of $61.2 million.
Prior to March 22, 1996, the date of the Acquistion, the Simmons ESOP held
approximately 11,671,663 million shares of common stock of the Company. On the
Acquisition Closing Date, the Simmons ESOP sold approximately 6,001,257 million
shares, representing all shares theretofore allocated to participants' ESOP
accounts, to Holdings for $31.2 million in the aggregate, the net proceeds of
which were reinvested in diversified investments in the respective accounts of
such participants in the Simmons ESOP. Pursuant to the Merger, the remaining
5,670,406 million shares, representing all unallocated shares held in the
suspense account, were converted into Series A Preferred Stock. If converted
into common stock of the Company or capital stock of Holdings, the Series A
Preferred Stock would represent direct or indirect ownership of 15.1% of the
common stock of the Company, after giving effect to such conversion (exclusive
of stock options granted under the Company's management stock incentive plan).
The Company will make annual cash contributions to the Simmons ESOP in an
amount up to 25% of eligible participant compensation, subject to certain
limitations and conditions. The Simmons ESOP will then use all such cash to
repay the internal ESOP Loan to the Company. As a result, there is no cash cost
to the Company associated with the contribution to the Simmons ESOP. As the
internal ESOP Loan is repaid, a portion of the Series A Preferred Stock will be
allocated to participant accounts and non-cash ESOP expense equal to the fair
value of the allocated shares is charged to non-cash ESOP expense. At such time
as the internal ESOP Loan is repaid in full (in approximately six years), all
shares of Series A Preferred Stock held by the Simmons ESOP will have been
allocated to plan participants.
With certain limited exceptions (such as an exception required by law
permitting certain retirement age individuals with at least 10 years of plan
participation to liquidate, over a six-year period, shares allocated to their
accounts) shares allocated to a participant's account under the Simmons ESOP
cannot be sold or otherwise transferred by the participant. The Simmons ESOP
provides for distributions to be made to participants following termination of
employment. With respect to participants whose termination of employment occurs
after becoming eligible for retirement (age 65), early retirement (age 55 with
at least 10 years of service), on account of permanent disability or death,
distribution generally is made during the plan year following the plan year in
which such termination occurs. In all other cases, distribution generally is
made or commences to be made after the expiration of a five plan year period
following the plan year in which termination occurs. Distributions are made in
cash, based on the fair market value (as determined pursuant to an annual
appraisal) of the shares allocated to the participant's account. Such shares are
deemed to have a value of not less than the redemption price for such shares. A
participant entitled to a distribution is entitled under law to have Company
shares allocated to his or her account distributed in kind. A participant
electing to have a distribution of shares has a limited right to require the
Company to purchase such shares at fair market value over an
55
<PAGE>
approximately two year period, with such value to be not less than the
redemption price, in the case of shares of Series A Preferred Stock.
Defined Benefit Plan. The Company also sponsors a single employer defined
benefit pension plan for eligible employees called the Retirement Plan for
Simmons U.S.A. Employees. This plan currently benefits only employees covered by
certain collective bargaining agreements, and has approximately 122
participants. The monthly benefit for such participants upon normal retirement
is generally determined as the sum of (i) 0.75% of monthly earnings as of
January 1, 1963 multiplied by specified credited service as of May 1, 1963, (ii)
1.0% of the first $400 of monthly earnings plus 1.75% of monthly earnings in
excess of $400 for the time period from May 1, 1963 through April 30, 1967 and
(iii) 1.25% of the first $550 of monthly earnings plus 1.75% of monthly earnings
in excess of $550 for each year and completed month of credited service,
beginning May 1, 1967. There is a reduction for benefits accrued under the
Retirement Plan for Simmons Employees, a predecessor plan that was terminated in
1987. A somewhat different formula applies to certain employees who are
represented by IAM Local 315 in New Jersey and UFWA Local 262 in California.
This plan is fully funded and accruals have been frozen. None of the named
executive officers benefits under the plan.
Multiemployer Plans. Certain union employees participate in multi-employer
pension plans sponsored by their respective unions. Amounts charged to pension
cost, representing the Company's required contributions to these plans for the
years ending December 30, 1995, December 31, 1994 and December 25, 1993, were
$1,366,000, $1,403,000 and $1,304,000, respectively.
Nonqualified Plans.
Simmons Company Nonqualified Employee Stock Ownership Plan. In 1989, the
Company instituted this nonqualified plan to provide benefits to eligible
employees similar to those benefits provided under the Simmons ESOP, described
above. This plan covers certain employees who are not eligible to participate in
the Simmons ESOP because of restrictions imposed by the Simmons ESOP on
employees who elected favorable income tax treatment under Code Section 1402
with respect to the sale of employer securities to the Simmons ESOP. Benefits
are to be paid in cash and are computed based on the value of shares the
participants would have received had they participated in the Simmons ESOP.
Participants are entitled to receive accrued benefits upon termination of
employment with the Company, retirement, death or permanent disability. The
nonqualified plan provides for bookkeeping entries to be provided on account of
each Member, to be credited with the shares of stock which would have been
allocated to the Member's accounts under the Simmons ESOP but for the fact that
the Simmons ESOP terms restricted such an allocation. The same vesting schedule
and distribution provisions apply as are described in the Simmons ESOP. The
Company charged approximately $405,000, $582,000 and $280,000 to expense for the
years ended December 30, 1995, December 31, 1994 and December 25, 1993,
respectively. The accrued benefits under the nonqualified plan were $1,132,000,
$786,000 and $435,000 at December 30, 1995, December 31, 1994 and December 25,
1993, respectively, and are included in other long term liabilities in the
accompanying balance sheets. Vested interests of current participants in the
plan were distributed upon consummation of the Acquisition, resulting in
payments to Messrs. Barton and Passaglia of $102,607 and $117,605, respectively.
Retiree Health Coverage.
The Company provides certain health care and life insurance benefits to
eligible retired employees. Eligibility is defined as retirement from active
employment, having reached age 55 with 15 years of service, and previous
coverage as a salaried or non-union employee. Additionally, dependents are
eligible to receive benefits, provided the dependent was covered prior to
retirement. The medical plan pays a stated percentage of most medical expenses
reduced for any deductible and payments made by government programs and other
group coverage. Additionally,
56
<PAGE>
there is a $20,000 lifetime maximum benefit for participants age 65 and over.
The Company also provides life insurance to all retirees who retired before
1979. These plans are unfunded.
The Company accrues the cost of providing post-retirement benefits including
medical and life insurance coverage, during the active service period of the
employee.
EMPLOYMENT ARRANGEMENTS
Zenon Nie, Chairman of the Board of Directors and Chief Executive Officer,
and the Company have entered into a three-year employment agreement (which
renews automatically on a daily basis, subject to termination upon three years'
notice). Pursuant to that agreement, Mr. Nie is entitled to receive (i) a base
salary, currently $500,000 per year, subject to further increases approved by
the Company's Board of Directors, (ii) an annual cash bonus based upon achieving
specified levels of operating income (the "Annual Incentive Plan") and (iii)
specified fringe benefits, including reimbursement of country club dues and
provision of an automobile.
Martin R. Passaglia, Senior Executive Vice President, and Jonathan C.
Daiker, Executive Vice President-Finance and Administration and Chief Financial
Officer, have entered into employment agreements with the Company, expiring on
January 1, 1997 and March 22, 1998, respectively. Mr. Passaglia's employment
agreement renews automatically for successive one-year terms, subject to
termination upon notice. Pursuant to these agreements, Messrs. Passaglia and
Daiker are entitled to receive a base salary, currently $267,000 and $200,000
per year, respectively (subject to further increases approved by the Company's
Board of Directors), and to participate in all Company incentive and fringe
benefit programs, including the Annual Incentive Plan.
Certain additional executive officers, including named executive officer
Robert K. Barton, have entered into employment agreements pursuant to which such
executive officers will be entitled to continue to receive base salary for up to
twelve months plus pro rata payments under the Annual Incentive Plan in the
event that their employment is terminated other than for cause, death or
disability, following a Change of Control, as defined therein. All executive
officers are eligible to participate in the Annual Incentive Plan, payments
under which are based upon the Company's achievement of targeted levels of
operating income, as defined in the plan.
MANAGEMENT STOCK INCENTIVE PLAN
Upon the consummation of the Acquisition, Holdings adopted a Management
Stock Incentive Plan (the "Plan"), in order to provide incentives to employees
and directors of Holdings and the Company by granting them awards tied to the
Class C Stock of Holdings. The Plan is administered by a committee of the Board
of Directors of Holdings (the "Compensation Committee"), which has broad
authority in administering and interpreting the Plan. Awards to employees are
not restricted to any specified form or structure and may include, without
limitation, restricted stock, stock options, deferred stock or stock
appreciation rights (collectively, "Awards"). Options granted under the Plan may
be options intended to qualify as incentive stock options under Section 422 of
the Code or options not intended to so qualify. An Award granted under the Plan
to an employee may include a provision terminating the Award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including, at the discretion of the
Compensation Committee, any change of control of the Company.
Holdings has granted options to purchase up to 2,440,750 shares of its Class
C Stock to certain members of the Company's senior management and intends to
grant additional options to purchase an aggregate of up to approximately 610,715
shares of its Class C Stock to other officers and employees of the Company. The
exercise price of each option granted in connection with the Acquisition is
$2.66 per share, which is the same price per share paid by existing holders of
Class C Stock of Holdings to acquire such Class C Stock. In addition, Holdings
has granted options to purchase up to an additional 202,900 shares of its Class
C Stock to certain members of the
57
<PAGE>
Company's senior management at an exercise price of $3.57 per share, which are
exercisable if an option that has been granted to an affiliate of Investcorp
(the "Investcorp Option") is exercised. Holdings intends to issue options to
acquire up to an additional 48,019 shares of its Class C Stock to officers and
employees of the Company, at an exercise price of $3.57 per share, which are
also exercisable if the Investcorp Option is exercised. Except as noted in the
preceding sentence, the exercise price of each option granted in the future will
be equal to the fair market value of the Company's common stock at the time of
the grant. Each option will be subject to certain vesting provisions. To the
extent not earlier vested or terminated, all options will vest on the tenth
anniversary of the date of grant and will expire 30 days thereafter if not
exercised. In addition, certain holders of Class C Stock of Holdings have
indicated an intent to offer certain members of the Company's management an
opportunity to purchase shares of Class C Stock of Holdings at the same price
paid by such holders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a corporation to indemnify and advance reasonable expenses to any person who was
a party, is a party, or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The Company's Amended and Restated Articles of Incorporation and Bylaws each
include indemnification provisions that mirror the language of the statute. In
addition, the Company's Bylaws provide that, subject to any limitation in the
Company's Articles of Incorporation, the Company may indemnify a director or
officer to the fullest extent permitted by law, including, without limitation,
DGCL Sec.145. Consequently, a director or officer of the Company or a person
serving at the request of the Company in the above-named capacities will be
fully indemnified against such judgments, penalties, fines, settlements and
reasonable expenses actually incurred, except if: (1) the person did not conduct
himself in good faith and did not reasonably believe his conduct was in the
corporation's best interests; or (2) in the case of any criminal action or
proceeding, the person had reasonable cause to believe his conduct was unlawful.
No indemnification may be made in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The Company's Amended and Restated Articles of Incorporation also contain a
provision eliminating liability to the Company or its shareholders for monetary
damages from breach of fiduciary duty as a director. The inclusion of these
indemnification provisions in the Company's Amended and Restated Articles of
Organization and Bylaws is intended to enable the Company to attract qualified
persons to serve as directors and officers who might otherwise be reluctant to
do so.
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<PAGE>
OWNERSHIP OF VOTING SECURITIES
The Company has two classes of issued and outstanding stock (common stock
and Series A Preferred Stock), both of which possess voting rights. At May 24,
1996, there were 31,964,452 shares of the Company's common stock issued and
outstanding, representing 84.9% of the outstanding voting securities of the
Company, and 5,670,406 shares of Series A Preferred Stock issued and
outstanding, representing 15.1% of the outstanding voting securities of the
Company. All of the Company's common stock is owned by Holdings and all of the
Series A Preferred Stock is owned by the Simmons ESOP. The address of the
Simmons ESOP is c/o NationsBank, N.A. (South), as Trustee, 600 Peachtree Street,
NE, Atlanta, Georgia 30308.
Of the three classes of issued and outstanding stock of Holdings (Class A,
Class C and Class D stock), only shares of Class D stock currently possess
voting rights. At May 24, 1996, there were 200,000 shares of Holdings' Class D
stock issued and outstanding. Certain of the investors in the equity of Holdings
intend to offer certain members of the Company's management an opportunity to
purchase shares of Class C stock of Holdings, which stock has no voting rights
except in certain limited circumstances. The following table sets forth the
beneficial ownership of each class of issued and outstanding voting securities
of Holdings which currently possess voting rights, as of the date hereof, by
each director of the Company, each of the executive officers of the Company
listed under "Management," the directors and executive officers of the Company
as a group and each person who beneficially owns more than 5% of the outstanding
shares of any class of voting securities of Holdings.
Class D Voting Stock:
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
NAME (A) CLASS (A)
- ---------------------------------------------------------------------- --------- ----------
<S> <C> <C>
INVESTCORP S.A. (b)(c)................................................ 200,000 100.0%
37 rue Notre-Dame,
Luxembourg
SIPCO Limited (d)..................................................... 200,000 100.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands
CIP Limited (e)(f).................................................... 184,000 92.0%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Ballet Limited (e)(f)................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Denary Limited (e)(f)................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Gleam Limited (e)(f).................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT OF
NAME (A) CLASS (A)
- ---------------------------------------------------------------------- --------- ----------
<S> <C> <C>
Highlands Limited (e)(f).............................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Noble Limited (e)(f).................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Outrigger Limited (e)(f).............................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Quill Limited (e)(f).................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Radial Limited (e)(f)................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Shoreline Limited (e)(f).............................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
Zinnia Limited (e)(f)................................................. 18,400 9.2%
P.O. Box 2197
West Wind Building
George Town, Grand Cayman
Cayman Islands
INVESTCORP Investment Equity Limited(c)............................... 16,000 8.0%
P.O. Box 1111
West Wind Building
George Town, Grand Cayman
Cayman Islands
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) As used in this table, beneficial ownership means the sole or shared power to vote, or
to direct the voting of a security, or the sole or shared power to dispose, or direct
the disposition of, a security.
(b) Investcorp does not directly own any stock in Holdings. The number of shares shown as
owned by Investcorp includes all of the shares owned by INVESTCORP Investment Equity
Limited (see (c) below). Investcorp owns no stock in Ballet Limited, Denary Limited,
Gleam Limited, Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited,
Radial Limited, Shoreline Limited, Zinnia Limited, or in the beneficial owners of these
entities (see (f) below). Investcorp may be deemed to share beneficial ownership of the
shares of voting stock held by these entities because the entities have entered into
revocable management services or similar agreements with an affiliate of Investcorp,
pursuant to which each of such entities has granted such affiliate the authority to
direct the voting and disposition of the Holdings voting stock owned by such entity for
so long as such agreement is in effect. Investcorp is a Luxembourg corporation.
</TABLE>
(Footnotes continued on following page)
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<PAGE>
(Footnotes continued from preceding page)
<TABLE>
<C> <S>
(c) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
wholly-owned subsidiary of Investcorp.
(d) SIPCO Limited may be deemed to control Investcorp through its ownership of a majority
of a company's stock that indirectly owns a majority of Investcorp's shares.
(e) CIP Limited ("CIP") owns no stock in Holdings. CIP indirectly owns less than 0.1% of
the stock in each of Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited,
Noble Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and
Zinnia Limited (see (f) below). CIP may be deemed to share beneficial ownership of the
shares of voting stock of Holdings held by such entities because CIP acts as a director
of such entities and the ultimate beneficial shareholders of each of those entities
have granted to CIP revocable proxies in companies that own those entities' stock. None
of the ultimate beneficial owners of such entities beneficially owns individually more
than 5% of Holdings' voting stock.
(f) CIP Limited, Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and Zinnia
Limited each is a Cayman Islands corporation.
</TABLE>
STOCKHOLDERS' AGREEMENT
In connection with the Acquisition, the Company entered into an agreement
dated as of March 22, 1996 with Holdings and the Simmons ESOP (the
"Stockholders' Agreement"). The following is a summary description of the
principal terms of the Stockholders' Agreement and is subject to and qualified
in its entirety by reference to the definitive Stockholders' Agreement.
Tag-Along and Drag-Along Rights. If, following a sale by Holdings of shares
of common stock of the Company (other than pursuant to a registration statement
under the Securities Act) to an unaffiliated third party, Holdings and its
affiliates cease to own (or to continue to own), in the aggregate, at least 50%
of the shares of common stock of the Company acquired by Holdings on the
effective date of the Acquisition (a "Section 2.1 Event"), the ESOP Trustee may
elect to participate in such sale on a pro rata basis or may be required by
Holdings or the unaffiliated third party to participate in such sale on a pro
rata basis, for the same consideration per share and otherwise on the same terms
and conditions as apply to the sale of shares by Holdings, subject to certain
notice provisions and other conditions.
Exchange Rights. The ESOP Trustee may elect to exchange shares of common
stock of the Company for shares of Class C Stock of Holdings on a one-for-one
basis, as adjusted for any stock dividend, stock split, combination,
recapitalization or similar event, upon the occurrence of a Section 2.1 Event or
one of the following events (each an "Exchange Event"): (i) a sale of Holdings
pursuant to (A) the sale of 50% or more of the outstanding shares of Holdings'
voting capital stock, (B) a sale of all or substantially all of the assets of
Holdings, or (C) a merger, consolidation or recapitalization of Holdings as a
result of which the ownership of the surviving corporation's voting capital
stock changes more than 50%; or (ii) an initial public offering of the common
stock of Holdings pursuant to an effective registration statement under the
Securities Act. Shares of Series A Preferred Stock of the Company are
convertible, at the option of the holder, into shares of common stock of the
Company. See "Capital Structure--Preferred Stock."
Consent of ESOP Trustee. The Company and Holdings have agreed that, subject
to certain exceptions, the following actions will require the written consent of
the ESOP Trustee: (i) the occurrence of a merger or consolidation of the Company
with Holdings, any of its affiliates, or any corporation which, after such
merger or consolidation, would be an affiliate of Holdings, (ii) the issuance by
the Company or Holdings of any shares, securities convertible into shares or
options exercisable for shares of common stock of the Company or Class C Stock
of Holdings, respectively, for consideration per share less than the fair market
value of such shares or options on the date of issuance or grant (other than
shares, securities convertible into shares, or options
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<PAGE>
exercisable for shares of Class C Stock of Holdings in an outstanding amount not
to exceed 3,051,465 shares issued to directors, employees or consultants of the
Company); (iii) the payment by Holdings of dividends on any shares of Holdings
capital stock unless an equivalent amount is paid to holders of Series A
Preferred Stock upon conversion and exchange for Class C Stock of Holdings or
common stock of the Company; (iv) the undertaking by Holdings of any activity
other than incident to Holdings' ownership of the common stock of the Company or
operation of the Company; (v) any amendment by Holdings' Board of Directors to
Holdings' Bylaws, Certificate of Incorporation or Certificate of Designation
other than to increase the authorized number of shares of any class of Holdings'
capital stock; (vi) the entry by the Company or Holdings into any agreement that
prohibits or limits the Company's ability to honor the "put" option granted to
participants in the Simmons ESOP, pursuant to the terms thereof, following
termination of the participants' employment with the Company and distribution of
such participants' shares of Series A Preferred Stock, if such shares are, at
the time of distribution, not publicly traded or subject to a trading
limitation; or (vii) the consummation of a Section 2.1 Event or Exchange Event
unless the Company has legally sufficient funds to honor the redemption option
set forth in the Company's Certificate of Incorporation.
Registration Rights. The Stockholders' Agreement also grants certain
registration rights with respect to shares of common stock of the Company that
are issued or are issuable upon conversion of shares of Series A Preferred Stock
and held by the ESOP Trustee or that are beneficially owned by Holdings, an
affiliate or a transferee. The Company is obligated to bear all expenses
incident to any such registration other than the underwriting discounts and
commissions and transfer taxes, if any, incurred by selling stockholders in
connection with the shares sold pursuant to the registration statement.
PARENT OPTION AGREEMENT
In connection with the Stockholders' Agreement, the Company entered into an
agreement with Holdings pursuant to which the Company agreed that if Holdings
grants any options to purchase shares of common or Class C Stock of Holdings to
a director, employee or consultant of the Company, the Company will grant to
Holdings corresponding options, exercisable only upon exercise of the Holdings
options, to purchase the same number of shares of common stock of the Company at
the same per share exercise price and subject to substantially the same terms
and conditions as the Holdings options.
CERTAIN TRANSACTIONS
Holdings was formed to consummate the Acquisition on behalf of affiliates of
Investcorp, management and certain other investors. Financing for the
Acquisition was provided by (i) $85.0 million of capital provided by affiliates
of Investcorp, management and other investors, and (ii) borrowings in an
aggregate principal amount equal to $180.4 million, consisting of $80.4 million
under the Senior Credit Facility and all the proceeds of the $100.0 million
Subordinated Loan Facility. Invifin S.A., an affiliate of Investcorp
("Invifin"), provided $25.0 million of the $100.0 million Subordinated Loan
Facility. In connection with the Acquisition, the Company paid Investcorp
International Inc. ("International") advisory fees of $5.7 million. The Company
also paid $3.5 million to International for arranging the Senior Credit Facility
and $687,500 to Invifin in commitment fees in connection with the Subordinated
Loan Facility.
In connection with the Acquisition, the Company entered into an agreement
for management advisory and consulting services (the "Management Agreement")
with International pursuant to which the Company agreed to pay International
$1.0 million per annum for a five-year term. At the closing of the Acquisition,
the Company paid International $3.0 million for the first three years of the
term of the Management Agreement in accordance with its terms.
62
<PAGE>
In connection with the Acquisition, the Company entered into an agreement
with Holdings pursuant to which the Company agreed to reimburse Holdings for
certain expenses incident to Holdings' ownership of the Company's capital stock
for as long as Holdings and the Company file consolidated federal income tax
returns. Such expenses include franchise taxes and other fees required to
maintain Holdings' corporate existence; operating costs incurred by Holdings
attributable to its ownership of the Company's capital stock not to exceed
$250,000 per fiscal year; federal, state and local taxes paid by Holdings and
attributable to income of the Company and its subsidiaries other than taxes
arising from the sale or exchange by Holdings of the Company's common stock; the
purchase price of capital stock or options to purchase capital stock of Holdings
owned by former employees of the Company or its subsidiaries not to exceed the
amount permitted under the Senior Credit Facility and the Indenture relating to
the Notes; and registration expenses incurred by Holdings incident to a
registration of any capital stock of Holdings under the Securities Act.
In connection with the Acquisition, Holdings purchased options to acquire
common stock of the Company from certain members of management of the Company
for an aggregate purchase price of approximately $6.9 million, of which
approximately $4.3 million was used by certain members of management to purchase
stock of Holdings. In addition, the Company entered into agreements with certain
members of management of the Company, pursuant to which the Company agreed to
pay an aggregate of $3,735,000 of additional compensation in connection with
their investment in Holdings. Of this amount, $2,360,000 was paid at the
Acquisition Closing Date and the balance will be paid in late 1996 or early
1997. Of this amount, $1,575,609, $316,803, $264,444, $316,257 and $102,070 has
been or will be received by Messrs. Nie, Passaglia, Ulicny, Barton and Daiker,
respectively.
CAPITAL STRUCTURE
SENIOR CREDIT FACILITY
General. The Credit Agreement, dated as of March 22, 1996 (the "Senior
Credit Facility"), among the Company, the several lenders from time to time
parties thereto (collectively, the "Lenders") and Chemical Bank, as
administrative agent for the Lenders (the "Administrative Agent"), provides for
a $115.0 million term and revolving loan credit facility (the "Loans").
At March 30, 1996, on a pro forma basis after giving effect to the
Acquisition and adjusting for the Offering (including the application of the net
proceeds therefrom), the amount under the revolving credit portion of the Senior
Credit Facility that was available to be drawn was approximately $24.4 million,
after giving effect to $9.4 million of outstanding borrowings and $6.2 million
that was reserved in respect of the Company's reimbursement obligations with
respect to outstanding letters of credit. The remaining availability under the
revolving credit facility may be utilized to meet the Company's current working
capital requirements, including issuance of stand-by and trade letters of
credit. The Company also may utilize the remaining availability under the
revolving credit facility to fund acquisitions and capital expenditures.
The Loans are secured by a first priority security interest in substantially
all the personal property of the Company and a pledge by Holdings of all issued
and outstanding capital stock of the Company that is owned by Holdings. Such
pledge secures a guarantee of the Loans by Holdings. Upon the request of the
Administrative Agent, any domestic subsidiary of the Company that has material
assets will also be required to issue a guarantee of the Loans which will be
secured by a first priority security interest in substantially all personal
property of such subsidiary, and, upon the request of the Administrative Agent,
the Company will be required to pledge the issued and outstanding capital stock
of such subsidiary owned by the Company or any of its subsidiaries or up to 65%
of the issued and outstanding capital stock of any foreign subsidiary
63
<PAGE>
owned by the Company or any of its subsidiaries that has material assets to
secure indebtedness under the Senior Credit Facility.
Term Loans. The Senior Credit Facility provides for a $75.0 million term
loan facility, which is divided into two tranches, the Tranche A and Tranche B
term loans. The Tranche A term loans have a final scheduled maturity date of
March 31, 2001, and the Tranche B term loans have a final scheduled maturity
date of March 31, 2003.
The principal amounts of the Tranche A term loans are required to be repaid
in 10 consecutive semiannual installments totaling $2.0 million in fiscal year
1996, $5.0 million in fiscal year 1997, $7.0 million in fiscal year 1998, $9.0
million in fiscal year 1999, $11.0 million in fiscal year 2000, and $6.0 million
in fiscal year 2001. The principal amounts of the Tranche B term loans are
required to be repaid in 14 consecutive semiannual installments totaling
$100,000 in fiscal year 1996, $200,000 in each of fiscal years 1997, 1998, 1999
and 2000, $8.6 million in fiscal year 2001, $17.0 million in fiscal year 2002
and $8.5 million in fiscal year 2003.
Revolving Credit Facility. The Senior Credit Facility provides for a $40.0
million revolving credit facility. The revolving credit facility will expire on
the earlier of (a) March 31, 2001 and (b) such other date as the revolving
credit commitments thereunder shall terminate in accordance with the terms of
the Senior Credit Facility.
Interest Rates. Borrowings under the Senior Credit Facility accrue interest
at either the Alternate Base Rate (the "Alternate Base Rate") or an adjusted
Eurodollar Rate (the "Eurodollar Rate"), at the option of the Company, plus the
applicable interest margin. The Alternate Base Rate at any time is determined to
be the highest of (i) the Federal Effective Funds Rate plus 1/2 of 1% per annum,
(ii) the Base CD Rate plus 1% per annum and (iii) Chemical Bank's Prime Rate.
The applicable interest margin with respect to loans made under the revolving
credit facility and with respect to Tranche A term loans is 2.50% per annum with
respect to loans that accrue interest at the Eurodollar Rate and 1.25% per annum
for loans that accrue interest at the Alternate Base Rate. The applicable
interest margin with respect to Tranche B term loans is 3.00% per annum for
loans that accrue interest at the Eurodollar Rate and 1.75% per annum for loans
that accrue interest at the Alternate Base Rate.
Mandatory and Optional Prepayments. The Senior Credit Facility requires that
upon an initial public offering by the Company, Holdings or any subsidiary of
the Company of its common or other voting stock, or upon the incurrence of any
additional indebtedness (other than indebtedness permitted under the Senior
Credit Facility), or upon the receipt of proceeds from certain asset sales and
exchanges, 100% of the net proceeds from such offering, incurrence, sale or
exchange is required to be applied toward the prepayment of indebtedness under
the Senior Credit Facility. In addition, the Senior Credit Facility requires
that 50% of Excess Cash Flow (as defined in the Senior Credit Facility) is
required to be applied toward the prepayment of indebtedness under the Senior
Credit Facility. Such prepayments are required to be applied first to the
prepayment of the term loans and, second, to reduce permanently the revolving
credit commitments. Subject to certain conditions, the Company may, from time to
time, make optional prepayments of Loans without premium or penalty. Any
prepayment of term loans, whether mandatory or optional, is required to be
applied to the Tranche A term loans and the Tranche B term loans, and the
respective installments thereof, ratably according to the outstanding principal
amounts thereof.
Covenants. The Senior Credit Facility imposes certain covenants and other
requirements on the Company and its subsidiaries. In general, the affirmative
covenants provide for mandatory reporting by the Company of financial and other
information to the Lenders and notice by the Company to the Lenders upon the
occurrence of certain events. The affirmative covenants also include standard
operating covenants requiring the Company to operate its business in an orderly
manner consistent with past practice.
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<PAGE>
The Senior Credit Facility also contains certain negative covenants and
restrictions on actions by the Company and its subsidiaries that, among other
things, restrict: (i) consolidations, mergers and sales of assets; (ii) the
incurrence and existence of liens or other encumbrances; (iii) the incurrence
and existence of contingent obligations; (iv) the payment of dividends and
repurchases of common stock; (v) prepayments and amendments of certain
subordinated debt instruments and equity; (vi) investments, loans and advances;
(vii) capital expenditures; (viii) changes in fiscal year; (ix) certain
transactions with affiliates; and (x) changes in lines of business. In addition,
the Senior Credit Facility requires that the Company comply with specified
financial ratios and tests, including (i) a minimum Interest Coverage Ratio (as
defined in the Senior Credit Facility) that increases from 1.80 to 1 in the
third fiscal quarter of 1996 to 4.00 to 1 in the fourth fiscal quarter of 2002,
(ii) a maximum Leverage Ratio that decreases from 5.50 to 1 in the third fiscal
quarter of 1996 to 2.50 to 1 in the fourth fiscal quarter of 2002 and
(iii) a minimum Consolidated Cash Flow that increases from $37,500,000 for the
four fiscal quarters ended with the third fiscal quarter of 1996 to $67,500,000
for the four fiscal quarters ended with the fourth fiscal quarter of 2002.
"Leverage Ratio" is the ratio of Consolidated Funded Indebtedness (as defined
in the Senior Credit Facility) to Consolidated EBITDA (as defined in the Senior
Credit Facility) for the period of four fiscal quarters ending with the
respective fiscal quarter, and "Consolidated Cash Flow" is Consolidated EBITDA.
In addition, the Senior Credit Facility also provides that the Company and
its subsidiaries may not create, incur, assume or suffer to exist any
indebtedness except: (i) indebtedness arising under the Senior Credit Facility;
(ii) indebtedness existing on the closing date of the Senior Credit Facility
that was specifically scheduled, excluding the refinancing of such indebtedness;
(iii) intercompany indebtedness between the Company and its domestic
subsidiaries and of the Company to any of its foreign subsidiaries; (iv)
indebtedness under the Subordinated Loan Facility up to $100.0 million plus
additional principal thereof issued in lieu of cash interest; (v) any Permanent
Subordinated Debt (as defined in the Senior Credit Facility), provided that the
aggregate principal amount of such indebtedness does not exceed $110.0 million
and $100.0 million of the net proceeds thereof are used to repay indebtedness
under the Subordinated Loan Facility; (vi) indebtedness under industrial revenue
bonds or similar governmental and municipal bonds and for the deferred purchase
price of newly acquired property and to finance equipment purchases if incurred
within 180 days of the acquisition of such property, subject to an aggregate
limit of $12.0 million at any one time outstanding; (vii) indebtedness under
certain financing leases, subject to Capital Expenditure (as defined in the
Senior Credit Facility) and Interest Coverage Ratio limits; (viii) other
indebtedness of the Company and its domestic subsidiaries, subject to a $10.0
million limit in the aggregate at any one time outstanding; (ix) indebtedness of
its foreign subsidiaries, subject to a $5.0 million limit in the aggregate at
any one time outstanding; (x) indebtedness under letters of credit not issued
under the Senior Credit Facility, subject to a $5.0 million limit in the
aggregate at any one time outstanding; (xi) indebtedness in connection with
permitted acquisitions, subject to a $5.0 million limit in the aggregate; (xii)
indebtedness in connection with the repurchase of shares of the capital stock of
the Company made in accordance with the terms of the ESOP; (xiii) indebtedness
in connection with workmen's compensation obligations and general liability
exposure; and (xiv) indebtedness of foreign subsidiaries to the Company or any
of its other subsidiaries, up to $5.0 million less the sum of other outstanding
indebtedness of such foreign subsidiaries and investments by the Company and its
domestic subsidiaries therein.
Events of Default. The Senior Credit Facility specifies certain customary
events of default including non-payment of principal, interest or fees,
violation of covenants, inaccuracy of representations and warranties in any
material respect, cross default and cross-acceleration to certain other
indebtedness and agreements, bankruptcy and insolvency events, material
judgments and liabilities, change of control, unenforceability of certain
documents under the Senior Credit Facility and any amendment or other
modification of the Subordinated Loan Facility or the Notes made without all
required written consents in accordance with the terms of the Senior Credit
Facility. If certain bankruptcy and insolvency events of default occur, then all
amounts owing under the Senior Credit Facility become immediately due and
payable. If any other event of default occurs, and so long as such event of
default continues, the Administrative Agent may, with the consent of, or shall
upon the request of, a majority of the Lenders, declare all amounts owing under
the Senior Credit Facility to be due and payable.
Fees and Expenses. The Company is required to pay to the Administrative
Agent, for the account of each Lender, 1/2 of 1% per annum on the average daily
amount of the available
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revolving credit commitment of each such Lender. The Company is also required to
pay to the Administrative Agent an agent's fee in an amount agreed between the
Company and the Administrative Agent.
The description of the Senior Credit Facility set forth above does not
purport to be complete and is qualified in its entirety by reference to the
Senior Credit Facility that contains the principal terms and conditions thereof,
which is available upon request from the Company.
INDUSTRIAL REVENUE BONDS
The construction cost of the Janesville, Wisconsin facility of the Company
was financed through the issuance by the city of Janesville, Wisconsin of
variable rate industrial revenue bonds in August 1980, the proceeds of which
were loaned by the city to the Company, which agreed, pursuant to a loan
agreement, to pay to the city amounts sufficient to pay debt service on the
bonds. The variable rate industrial revenue bonds were converted in November
1992 to fixed rate industrial revenue bonds in a principal amount of $9,700,000
with an effective interest rate of 7.0%, maturing on October 1, 2017.
PREFERRED STOCK
The Company is authorized to issue 6,000,000 shares of preferred stock, par
value $.01 per share, 5,950,000 of which have been designated as "Series A
Preferred Stock." The remaining 50,000 shares are designated "Series C
Cumulative Redeemable Exchangeable Preferred Stock," none of which are
outstanding. At May 24, 1996, there were 5,670,406 shares outstanding of the
Series A Preferred Stock, all of which were held by the Simmons ESOP.
Each share of Series A Preferred Stock is convertible, at the option of the
holder, into the number of shares of common stock of the Company that results
from multiplying the number of shares of Series A Preferred Stock by the
"Conversion Factor" in effect at the time of the conversion. At May 24, 1996,
the Conversion Factor was one. However, the Conversion Factor will be (i)
proportionately increased if (A) the outstanding shares of common stock of the
Company are subdivided into a greater number of shares or a dividend convertible
into or exchangeable for common stock is paid or (B) the Investcorp Option is
exercised, and (ii) proportionately decreased if the outstanding shares of
common stock of the Company are combined into a smaller number of shares. Shares
of Series A Preferred Stock also are exchangeable for shares of Class C Stock of
Holdings upon the occurrence of certain events. See "Ownership of Voting
Securities--Stockholders' Agreement."
Shares of Series A Preferred Stock are redeemable for cash at the option of
the holder at a redemption price of $5.00 per share upon the occurrence of one
of the following events: (i) a sale of Holdings pursuant to (A) a sale of 50% or
more of the outstanding shares of Holdings' voting capital stock, (B) a sale of
all or substantially all of the assets of Holdings, or (C) a merger,
consolidation or recapitalization of Holdings as a result of which the ownership
of the surviving corporation's voting capital stock changes more than 50%; or
(ii) an initial public offering of common stock of the Company or Holdings
pursuant to an effective registration statement under the Securities Act.
In addition, holders of shares of Series A Preferred Stock have certain
"tag-along rights" and are subject to certain "drag-along rights" pursuant to
the terms of the Stockholders' Agreement following certain sales by Holdings of
shares of common stock of the Company. See "Ownership of Voting
Securities--Stockholders' Agreement."
Each share of Series A Preferred Stock entitles the holder thereof to a
number of votes equal to the number of votes carried by the number of shares of
common stock of the Company that would be issuable if such share of Series A
Preferred Stock were converted to common stock. In most circumstances the ESOP
Trustee votes such shares as directed by a committee appointed under
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the Simmons ESOP. However, upon the occurrence of a corporate merger,
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all of the assets of the Company or other similar
transaction, participants in the Simmons ESOP may direct the committee as to the
manner in which such participants' allocated shares shall be voted. Holders of
Series A Preferred Stock are entitled to receive equal per-share dividends on an
as-converted basis when dividends or distributions are declared upon shares of
common stock of the Company.
In the event of any involuntary or voluntary liquidation, dissolution or
winding-up of the affairs of the Company, holders of Series A Preferred Stock
are entitled to receive out of the assets of the Company available for
distribution to the shareholders, before any payments are made or assets
distributed on any common stock or on any other class or series of capital stock
of the Company, the amount of $5.00 per share. If the assets of the Company are
insufficient to permit such distribution, the entire assets of the Company
distributable to stockholders of the Company will be distributed ratably among
the holders of Series A Preferred Stock in proportion to the sum of their
respective per share liquidation values.
COMMON STOCK
The authorized common stock of the Company consists of 50,000,000 shares of
common stock, par value $0.01 per share ("Common Stock"). At May 24, 1996, there
were 31,964,452 shares of Common Stock issued and outstanding, all of which are
held of record by Holdings. All outstanding shares of Common Stock are pledged
to secure the Company's obligations under the Senior Credit Facility. Each share
of Common Stock entitles the holder thereof to one vote on all matters to be
voted on by shareholders of the Company. Pursuant to the restrictions contained
in the Senior Credit Facility and the Indenture, the Company is not expected to
be able to pay dividends on its Common Stock for the foreseeable future, other
than certain limited dividends permitted by the Senior Credit Facility and the
Indenture. In the event of a liquidation, dissolution or winding-up of the
Company, the holders of the Common Stock are entitled to share in the remaining
assets of the Company after payment of all liabilities (including payments
required to be made to holders of the Notes) and after satisfaction of all
liquidation preferences payable to the holders of the Series A Preferred Stock
and all other shares of stock ranking senior to the Common Stock in respect of
any distribution upon the liquidation, dissolution or winding-up of the Company.
The Common Stock has no pre-emptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of the Common Stock are fully paid and
non-assessable.
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DESCRIPTION OF NOTES
GENERAL
The New Notes are to be issued under an Indenture, dated as of April 18,
1996 (the "Indenture"), between the Company and SunTrust Bank, Atlanta, as
Trustee (the "Trustee"), a copy of which is available upon request to the
Company.
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended ("TIA"). Capitalized terms used herein
and not otherwise defined have the meanings set forth in "--Certain
Definitions."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee's agent, at The First Chicago Trust
Company of New York, 14 Wall Street, 8th Floor, Corporate Trust Department, New
York, New York, 10005), except that, at the option of the Company, payment of
interest may be made by check mailed to the addresses of the Holders as such
address appears in the Note Register.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. No service
charge will be made for any registration of transfer or exchange of New Notes,
but the Company may require payment of a sum sufficient to cover any transfer
tax or other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The New Notes will be unsecured senior subordinated obligations of the
Company, limited to $100.0 million aggregate principal amount, and will mature
on April 15, 2006. Each New Note will bear interest at a rate per annum shown on
the front cover of this Prospectus from April 18, 1996, or from the most recent
date to which interest has been paid or provided for, payable semiannually to
Holders of record at the close of business on April 1st or October 1st
immediately preceding the interest payment date on April 15th and October 15th
of each year, commencing October 15, 1996.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option of
the Company prior to April 15, 2001. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued interest to the redemption
date (subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date):
If redeemed during the 12-month period commencing on or after April 15th of
the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ----------------------------------------------------------------------- ----------
<S> <C>
2001................................................................... 105.3750%
2002................................................................... 103.5833%
2003................................................................... 101.7917%
2004 and thereafter.................................................... 100.0000%
</TABLE>
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In addition, at any time and from time to time on or prior to April 15,
1999, the Company may redeem in the aggregate up to 33 1/3% of the original
aggregate principal amount of Notes with the proceeds of one or more Public
Equity Offerings by Holdings (so long as substantially all its assets consist of
its investment in the Company) or the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.75% plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 66 2/3% of the
original aggregate principal amount of the Notes must remain outstanding after
each such redemption.
At any time on or prior to April 15, 2001, the Notes may also be redeemed as
a whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days' prior notice (but in no event more
than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued but unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at April 15, 2001 (such redemption price being described under "--Optional
Redemption") plus (2) all required interest payments (excluding accrued but
unpaid interest) due on such Note through April 15, 2001, computed using a
discount rate equal to the Treasury Rate plus 100 basis points, over (B) the
principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to April 15, 2001; provided, however, that if the period
from the Redemption Date to April 15, 2001 is not equal to the constant maturity
of a United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the period
from the Redemption Date to April 15, 2001 is less than one year, the weekly
average yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
provided that no Note of $1,000 in original principal amount or less will be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The payment of the principal of, premium (if any) and interest on the Notes
is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Indebtedness
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of the Company. However, payment from the money or the proceeds of U.S.
Government Obligations held in any defeasance trust described under "Defeasance"
below is not subordinated to any Senior Indebtedness or subject to the
restrictions described herein. At March 30, 1996, adjusting for the issuance and
sale of the Notes and the application of the net proceeds therefrom, the
outstanding Senior Indebtedness of the Company would have been $95.2 million.
Although the Indenture contains limitations on the amount of additional
Indebtedness which the Company may Incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness" below.
"Senior Indebtedness" whether outstanding on the date of the Indenture or
thereafter issued, is defined as (i) all obligations consisting of the Bank
Indebtedness; (ii) all obligations consisting of the principal of and premium,
if any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company regardless of whether post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of the Company for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable; (iii)
all Capitalized Lease Obligations of the Company; (iv) all obligations of the
Company (A) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (B) under interest rate
swaps, caps, collars, options and similar arrangements and foreign currency
hedges entered into in respect of any obligations described in clauses (i), (ii)
and (iii) or (C) issued or assumed as the deferred purchase price of property
and all conditional sale obligations of the Company and all obligations of the
Company under any title retention agreement; (v) all obligations of other
persons of the type referred to in clauses (ii), (iii) and (iv) and all
dividends of other persons for the payment of which, in either case, the Company
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including guarantees of such obligations and dividends; and (vi) all
obligations of the Company consisting of modifications, renewals, extensions,
replacements and refundings of any obligations described in clauses (i), (ii),
(iii), (iv) or (v); unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are not superior in right of payment to the Notes; provided, however, that
Senior Indebtedness will not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for federal, state, local or other taxes owed or
owing by the Company, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness,
Guarantee or obligation of the Company that is subordinate or junior to any
other Indebtedness, Guarantee or obligation of the Company or (5) any
Indebtedness that is incurred in violation of the Indenture. If any Designated
Senior Indebtedness is disallowed, avoided or subordinated pursuant to the
provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness which is subordinate or
junior in ranking in any respect to Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to secured Indebtedness merely because it is
unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not
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paid when due or (ii) any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full. However, the Company may pay the Notes without regard to the foregoing if
the Company and the Trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing or (iii) because such Designated Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Notes after the end of such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period. However, if any Blockage Notice within such 360-day period is given
by or on behalf of any holders of Designated Senior Indebtedness (other than the
Bank Indebtedness), the Representative of the Bank Indebtedness may give another
Blockage Notice within such period. In no event, however, may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any consecutive 360-day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of the Senior Indebtedness before the
Noteholders are entitled to receive any payment and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled, but for the subordination provisions of the Indenture, will
be made to holders of the Senior Indebtedness as their interests may appear. If
a distribution is made to Noteholders that, due to the subordination provisions,
should not have been made to them, such Noteholders are required to hold it in
trust for the holders of Senior Indebtedness and pay it over to them as their
interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less,
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ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the holders of Senior Subordinated Indebtedness.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
(i) prior to the first public offering of Voting Stock of the Company or
Holdings, as the case may be, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of majority voting power of the Voting Stock
of Holdings or Holdings shall cease to own 84% of the issued and outstanding
Voting Stock of the Company, whether as a result of issuance of securities
of the Company or Holdings, as the case may be, any merger, consolidation,
liquidation or dissolution of the Company or Holdings, as the case may be,
any direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders will be deemed to beneficially own any Voting Stock of a
corporation (the "specified corporation") held by any other corporation (the
"parent corporation") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, a majority of the Voting Stock of the
parent corporation);
(ii) following the first public offering of Voting Stock of the Company
or Holdings, as the case may be, any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power of
the Voting Stock of the Company or Holdings, as the case may be; provided
that the Permitted Holders beneficially own (as defined in clause (i)
above), directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Company or Holdings, as the
case may be, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company or Holdings, as the case
may be (for purposes of this clause (ii), such other person shall be deemed
to beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person "beneficially owns" (as defined in
this clause (ii)), directly or indirectly, more than 35% of the voting power
of the Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the Voting Stock
of such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation); or
(iii) following the first public offering of Voting Stock of the Company
or Holdings, as the case may be, any person (other than Investcorp, its
Affiliates and members of the Management Group) (a) nominates one or more
individuals for election to the board of directors of the Company or
Holdings, as the case may be, (b) solicits proxies, authorizations or
consents in connection therewith and (c) such number of nominees elected to
serve on the board of directors represents a majority of the board of
directors of the Company or Holdings, as the case may be, following such
election.
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In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control, the Company shall (i) repay in full all Bank Indebtedness or
offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the agreements governing the Bank Indebtedness to permit the repurchase of
the Notes as provided for in the immediately following paragraph.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of Holders of record on a record date to
receive interest on the relevant interest payment date); (2) the circumstances
and relevant facts and financial information regarding such Change of Control;
(3) the repurchase date (which shall be no earlier than 30 days nor later than
60 days from the date such notice is mailed); and (4) the instructions
determined by the Company, consistent with this covenant, that a Holder must
follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchaser. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to repurchase the Notes could
cause a default under such Senior Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the Company.
Finally, the Company's ability to pay cash to the Holders upon a repurchase may
be limited by the Company's then existing financial resources. There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; provided, however, that
the Company may Incur Indebtedness if on the date thereof the Consolidated
Coverage Ratio would be greater than 2.00:1.00, if
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such Indebtedness is Incurred on or prior to March 31, 1998; and 2.25:1.00 if
such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness: (i) Indebtedness
under the Senior Credit Facility (as the same may be amended from time to time,
without increasing the committed amount thereunder, except as otherwise
permitted by this covenant) and any Refinancing Indebtedness with respect
thereto in an aggregate principal amount on the date of Incurrence that, when
added to all other Indebtedness Incurred pursuant to this clause (i) and then
outstanding, shall not exceed the sum of the then outstanding Indebtedness under
the Senior Credit Facility and the unused commitments thereunder; provided,
however, that any Refinancing Indebtedness with respect to Indebtedness Incurred
pursuant to this clause (i) shall not be subject to the limitations contained in
clauses (i) and (ii) of the definition of Refinancing Indebtedness set forth in
"--Certain Definitions" below; (ii) Indebtedness (A) of the Company to any
Restricted Subsidiary, (B) of any Restricted Subsidiary to the Company or any
other Restricted Subsidiary; (iii) Indebtedness represented by the Notes, any
Indebtedness (other than the Indebtedness described in clauses (i) and (ii)
above) outstanding on the date of the Indenture and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii) or
paragraph (a); (iv) Indebtedness of the Company and its Restricted Subsidiaries
for (A) industrial revenue bonds or other similar governmental and municipal
bonds and (B) the deferred purchase price of newly acquired property of the
Company and its Restricted Subsidiaries used in the ordinary course of business
of the Company and its Subsidiaries (provided such purchase money financing is
entered into within 180 days of the acquisition of such property) in an amount
(based on the remaining balance of the obligations therefor on the books of the
Company and its Restricted Subsidiaries) which in the case of the preceding
clauses (A) and (B) shall not exceed $12.0 million in the aggregate at any time
outstanding; (v) Indebtedness of the Company or any of its Restricted
Subsidiaries (which may comprise Bank Indebtedness) in an aggregate principal
amount at any time outstanding not in excess of $15.0 million; (vi) Indebtedness
in an aggregate principal amount at any time outstanding not in excess of $5.0
million in respect of letters of credit (other than letters of credit issued
under the Senior Credit Facility); (vii) (A) Indebtedness assumed in connection
with acquisitions permitted under the Senior Credit Facility (so long as such
Indebtedness was not incurred in anticipation of such acquisitions), (B)
Indebtedness of newly acquired Subsidiaries acquired in such acquisitions (so
long as such Indebtedness was not incurred in anticipation of such acquisitions)
and (C) Indebtedness owed to the seller in any acquisition permitted under the
Senior Credit Facility constituting part of the purchase price thereof, all in
an aggregate principal amount at any time outstanding not in excess of $5.0
million; (viii) Indebtedness represented by the Note Guarantees and Guarantees
of Indebtedness Incurred pursuant to clause (i) or (v) above; and (ix)
Indebtedness incurred in connection with the repurchase of shares of the Capital
Stock of the Company or Holdings as permitted by paragraph (b)(v)(D) of the
covenant described under "--Limitation on Restricted Payments."
(c) Notwithstanding any other provision of this covenant, the Company will
not Incur any Indebtedness (i) pursuant to paragraph (b) if the proceeds thereof
are used, directly or indirectly, to repay, prepay, redeem, defease, retire,
refund or refinance any Subordinated Obligations unless such Indebtedness shall
be subordinated to the Notes to at least the same extent as such Subordinated
Obligations or (ii) pursuant to paragraph (a) or (b) if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any
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merger or consolidation involving the Company) except dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and except
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary is not wholly owned, to its other
shareholders on a pro rata basis), (ii) purchase, redeem, retire or otherwise
acquire for value any Capital Stock of the Company or any Restricted Subsidiary
held by Persons other than the Company or another Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), (iv) pay any
amount to Holdings for the purposes set forth in clauses (v)(A) through (C) of
the following paragraph (b), or (v) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement, payment or
Investment being herein referred to as a "Restricted Payment") if at the time
the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); (2)
the Company could not Incur at least $1.00 of additional Indebtedness pursuant
to paragraph (a) of the covenant described under "--Limitation on Indebtedness";
or (3) the aggregate amount of such Restricted Payment and all other Restricted
Payments (the amount so expended, if other than in cash, to be determined in
good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a resolution of the Board of Directors) declared or made
subsequent to the Issue Date would exceed the sum of: (A) 50% of the
Consolidated Net Income accrued during the period (treated as one accounting
period) from the beginning of the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter ending at least
45 days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate Net Cash Proceeds received by the Company from the issue or sale of
its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date
(other than an issuance or sale to a Subsidiary of the Company or an employee
stock ownership plan or other trust established by the Company or any of its
Subsidiaries); and (C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon the
conversion or exchange (other than by a Subsidiary) subsequent to the Issue Date
of any Indebtedness of the Company or its Restricted Subsidiaries convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash or other property distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange).
(b) The provisions of the foregoing paragraph shall not prohibit: (i) any
purchase or redemption of Capital Stock of the Company or Subordinated
Obligations made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries); provided, however, that (A) such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale applied in the manner set forth in this clause (i)
will be excluded from clause (3)(B) of paragraph (a); (ii) any purchase or
redemption of Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of the Company
that is permitted to be Incurred pursuant to the covenant described under
"--Limitation on Indebtedness"; provided, however, that such purchase or
redemption will be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"--Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that
such purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments; (iv) dividends paid within 60 days
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after the date of declaration thereof if at such date of declaration such
dividend would have complied with paragraph (a); provided, however, that such
dividend will be included in the calculation of the amount of Restricted
Payments; or (v) payment of dividends, other distributions or other amounts by
the Company for the purposes set forth in clauses (A) through (E) below;
provided, however, that such dividend, distribution or amount set forth in
clauses (A) through (D) will be included in the calculation of the amount of
Restricted Payments for purposes of the preceding paragraph: (A) to Holdings in
amounts equal to the amounts required for Holdings to pay franchise taxes and
other fees required to maintain its corporate existence and provide for other
operating costs of up to $500,000 per fiscal year; (B) to Holdings in amounts
equal to amounts required for Holdings to pay federal, state and local income
taxes to the extent such income taxes are attributable to the income of the
Company and its Restricted Subsidiaries (and, to the extent of amounts actually
received from its Unrestricted Subsidiaries, in amounts required to pay such
taxes to the extent attributable to the income of such Unrestricted
Subsidiaries); (C) to Holdings in amounts equal to amounts expended by Holdings
to repurchase Capital Stock of Holdings owned by former employees of the Company
or its Subsidiaries or their assigns, estates and heirs; provided, however, that
the aggregate amount paid, loaned or advanced to Holdings pursuant to this
clause (C) shall not, in the aggregate, exceed $2.5 million per fiscal year of
the Company, up to a maximum aggregate amount of $7.5 million during the term of
the Indenture, plus any amounts contributed by Holdings to the Company as a
result of resales of such repurchased shares of Capital Stock; (D) in amounts
equal to amounts expended by the Company to repurchase shares of its Capital
Stock from deceased or retired employees in accordance with the terms of the
ESOP as in effect on the Closing Date and from employees whose employment with
the Company or any of its Subsidiaries has terminated for any other reason but
only to the extent mandatorily required by the ESOP as in effect on the Closing
Date, the Code or ERISA; provided that in each case the Company has deferred
making any cash payments in respect of such repurchase obligations to the
maximum extent possible under the ESOP as in effect on the Closing Date; and (E)
in an amount not in excess of an aggregate amount of $750,000 to redeem the
Series C Preferred Stock of the Company that was called for redemption in
connection with the Acquisition.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except: (1) any encumbrance or restriction pursuant to
an agreement in effect at or entered into on the date of the Indenture; (2) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary
prior to the date on which such Restricted Subsidiary was acquired by the
Company (other than Indebtedness Incurred as consideration in, or to provide all
or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date; (3) any encumbrance or restriction pursuant to an
agreement effecting a refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this covenant or this clause (3)
or contained in any amendment to an agreement referred to in clause (1) or (2)
of this covenant or this clause (3); provided, however, that the encumbrances
and restrictions contained in any such refinancing agreement or amendment are no
less favorable to the Noteholders than encumbrances and restrictions contained
in such agreements; (4) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license or
similar contract, (B) by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise
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prohibited by the Indenture or (C) contained in security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject to such security
agreements; and (5) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value of the shares
and assets subject to such Asset Disposition, (ii) at least 80% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash and (iii) an amount equal to 100% of the Net Available Cash
from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) first, to the extent the Company elects (or
is required by the terms of any Senior Indebtedness or Indebtedness (other than
Preferred Stock) of a Wholly Owned Subsidiary), to prepay, repay or purchase
Senior Indebtedness or such Indebtedness (other than Preferred Stock) of a
Wholly Owned Subsidiary (in each case other than Indebtedness owed to the
Company or an Affiliate of the Company) within 12 months after the later of the
date of such Asset Disposition or the receipt of such Net Available Cash; (B)
second, to the extent of the balance of Net Available Cash after application in
accordance with clause (A), to the extent the Company or such Restricted
Subsidiary elects, to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net Available
Cash received by the Company or another Restricted Subsidiary) within 12 months
from the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and (B), to make an offer
to purchase Notes pursuant and subject to the conditions of the Indenture to the
Noteholders at a purchase price of 100% of the principal amount thereof plus
accrued and unpaid interest to the purchase date, and (D) fourth, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A), (B) and (C), to (x) acquire Additional Assets (other than
Indebtedness and Capital Stock) or (y) prepay, repay or purchase Indebtedness of
the Company (other than Indebtedness owed to an Affiliate of the Company and
other than Disqualified Stock of the Company) or Indebtedness of any Restricted
Subsidiary (other than Indebtedness owed to the Company or an Affiliate of the
Company), in each case described in this clause (D) within one year from the
receipt of such Net Available Cash or, if the Company has made an Offer pursuant
to clause (C), six months from the date such Offer is consummated; provided,
however, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such
Restricted Subsidiary will retire such Indebtedness and will cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. The Company and the Restricted
Subsidiaries will not be required to apply any Net Available Cash in accordance
with this covenant except to the extent that the aggregate Net Available Cash
from all Asset Dispositions that is not applied in accordance with this covenant
exceeds $500,000.
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness of the Company (other than Disqualified Stock
of the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
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(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes (the "Offer") at a
purchase price of 100% of their principal amount plus accrued and unpaid
interest to the Purchase Date in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture. If the
aggregate purchase price of the Notes tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase of the Notes, the Company
will apply the remaining Net Available Cash in accordance with clause
(a)(iii)(D) above. The Company shall not be required to make an Offer for Notes
pursuant to this covenant if the Net Available Cash available therefor (after
application of the proceeds as provided in clauses (a)(iii)(A) and (a)(iii)(B)
is less than $5.0 million for any particular Asset Disposition (which lesser
amounts shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this paragraph (c) by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") on terms (i) that are less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate and (ii) that, in the event such Affiliate
Transaction involves an aggregate amount in excess of $500,000, are not in
writing and have not been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction. In addition,
any transaction involving aggregate payments or other transfers by the Company
and its Restricted Subsidiaries in excess of $3.0 million will also require an
opinion from an independent investment banking firm or appraiser of national
prominence, as appropriate, to the effect that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments," (ii) the performance of the Company's or
Subsidiary's obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other similar
arrangement heretofore or hereafter entered into in the ordinary course of
business, (iii) payment of compensation to employees, officers, directors or
consultants in the ordinary course of business, (iv) maintenance in the ordinary
course of business of benefit programs or arrangements for employees, officers
or directors, including vacation plans, health and life insurance plans,
deferred compensation plans, and retirement or savings plans and similar plans,
(v) any transaction between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries, (vi) the payment of certain fees under the Management
Agreement, provided that such payment will not exceed an aggregate amount of
$1.0 million during any 12-month period, (vii) payments to certain members of
management in respect of a one-time management tax gross-up made in connection
with the Acquisition not in excess of an aggregate amount of $1,376,000, or
(viii) payments made to Holdings to reimburse Holdings for costs, fees and
expenses incident to a registration of any of the capital stock of Holdings for
a primary offering under the Securities Act, so long as the net proceeds of such
offering (if it is completed) are contributed to, or otherwise used for the
benefit of, the Company.
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Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien on any of its property or assets (including Capital Stock), whether owned
on the date of the Indenture or thereafter acquired, securing any obligation
other than Permitted Liens unless the obligations due under the Indenture and
the Notes are secured, on an equal and ratable basis (or on a senior basis, in
the case of Indebtedness subordinated in right of payment to the Notes), with
the obligations so secured.
SEC Reports. The Company shall file with the Trustee and provide
Noteholders, within 15 days after it files them with the SEC, copies of its
annual report and the information, documents and other reports which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act. Notwithstanding that the Company may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall continue to file with the SEC and, within 15 days after such
reports are filed, provide the Trustee and Noteholders (at their addresses as
set forth in the register of Notes) with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Exchange Act. The Company shall also comply with the other provisions of TIA
314(a).
Future Note Guarantors. The Company will cause each Domestic Subsidiary that
Incurs Indebtedness and each Restricted Subsidiary that is a guarantor of
Indebtedness Incurred pursuant to clause (b)(i) or (b)(v) of the covenant
described under "--Limitation on Indebtedness" to execute and deliver to the
Trustee a Note Guarantee pursuant to which such Subsidiary will Guarantee
payment of the Notes. Each Note Guarantee will be limited in amount to an amount
not to exceed the maximum amount that can be Guaranteed by that Subsidiary
without rendering the Note Guarantee, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business, other than a Related
Business.
Merger and Consolidation. The Company will not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) immediately
after giving effect to such transaction, the Successor Company would be able to
incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under "--Limitation on Indebtedness"; (iv) immediately after
giving effect to such transaction, the Successor Company will have Consolidated
Net Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company will have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (1) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (2) the Company may merge with
an Affiliate incorporated for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
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DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by the provisions described under
"--Ranking" above, (iii) the failure by the Company to comply with its
obligations under the covenant described under "--Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its obligations under the covenants described under "--Change of Control"
above or under the covenants described under "--Certain Covenants" above (in
each case, other than a failure to purchase Notes), (v) the failure by the
Company to comply for 60 days after notice with its other agreements contained
in the Indenture, (vi) the failure of the Company or any Significant Subsidiary
to pay any Indebtedness within any applicable grace period after final maturity
or acceleration by the holders thereof because of a default if the total amount
of such Indebtedness unpaid or accelerated exceeds $10.0 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions"), (viii) the rendering of any judgment or decree for the payment of
money in excess of $10.0 million against the Company or a Significant Subsidiary
if (A) an enforcement proceeding thereon is commenced or (B) such judgment or
decree remains outstanding for a period of 60 days following such judgment and
is not discharged, waived or stayed (the "judgment default provision") or (ix)
the failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof) or the denial or disaffirmation by any such Note Guarantor of its
obligations under the Indenture or any Note Guarantee if such Default continues
for 10 days. However, a default under clauses (iv) and (v) will not constitute
an Event of Default until the Trustee or the Holders of 25% in principal amount
of the outstanding Notes notify the Company of the default and the Company does
not cure such default within the time specified in clauses (iv) and (v) hereof
after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued but unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company
occurs and is continuing, the principal of and interest on all the Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the
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time, method and place of conducting any proceeding for any remedy available to
the Trustee or of exercising any trust or power conferred on the Trustee. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other Holder or that would involve the Trustee in personal liability.
Prior to taking any action under the Indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
no later than the date that is the earlier of 90 days after such default occurs
or 30 days after it is known to a trust officer or written notice is received by
the Trustee. Except in the case of a Default in the payment of principal of,
premium (if any) or interest on any Note, the Trustee may withhold notice if and
so long as a committee of its Trust officers in good faith determines that
withholding notice is in the interests of the Noteholders. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status and
what action the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each Holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose Holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption of any Note or change the time at which any Note may be redeemed as
described under "--Optional Redemption" above, (v) make any Note payable in
money other than that stated in the Note, (vi) make any change to the
subordination provisions of the Indenture that adversely affects the rights of
any Holder, (vii) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes or (viii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided, however, that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the Code, or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code), to add further Guarantees with respect to the Notes,
to secure the Notes, to add to the covenants of the Company for the benefit of
the Noteholders or to surrender any right or power conferred upon the Company,
to make any change that does not adversely affect the rights of any Holder or to
comply with any requirement of the SEC in connection with the qualification of
the Indenture under the Trust Indenture Act. However, no amendment may be made
to the subordination provisions of the Indenture that adversely affects the
rights of any holder of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or any group or representative thereof authorized
to give a consent) consent to such change.
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The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
or other governmental charges required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any Note selected for redemption
or to transfer or exchange any Note for a period of 15 days prior to a selection
of Notes to be redeemed. The Notes will be issued in registered form and the
registered holder of a Note will be treated as the owner of such Note for all
purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "--Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Subsidiaries and the
judgment default provision described under "--Defaults" above and the
limitations contained in clauses (iii) and (iv) under "--Merger and
Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) with respect only to
Subsidiaries, (viii) or (ix) under "--Defaults" above or because of the failure
of the Company to comply with clause (iii) or (iv) under "--Merger and
Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
SunTrust Bank, Atlanta is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
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GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who is a director or
officer (a) of such Person, (b) of any Subsidiary of such Person or (c) of any
Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the covenants described under "--Certain Covenants--Limitation on
Sales of Assets and Subsidiary Stock" and "--Limitation on Affiliate
Transactions" only, "Affiliate" shall also mean any beneficial owner of shares
representing 5% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary, (ii) a disposition of property or assets in the ordinary course of
business, and (iii) for purposes of the covenant described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenant described under "--Certain
Covenants--Limitation on Restricted Payments."
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Facility and the other Senior Credit Documents and the
Refinancing Indebtedness with respect thereto, as amended from time to time,
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post filing interest is allowed in
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
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"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions (including, without limitation, the
Federal Reserve System) are authorized or required by law to close in New York
City.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
to (ii) Consolidated Interest Expense for such four fiscal quarters; provided,
however, that (1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge of any other
Indebtedness repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such period, (2) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets that are the subject of such Asset Disposition for
such period or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period and Consolidated Interest Expense for such
period shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in connection with such
Asset Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition or any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (2) or (3) above if made by
the Company or a Restricted Subsidiary during
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such period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Protection
Agreement applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term as at the date of determination in excess of 12
months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Subsidiaries, plus, to the extent
incurred by the Company and its Subsidiaries in such period but not included in
such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) noncash interest expense, (v) commissions, discounts
and other fees and charges attributable to letters of credit and bankers'
acceptance financing, (vi) interest actually paid by the Company or any such
Subsidiary under any Guarantee of Indebtedness or other obligation of any other
Person, (vii) net costs associated with Hedging Obligations (including
amortization of fees), (viii) the product of (a) all Preferred Stock dividends
in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary multiplied by (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and (ix)
the cash contributions to any employee stock ownership plan or similar trust to
the extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust; provided, however, that there shall be excluded
therefrom any such interest expense of any Unrestricted Subsidiary to the extent
the related Indebtedness is not Guaranteed or paid by the Company or any
Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iv) below) and (B) the Company's equity in a net loss of any such Person (other
than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any expense recognized (net of
tax benefits related thereto) as a consequence of payments permitted to be made
by the Company under clauses (v)(A) through (C) of paragraph (b) of the covenant
described under "--Certain Covenants--Limitation on Restricted Payments"; (iii)
any net income (loss) of any person acquired by the Company or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iv) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (A) subject to the limitations
contained in (v) below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been
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distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend (subject, in the case of a dividend
that could have been made to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income; (v) any gain (but not loss) realized upon the sale or
other disposition of any asset of the Company or its consolidated Subsidiaries
(including pursuant to any sale/leaseback transaction) that is not sold or
otherwise disposed of in the ordinary course of business and any gain (but not
loss) realized upon the sale or other disposition of any Capital Stock of any
Person; (vi) any extraordinary gain or loss; and (vii) the cumulative effect of
a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount of, or under which, at the date of determination, the
holders thereof, are committed to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Notes.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" means, for any period the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense, (v) the effect of inventory
write-up under APB 16 in connection with the Acquisition, (vi) non-cash ESOP
Expense, (vii) the establishment of a reserve not in excess of $4,000,000 for a
one-time management tax gross up payment made in connection with the Acquisition
and (viii) non-cash expenses not in excess of $3,000,000 related to the
prepayment of management fees paid pursuant to certain agreements referred to in
the Indenture.
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"ESOP" means the Simmons Company Employee Stock Ownership Plan, as from time
to time amended, supplemented or otherwise modified, and a trust forming a part
thereof and its successors.
"ESOP Expense" means, with respect to any period, the aggregate amount of
expenses incurred by the Company relating to the ESOP with respect to such
period calculated in accordance with GAAP.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
not organized under the laws of the United States of America or any state
thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP as in effect as of the Issue Date.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
in the Register.
"Holdings" means Simmons Holdings, Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication) (i) the principal of and premium (if any) in
respect of indebtedness of such Person for borrowed money; (ii) the principal of
and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto); (iv) all obligations
of such Person to pay the deferred and unpaid purchase price of property or
services (except Trade Payables), which purchase price is due more than six
months after the date of placing such property in service or taking delivery and
title thereto or the completion of such services; (v) all Capitalized Lease
Obligations of such Person; (vi) the
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amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Subsidiary of the Company, any Preferred Stock (but excluding, in each case, any
accrued dividends); (vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person shall
be the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by such
Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments," (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means any Officer of the Company or Holdings.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred (including legal, accounting and investment banking fees and any
relocation expenses incurred as a result of an Asset Disposition), and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness
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that is secured by any assets subject to such Asset Disposition, in accordance
with the terms of any Lien upon such assets, or that must by its terms, or in
order to obtain a necessary consent to such Asset Disposition, or by applicable
law be repaid out of the proceeds from such Asset Disposition, (iii) all
distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock by the Company or any Subsidiary, the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Note Guarantee" means any guarantee that may from time to time be executed
and delivered by a Subsidiary of the Company pursuant to the provisions of the
covenant described under "--Certain Covenants--Future Note Guarantors". Each
such Note Guarantee will be in the form prescribed in the Indenture.
"Note Guarantor" means any Subsidiary that has issued a Note Guarantee.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary or Assistant Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means Investcorp, its Affiliates, members of the
Management Group and any Person acting in the capacity of an underwriter in
connection with a public or private offering of the Company's or Holdings'
Capital Stock.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary, the Company or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary; and
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments.
"Permitted Liens" means, (a) Liens for taxes, assessments or other
governmental charges not yet delinquent or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the Company or such Restricted Subsidiary, as the
case may be, in accordance with GAAP; (b) carriers', warehousemen's,
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mechanics', landlords', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business in respect of obligations that are not yet
due or that are bonded or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Company or such Restricted Subsidiary, as the case may be,
in accordance with GAAP; (c) pledges or deposits in connection with workmen's
compensation, unemployment insurance and other social security legislation; (d)
deposits to secure the performance of bids, tenders, trade or government
contracts (other than for borrowed money), leases, licenses, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business; (e) easements
(including reciprocal easement agreements), rights-of-way, building, zoning and
similar restrictions, utility agreements, covenants, reservations, restrictions,
encroachments, changes, and other similar encumbrances or title defects
incurred, or leases or subleases granted to others, in the ordinary course of
business, which do not in the aggregate materially detract from the aggregate
value of the properties of the Company and its Subsidiaries, taken as a whole or
in the aggregate materially interfere with or adversely affect in any material
respect the ordinary conduct of the business of the Company and its Subsidiaries
on the properties subject thereto, taken as a whole; (f) Liens pursuant to the
Senior Credit Documents, liens in connection with industrial revenue bonds,
liens securing the Bank Indebtedness and bankers' liens arising by operation of
law; (g) Liens on property of the Company or any of its Restricted Subsidiaries
created solely for the purpose of securing Indebtedness permitted by clause
(b)(iv) of the covenant described under "--Certain Covenants--Limitation on
Indebtedness" or incurred in connection with Indebtedness permitted by clause
(b)(vii) thereof; provided, however that, in the case of liens described in such
clause (b)(iv), no such Lien shall extend to or cover other property of the
Company or such Restricted Subsidiary other than the respective property so
acquired, and the principal amount of Indebtedness secured by any such Lien
shall at no time exceed the original purchase price of such property; (h) Liens
existing on the date of the Indenture; (i) Liens on goods (and the proceeds
thereof) and documents of title and the property covered thereby securing
Indebtedness in respect of commercial letters of credit; (j) (i) mortgages,
liens, security interests, restrictions or encumbrances that have been placed by
any developer, landlord or other third party on property over which the Company
or any Restricted Subsidiary of the Company has easement rights or on any real
property leased by the Company on the date of the Indenture and subordination or
similar agreements relating thereto and (ii) any condemnation or eminent domain
proceedings affecting any real property; (k) leases or subleases to third
parties; (l) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Restricted Subsidiaries; and
(m) Liens securing Indebtedness Incurred under clause (b)(v) of the covenant
described under "--Certain Covenants-- Limitation on Indebtedness".
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note that is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock (or other voting stock) of the Company or Holdings pursuant to an
effective registration statement (other than a registration statement on Form
S-4, S-8 or any successor or similar forms) under the Securities Act.
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"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Company or Holdings (as applicable) has been distributed by means
of an effective registration statement under the Securities Act.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances Indebtedness of any Restricted Subsidiary (to the extent
permitted in the Indenture) and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness; provided, however, that (i) except in
the case of any refunding, refinancing, replacement, renewal, repayment or
extension of any Bank Indebtedness, the Refinancing Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the Indebtedness being
refinanced, (ii) except in the case of any refunding, refinancing, replacement,
renewal, repayment or extension of any Bank Indebtedness, the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced and (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being refinanced, plus fees, underwriting
discounts and other costs and expenses incurred in connection with such
Refinancing Indebtedness; provided further, however, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that
refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means those businesses in which the Company or any of its
Subsidiaries are engaged on the date of the Indenture, or that are directly
related thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Senior Credit Documents" means the collective reference to the Senior
Credit Facility, the notes issued pursuant thereto and the Guarantees thereof,
and the Security Agreements, the Mortgages and the Pledge Agreements (each as
defined in the Senior Credit Facility).
"Senior Credit Facility" means the credit agreement dated as of March 22,
1996, as amended, waived or otherwise modified from time to time, among the
Company, the several lenders party thereto and Chemical Bank, a New York banking
corporation, as administrative agent (except to the extent that any such
amendment, waiver or other modification thereto would be prohibited by the terms
of the Indenture, unless otherwise agreed to by the Holders of at least a
majority in aggregate principal amount of Notes at the time outstanding).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes and is not subordinated by its terms to any
Indebtedness or other obligation of the Company that is not Senior Indebtedness.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter Incurred) that is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person or (ii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company that is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by the
United States of America having capital, surplus and undivided profits
aggregating in excess of $300.0 million (or the foreign currency equivalent
thereof), (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) or (ii) above
entered into with a bank meeting the qualifications described in clause (ii)
above, and (iv) investments in commercial paper, maturing not more than six
months after the date of acquisition, issued by any Lender as defined under the
Senior Credit Facility or the parent corporation of any Lender, and commercial
paper with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (A) the Subsidiary to be so designated has total consolidated assets
of $1,000 or less or (B) if such Subsidiary has consolidated assets greater than
$1,000, then such designation would be permitted under the provisions of the
covenant described under "--Certain Covenants--Limitations on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however, that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under "--Certain
Covenants--Limitation on Indebtedness" and (y) no Default shall have occurred
and be
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<PAGE>
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.
BOOK ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered notes in global form without coupons (each, a
"Global Note"). Upon issuance, each Global Note will be deposited with, or on
behalf of, the Depository Trust Company (the "Depository") and registered in the
name of Cede & Co., as nominee of the Depository.
If a holder tendering Old Notes so requests, such holder's New Notes will be
issued as described below under "Certificated Securities" in registered form
without coupons (the "Certificated Securities").
The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants include securities
brokers and dealers (including the Initial Purchaser), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit the
accounts of Participants who elect to exchange Old Notes with an interest in the
Global Note and (ii) ownership of the New Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depository (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own and that security interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
So long as the Depository or its nominee is the registered owner of a Global
Note, the Depository or such nominee, as the case may be, will be considered the
sole owner or Holder of the New Notes represented by the Global Note for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in a Global Note will not be entitled to have New Notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of Certificated Securities, and will not be considered
the owners or
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Holders thereof under the Indenture for any purpose, including with respect to
the giving of any directions, instruction or approval to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in New Notes
represented by a Global Note to pledge such interest to persons or entities that
do not participate in the Depository's system, or to otherwise take action with
respect to such interest, may be affected by the lack of a physical certificate
evidencing such interest.
The Company understands that under existing industry practice, in the event
the Company requests any action of Holders or an owner of a beneficial interest
in a Global Note desires to take any action that the Depository, as the Holder
of such Global Note, is entitled to take, the Depository would authorize the
Participants to take such action and the Participant would authorize persons
owning through such Participants to take such action or would otherwise act upon
the instruction of such persons. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of New Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such New
Notes.
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Note representing such New Notes under
the indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the New Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of New Notes (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Global Note as shown
on the records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depository of
its Global Notes, Certificated Securities will be issued to each person that the
Depository identifies as the beneficial owner of the New Notes represented by
the Global Note. In addition, any person having a beneficial interest in a
Global Note or any holder of Old Notes whose Old Notes have been accepted for
exchange may, upon request to the Trustee or the Exchange Agent, as the case may
be, exchange such beneficial interest or Old Notes for Certificated Securities.
Upon any such issuance, the Trustee is required to register such Certificated
Securities in the name of such person or persons (or the nominee of any
thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related New Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the New Notes to be issued).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States federal income tax
consequences of the Exchange Offer is for general information only. It is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. Moreover, holders of Notes should note that
there are no Treasury Regulations, judicial decisions or other authority that
have considered a transaction closely comparable to the Exchange Offer and there
can be no assurance that the Internal Revenue Service (the "IRS") will not take
a contrary position to the positions taken herein. The following relates only to
the Old Notes, and the New Notes received therefor, that are held as "capital
assets" within the meaning of Section 1221 of the Code by persons who are
citizens or residents of the United States. It does not discuss state, local, or
foreign tax consequences, nor does it discuss tax consequences to categories of
holders that are subject to special rules, such as foreign persons, tax-exempt
organizations, insurance companies, banks, and dealers in stocks and securities.
Tax consequences may vary depending on the particular status of an investor. No
rulings will be sought from the IRS with respect to the federal income tax
consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE OLD NOTES
FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING
THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS
PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE OLD NOTES FOR NEW
NOTES.
THE EXCHANGE OFFER
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to the Company, the
exchange of Old Notes for New Notes pursuant to the Exchange Offer will not
constitute a material modification of the terms of the Notes and, accordingly,
such exchange will not constitute an exchange for federal income tax purposes.
Accordingly, such exchange will have no federal income tax consequences to
holders of Notes, either those who exchange or those who do not, and each holder
of Notes would continue to be required to include interest on the Notes in its
gross income in accordance with its method of accounting for federal income tax
purposes.
BACKUP WITHHOLDING
Under the Code, a holder of a Note may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to payments in
respect of interest thereon or the gross proceeds from the disposition thereof.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN") within a
reasonable time after request therefor, (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Corporations and certain other entities described in the Code and Treasury
regulations are exempt from such withholding if their exempt status is properly
established.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1996 (90 days after the date of this Prospectus),
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the holders of the Old
Notes), other than commissions or concessions of any brokers or dealers, and
will indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Gibson, Dunn & Crutcher LLP, New York, New York.
EXPERTS
The financial statements of the Company as of and for the year ended
December 30, 1995 appearing in this Prospectus have been audited by Coopers &
Lybrand L.L.P., independent auditors, as stated in their report appearing
herein, and are included in reliance on such report given on the authority of
such firm as experts in accounting and auditing. The financial statements for
the two years ended December 31, 1994 appearing in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein, in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
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SIMMONS COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants.................................................... F-2
Report of Independent Public Accountants............................................. F-3
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1994 and December 30, 1995........ F-4
Consolidated Statements of Operations for the years ended December 25, 1993,
December 31, 1994 and December 30, 1995.............................................. F-5
Consolidated Statements of Common Stockholders' Equity for the years ended
December 25, 1993, December 31, 1994 and December 30, 1995........................... F-6
Consolidated Statements of Cash Flows for the years ended December 25, 1993,
December 31, 1994 and December 30, 1995.............................................. F-7
Notes to Consolidated Financial Statements....................................... F-8
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheet as of March 30, 1996
for the Successor.............................................................. F-21
Condensed Consolidated Statements of Operations for the quarter ended
April 1, 1995 for the Predecessor, for the period from December 31, 1995
through March 21, 1996 for the Predecessor, and for the period from
March 22, 1996 through March 30, 1996 for the Successor........................ F-22
Condensed Consolidated Statements of Cash Flows for the quarter ended
April 1, 1995 for the Predecessor, for the period from December 31, 1995
through March 21, 1996 for the Predecessor, and for the period from
March 22, 1996 through March 30, 1996 for the Successor........................ F-23
Notes to Condensed Consolidated Financial Statements............................. F-24
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
SIMMONS COMPANY
We have audited the accompanying consolidated balance sheet of Simmons
Company (a Delaware corporation) and subsidiaries as of December 30, 1995, and
the related consolidated statements of operations, common stockholders' equity
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As explained in Note 15 to the consolidated financial statements, on March
22, 1996, an affiliate of INVESTCORP S.A. ("Investcorp") acquired 100% of the
common stock of Simmons Company.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Simmons Company and subsidiaries as of December 30, 1995, and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Atlanta, Georgia
March 13, 1996, except for Notes 8 and 15
which are as of March 22, 1996
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
SIMMONS COMPANY
We have audited the accompanying consolidated balance sheets of Simmons
Company (a Delaware corporation) and subsidiaries as of December 31, 1994 and
December 25, 1993 and the related consolidated statements of operations, common
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Simmons Company and subsidiaries as of December 31, 1994 and December 25, 1993
and the consolidated results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
As explained in Note 2 to the financial statements, effective December 26,
1993, the Company changed its method of accounting for its Employee Stock
Ownership Plan in accordance with Statement of Position No. 93-6 of the American
Institute of Certified Public Accountants, "Employers' Accounting for Employee
Stock Ownership Plans."
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 17, 1995 except for Notes 6
and 14 which are as of May 4, 1995
(not presented herein)
F-3
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 8,477 $ 9,185
Accounts receivable, net...................................... 42,861 49,453
Inventories................................................... 15,760 18,293
Deferred income taxes......................................... 9,276 7,565
Other current assets.......................................... 5,425 5,372
------------ ------------
Total current assets...................................... 81,799 89,868
Property, plant and equipment, net.............................. 21,614 23,410
Patents......................................................... 16,165 14,275
Goodwill........................................................ 125,437 121,573
Other assets.................................................... 4,876 5,366
------------ ------------
$249,891 $254,492
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................................. $ 18,312 $ 22,712
Accrued liabilities........................................... 31,933 37,800
Current maturities of long-term obligations................... 11,572 2,661
------------ ------------
Total current liabilities................................. 61,817 63,173
Noncurrent liabilities:
Long-term debt................................................ 96,954 90,291
Capital lease................................................. 909 816
Deferred income taxes......................................... 8,469 6,537
Postretirement benefit obligations other than pensions........ 7,268 7,999
Other......................................................... 8,659 8,352
------------ ------------
Total liabilities......................................... 184,076 177,168
------------ ------------
Commitments (Notes 3 and 8)
Redeemable preferred stock...................................... 641 680
------------ ------------
Redeemable common stock under ESOP, net of related unearned
compensation of $29,624 and $29,674, respectively............... 23,238 32,272
------------ ------------
Common stockholders' equity:
Common stock, $.01 par value; 50,000,000 shares authorized,
36,311,967 shares issued........................................ 363 363
Additional paid-in capital.................................... 190,560 176,501
Unearned compensation under ESOP.............................. (60,169) (47,531)
Accumulated deficit........................................... (88,305) (78,894)
Foreign currency translation adjustment....................... (347) (288)
Treasury stock, 60,472 and 1,727,191 shares, respectively, at
cost............................................................ (166) (5,779)
------------ ------------
Total common stockholders' equity......................... 41,936 44,372
------------ ------------
$249,891 $254,492
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales......................................... $391,382 $439,689 $489,815
Cost of products sold............................. 240,125 269,741 292,825
------------ ------------ ------------
Gross profit.................................. 151,257 169,948 196,990
Selling, general and administrative expenses...... 124,452 137,791 161,202
ESOP expense...................................... 14,000 4,463 4,533
Amortization of intangible assets................. 5,724 5,753 5,753
Interest expense, net............................. 8,105 8,197 8,185
Other deductions, net............................. 760 2,517 400
------------ ------------ ------------
Income (loss) before income taxes and change
in accounting principle........................... (1,784) 11,227 16,917
Provision for income taxes........................ 1,043 3,233 7,506
------------ ------------ ------------
Income (loss) before cumulative effect of
change in accounting principle.................... (2,827) 7,994 9,411
Cumulative effect of the change in accounting for
income taxes...................................... (492) -- --
------------ ------------ ------------
Net income (loss)................................. $ (3,319) $ 7,994 $ 9,411
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL UNEARNED CURRENCY TOTAL
COMMON COMMON PAID-IN COMPENSATION ACCUMULATED TRANSLATION TREASURY STOCKHOLDERS'
SHARES STOCK CAPITAL UNDER ESOP DEFICIT ADJUSTMENT STOCK EQUITY
---------- ------ ---------- ------------ ----------- ----------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 26,
1992..................... 36,311,967 $363 $231,394 $ (104,567) $ (92,980) $(146) $ (21 ) $34,043
ESOP expense............ -- -- -- 14,000 -- -- -- 14,000
Net loss................ -- -- -- -- (3,319) -- -- (3,319)
Dividends paid or
accrued on redeemable
preferred stock.......... -- -- (46) -- -- -- -- (46)
Change in foreign
currency translation... -- -- -- -- -- (77) -- (77)
Change in fair value of
ESOP shares.............. -- -- (14,525) 7,827 -- -- -- (6,698)
Purchase of treasury
stock.................... -- -- -- -- -- -- (24 ) (24)
---------- ------ ---------- ------------ ----------- --- -------- ------
Balance, December 25,
1993..................... 36,311,967 363 216,823 (82,740) (96,299) (223) (45 ) 37,879
ESOP expense............ -- -- (9,541) 14,004 -- -- -- 4,463
Income tax benefit on
ESOP..................... -- -- 3,721 -- -- -- -- 3,721
Net income.............. -- -- -- -- 7,994 -- -- 7,994
Dividends paid or
accrued on redeemable
preferred stock.......... -- -- (55) -- -- -- -- (55)
Change in foreign
currency translation... -- -- -- -- -- (124) -- (124)
Change in fair value of
ESOP shares.............. -- -- (20,388) 8,567 -- -- -- (11,821)
Purchase of treasury
stock.................... -- -- -- -- -- -- (121 ) (121)
---------- ------ ---------- ------------ ----------- --- -------- ------
Balance, December 31,
1994..................... 36,311,967 363 190,560 (60,169) (88,305) (347) (166 ) 41,936
ESOP expense............ -- -- (8,065) 12,598 -- -- -- 4,533
Income tax benefit on
ESOP..................... -- -- 3,145 -- -- -- -- 3,145
Net income.............. -- -- -- -- 9,411 -- -- 9,411
Dividends paid or
accrued on redeemable
preferred stock.......... -- -- (65) -- -- -- -- (65)
Change in foreign
currency translation... -- -- -- -- -- 59 -- 59
Change in fair value of
ESOP shares.............. -- -- (9,074) 40 -- -- -- (9,034)
Purchase of treasury
stock.................... -- -- -- -- -- -- (5,613 ) (5,613)
---------- ------ ---------- ------------ ----------- --- -------- ------
Balance, December 30,
1995..................... 36,311,967 $363 $176,501 $ (47,531) $ (78,894) $(288) $(5,779 ) $44,372
---------- ------ ---------- ------------ ----------- --- -------- ------
---------- ------ ---------- ------------ ----------- --- -------- ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
DECEMBER 25, DECEMBER 31, DECEMBER 30,
1993 1994 1995
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................. $ (3,319) $ 7,994 $ 9,411
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation................................. 3,141 3,496 4,027
Non-cash interest expense.................... 1,040 1,112 1,180
Amortization of deferred debt issuance
costs............................................ 957 835 679
Loss (gain) on disposal of fixed assets...... (141) 2,823 --
Amortization of intangibles.................. 5,724 5,753 5,753
ESOP expense................................. 14,000 4,463 4,533
Provision for bad debts...................... 1,257 1,706 3,500
Provision for deferred income taxes.......... 822 2,484 1,006
Other, net................................... -- (732) (444)
Cumulative effect of change in accounting for
income taxes..................................... 492 -- --
Net changes in operating assets and
liabilities:
Accounts receivable.......................... (15,040) 7,997 (10,092)
Inventories.................................. (3,342) 641 (2,533)
Other assets and liabilities................. 862 84 2,029
Accounts payable............................. 8,322 (5,905) 4,400
Accrued liabilities.......................... 3,227 1,629 5,064
------------ ------------ ------------
Net cash provided by operating activities.... 18,002 34,380 28,513
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment..... (4,972) (4,496) (5,834)
Proceeds from sale of property................. 254 301 --
------------ ------------ ------------
Net cash used in investing activities........ (4,718) (4,195) (5,834)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from revolving line of credit and
long-term borrowings......................... 17,181 25,789 15,842
Principal payments on revolving line of credit,
long-term debt and capital lease obligations..... (26,665) (58,532) (32,259)
Treasury stock purchases....................... (24) (121) (5,613)
------------ ------------ ------------
Net cash used in financing activities........ (9,508) (32,864) (22,030)
------------ ------------ ------------
Net effect of exchange rate changes on cash...... (77) (124) 59
------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents...................................... 3,699 (2,803) 708
Cash and cash equivalents, beginning of year..... 7,581 11,280 8,477
------------ ------------ ------------
Cash and cash equivalents, end of year........... $ 11,280 $ 8,477 $ 9,185
------------ ------------ ------------
------------ ------------ ------------
Supplemental cash flow information:
Cash paid for interest......................... $ 6,125 $ 7,840 $ 5,458
------------ ------------ ------------
------------ ------------ ------------
Cash paid for income taxes..................... $ 390 $ 749 $ 3,047
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY
Simmons Company ("Simmons" or "the Company") is one of the largest bedding
manufacturers in the United States. The Company manufactures and distributes
mattresses, box springs, bedding frames and sleep accessories. Simmons also
sells bedding products to certain institutional customers, such as schools and
government entities, and to the lodging industry. The Company also licenses its
patents and trademarks to various domestic and foreign manufacturers.
The Company was privately held by the Simmons family for many years and
later was publicly traded. Following a number of ownership changes beginning in
1978, the Company has most recently been owned by an Employee Stock Ownership
Plan (the "ESOP") and affiliates of Merrill Lynch Capital Partners, Inc.
("MLCP"). In 1991, MLCP made a $32 million equity investment, acquiring its
controlling interest of approximately 60%, as part of a financial restructuring
of the Company's balance sheet.
See Note 15 for a discussion of the acquisition of the Company, which was
completed on March 22, 1996.
2. PRINCIPAL ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of
the Company and all its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain amounts in the 1993
and 1994 financial statements have been reclassified to conform with the current
year presentation.
]Basis of Accounting
The consolidated financial statements of the Company have been prepared in
accordance with generally accepted accounting principles. Such financial
statements include estimates and assumptions that affect the reported amount of
assets and liabilities, disclosure of contingent assets and liabilities and the
amounts of revenues and expenses. Actual results could differ from those
estimates.
Fiscal Year
The Company operates on a 52/53 week fiscal year ending on the last Saturday
in December. Fiscal years 1993 and 1995 comprised 52 weeks and fiscal 1994
comprised 53 weeks.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity
of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
net realizable value.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation expense is
determined principally using the straight-line method over the estimated useful
lives for financial reporting and accelerated methods for income tax purposes.
Expenditures that substantially increase asset values or extend useful lives are
capitalized. Expenditures for maintenance and repairs are expensed as incurred.
When property items are retired or otherwise disposed of, amounts
F-8
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. PRINCIPAL ACCOUNTING POLICIES--(CONTINUED)
applicable to such items are removed from the related asset and accumulated
depreciation accounts and any resulting gain or loss is credited or charged to
income. Useful lives are generally as follows:
<TABLE>
<S> <C>
Buildings and improvements.......................................... 10 - 25 years
Machinery and equipment............................................. 5 - 15 years
</TABLE>
Patents and Goodwill
The cost of patents acquired is being amortized using the straight-line
method over the estimated remaining economic lives of the respective patents.
Accumulated amortization of patents totaled approximately $11,269,000 and
$13,198,000 as of December 31, 1994 and December 30, 1995, respectively.
Amortization expense was approximately $1,900,000, $1,929,000 and $1,929,000 for
1993, 1994 and 1995, respectively.
Goodwill is being amortized on a straight-line basis, over the estimated
future periods to be benefited (principally 40 years). Accumulated amortization
of goodwill totaled $22,967,000 and $26,831,000 as of December 31, 1994 and
December 30, 1995, respectively. Amortization expense was approximately
$3,824,000 in the accompanying statements of operations for each of fiscal years
1993, 1994 and 1995.
At each balance sheet date, management assesses whether there has been a
permanent impairment in the value of patents or goodwill by comparing
anticipated undiscounted future cash flows from operating activities with the
carrying value of the intangibles. The factors considered by management in this
assessment include operating results, trends and prospects, as well as the
effects of obsolescence, demand, competition and other economic factors.
Revenue Recognition
The Company recognizes revenue at the time the product is shipped to the
customer.
ESOP Expense
In 1994, the Company prospectively adopted Statement of Position No. 93-6 of
the American Institute of Certified Public Accounts, "Employers' Accounting for
Employee Stock Ownership Plans," whereby ESOP expense is recognized as an amount
equal to the fair market value of the shares released. The unearned compensation
balance continues to be amortized using the shares allocated method (i.e., at
cost). The difference in these two amounts is recorded as a charge to additional
paid-in capital.
Product Development Costs
Costs associated with the development of new products and changes to
existing products are charged to expense as incurred. These costs amounted to
approximately $560,000, $1,100,000 and $1,245,000 in 1993, 1994 and 1995,
respectively, and are included in cost of products sold in the accompanying
statements of operations.
Advertising Costs
The Company records the cost of advertising as an expense when incurred.
Advertising expense was $41,620,000, $43,532,000 and $49,510,000 for 1993, 1994
and 1995, respectively, and is included as a component of selling, general and
administrative expenses in the accompanying statements of operations.
F-9
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. PRINCIPAL ACCOUNTING POLICIES--(CONTINUED)
Concentration of Credit Risk
The Company manufactures and markets sleep products, including mattresses,
box springs, and flotation mattresses to retail establishments primarily in the
United States. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral. Sales
to three of the Company's major customers aggregated approximately 17%, 23% and
23% of total sales for 1993, 1994 and 1995, respectively. Accounts receivable
from one customer was approximately 12% and 16% of total accounts receivable at
December 31, 1994 and December 30, 1995, respectively. However, sales to no one
customer represented more than 9% of net sales for 1993, 1994 or 1995.
Purchases of raw materials from one vendor represented approximately 19%,
19% and 20% of cost of products sold for 1993, 1994 and 1995, respectively.
The Company maintains cash balances in excess of FDIC insurance limits at
certain large financial institutions. The Company monitors the financial
condition of such institutions and considers the risk of loss to be remote.
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of, which the Company is required to adopt in 1996. SFAS
No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles and goodwill. The adoption of SFAS No.
121 is not expected to have a material impact on the Company's financial
position, annual operating results or cash flows.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which the Company is required to adopt effective in 1996. SFAS No.
123 establishes optional alternative accounting methods for stock-based
compensation as well as new required disclosures. The Company has elected to
account for stock-based compensation under previously existing accounting
guidance. As such, SFAS No. 123 will be adopted in 1996 for disclosure purposes
only and will not impact the Company's financial position, annual operating
results or cash flows.
3. EMPLOYEE STOCK OWNERSHIP PLAN
The Company is structured so that the employees of the Company will have a
beneficial ownership of the Company's common stock through their participation
in the ESOP. At December 31, 1994 and December 30, 1995, the ESOP owned
11,746,627 and 11,687,923 shares of the Company's common stock, respectively.
The funds used to purchase the common stock were borrowed by the ESOP pursuant
to various loan agreements with the Company.
The ESOP pledged all of its shares of the Company's common stock as
collateral for the loans. These shares are held by NationsBank Trust, the ESOP
trustee, in a suspense account and are released to the ESOP participants'
accounts based on debt service. As of December 31, 1994 and December 30, 1995,
5,163,682 and 6,088,982 shares, respectively, had been allocated to
participants' accounts. The remaining unallocated shares held in the ESOP had
estimated fair values of approximately $29,624,000 ($4.50 per share) and
$29,664,000 ($5.30 per share) at December 31, 1994 and December 30, 1995,
respectively.
Under the ESOP, employees are eligible to participate in the ESOP following
the date when the employee has completed at least one year of service and has
reached age 21. All employees of
F-10
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. EMPLOYEE STOCK OWNERSHIP PLAN--(CONTINUED)
the Company, except employees who are covered by a negotiated collective
bargaining agreement (unless the collective bargaining agreement provides for
participation in the ESOP) or who are nonresident aliens, are covered by the
ESOP. Approximately 50% of the Company's full-time employees are participants in
the ESOP. The participants and beneficiaries of the ESOP are not subject to
income tax with respect to contributions made on their behalf until they receive
distributions from the ESOP.
Under the provisions of the ESOP, the Company is obligated to repurchase
participant shares which have been distributed under the terms of the plan, as
long as the shares are not publicly traded or if the shares are subject to
trading limitations. The Company repurchased approximately 42,938 and 58,700
shares from ESOP participants in 1994 and 1995, respectively, at prices ranging
from $2.75 to $3.30 in 1994 and $3.30 to $4.50 per share in 1995, respectively.
These shares have been reflected as treasury stock.
Because of the Company's obligation to repurchase its shares from the ESOP
under certain circumstances for their then current fair value, the Company has
classified the redemption value of such shares in the accompanying balance
sheets as Redeemable Common Stock Under ESOP. Additionally, pursuant to
generally accepted accounting principles, the Company has classified a
proportional amount of unearned compensation under ESOP in the same manner.
The Company also repurchased 1,608,019 shares at $3.30 to $4.50 per share
from non-ESOP stockholders during 1995, which is also reflected as treasury
stock.
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 1994 and
December 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Accounts receivable............................................ $47,142 $56,593
Allowance for doubtful accounts................................ (2,267) (4,600)
Allowance for cash discounts and other......................... (2,014) (2,540)
------- -------
$42,861 $49,453
------- -------
------- -------
</TABLE>
5. INVENTORIES
Inventories consist of the following at December 31, 1994 and December 30,
1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Raw materials.................................................. $10,101 $11,807
Work-in-progress............................................... 1,920 1,942
Finished goods................................................. 3,739 4,544
------- -------
$15,760 $18,293
------- -------
------- -------
</TABLE>
F-11
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 1994
and December 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- -------
<S> <C> <C>
Land, buildings and improvements.............................. $ 9,178 $ 8,784
Machinery and equipment....................................... 27,636 32,966
Construction in progress...................................... 509 844
-------- -------
37,323 42,594
Less accumulated depreciation................................. (15,709) (19,184)
-------- -------
$ 21,614 $23,410
-------- -------
-------- -------
</TABLE>
7. OTHER ASSETS
Other assets consist of the following at December 31, 1994 and December 30,
1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Long-term note receivable......................................... $2,200 $2,200
Debt issue costs, net of accumulated amortization of $4,519 and
$5,613, respectively.............................................. 1,999 1,584
Other............................................................. 677 1,582
------ ------
$4,876 $5,366
------ ------
------ ------
</TABLE>
Debt issue costs are being amortized to interest expense using the
straight-line method (which approximates the effective interest method) over the
term of the respective debt. Amortization of $957,000, $835,000 and $679,000 for
1993, 1994 and 1995, respectively, is included as a component of interest
expense in the accompanying consolidated statements of operations.
8. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1994 and December
30, 1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Senior loans:
Tranche A term loan........................................ $ 46,013 $ 36,045
Tranche C term loan........................................ 17,700 17,700
Revolving loan............................................. 8,053 2,000
Adjustable rate senior subordinated notes.................... 2,354 2,618
Adjustable rate junior subordinated notes.................... 23,885 24,328
Janesville, Wisconsin, industrial revenue bonds, 7%, due
October 2017................................................. 9,700 9,700
Other........................................................ 735 468
-------- --------
108,440 92,859
Less current portion......................................... (11,486) (2,568)
-------- --------
$ 96,954 $ 90,291
-------- --------
-------- --------
</TABLE>
In connection with the Acquisition discussed in Note 15, the Company
refinanced the above term loans, the revolving loan, and the senior and junior
subordinated notes. As a result, the current and future maturities of long-term
debt have been adjusted to reflect the principal payment terms resulting from
such refinancing.
F-12
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT--(CONTINUED)
Interest on the Tranche A and C term loans was computed based on the
Company's selection from certain variable rates as defined in the loan
agreements. The interest rates at December 30, 1995 were 8.0% and 7.75% for the
Tranche A and C term loans, respectively.
In 1994, the Chemical Bank credit agreement was amended to allow amounts
previously held in a cash collateral account due to limitations in the ESOP
agreement to be used to prepay the Tranche A loan. This prepayment precluded the
holders of the Tranche A loan from excluding 50% of interest received from
taxable income, after such prepayment. The Company effectively pays a higher
interest rate on the related debt as a result of the disallowance.
The revolving loan agreement provides funding based on the amount of the
monthly available borrowing base, as defined in the loan agreement, up to a
maximum of $26,000,000. Interest is computed based on the Company's selection
from certain variable rates as defined in the loan agreement and at December 30,
1995 was 9.5%. The Company pays Chemical Bank a revolving credit commitment fee
of .5% per annum on the average daily unused credit facility. The available
unused portion of the revolving loan was approximately $17,743,000 at December
30, 1995. The revolving credit agreement expires in conjunction with the
maturity of the Tranche C term loan in 1997. At December 30, 1995, available
borrowings under the revolving credit agreement were reduced by standby letters
of credit in the amount of $6,257,000 related to insurance coverage, industrial
site evaluation, and the acquisition of real estate leases.
The adjustable rate senior subordinated notes pay a variable rate of
interest equal to the prime rate plus 2% and mature in January 1999. The
interest rate at December 30, 1995 was 10.5%. Interest may be paid in cash or
added to the outstanding loan principal balance.
The adjustable rate junior subordinated notes bear interest at 10% through
March 14, 1996, and 12% thereafter and mature on January 17, 2003. Interest may
be paid in cash or by issuing additional notes, thereby increasing the
outstanding loan principal balance. In connection with a 1991 exchange of notes,
these adjustable rate junior subordinated notes were recorded at the exchanged
notes' carrying value, since the total future cash payment requirements
(principal and interest) on these notes exceeded the carrying value of the
junior subordinated notes for which they were exchanged. For financial reporting
purposes, the effective interest rate has been adjusted to equate the present
value of the future cash payments specified by the terms of the new notes with
their carrying amount and was 3.96% at December 30, 1995.
All shares of common stock of the Company, accounts receivable, inventories
and property, plant and equipment have been pledged as collateral for the
various debt agreements.
Total interest expense was $8,155,000, $9,042,000 and $8,347,000, for 1993,
1994 and 1995, respectively.
The various loan agreements contain restrictions which require the Company
to comply with certain financial tests, including current ratio, consolidated
interest expense coverage ratio, consolidated net worth, leverage ratio, working
capital and capital expenditures. The Company was in compliance with all debt
covenants at December 30, 1995. In addition, the various loan agreements
restrict the Company from paying cash dividends and limit other payments, loans,
advances, additional debt, liens and material acquisitions.
The fair value of the Company's long-term debt is estimated based on the
current rates offered to the Company for debt of similar terms and maturities.
At December 30, 1995, the Company's fair value of long-term debt approximates
the carrying value except for the junior subordinated notes, whose fair value
was determined to be approximately $17,571,000.
F-13
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT--(CONTINUED)
Future maturities of long-term debt as of December 30, 1995 are as follows
(in thousands):
<TABLE>
<S> <C>
1996..................................................................... $2,568
1997..................................................................... 5,200
1998..................................................................... 7,200
1999..................................................................... 9,200
2000..................................................................... 11,200
Thereafter............................................................... 57,491
--------
$92,859
--------
--------
</TABLE>
The Company has entered into a series of long-term supply agreements with a
major supplier for certain raw materials. Based on various provisions of these
agreements, these commitments are currently estimated to aggregate the lesser of
$30 million or approximately 60% of the products covered by such agreements per
year, and generally expire through the year 2010.
9. LEASES
The Company has capitalized a leased facility. Annual lease payments
providing amounts sufficient to pay principal and interest are summarized as
follows (in thousands):
<TABLE>
<S> <C>
1996...................................................................... $163
1997...................................................................... 163
1998...................................................................... 163
1999...................................................................... 163
2000...................................................................... 163
Thereafter................................................................ 720
-------
1,535
Less Interest............................................................. 626
-------
Unpaid principal at December 30, 1995 (including $93 due within one
year)..................................................................... $909
-------
-------
</TABLE>
Amounts related to the capital lease are included in buildings and
improvements in the accompanying financial statements.
The Company also leases certain other facilities and equipment under
operating leases. Rent expense was $8,672,000, $10,143,000 and $10,626,000, for
1993, 1994 and 1995, respectively.
The following is a schedule of the future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 30, 1995 (in thousands):
<TABLE>
<S> <C>
1996..................................................................... $10,085
1997..................................................................... 8,901
1998..................................................................... 7,853
1999..................................................................... 7,204
2000..................................................................... 6,388
Thereafter............................................................... 30,852
--------
$71,283
--------
--------
</TABLE>
F-14
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. REDEEMABLE PREFERRED STOCK
The Company has issued 5,000 shares of Series C Preferred Stock plus shares
subsequently issued for dividends. The Company is required to redeem the Series
C upon the occurrence of certain events but in no case later than January 17,
2003. Dividends on the Series C are accrued at the rate of 8% through March 14,
1994, 9% from March 15, 1994 through March 14, 1995, 10% from March 15, 1995
through March 14, 1996, and 12% thereafter. The Series C shares are exchangeable
into new adjustable rate junior subordinated notes after three years from date
of issuance at 97% of their liquidation preference and at 100% of their fair
value after six years from date of issuance. At December 30, 1995, the Series C
had an aggregate liquidation preference of approximately $720,000, including
accrued dividends.
The Series C shares have no voting rights, except that, upon certain
occurrences of default, the holders of Series C shares will have the right to
elect one director. The Series C shares contain covenants that restrict cash
dividends on common stock. Dividends in cash, however, may be paid on shares of
common stock held by the ESOP to the extent that the ESOP utilizes the dividends
to repay amounts borrowed from the Company or purchase shares from the
employees. The Series C shares are subordinated in liquidation and right of
payment to all indebtedness of the Company. At December 31, 1994 and December
30, 1995, the Company had 6,408 and 6,801 shares issued and outstanding,
respectively.
The Series C shares were called for redemption in connection with the
Acquisition as discussed in Note 15.
11. STOCK OPTION PLAN
The board of directors has established a performance stock option plan and a
separate executive stock option plan ("the Plans"). The option price per share
is equal to the estimated fair value on the date of the grant. The Company has
reserved shares in an amount sufficient for issuance upon exercise of the
options under the plans. Stock option transactions for both plans are as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Options outstanding at beginning of year... 1,470,000 1,426,000 2,170,000
Granted.................................... 60,000 840,000 1,042,000
Canceled................................... (104,000) (96,000) (160,000)
-------------------- -------------------- --------------------
Options outstanding at end of year......... 1,426,000 2,170,000 3,052,000
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------
Option price range at end of year.......... $ 1.42 - 2.75 $ 1.42 - 3.30 $ 1.42 - 4.50
Options vested at end of year.............. 158,947 472,038 1,293,000
</TABLE>
F-15
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Current tax provision:
Federal................................................ $ 47 $ 277 $5,398
State.................................................. 115 208 1,102
Foreign................................................ 59 264 --
------ ------ ------
221 749 6,500
------ ------ ------
Deferred tax provision:
Federal................................................ 658 2,166 903
State.................................................. 164 318 103
------ ------ ------
822 2,484 1,006
------ ------ ------
$1,043 $3,233 $7,506
------ ------ ------
------ ------ ------
</TABLE>
The reconciliation of the statutory federal income tax rate to the effective
income tax rate for the 1993, 1994 and 1995 provision for income taxes is as
follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
Income taxes at statutory rate......................... $ (606) $ 3,727 $ 5,921
State income taxes, net of federal benefit............. 115 347 889
Goodwill amortization.................................. 1,491 1,491 1,491
Reduction of valuation allowance....................... -- (3,626) (1,914)
Other, net............................................. 43 1,294 1,119
------ ------- -------
$1,043 $ 3,233 $ 7,506
------ ------- -------
------ ------- -------
</TABLE>
Components of the net deferred income tax asset (liability) at December 31,
1994 and December 30, 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- ------
<S> <C> <C>
Current deferred income taxes:
Accounts receivable and inventory reserves..................... $ 1,921 $2,587
Accrued liabilities not currently deductible................... 5,957 5,014
Net operating loss carryforwards............................... 3,106 --
Valuation allowance............................................ (957) --
Prepaids and other assets, net currently taxable............... (751) (36)
------- ------
9,276 7,565
------- ------
Noncurrent deferred income taxes:
Property basis differences..................................... (1,198) (1,356)
Patents basis differences...................................... (5,569) (4,871)
ESOP liability basis differences............................... (8,990) (7,181)
Net operating loss carryforwards............................... 2,645 1,688
Valuation allowance............................................ (2,645) (1,688)
Other noncurrent accrued liabilities, not currently
deductible....................................................... 7,288 6,871
------- ------
(8,469) (6,537)
------- ------
Net deferred tax asset......................................... $ 807 $1,028
------- ------
------- ------
</TABLE>
At December 30, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $4,326,000, all of which are
limited to their utilization under the Internal Revenue Code. Due to such
limitations, the Company believes it is more likely than not that it will not
realize the benefit of the loss carryforwards and has provided a valuation
allowance of approximately $1,688,000 to fully reserve such amounts as of
December 30, 1995. These carryforwards expire through 2006.
F-16
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED)
Effective December 27, 1992, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."
SFAS No. 109 requires a change in accounting for income taxes to an asset and
liability approach. SFAS No. 109 uses the method under which deferred tax assets
and liabilities are determined based on the difference between the financial
accounting and income tax bases of assets and liabilities. The cumulative effect
of this change in accounting on the Company's results of operations was $492,000
and is included in the 1993 statement of operations.
13. RETIREMENT PLANS
The Company has an ESOP (see Note 3) and a defined contribution plan (a
401(k) plan) and makes contributions to multiemployer pension plans.
The Company had accrued $2,448,000 and $2,753,000 at December 31, 1994 and
December 30, 1995, respectively, for a supplemental executive retirement plan
for a former executive. Such amounts are included in postretirement benefit
obligations other than pensions in the accompanying balance sheets.
The Company has a defined contribution pension plan (a 401(k) plan) for
substantially all employees other than employees subject to collective
bargaining agreements. Eligible participants may make limited contributions to
the defined contribution plan; however, no employer contributions are allowed.
Certain union employees participate in multiemployer pension plans sponsored
by their respective unions. Amounts charged to pension cost, representing the
Company's required contributions to these plans for 1993, 1994 and 1995, were
$1,304,000, $1,403,000 and $1,366,000, respectively.
The Company also has an unfunded nonqualified employee stock ownership plan
to provide benefits to certain employees who were not eligible to participate in
the ESOP. Benefits are to be paid in cash and are computed based on the value of
shares the participants would have received had they participated in the ESOP.
Participants are entitled to receive accrued benefits upon termination of
employment with the Company, retirement, death, or permanent disability.
Benefits vest based on the provisions of the ESOP. The Company charged
approximately $280,000, $582,000, and $405,000 to expense for 1993, 1994, 1995,
respectively. The accrued benefits under the nonqualified plan were $786,000 and
$1,132,000 at December 31, 1994 and December 30, 1995, respectively, and are
included in other long-term liabilities in the accompanying balance sheets.
The Company provides certain health care and life insurance benefits to
eligible retired employees. Eligibility is defined as retirement from active
employment, having reached age 55 with 15 years of service, and previous
coverage as a salaried or nonunion employee. Additionally, dependents are
eligible to receive benefits, provided the dependent was covered prior to
retirement. The medical plan pays a stated percentage of most medical expenses
reduced for any deductible and payments made by government programs and other
group coverage. Additionally, there is a $20,000 lifetime maximum benefit for
participants age 65 and over. The Company also provides life insurance to all
retirees who retired before 1979. These plans are unfunded.
The Company accrues the cost of providing postretirement benefits, including
medical and life insurance coverage, during the active service period of the
employee.
F-17
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. RETIREMENT PLANS--(CONTINUED)
The following table presents a reconciliation of the Plan's status at
December 31, 1994 and December 30, 1995 (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................ $3,769 $3,406
Fully eligible active plan participants......................... 689 890
Other active participants....................................... 1,377 1,259
------ ------
5,835 5,555
Unrecognized prior service cost................................... 333 303
Unrecognized net gain/(loss)...................................... (584) 88
------ ------
Accrued postretirement benefit obligation......................... $5,584 $5,946
------ ------
------ ------
</TABLE>
The components of the net periodic postretirement benefit cost for 1993,
1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.................................................. $122 $137 $163
Interest cost on accumulated benefit obligation............... 408 412 387
Amortization of unrecognized prior service cost............... (30) (30) (30)
---- ---- ----
Net periodic postretirement benefit cost...................... $500 $519 $520
---- ---- ----
---- ---- ----
</TABLE>
Assumptions used in the computation of the accumulated postretirement
benefit obligation at December 31, 1994 and December 30, 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
----- -----
<S> <C> <C>
Discount rate...................................................... 7.5% 7.0%
Initial health care cost trend rate................................ 14.5% 11.5%
Ultimate health care cost trend rate............................... 6.5% 5.5%
Year ultimate health care cost trend rate reached.................. 2009 2007
</TABLE>
If the health care cost trend rate were increased by 1% for all future
years, the accumulated postretirement benefit obligation as of December 30, 1995
would have increased 7.5%. The effect of this change on the aggregate of service
and interest cost for 1995 would have been an increase of 11%.
14. RELATED-PARTY TRANSACTIONS
Certain holders of the senior and junior subordinated notes are related
parties. The amounts due to these individuals at December 31, 1994 and December
30, 1995 were $1,951,136 and $438,170, respectively.
15. SUBSEQUENT EVENTS
On March 22, 1996, Simmons Holdings, Inc. ("Holdings"), through its
subsidiary formed for this purpose, Simmons Acquisition Corp. ("SAC"), acquired
100% of the outstanding common stock of the Company (the "Acquisition").
Holdings was formed to consummate the Acquisition on behalf of affiliates of
INVESTCORP S.A. ("Investcorp"), management and certain other investors.
Immediately following the completion of the Acquisition, SAC merged into the
Company, as a result of which 100% of the Common Stock of the Company became
owned by Holdings.
The purchase price for the Acquisition was approximately $269.6 million
(including approximately $94.6 million in refinancing or assumption of existing
indebtedness, purchase of certain
F-18
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. SUBSEQUENT EVENTS--(CONTINUED)
stock options, and the payments of fees and expenses) which will be allocated to
the assets and liabilities of the Company based upon their estimated fair values
at the date of Acquisition, under the purchase method of accounting. The
financing for the Acquisition (including the refinancing of outstanding debt)
was provided by (i) borrowings under a new $115 million Senior Credit Facility,
which will refinance the Company's existing senior and subordinated loans, (ii)
the $100 million proceeds under a new Subordinated Loan Facility, and (iii) $85
million of capital provided by affiliates of Investcorp, management and certain
other investors from Holdings.
In connection with the Acquisition, the Simmons ESOP sold 6,001,257 shares
of the Company's common stock (representing all of the allocated shares) for
cash, and converted each of the remaining 5,670,406 shares of common stock of
the Company (unallocated shares) into one share of Series A Preferred Stock. The
Series A Preferred Stock is convertible into common stock of the Company on a
one-to-one basis and is entitled to an aggregate liquidation preference of $28.4
million ($5.00 per share). The ESOP also has the right, upon the occurrence of
certain events, to require the Company to purchase the stock owned by the ESOP
for $5.00 per share.
The Company intends to issue $100 million in Senior Subordinated Notes,
pursuant to an offering, during April, 1996 (the "Offering"). The proceeds of
the offering will be used to retire loans under the Subordinated Loan Facility
mentioned above.
The following unaudited pro forma condensed consolidated statement of
operations presents the results of operations for the year ended December 30,
1995 as though the Acquisition and the Offering had been completed on January 1,
1995, and assumes that there were no other changes in the operations of the
Company. The following unaudited pro forma condensed consolidated balance sheet
assumes the Acquisition and the Offering had been completed on December 30,
1995. Such pro forma information excludes non-recurring charges of $1.0 million
related to the write-up of inventory to its estimated fair value, $3.7 million
related to amounts payable to management, $350,000 for non-recurring fees and
tax benefits of $2.0 million related to these items. The pro forma results are
not necessarily indicative of the financial results that might have occurred had
the Acquisition and the Offering actually taken place on January 1, 1995, or of
future results of operations (in thousands):
<TABLE>
<S> <C>
Net sales....................................................................... $489,815
Cost of products sold........................................................... 292,750
Selling, general and administrative expenses.................................... 161,202
ESOP expense.................................................................... 4,625
Amortization of intangible assets............................................... 7,648
Interest expense, net........................................................... 19,068
Other deductions, net........................................................... 1,570
--------
Loss before taxes on income................................................... 2,952
Provision for income taxes...................................................... 2,316
--------
Net loss........................................................................ $ 636
--------
--------
</TABLE>
F-19
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. SUBSEQUENT EVENTS--(CONTINUED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Current Assets:
Cash and cash equivalents..................................................... $ 9,185
Accounts receivable, net...................................................... 49,453
Inventories................................................................... 19,293
Deferred income taxes......................................................... 7,165
Other current assets.......................................................... 6,372
--------
Total current assets...................................................... 91,468
Property, plant and equipment................................................... 26,410
Patents......................................................................... 17,000
Goodwill........................................................................ 192,603
Deferred income taxes........................................................... 8,843
Other assets.................................................................... 12,705
--------
Total assets.............................................................. $349,029
--------
--------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Current Liabilities:
Accounts Payable.............................................................. $ 22,712
Accrued liabilities........................................................... 33,155
Current maturities of long-term obligations................................... 4,761
--------
Total current liabilities................................................. 60,628
Long-term debt.................................................................. 188,244
Capital lease................................................................... 816
Postretirement benefit obligations other than pensions.......................... 7,999
Other........................................................................... 10,252
--------
Total liabilities......................................................... 267,939
Series A Preferred Stock--ESOP.................................................. 28,352
Unearned compensation--ESOP..................................................... (28,352)
Common stockholder's equity..................................................... 81,090
--------
Total liabilities and stockholder's equity................................ $349,029
--------
--------
</TABLE>
The allocation of the purchase price shown above is, in most instances,
based on preliminary information and is therefore subject to revision when
additional information concerning asset and liability valuations is obtained.
F-20
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 8,111
Accounts receivable, net...................................................... 53,581
Inventories................................................................... 17,574
Deferred income taxes......................................................... 7,165
Other current assets.......................................................... 5,574
--------
Total current assets...................................................... 92,005
Property, plant and equipment, net.............................................. 27,907
Patents......................................................................... 17,007
Goodwill........................................................................ 190,367
Deferred income taxes........................................................... 9,607
Other assets.................................................................... 12,813
--------
$349,706
--------
--------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.............................................................. $ 14,032
Accrued liabilities........................................................... 42,686
Current maturities of long-term obligations................................... 4,528
--------
Total current liabilities................................................. 61,246
Noncurrent liabilities:
Long-term obligations......................................................... 186,701
Post retirement benefit obligations other than pensions....................... 7,581
Other......................................................................... 12,539
--------
Total liabilities......................................................... 268,067
--------
Series A Preferred Stock--ESOP.................................................. 28,352
Unearned compensation--ESOP..................................................... (28,243)
Common stockholder's equity:
Common stock, $.01 par value; 50,000,000 shares authorized, 31,964,452 shares
issued.......................................................................... 320
Additional paid-in capital.................................................... 84,680
Accumulated deficit........................................................... (3,468)
Foreign currency translation adjustment....................................... (2)
--------
Total common stockholder's equity......................................... 81,530
--------
$349,706
--------
--------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-21
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR
PREDECESSOR ----------
----------------------------- PERIOD
PERIOD FROM FROM
DECEMBER 31, MARCH 22,
1995 1996
QUARTER ENDED THROUGH THROUGH
APRIL 1, MARCH 21, MARCH 30,
1995 1996 1996
------------- ------------ ----------
<S> <C> <C> <C>
Net sales........................................... $ 108,653 $106,431 $ 12,886
Cost of products sold............................... 67,104 66,630 9,042
------------- ------------ ----------
Gross profit.................................... 41,549 39,801 3,844
Selling, general and administrative expenses........ 37,518 35,846 4,626
ESOP expense........................................ 1,133 1,203 109
Amortization of intangibles......................... 1,438 1,324 118
Interest expense, net............................... 1,929 1,489 461
Other deductions, net............................... 197 96 4,309
------------- ------------ ----------
Loss before income taxes........................ (666) (157) (5,779)
Provision for income tax benefit (expense).......... 296 (282) 2,311
------------- ------------ ----------
Net loss............................................ $ (370) $ (439) $ (3,468)
------------- ------------ ----------
------------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-22
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
----------------------------- --------------
QUARTER PERIOD FROM PERIOD FROM
ENDED DECEMBER 31, 1995 MARCH 22, 1996
APRIL 1, THROUGH THROUGH
1995 MARCH 21, 1996 MARCH 30, 1996
-------- ----------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................... $ (370) $ (439) $ (3,468)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation.............................. 973 874 96
Non-cash interest expense................. 225 322 --
Amortization of deferred debt issuance
costs......................................... 56 84 --
Amortization of intangibles............... 1,438 1,324 118
ESOP expense.............................. 1,133 1,203 109
Provision for bad debts................... 453 566 50
Provision for deferred income taxes....... (1,342) (164) --
Other, net................................ (15) 66 --
Net changes in operating assets and
liabilities:
Accounts receivable....................... (4,041) (1,732) (3,012)
Inventories............................... (2,028) 1,229 490
Other assets and liabilities.............. 1,046 (531) (2,916)
Accounts payable.......................... 8,379 (7,250) (1,430)
Accrued liabilities....................... 7,564 6,787 (224)
-------- ------- --------------
Net cash provided by (used in) operating
activities.................................... 13,471 2,339 (10,187)
-------- ------- --------------
Cash flows from investing activities:
Purchases of property, plant, and
equipment..................................... (163) (1,567) --
Payment to the seller for the acquisition... -- -- (151,625)
Payments to option holders.................. -- -- (6,950)
Payments of acquisition costs............... -- -- (16,040)
-------- ------- --------------
Net cash (used in) investing activities... (163) (1,567) (174,615)
-------- ------- --------------
Cash flows from financing activities:
Proceeds from Predecessor revolving line of
credit and long-term borrowings............... 2,842 3,334 --
Predecessor principal payments on revolving
line of credit, long term debt and capital
lease obligations............................. (12,437) (3,490) --
Payments of Predecessor debt................ -- -- (55,495)
Proceeds of Successor debt.................. -- -- 160,000
Payments of financing costs................. -- -- (5,742)
Proceeds from issuance of Successor common
stock......................................... -- -- 85,000
Treasury stock purchases.................... (5,218) (660) --
-------- ------- --------------
Net cash provided by (used in) financing
activities.................................... (14,813) (816) 183,763
-------- ------- --------------
Net effect of exchange rate changes on cash... 6 9 --
-------- ------- --------------
Decrease in cash and cash equivalents......... (1,499) (35) (1,039)
Cash and cash equivalents, beginning of
period........................................ 8,477 9,185 9,150
-------- ------- --------------
Cash and cash equivalents, end of period...... $ 6,978 $ 9,150 $ 8,111
-------- ------- --------------
-------- ------- --------------
Supplemental cash flow information:
Cash paid for interest...................... $ 859 $ 803 $ 273
-------- ------- --------------
-------- ------- --------------
Cash paid for income taxes.................. $ -- $ 2,315 $ 93
-------- ------- --------------
-------- ------- --------------
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
F-23
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION AND PREPARATION OF INTERIM FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements of the Company have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (the "SEC"). In the opinion of the management of the
Company, these statements include all adjustments necessary for a fair
presentation of the results of all interim periods reported herein. All
adjustments are of a normal recurring nature unless otherwise disclosed. Certain
information and footnote disclosures prepared in accordance with generally
accepted accounting principles have been either condensed or omitted pursuant to
SEC rules and regulations. However, management believes that the disclosures
made are adequate for a fair presentation of results of operations, financial
position and cash flows. These condensed consolidated financial statements
should be read in conjunction with the year-end consolidated financial
statements and accompanying notes included elsewhere herein. Operating results
for the periods in the quarter ended March 30, 1996 are not necessarily
indicative of future results that may be expected for the year ending December
28, 1996.
2. THE ACQUISITION
On March 22, 1996, Simmons Holdings, Inc. ("Holdings"), through its
subsidiary formed for this purpose, Simmons Acquisition Corp. ("SAC"), acquired
100% of the outstanding common stock of the Company. Holdings was formed to
consummate the Acquisition on behalf of affiliates of INVESTCORP S.A.
("Investcorp"), management and certain other investors. Immediately following
the completion of the Acquisition, SAC merged into the Company, as a result of
which 100% of the common stock of the Company became owned by Holdings. For
purposes of identification and description, Simmons Company is referred to as
the "Predecessor" for the period prior to the Acquisition, the "Successor" for
the period subsequent to the Acquisition, and the "Company" for both periods.
The purchase price for the Acquisition was approximately $269.6 million
(including approximately $94.6 million in refinancing or assumption of existing
indebtedness, purchase of certain stock options, and the payments of fees and
expenses) which were allocated to the assets and liabilities of the Company
based upon their estimated fair market value at the date of Acquisition, under
the purchase method of accounting. The allocation of the purchase price was, in
certain instances, based on preliminary information and is therefore subject to
revision when additional asset and liability valuations are obtained. In the
opinion of the Company's management, the asset and liability valuation for the
Acquisition will not be materially different than that initially recorded.
The financing for the Acquisition (including the refinancing of outstanding
debt) was provided for by (i) borrowings under a new $115.0 million Senior
Credit Facility, which refinanced the Company's existing senior and subordinated
loans, (ii) the $100.0 million proceeds under a new Subordinated Loan Facility,
and (iii) $85.0 million of capital provided by affiliates of Investcorp,
management and certain other investors from Holdings.
In connection with the Acquisition, the Simmons ESOP sold 6,001,257 shares
of the Company's common stock (representing all of the allocated shares) for
cash, and converted each of the remaining 5,670,406 shares of common stock of
the Company (unallocated shares) into one share of Series A Preferred Stock. The
Series A Preferred Stock is convertible into common stock of the Company on a
one-to-one basis and is entitled to an aggregate liquidation preference of $28.4
million ($5.00 per share). The ESOP also has the right, upon the occurrence of
certain events, to require the Company to purchase the stock owned by the ESOP
for $5.00 per share.
F-24
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
2. THE ACQUISITION--(CONTINUED)
On April 18, 1996, the Company issued $100.0 million in 10.75% Senior
Subordinated Notes, pursuant to an offering (the "Offering") (See Note 4). The
proceeds of the offering were used to retire loans under the Subordinated Loan
Facility mentioned above.
The following unaudited pro forma data present the results of operations for
the quarters ended April 1, 1995 and March 30, 1996, respectively, as though the
Acquisition and the Offering had been completed on January 1, 1995 and assume
that there were no other changes in the operations of the Company. Such pro
forma information excludes non-recurring charges of $1.0 million related to the
write-up of inventory to its estimated fair value, $3.7 million related to
amounts payable to management, $350,000 for non-recurring fees, and tax benefits
of $2.0 million related to these items. The pro forma results are not
necessarily indicative of the financial results that might have occurred had the
Acquisition and the Offering actually taken place on the above mentioned date,
or of the future results of operations (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------
APRIL 1, MARCH 30,
1995 1996
-------- ---------
<S> <C> <C>
Net sales........................................... $108,653 $ 119,317
Loss before income tax benefit...................... (4,157) (4,367)
Net loss............................................ (2,564) (3,079)
</TABLE>
3. INVENTORIES
Inventories consist of the following at March 30, 1996 (in thousands):
<TABLE>
<S> <C>
Raw materials................................................... $ 11,185
Work-in-progress................................................ 2,130
Finished goods.................................................. 4,259
--------
$ 17,574
--------
--------
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at March 30, 1996 (in
thousands):
<TABLE>
<S> <C>
Senior loans:
Tranche A term loan........................................... $ 25,000
Tranche B term loan........................................... 35,000
Adjustable rate senior subordinated notes....................... 2,711
Adjustable rate junior subordinated notes....................... 17,697
Subordinated Loan Facility, 12.25%.............................. 100,000
Industrial Revenue Bonds, 7.00%, due 2017....................... 9,700
Other, including capital lease obligations...................... 1,121
--------
191,229
Less current portion............................................ (4,528)
--------
$186,701
--------
--------
</TABLE>
F-25
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. LONG-TERM OBLIGATIONS--(CONTINUED)
In connection with the Acquisition, the Company entered into a new Senior
Credit Facility (the "Senior Credit Facility"). The Senior Credit Facility
provides for a $40.0 million revolving credit facility. The revolving credit
facility will expire on the earlier of (a) March 31, 2001 or (b) such other date
as the revolving credit commitments thereunder shall terminate in accordance
with the terms of the Senior Credit Facility. The Senior Credit Facility also
provides for a $75.0 million term loan facility, which is divided into two
tranches, the Tranche A and Tranche B term loans. The Tranche A term loans have
a final scheduled maturity date of March 31, 2001, and the Tranche B term loans
have a final scheduled maturity date of March 31, 2003.
The interest rate under the Senior Credit Facility is based, at the
Company's option, on an Alternate Base Rate or a Eurodollar Rate (both as
defined), plus margins as follows:
<TABLE>
<CAPTION>
REVOLVING TRANCHE A TRANCHE B
CREDIT LOAN TERM LOAN TERM LOAN
----------- --------- ---------
<S> <C> <C> <C>
Alternate base rate margin............... 1.25% 1.25% 1.75%
Eurodollar rate (LIBOR-based)............ 2.50% 2.50% 3.00%
</TABLE>
The interest rates in effect at March 30, 1996 for the revolving credit,
Tranche A term, and Tranche B term loans were 9.75%, 9.5% and 10.0%,
respectively.
Management of the Company has developed and implemented a policy to maintain
the percentage of fixed and variable rate debt within certain parameters. The
Company enters into interest rate swap agreements whereby the Company agrees to
exchange, at specified intervals, the difference between fixed and variable
interest amounts calculated by reference to an agreed-upon notional principal
amount linked to LIBOR. Any differences paid or received on the interest rate
swap agreement are recognized as adjustments to interest expense over the life
of the swap, thereby adjusting the effective interest rate on the underlying
obligation. On June 11, 1996, the Company entered into two interest rate swap
agreements to effectively convert $40 million of the variable rate Tranche A and
Tranche B debt to fixed rate debt with effective interest rates of 8.8%-9.3%.
The interest rate swap agreements have a duration of two years.
At March 30, 1996 the amount under the revolving credit portion of the
Senior Credit Facility that was available to be drawn was approximately $33.8
million, after giving effect to no amounts of outstanding borrowings and $6.2
million that was reserved for the Company's reimbursement obligations with
respect to outstanding letters of credit. The remaining availability under the
revolving credit facility may be utilized to meet the Company's current working
capital requirements, including issuance of stand-by and trade letters of
credit. The Company also may utilize the remaining availability under the
revolving credit facility to fund acquisitions and capital expenditures.
The Senior Credit Facility contains certain covenants and restrictions on
actions by the Company and its subsidiaries. In addition, the Senior Credit
Facility requires that the Company comply with specified financial ratios and
tests, including minimum cash flow, a maximum ratio of indebtedness to cash flow
and a minimum interest coverage ratio.
On April 18, 1996, the Company completed a refinancing, which consisted of
(i) the sale of $100.0 million of 10.75% Senior Subordinated Notes due 2006 (the
"Notes") pursuant to a private offering, (ii) the application of approximately
$96.0 million (after deduction of discounts to the Initial
F-26
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. LONG-TERM OBLIGATIONS--(CONTINUED)
Purchaser and other expenses of the Offering), together with other available
funds, to repay the outstanding indebtedness under the Company's Subordinated
Loan Facility.
The Notes mature on April 15, 2006 and bear interest at the rate of 10.75%
per annum from April 15, 1996 payable semiannually on April 15th and October
15th of each year, commencing October 15, 1996. The Notes may be redeemed at the
option of the Company on or after April 15, 2001, under the conditions and at
the redemption price as specified in the note indenture, dated as of April 18,
1996, under which the Notes were issued (the "Note Indenture"). The Notes are
subordinated to all existing and future Senior Indebtedness (as defined) of the
Company and will be effectively subordinated to all obligations of any
subsidiaries of the Company.
The Company plans to issue 10.75% Series A Senior Subordinated Notes due
2006 (the "New Notes") pursuant to an exchange offer whereby holders of the
Notes will have the opportunity to receive New Notes which will be registered
under the Securities Act of 1933, as amended, but are otherwise identical to the
Old Notes.
Future maturities of long-term obligations as of March 30, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
1996 (nine months).............................................. $ 2,334
1997............................................................ 5,200
1998............................................................ 7,200
1999............................................................ 9,200
2000............................................................ 11,200
Thereafter...................................................... 156,095
--------
$191,229
--------
--------
</TABLE>
Subsequent to March 30, 1996 the Tranche A term loan was increased to $40.0
million and the proceeds, together with certain additional funds, were used to
retire the adjustable rate junior and senior subordinated notes. The above
future maturities, and the current maturities of long-term obligations in the
condensed consolidated balance sheet, have been adjusted to reflect these
transactions, as well as the terms of the Notes.
5. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Successor paid Investcorp and its
affiliates approximately $9.1 million in exchange for Investcorp's assistance in
arranging the Acquisition and the financing.
6. INCOME TAXES
As a result of the Acquisition and the resultant purchase price allocation,
the components of deferred income tax assets were adjusted to reflect the
differences in the amounts allocated to
F-27
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. INCOME TAXES--(CONTINUED)
assets and liabilities and their tax bases at the date of Acquisition. The
components of the deferred income tax assets at March 30, 1996 were as follows
(in thousands):
<TABLE>
<S> <C>
Current deferred income tax assets:
Accounts receivable and inventory reserves..................................... $ 2,187
Accrued liabilities not currently deductible................................... 4,978
-------
7,165
-------
Net noncurrent deferred income tax assets (liabilities):
Property basis differences..................................................... (2,556)
Patents basis differences...................................................... (6,636)
ESOP liability basis differences............................................... 13,059
Net operating loss carryforwards............................................... 1,688
Valuation allowance............................................................ (1,688)
Adjustable rate notes basis differences........................................ (2,931)
Other noncurrent accrued liabilities not currently deductible.................. 8,671
-------
9,607
-------
Total net deferred income tax assets........................................... $16,772
-------
-------
</TABLE>
F-28
<PAGE>
No person has been authorized to give Prospectus
any information or to make any
representations other than those $
contained in this Prospectus, and, if
given or made, such information or Simmons Company
representations must not be relied upon
as having been authorized. This 10 3/4% Series A Senior
Prospectus does not constitute an offer Subordinated Notes due 2006
to sell or the solicitation of an offer
to buy any securities other than the
securities to which it relates or any
offer to sell or the solicitation of an
offer to buy such securities in any
circumstances in which such offer or
solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create any implication
that there has been no change in the
affairs of the Company since the date
hereof or that the information contained
herein is correct as of any time
subsequent to its date.
- ----------------------------------------
Table of Contents
Summary.......................... 3
Risk Factors.....................11
The Acquisition..................15
The Simmons ESOP.................16
Use of Proceeds..................16
Capitalization...................17
Selected Historical and Pro Forma
Financial Data..................18
Pro Forma Condensed Consolidated
Financial Data (Unaudited).......21
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......25
The Exchange Offer...............33
Business.........................39
Management.......................50
Ownership of Voting Securities...59
Certain Transactions.............62
Capital Structure................63
Description of Notes.............68
Certain Federal Income Tax
Considerations...................95
Plan of Distribution.............96
Legal Matters....................97
Experts..........................97
Index to Consolidated Financial
Statements......................F-1
UNTIL , 1996 (90 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
NOTES, WHETHER OR NOT PARTICIPATING IN
THE ORIGINAL DISTRIBUTION MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS. , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
a corporation to indemnify and advance reasonable expenses to any person who was
a party, is a party, or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The Company's Amended and Restated Articles of Incorporation and Bylaws each
include indemnification provisions that mirror the language of the statute. In
addition, the Company's Bylaws provide that, subject to any limitation in the
Company's Articles of Incorporation, the Company may indemnify a director or
officer to the fullest extent permitted by law, including, without limitation,
DGCL Sec.145. Consequently, a director or officer of the Company or a person
serving at the request of the Company in the above-named capacities will be
fully indemnified against such judgments, penalties, fines, settlements and
reasonable expenses actually incurred, except if: (1) the person did not conduct
himself in good faith and did not reasonably believe his conduct was in the
corporation's best interests; or (2) in the case of any criminal action or
proceeding, the person had reasonable cause to believe his conduct was unlawful.
No indemnification may be made in respect of any claim, issue or matter as to
which such person is adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The Company's Amended and Restated Articles of Incorporation also contain a
provision eliminating liability to the Company or its shareholders for monetary
damages from breach of fiduciary duty as a director. The inclusion of these
indemnification provisions in the Company's Amended and Restated Articles of
Organization and Bylaws is intended to enable the Company to attract qualified
persons to serve as directors and officers who might otherwise be reluctant to
do so.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------------ ---------------------------------------------------------------------------
<S> <C>
2+ Agreement of Merger between Simmons Acquisition Corp. and the Company,
dated March 22, 1996
3(i)+ Amended and Restated Certificate of Incorporation of the Company
3(ii)+ By-laws of the Company adopted by the Company
4.1+ Indenture between the Company and SunTrust Bank, as Trustee, dated as of
April 18, 1996.
4.2+ Exchange and Registration Rights Agreement between the Company and Chase
Securities Inc. dated April 18, 1996.
4.3+ Letter of Transmittal.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
5 Opinion of Gibson, Dunn & Crutcher.
8 Opinion of Gibson, Dunn & Crutcher regarding tax matters.
10.1+ Stock Purchase Agreement between management stockholders, Merrill Lynch
Capital Appreciation Partnership No. B-XI, L.P., MLCP Associates L.P. No.
II, ML IBK Positions Inc., ML Offshore LBO Partnership No. B-XI, Merrill
Lynch KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1989, Merchant Banking
L.P. No. IV and the Company, Simmons Holdings, Inc., Simmons Acquisition
Corp. and NationsBank N.A. (South), solely as Trustee for the Simmons
Employee Stock Ownership Trust dated as of February 21, 1994.
10.2+ Consolidated ESOP Loan Agreement between the Company and the Employee Stock
Ownership Trust dated March 22, 1996.
10.3+ Consolidated Pledge Agreement between the Company and the Employee Stock
Ownership Trust dated March 22, 1996.
10.4+ Amended Agreement of Trust between the Company and NationsBank N.A. (South)
dated as of March 22, 1996.
10.5+ Second Amendment to the ESOP dated March 22, 1996.
10.6+ 1996 Stockholders' Agreement among the Company, the Simmons Company
Employee Stock Ownership Trust and Simmons Holdings, Inc. dated as of
March 22, 1996.
10.7+ Purchase Agreement between the Company and Chase Securities Inc. dated as
of April 15, 1996.
10.8+ Credit Agreement among the Company, Chemical Bank, as Administrative Agent,
and the lenders party thereto, dated as of March 22, 1996.
10.9 Security Agreement made by the Company in favor of Chemical Bank, as
Administrative Agent, dated as of March 22, 1996.
10.10+ Services and Expenses Agreement between the Company and Holdings, dated as
of March 22, 1996.
10.11+ Parent Option Agreement between the Company and Holdings, dated as of March
22, 1996.
10.12 Agreement for Management Advisory and Consulting Services between
Investcorp International, Inc. and the Company, dated as of March 22,
1996.
10.13 The Management Stock Incentive Plan of Simmons Holdings, Inc. established
as of March 22, 1996.
10.14+ Form of Stock Purchase Agreement
10.15+ Form of Stock Option Agreement
10.16+ Form of Bonus Stock Purchase Agreement
10.17+ Form of Anti-Dilution Stock Option Agreement
10.18+ Form of Bonus Agreement
10.19+ Form of Stock Acquisition Agreement
10.20 Labor Agreement between the Company and the Miscellaneous Warehousemen,
Drivers and Helpers Union, Local No. 986 affiliated with the
International Brotherhood of Teamsters covering warehouse employees,
truck drivers and shipping and receiving clerks for the period August 1,
1995 to August 1, 1998.
10.21+ Labor Agreement between the Company and United Furniture Workers of
America, Local #262, A.F.L.-C.I.O. covering production and maintenance
employees working at the San Leandro, California plant for the period
August 1, 1995 to August 1, 1998.
10.22+ Labor Agreement between the Company and ILWU Local 142 covering all full-
time production and maintenance employees for the period from January 15,
1994 to January 15, 1999.
10.23+ Labor Agreement between the Company and Buckeye Lodge Lodge #55 of the
International Association of Machinists and Aerospace Workers, Columbus,
Ohio covering maintenance technicians for the period from December 31,
1995 to December 31, 1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.24 Labor Agreement between the Company and The International Association of
Machinists and Aerospace Workers, Local No. 315 of District No. 15,
A.F.L.-C.I.O. covering all mechanics at the Piscataway, New Jersey plant
of the Company for the period from December 10, 1995 to December 10,
1998.
10.25 Master Multi-Plan Working Ageement between the Company and The United Steel
Workers of America, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division) through its Locals 63, 424, 422, 420, ,425, 173 and 515
covering various employees in the Atlanta, Georgia; Columbus, Ohio;
Dallas, Texas; Piscataway, New Jersey; Jacksonville, Florida; Kansas
City; Missouri; and Los Angeles, California plants of the Company for the
period from October 15, 1994 to October 15, 1997.
10.26 Loan Finance and Advisory Services Agreement dated as of March 22, 1996
between Investcorp International Inc. and the Company.
10.27 Mergers and Acquisitions Advisory Agreement dated as of March 22, 1996
between Investcorp International Inc. and the Company.
10.28+ Lease between the Company, as tenant, and Leadership Group, Inc. as
landlord, dated November 4, 1987, for premises in Grove City, Ohio. (i)
Amendment dated April 1, 1988.
10.29 Lease between the Company, as tenant, and Security Capital Industrial
Trust, as landlord, dated December 16, 1988, for premises in Aurora,
Colorado.
10.30+ Lease between the Company, as tenant, and 365 South Randolphville, L.P., as
assignee of 287 Industrial park, as landlord, dated September 16, 1988,
for premises in Piscataway, New Jersey.
10.31 Lease between the Company, as tenant, and The Prudential Insurance Company
of America, as landlord, dated June 19, 1973, for premises in
Jacksonville, Florida, as amended August 17, 1992 and
June 1, 1999.
10.32+ Lease between the Company, as tenant, and Hunter Industrial Venture, as
landlord, dated September 22, 1986, for premises in Kansas City,
Missouri. (i) Amendment dated July 31, 1989 (ii) Amendment dated February
27, 1990 (iii) Second Amendment to Lease
10.33 Lease between the Company, as tenant, and 20100 S. Alameda Property Co.
(assignee of Overton, Moore & Associates), as landlord, dated March 12,
1974, for premises in Compton, California. (i) First Amendment dated
October 2, 1974 (ii) Second Amendment dated as of September 17, 1984
(iii) Third Amendment dated as of September 18, 1984 (iv) Fourth
Amendment dated as of June 28, 1993
10.34 Lease between the Company, as tenant, and Glenn Rudel (d/b/a Rudel
Development), as landlord, dated June 18, 1987, for premises in Phoenix,
Arizona. (i) Addendum dated June 18, 1987 (ii) Second Addendum dated
March 28, 1989
10.35+ Lease between the Company, as tenant, and Bluefin Associates, as landlord,
dated December 4, 1987, for premises in Agawam, Massachusetts. (i) First
Amendment dated October 5, 1993
10.36 Lease between the Company, as tenant, and Concourse I, Ltd., as landlord,
dated August 1, 1992, for premises in Atlanta, Georgia.
10.37+ Lease between the Company, as tenant, and John W. Rooker, as landlord,
dated October 23, 1991, for premises in Mableton, Georgia. (i) First
Amendment dated as of December 10, 1991 (ii) Second Amendment dated as of
July 14, 1992
10.38 Lease between the Company, as tenant, and CK-Childress Klein #8 Limited
Partnership, as landlord, dated May 5, 1993, for premises in Charlotte,
North Carolina. (i) First Amendment dated February 6, 1994
10.39 Lease between the Company, as tenant, and St. Paul Properties, Inc., as
landlord, dated February 5, 1993, for premises in Carrollton, Texas.
10.40+ Lease between the Company, as tenant, and Moon & Hart, as landlord, dated
November 30, 1992, for premises in Ewa Beach, Hawaii.
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
10.41 Lease between the Company, as tenant, and 1700 Fairway Drive Associates, as
landlord, dated September 30, 1992, for premises in San Leandro,
California. (i) Amendment to Lease dated July 1, 1993
10.42+ Lease between the Company, as tenant, and Hill-Raaum Investment Company, as
landlord, dated December 19, 1991, for premises in Bellevue, Washington.
10.43 Lease between Simmons Caribbean Bedding, Inc., as tenant, and ALFA Casting
Corporation, as landlord, dated May 25, 1989, for premises in Toa Baja,
Puerto Rico. (i) Modification of Lease Agreement dated April 7, 1994
10.44+ Lease between the Company, as tenant, and St. Paul Properties, Inc., as
landlord, dated October 19, 1994 for premises in Gwinnett County,
Georgia.
10.45+ Lease between the Company, as tenant, and Liberty Property Limited
Partnership (assignee of Simmons Associates, L.P.), as landlord, dated as
of October 7, 1994 for premises in Spotsylvania County, Virginia. (i)
First Amendment dated as of October 28, 1994
10.46+ Lease between the Company and Eagle Warren Properties, successors to B.F.
Saul Real Estate Investment Trust, dated July 15, 1977 for premises in
Norcross, Georgia. (i) Amendment
10.47 Loan Agreement, dated as of November 1, 1982, between the City of
Janesville, Wisconsin and the Company, as successor by merger to Simmons
Manufacturing Company, Inc., relating to $9,700,000 City of Janesville,
Wisconsin Industrial Development Revenue Bond (Simmons Manufacturing
Company, Inc. Project) Series 1982.
10.48 Down Products Trademark License Agreement, dated January 4, 1991 between
Simmons, as Licensor, and Louisville Bedding Co., as Licensee.
10.49+ Down Products Trademark License Agreement, dated January 1, 1995 between
Simmons, as Licensor, and Louisville Bedding Co., as Licensee.
10.50 Amended and Restated Trademark License Agreement dated as of April 14, 1986
(as restated November 28, 1990) between Simmons, as Licensor, and
Louisville Bedding Co., as Licensee.
10.51+ Trademark License Agreement, dated as of July 13, 1990 between Simmons, as
Licensor, and Simmons Upholstered Furniture Inc., as Licensee
10.52+ Patent and Technology License Agreement, dated as of July 13, 1990 between
Simmons Company as Licensor and Simmons Upholstered Furniture Inc. as
Licensee
10.53 Agreement dated as of October 30, 1986 between Simmons, as Licensor, and
Simmons Universal Corporation, as Licensee.
10.54+ Woolmark License Agreement, dated as of October 21, 1988 between the Wool
Bureau Incorporated and Simmons.
10.55 License Agreement, dated as of June 29, 1990 between Simmons, Simmons I.P.
Inc., as Licensor, and Simmons Canada Inc., as Licensee.
10.56 Industrial Property License Agreement, Areas 1-5, dated as of April 9, 1987
as between Simmons, and INFO Establishment, as Licensor and
Christie-Tyler PLC, as Licensee.
10.57+ Existing Territory License Agreement, dated as of June 30, 1987 between
Simmons and SJL Investments Limited.
10.58+ Trademark License Agreement, dated as of May 21, 1990 as between Simmons,
as Licensor, and Compania Simmons S.A. de C.V. as Licensee.
10.59+ Master Agreement, dated as of December 7, 1993 between Simmons and N.V. B
Linea.
10.60+ Assignment, dated as of December 7, 1993 between Simmons and N.V. B Linea.
10.61+ Security Agreement, dated as of December 7, 1993 between Simmons and N.V. B
Linea.
10.62 Software License Agreement, undated, between Simmons and J.D. Edwards &
Company.
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
10.63 Employment Agreement dated November 5, 1993 between the Company and Zenon
S. Nie as amended September 12, 1995.*
12+ Statement re: Computation of Ratio of Earnings to Fixed Charges.
21+ Subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Gibson, Dunn & Crutcher LLP
25+ Statement of Eligibility of Trustee.
27+ Financial Data Schedule
</TABLE>
- ------------
+ previously filed
(b) Financial Statement Schedules:
1. Financial Statement Schedules filed herewith:
None applicable
ITEM 22. UNDERTAKINGS
(a) The Company undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and (iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time will deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The Company undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or
13 of this form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding to
the request.
(c) The Company undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Atlanta, Georgia, on July 30, 1996.
SIMMONS COMPANY
By: /s/ Zenon S. Nie
..................................
Zenon S. Nie
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 30, 1996.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
/s/ Zenon S. Nie Chairman of the Board of Directors,
............................................. Chief Executive Officer and Director
Zenon S. Nie (Principal Executive Officer)
/s/ Martin R. Passaglia Senior Executive Vice President and Director
.............................................
Martin R. Passaglia
/s/ Jonathan C. Daiker Executive Vice President--Finance and
............................................. Administration, Chief Financial Officer and
Jonathan C. Daiker Director (Principal Financial and
Accounting Officer)
* Director
.............................................
Savio W. Tung
* Director
.............................................
Christopher J. O'Brien
* Director
.............................................
Charles J. Philippin
* Director
.............................................
Jon P. Hedley
</TABLE>
*By /s/ Roger W. Franklin
..................................
Roger W. Franklin
Attorney-in-Fact
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------------ ---------------------------------------------------------------------------
<S> <C>
2+ Agreement of Merger between Simmons Acquisition Corp. and the Company,
dated March 22, 1996
3(i)+ Amended and Restated Certificate of Incorporation of the Company
3(ii)+ By-laws of the Company adopted by the Company
4.1+ Indenture between the Company and SunTrust Bank, as Trustee, dated as of
April 18, 1996.
4.2+ Exchange and Registration Rights Agreement between the Company and Chase
Securities Inc. dated April 18, 1996.
4.3+ Letter of Transmittal.
5 Opinion of Gibson, Dunn & Crutcher.
8 Opinion of Gibson, Dunn & Crutcher regarding tax matters.
10.1+ Stock Purchase Agreement between management stockholders, Merrill Lynch
Capital Appreciation Partnership No. B-XI, L.P., MLCP Associates L.P. No.
II, ML IBK Positions Inc., ML Offshore LBO Partnership No. B-XI, Merrill
Lynch KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1989, Merchant Banking
L.P. No. IV and the Company, Simmons Holdings, Inc., Simmons Acquisition
Corp. and NationsBank N.A. (South), solely as Trustee for the Simmons
Employee Stock Ownership Trust dated as of February 21, 1994.
10.2+ Consolidated ESOP Loan Agreement between the Company and the Employee Stock
Ownership Trust dated March 22, 1996.
10.3+ Consolidated Pledge Agreement between the Company and the Employee Stock
Ownership Trust dated March 22, 1996.
10.4+ Amended Agreement of Trust between the Company and NationsBank N.A. (South)
dated as of March 22, 1996.
10.5+ Second Amendment to the ESOP dated March 22, 1996.
10.6+ 1996 Stockholders' Agreement among the Company, the Simmons Company
Employee Stock Ownership Trust and Simmons Holdings, Inc. dated as of
March 22, 1996.
10.7+ Purchase Agreement between the Company and Chase Securities Inc. dated as
of April 15, 1996.
10.8+ Credit Agreement among the Company, Chemical Bank, as Administrative Agent,
and the lenders party thereto, dated as of March 22, 1996.
10.9 Security Agreement made by the Company in favor of Chemical Bank, as
Administrative Agent, dated as of March 22, 1996.
10.10+ Services and Expenses Agreement between the Company and Holdings, dated as
of March 22, 1996.
10.11+ Parent Option Agreement between the Company and Holdings, dated as of March
22, 1996.
10.12 Agreement for Management Advisory and Consulting Services between
Investcorp International, Inc. and the Company, dated as of March 22,
1996.
10.13 The Management Stock Incentive Plan of Simmons Holdings, Inc. established
as of March 22, 1996.
10.14+ Form of Stock Purchase Agreement
10.15+ Form of Stock Option Agreement
10.16+ Form of Bonus Stock Purchase Agreement
10.17+ Form of Anti-Dilution Stock Option Agreement
10.18+ Form of Bonus Agreement
10.19+ Form of Stock Acquisition Agreement
10.20 Labor Agreement between the Company and the Miscellaneous Warehousemen,
Drivers and Helpers Union, Local No. 986 affiliated with the
International Brotherhood of Teamsters covering warehouse employees,
truck drivers and shipping and receiving clerks for the period August 1,
1995 to August 1, 1998.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.21+ Labor Agreement between the Company and United Furniture Workers of
America, Local #262, A.F.L.-C.I.O. covering production and maintenance
employees working at the San Leandro, California plant for the period
August 1, 1995 to August 1, 1998.
10.22+ Labor Agreement between the Company and ILWU Local 142 covering all full-
time production and maintenance employees for the period from January 15,
1994 to January 15, 1999.
10.23+ Labor Agreement between the Company and Buckeye Lodge Lodge #55 of the
International Association of Machinists and Aerospace Workers, Columbus,
Ohio covering maintenance technicians for the period from December 31,
1995 to December 31, 1997.
10.24 Labor Agreement between the Company and The International Association of
Machinists and Aerospace Workers, Local No. 315 of District No. 15,
A.F.L.-C.I.O. covering all mechanics at the Piscataway, New Jersey plant
of the Company for the period from December 10, 1995 to December 10,
1998.
10.25 Master Multi-Plan Working Ageement between the Company and The United Steel
Workers of America, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division) through its Locals 63, 424, 422, 420, ,425, 173 and 515
covering various employees in the Atlanta, Georgia; Columbus, Ohio;
Dallas, Texas; Piscataway, New Jersey; Jacksonville, Florida; Kansas
City; Missouri; and Los Angeles, California plants of the Company for the
period from October 15, 1994 to October 15, 1997.
10.26 Loan Finance and Advisory Services Agreement dated as of March 22, 1996
between Investcorp International Inc. and the Company.
10.27 Mergers and Acquisitions Advisory Agreement dated as of March 22, 1996
between Investcorp International Inc. and the Company.
10.28+ Lease between the Company, as tenant, and Leadership Group, Inc. as
landlord, dated November 4, 1987, for premises in Grove City, Ohio. (i)
Amendment dated April 1, 1988.
10.29 Lease between the Company, as tenant, and Security Capital Industrial
Trust, as landlord, dated December 16, 1988, for premises in Aurora,
Colorado.
10.30+ Lease between the Company, as tenant, and 365 South Randolphville, L.P., as
assignee of 287 Industrial park, as landlord, dated September 16, 1988,
for premises in Piscataway, New Jersey.
10.31 Lease between the Company, as tenant, and The Prudential Insurance Company
of America, as landlord, dated June 19, 1973, for premises in
Jacksonville, Florida, as amended August 17, 1992 and
June 1, 1999.
10.32+ Lease between the Company, as tenant, and Hunter Industrial Venture, as
landlord, dated September 22, 1986, for premises in Kansas City,
Missouri. (i) Amendment dated July 31, 1989 (ii) Amendment dated February
27, 1990 (iii) Second Amendment to Lease
10.33 Lease between the Company, as tenant, and 20100 S. Alameda Property Co.
(assignee of Overton, Moore & Associates), as landlord, dated March 12,
1974, for premises in Compton, California. (i) First Amendment dated
October 2, 1974 (ii) Second Amendment dated as of September 17, 1984
(iii) Third Amendment dated as of September 18, 1984 (iv) Fourth
Amendment dated as of June 28, 1993
10.34 Lease between the Company, as tenant, and Glenn Rudel (d/b/a Rudel
Development), as landlord, dated June 18, 1987, for premises in Phoenix,
Arizona. (i) Addendum dated June 18, 1987 (ii) Second Addendum dated
March 28, 1989
10.35+ Lease between the Company, as tenant, and Bluefin Associates, as landlord,
dated December 4, 1987, for premises in Agawam, Massachusetts. (i) First
Amendment dated October 5, 1993
10.36 Lease between the Company, as tenant, and Concourse I, Ltd., as landlord,
dated August 1, 1992, for premises in Atlanta, Georgia.
10.37+ Lease between the Company, as tenant, and John W. Rooker, as landlord,
dated October 23, 1991, for premises in Mableton, Georgia. (i) First
Amendment dated as of December 10, 1991 (ii) Second Amendment dated as of
July 14, 1992
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.38 Lease between the Company, as tenant, and CK-Childress Klein #8 Limited
Partnership, as landlord, dated May 5, 1993, for premises in Charlotte,
North Carolina. (i) First Amendment dated February 6, 1994
10.39 Lease between the Company, as tenant, and St. Paul Properties, Inc., as
landlord, dated February 5, 1993, for premises in Carrollton, Texas.
10.40+ Lease between the Company, as tenant, and Moon & Hart, as landlord, dated
November 30, 1992, for premises in Ewa Beach, Hawaii.
10.41 Lease between the Company, as tenant, and 1700 Fairway Drive Associates, as
landlord, dated September 30, 1992, for premises in San Leandro,
California. (i) Amendment to Lease dated July 1, 1993
10.42+ Lease between the Company, as tenant, and Hill-Raaum Investment Company, as
landlord, dated December 19, 1991, for premises in Bellevue, Washington.
10.43 Lease between Simmons Caribbean Bedding, Inc., as tenant, and ALFA Casting
Corporation, as landlord, dated May 25, 1989, for premises in Toa Baja,
Puerto Rico. (i) Modification of Lease Agreement dated April 7, 1994
10.44+ Lease between the Company, as tenant, and St. Paul Properties, Inc., as
landlord, dated October 19, 1994 for premises in Gwinnett County,
Georgia.
10.45+ Lease between the Company, as tenant, and Liberty Property Limited
Partnership (assignee of Simmons Associates, L.P.), as landlord, dated as
of October 7, 1994 for premises in Spotsylvania County, Virginia. (i)
First Amendment dated as of October 28, 1994
10.46+ Lease between the Company and Eagle Warren Properties, successors to B.F.
Saul Real Estate Investment Trust, dated July 15, 1977 for premises in
Norcross, Georgia. (i) Amendment
10.47 Loan Agreement, dated as of November 1, 1982, between the City of
Janesville, Wisconsin and the Company, as successor by merger to Simmons
Manufacturing Company, Inc., relating to $9,700,000 City of Janesville,
Wisconsin Industrial Development Revenue Bond (Simmons Manufacturing
Company, Inc. Project) Series 1982.
10.48 Down Products Trademark License Agreement, dated January 4, 1991 between
Simmons, as Licensor, and Louisville Bedding Co., as Licensee.
10.49+ Down Products Trademark License Agreement, dated January 1, 1995 between
Simmons, as Licensor, and Louisville Bedding Co., as Licensee.
10.50 Amended and Restated Trademark License Agreement dated as of April 14, 1986
(as restated November 28, 1990) between Simmons, as Licensor, and
Louisville Bedding Co., as Licensee.
10.51+ Trademark License Agreement, dated as of July 13, 1990 between Simmons, as
Licensor, and Simmons Upholstered Furniture Inc., as Licensee
10.52+ Patent and Technology License Agreement, dated as of July 13, 1990 between
Simmons Company as Licensor and Simmons Upholstered Furniture Inc. as
Licensee
10.53 Agreement dated as of October 30, 1986 between Simmons, as Licensor, and
Simmons Universal Corporation, as Licensee.
10.54+ Woolmark License Agreement, dated as of October 21, 1988 between the Wool
Bureau Incorporated and Simmons.
10.55 License Agreement, dated as of June 29, 1990 between Simmons, Simmons I.P.
Inc., as Licensor, and Simmons Canada Inc., as Licensee.
10.56 Industrial Property License Agreement, Areas 1-5, dated as of April 9, 1987
as between Simmons, and INFO Establishment, as Licensor and
Christie-Tyler PLC, as Licensee.
10.57+ Existing Territory License Agreement, dated as of June 30, 1987 between
Simmons and SJL Investments Limited.
10.58+ Trademark License Agreement, dated as of May 21, 1990 as between Simmons,
as Licensor, and Compania Simmons S.A. de C.V. as Licensee.
10.59+ Master Agreement, dated as of December 7, 1993 between Simmons and N.V. B
Linea.
10.60+ Assignment, dated as of December 7, 1993 between Simmons and N.V. B Linea.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.61+ Security Agreement, dated as of December 7, 1993 between Simmons and N.V. B
Linea.
10.62 Software License Agreement, undated, between Simmons and J.D. Edwards &
Company.
10.63 Employment Agreement dated November 5, 1993 between the Company and Zenon
S. Nie as amended October 5, 1995.
12+ Statement re: Computation of Ratio of Earnings to Fixed Charges.
21+ Subsidiaries of the Company.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5)
25+ Statement of Eligibility of Trustee.
27+ Financial Data Schedule
</TABLE>
- ------------
+ previously filed
EXHIBIT 5
July 30, 1996
(212) 351-4000 C 88618-00003
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
Re: 10-3/4% Series A Senior Subordinated Notes Due 2006
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-4 (the "Registration Statement") of Simmons Company, a Delaware
corporation (the "Company"), which the Company has filed with the Securities
and Exchange Commission (the "Commission") in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"),
of up to $100,000,000 aggregate principal amount of the Company's 10-3/4%
Series A Senior Subordinated Notes due 2006 (the "Exchange Notes"). The Exchange
Notes are to be issued in exchange for an equal aggregate principal amount of
the Company's outstanding 10-3/4% Senior Subordinated Notes due 2006 (the
"Original Notes") pursuant to the Exchange and Registration Rights Agreement
dated as of April 18, 1996 between the Company and Chase Securities Inc.
The Exchange Notes are to be issued by the Company pursuant to the terms of
an Indenture (the "Indenture") dated as of April 18, 1996 between the Company
and SunTrust Bank, Atlanta, as Trustee (the "Trustee").
<PAGE>
We have examined the proceedings taken or proposed to be taken
by the Company in connection with the issuance of the Exchange Notes. In
arriving at the following opinion, we have relied, among other things, upon our
examination of such corporate records of the Company and such
certificates of public officials and of officers of the Company as we have
deemed appropriate for purposes of rendering this opinion. We have assumed with
your permission that the terms of the Original Notes and the Exchange Notes have
been established in accordance with the terms of the Indenture, and that their
issuance and sale (i) did not and will not violate any applicable law or result
in a default under or breach of any agreement or instrument binding upon the
Company and (ii) complied and will comply with any requirement or restriction
imposed by any court or governmental body having jurisdiction over the Company.
In addition, we have assumed that the Indenture has been duly authorized,
executed and delivered by the Trustee and constitutes the legal, valid and
binding agreement of the Trustee.
Based upon the foregoing examination and assumptions and in
reliance thereon, and subject to the completion, prior to the issuance of the
Exchange Notes of such proceedings now contemplated by the Company, and subject
to the issuance by the Commission of an order declaring the Registration
Statement effective, it is our opinion that the Exchange Notes, when issued
in accordance with the terms of the Indenture, duly executed by the Company,
duly authenticated by the Trustee, and issued and delivered against exchange
of the Original Notes in accordance with the terms set forth in the prospectus
that forms a part of the Registration Statement, will constitute valid and
binding obligations of the Company.
Our opinion is subject to: (i) the effect of applicable
bankruptcy, reorganization, insolvency, moratorium, arrangement and other laws
affecting creditors' rights, including, without limitation, the effect of
statutory or other laws regarding fraudulent conveyances, fraudulent transfers
and preferential transfers; and (ii) the limitations imposed by general
principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity)
This opinion is limited to the effect of the present state of
the laws of the United States of America and the State of New York and, to the
limited extent set forth below, the General Corporation Law of the State of
Delaware. Although we are not admitted to practice in the State of Delaware, we
are generally familiar with the General Corporation Law of the State of Delaware
and have made such inquiries as we consider necessary to our opinions expressed
herein. The opinions expressed herein are based upon the law and circumstances
as they are in effect or exist on the date hereof, and we assume no obligation
to revise or supplement this letter in the event of future changes in the law or
interpretation thereof with respect to circumstances or events
<PAGE>
that may occur subsequent to the date hereof. We are expressing no opinion as to
the effect of the laws of any other jurisdiction.
We consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and the prospectus which
forms a part thereof. In giving this consent, we do not admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act or the Rules and Regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
EXHIBIT 8
July 30, 1996
(212) 351-4000 C 88618-00003
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
At your request, we have examined the Registration Statement
on Form S-4, (the "Registration Statement") of Simmons Company, a Delaware
corporation ("Simmons") to be filed in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act"), of up to
$100,000,000 aggregate principal amount of Simmons' 10-3/4% Series A Senior
Subordinated Notes due 2006 (the "New Notes") and the exchange (the "Exchange")
of the New Notes for a like principal amount of Simmons' 10-3/4% Senior
Subordinated Notes due 2006.
We hereby confirm our opinions set forth in the Registration
Statement under the caption "Certain Federal Income Tax Consequences."
Furthermore, it is our opinion that the discussion under the caption "Certain
Federal Income Tax Consequences," to the extent it discusses matters of law or
legal conclusions, is correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement, and we further consent to the use of our name
under the captions "Legal Matters" and "Certain Federal Income Tax
Consequences". In giving this consent, we do not thereby admit that we are
within the category of persons whose consent is required under
<PAGE>
Section 7 of the Securities Act or the rules and regulations promulgated
thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
JKM/DBR/jn
COMPANY SECURITY AGREEMENT
--------------------------
SECURITY AGREEMENT, dated as of March 22, 1996 made by SIMMONS
ACQUISITION CORP., a Delaware corporation (to be merged with and into Simmons
Company, the "Company"), in favor of CHEMICAL BANK, a New York banking
-------
corporation, as administrative agent (in such capacity, the "Administrative
--------------
Agent") for the several lenders (the "Lenders") from time to time parties to the
- ----- -------
Credit Agreement (as defined below).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and the Administrative Agent, the
- ---------
Lenders have severally agreed to make loans to, and the Issuing Lender (as
defined in the Credit Agreement) has agreed to issue and certain of the other
Lenders have agreed to participate in letters of credit for the account of, the
Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Company shall have executed and
delivered this Security Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective loans to, and to issue or participate in letters of credit
for the account of, the Company under the Credit Agreement, the Company hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
1. Defined Terms. Unless otherwise defined herein or in the
-------------
preamble or recitals hereto, terms which are defined in the Credit Agreement and
used herein are so used as so defined; the following terms which are defined in
the Uniform Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: Chattel Paper, Farm Products, Documents,
Goods, Instruments and Inventory; and the following terms shall have the
following meanings:
"Accounts" means all accounts receivable, book debts, notes, drafts,
--------
instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to the
Company (including under any trade names,
<PAGE>
2
styles or divisions thereof) whether arising out of personal property owned
or leased by it, Goods sold by it or services rendered by it or from any
other transaction, whether or not the same involves the lease of personal
property, sale of Goods or performance of services by the Company
(including, without limitation, any such obligation which would be
characterized as an account, general intangible or chattel paper under the
Code) and all of the Company's rights in, to and under all purchase orders
now owned or hereafter received or acquired by it for Goods or services,
and all of the Company's rights to any Goods represented by any of the
foregoing (including returned or repossessed Goods and unpaid seller's
rights) and all moneys due or to become due to the Company under all
contracts for the sale of Goods and/or the performance of services by it
(whether or not yet earned by performance), under any lease of real or
personal property (to the extent the grant of such a security interest is
permitted by applicable law and is not prohibited by such lease), or under
any franchise agreement, or in connection with any other transaction, now
in existence or hereafter arising, including without limitation the right
to receive the proceeds of said purchase orders and contracts and rents
under such leases, and all collateral security and guarantees of any kind
given by any Person with respect to any of the foregoing.
"Code" means the Uniform Commercial Code as from time to time in
----
effect in the State of New York.
"Collateral" has the meaning assigned to it in Section 2 of this
----------
Security Agreement.
"Contract" means, with respect to an Account, any agreement relating
--------
to the terms of payment or the terms of performance thereof, including,
without limitation, (a) all rights of the Company to receive moneys due and
to become due to it thereunder or in connection therewith, (b) all rights
of the Company to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of the Company to perform and to
exercise all remedies thereunder.
"Copyright License" means any written agreement, naming the Company,
-----------------
as licensor or licensee, granting any right in the United States to use any
Copyright including, without limitation, any referred to in Schedule I
hereto.
"Copyrights" means all of the following to the extent the Company now
----------
or hereafter has any right, title or interest: (a) all United States
copyrights and all registrations and applications therefor, including,
without limitation, any referred to in Schedule I hereto, and (b) all
renewals of such copyrights.
"Equipment" means all machinery, equipment and furniture, now owned or
---------
hereafter acquired by the Company or in which the Company now has or
hereafter may acquire any right, title or interest and any and all
additions, substitutions and replacements thereof, wherever located,
together with all attachments, components, parts, equipment
<PAGE>
3
and accessories installed therein or affixed thereto, including, but not
limited to, all equipment as defined in Section 9-109(2) of the Code.
"General Intangibles" has the meaning given to it in the Code and
-------------------
includes, whether or not so included in such meaning, any franchise
agreements or rights in favor of or granted by the Company to know-how,
trade secrets, product or service development ideas and designs,
advertising commercials, renderings, strategies and plans, blueprints,
architectural drawings, site location, personnel and franchisee
information, proprietary information, computer and software technology and
programs, contracts with distributors, and any similar items, all interest
rate, foreign currency or similar agreements and general intangibles
attributable to the Capital Stock of each of the Subsidiaries of the
Company.
"License" means any Copyright License, Patent License or Trademark
-------
License.
"Obligations" means (i) the unpaid principal amount of, and interest
-----------
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such post-
filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent, the
Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
any Letter of Credit or L/C Application, the other Credit Documents and any
other document executed and delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all reasonable fees and disbursements of counsel to the
Administrative Agent, the Issuing Lender or to the Lenders that are
required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Patent License" means any agreement, whether written or oral,
--------------
providing for the grant by or to the Company of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule II hereto.
"Patents" means (a) all letters patent of the United States or any
-------
other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule II hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country,
including, without limitation, any thereof referred to in Schedule II
hereto.
"Proceeds" means "proceeds", as such term is defined in Section 9-
--------
306(1) of the Code and, to the extent not included in such definition,
shall include, without limitation, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit
<PAGE>
4
payable to the Company, from time to time with respect to any of the
Collateral, (b) all payments (in any form whatsoever) paid or payable to
the Company from time to time in connection with any taking of all or any
part of the Collateral by any Governmental Authority or any Person acting
under color of Governmental Authority, (c) all judgments in favor of the
Company in respect of the Collateral and (d) all other amounts from time to
time paid or payable or received or receivable under or in connection with
any of the Collateral.
"Security Agreement" means this Security Agreement, as amended,
------------------
supplemented or otherwise modified from time to time.
"Trademark License" means any agreement, written or oral, providing
-----------------
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule III
hereto.
"Trademarks" means (a) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule III hereto, and (b) all renewals thereof.
"Vehicles" means all cars, trucks, trailers and other vehicles covered
--------
by a certificate of title law of any state.
2. Grant of Security Interest. (a) As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Administrative Agent for the ratable benefit of the Lenders a
security interest in all of the following property now owned or at any time
hereafter acquired by the Company or in which the Company now has or at any time
in the future may acquire any right, title or interest (collectively, the
"Collateral"):
----------
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Copyrights;
(v) all Copyright Licenses;
<PAGE>
5
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) all Patents;
(xii) all Patent Licenses;
(xiii) all Trademarks;
(xiv) all Trademark Licenses;
(xv) all Vehicles;
(xvi) all other Goods and personal property of the Company,
whether tangible or intangible and whether now or
hereafter owned by the Company, and wherever located; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Administrative Agent and Lenders; Limitations on
----------------------------------------------------------
Administrative Agent's and Lenders' Obligations.
- -----------------------------------------------
(a) Company Remains Liable under Accounts, Licenses, Contracts, Etc.
---------------------------------------------------------------
Anything herein to the contrary notwithstanding, the Company shall remain
liable under each of the Accounts, Licenses and Contracts to observe and
perform all the material conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account, License or Contract. Neither
the Administrative Agent nor any Lender shall have any obligation or
liability under any Account, License or Contract by reason of or arising
out of this Security Agreement or the receipt by the Administrative Agent
or any Lender of any payment relating to such Account, License or Contract
pursuant hereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of the Company
under or pursuant to any Account, License or Contract, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
under any Account,
<PAGE>
6
License or Contract, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or
times.
(b) Notice to Account Debtors and Contracting Parties. At any time
-------------------------------------------------
after an Event of Default has occurred and so long as such Event of Default
shall be continuing, upon the request of the Administrative Agent the
Company shall, and the Administrative Agent may (with concurrent notice to
the Company thereof), notify account debtors on the Accounts and parties to
the Contracts and Licenses that the Accounts, Contracts and Licenses have
been assigned to the Administrative Agent for the ratable benefit of the
Lenders and that payments in respect thereof shall be made directly to the
Administrative Agent. At any time after an Event of Default shall have
occurred and be continuing, the Administrative Agent may in its own name or
in the name of others communicate with account debtors on the Accounts and
parties to the Contracts and Licenses to verify with them to its
satisfaction the existence, amount and terms thereof.
(c) Verification of Accounts and Inventory. The Administrative Agent
--------------------------------------
shall have the right to make test verifications of the Accounts and
Inventory in any reasonable manner and through any medium that it considers
advisable, and the Company agrees to furnish all such assistance and
information as the Administrative Agent may reasonably require in
connection therewith provided that, so long as no Event of Default shall
have occurred and be continuing, any such verification shall be conducted
in the name of the Company or in such other manner as shall not disclose
the Administrative Agent's identity or interest in the Collateral. The
Administrative Agent may after the occurrence and during the continuance of
an Event of Default in its own name or in the name of others communicate
with account debtors in order to verify with them to the Administrative
Agent's satisfaction the existence, amount and terms of any Accounts and/or
Inventory.
4. Representations and Warranties. The Company hereby represents
------------------------------
and warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
---------------------
Administrative Agent for the ratable benefit of the Lenders pursuant to
this Security Agreement and the other Liens permitted to exist on the
Collateral pursuant to the Credit Agreement, the Company owns each item of
the Collateral free and clear of any and all Liens. No security agreement,
financing statement or other public notice with respect to all or any part
of the Collateral is on file or of record in any public office, except (i)
such as may have been filed in favor of the Administrative Agent, for the
ratable benefit of the Lenders, pursuant to this Security Agreement, or
(ii) as may be permitted pursuant to the Credit Agreement.
(b) Perfected First Priority Liens. The Liens granted pursuant to
------------------------------
this Security Agreement constitute perfected Liens on the Collateral in
favor of the Administrative
<PAGE>
7
Agent, for the ratable benefit of the Lenders, to the extent that (i) such
Liens constitute Liens on General Intangibles, or (ii) such Liens
constitute Liens on Equipment located in a jurisdiction listed on Schedule
IV, or (iii) such Liens can be perfected by filing a financing statement
under the Uniform Commercial Code, as in effect in the relevant
jurisdiction, or (iv) such Liens constitute Liens on Vehicles the
perfection of which has been requested pursuant to subsection 5(r), which
Lien has been properly notated on certificates of title received by the
Company, in respect of such Liens that can be perfected by notation thereof
on the certificates of title in respect of such Vehicles in accordance with
the law of the relevant jurisdiction, or (v) the Company is required to
deliver such Collateral to the Administrative Agent pursuant to Section
5(a) hereof, which are prior to all other Liens on the Collateral created
by the Company and in existence on the date hereof, except for Liens
permitted to exist on the Collateral pursuant to the Credit Agreement, and
which are enforceable as such against all creditors of and purchasers from
the Company.
(c) Accounts and Records. The amount represented by the Company to
--------------------
the Administrative Agent from time to time as owing by each account debtor
or by all account debtors in respect of the Accounts will at such time be
the correct amount actually owing by such account debtor or debtors
thereunder in all material respects, subject to adjustments in the ordinary
course of business. No amount payable to the Company under or in
connection with any Account, Contract or License in excess of $100,000 is
evidenced by any Instrument or Chattel Paper which has not been delivered
to the Administrative Agent. The place where the Company keeps its records
concerning the Accounts and the other Collateral is One Concourse Parkway,
Suite 600, Atlanta, Georgia 30328.
(d) Consents. Each Contract and License is in full force and effect
--------
and, to the best knowledge of the Company, constitutes a valid and legally
enforceable obligation of the other obligor in respect thereof or parties
thereto, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally. No consent or authorization of, filing with
or other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Accounts, Licenses or Contracts by any party
thereto other than those which have been duly obtained, made or performed,
are in full force and effect and do not subject the scope of any such
Account, License or Contract to any material adverse limitation, either
specific or general in nature. Neither the Company nor (to the best of the
Company's knowledge) any other party to any Account, License or Contract is
in default in the performance or observance of any of the terms thereof.
The Company has fully performed all its material obligations under each
License and Contract to the extent such obligations are required to be
performed on or prior to the date hereof. The right, title and interest of
the Company in, to and under each Account, License and Contract are not
subject to any defense, offset, counterclaim or claim which would
materially adversely affect the value of such Account,
<PAGE>
8
License or Contract as Collateral, nor have any of the foregoing been
asserted or alleged against the Company as to any of the foregoing.
(e) Inventory. The Inventory is kept at the locations listed on
---------
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(l) hereof.
(f) Equipment. The Equipment is kept at the locations listed on
---------
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(o) hereof.
(g) Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at One Concourse Parkway, Suite 600,
Atlanta, Georgia 30328.
(h) Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
(i) Patents, Trademarks and Copyrights. Schedule II hereto includes
----------------------------------
all material Patents and Patent Licenses owned by the Company in its own
name as of the date hereof. Schedule III hereto includes all material
Trademarks and Trademark Licenses owned by the Company in its own name as
of the date hereof. Schedule I hereto includes all material Copyrights in
which the Company has any colorable claim of ownership as of the date
hereof. To the best of the Company's knowledge, each Patent and Trademark
is valid, subsisting, unexpired and enforceable and has not been abandoned.
Except as set forth in Schedule II or Schedule III, none of such Patents
and Trademarks is the subject of any licensing or franchise agreement. All
licenses of the Company's Trademarks are in force and, to the best
knowledge of the Company, not in default. No holding, decision or judgment
has been rendered by any Governmental Authority with respect to any Patent
or Trademark which would limit, cancel or question the validity of any
Patent or Trademark. No action or proceeding is pending or, to the
knowledge of the Company, threatened (i) seeking to limit, cancel or
question the validity of any material Patent or Trademark or the Company's
ownership thereof, or (ii) which, if adversely determined, would have a
material adverse effect on the value of any material Patent or Trademark.
(j) Power and Authority; Authorization. The Company has the
----------------------------------
corporate power and authority and the right to execute and deliver, to
perform its obligations under, and to grant the Lien on the Collateral
pursuant to, this Security Agreement and has taken all necessary corporate
action to authorize its execution, delivery and performance of, and grant
of the Lien on the Collateral pursuant to, this Security Agreement.
(k) Governmental Obligors. Governmental Authorities are party to
----------------------
approximately 5% of the total Contracts of the Company and its
Subsidiaries.
<PAGE>
9
(l) No Litigation. No litigation, investigation or proceeding of or
-------------
before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or against
any of its properties or revenues with respect to this Security Agreement
or any of the transactions contemplated hereby which would have a material
adverse effect upon any material portion of the Collateral or the granting
of the security interests hereby.
5. Covenants. The Company covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Security Agreement until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
--------------------------------------------------------------
(i) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Company, the Company
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Company also
hereby authorizes the Administrative Agent to file any such financing or
continuation statement without the signature of the Company to the extent
permitted by applicable law. A carbon, photographic or other reproduction
of this Security Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
(ii) If any amounts payable under or in connection with any of the
Collateral having a face value in excess of $1,000,000 in the aggregate at
any one time outstanding shall be or become evidenced by any Instruments or
Chattel Paper, such Instruments or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant
to this Security Agreement. So long as no Default or Event of Default has
occurred and is continuing, upon request by the Company, the Administrative
Agent shall make available any pledged Collateral to the Company, or its
designee, that the Company specifies is required for the purpose of
ultimate sale, exchange, presentation, collection, renewal, registration or
transfer thereof, provided that in each case arrangements reasonably
--------
satisfactory to the Administrative Agent shall be made for the return of
such pledged Collateral within 21 days from the time of delivery by the
Administrative Agent, except for pledged Collateral that has been fully
repaid, satisfied, or transferred as permitted hereunder.
<PAGE>
10
(iii) Notwithstanding anything set forth in this Security Agreement
to the contrary, so long as no Default or Event of Default has occurred and
is continuing, the Company shall not be required to deliver to the
Administrative Agent any Instruments or Chattel Paper to be held by the
Administrative Agent as Collateral pursuant to this Security Agreement so
long as the aggregate amount evidenced by all such Instruments and Chattel
Paper does not exceed $1,000,000 at any one time outstanding.
(b) Indemnification. The Company agrees to pay, and to save the
---------------
Administrative Agent and the Lenders harmless from, any and all
liabilities, costs and expenses (including, without limitation, reasonable
legal fees and expenses) (i) with respect to, or resulting from, any delay
in paying, any and all excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay by the Company in complying with
any Requirement of Law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Security
Agreement; provided, that the Company shall not be liable for the payment
--------
of any portion of such liabilities, costs or expenses resulting from the
gross negligence or willful misconduct of the Administrative Agent or any
of the Lenders. Without limiting the preceding sentence, the Company will
indemnify and save and keep harmless the Administrative Agent and each
Lender from and against all expense, loss or damage suffered by reason of
any counterclaim of the account debtor or obligor thereunder, arising out
of a breach by the Company of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Company.
(c) Maintenance of Records. The Company will keep and maintain at
----------------------
its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments
received and all credits granted with respect to the Accounts, Contracts
and Licenses. The Company will mark its internal books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Administrative Agent's and the
Lenders' further security, the Administrative Agent, for the ratable
benefit of the Lenders, shall have a security interest in all of the
Company's books and records pertaining to the Collateral, and the Company
shall make available for review any such books and records to the
Administrative Agent or to its representatives during normal business hours
at the reasonable request of the Administrative Agent. The Company shall
permit representatives of any Lender, upon reasonable notice (but no more
frequently than monthly unless a Default or Event of Default shall have
occurred and be continuing), to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be requested upon reasonable
notice, and to discuss the business, operations, assets and financial and
other condition of the Company and its Subsidiaries with officers and
employees thereof and with their independent certified public accountants.
<PAGE>
11
(d) Right of Inspection. The Administrative Agent and the Lenders
-------------------
shall upon reasonable notice (but no more frequently than monthly) unless a
Default or Event of Default shall have occurred and be continuing, have
full and free reasonable access during normal business hours to all the
books, correspondence and records of the Company, and the Administrative
Agent and the Lenders and their respective representatives may examine the
same, take extracts therefrom and make photocopies thereof at any
reasonable time and as may be reasonably required upon reasonable notice,
and the Company agrees to render to the Administrative Agent at the
Company's cost and expense, and to the Lenders, such clerical and other
assistance as may be reasonably requested with regard thereto. The
Administrative Agent and the Lenders shall keep such information thereby
obtained confidential to the extent set forth in subsection 12.6(f) of the
Credit Agreement.
(e) Compliance with Laws, etc. The Company will comply in all
-------------------------
material respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of the Company's business;
provided, however, that the Company may contest any Requirement of Law in
-------- -------
any reasonable manner which shall not, in the reasonable opinion of the
Administrative Agent, adversely affect the Administrative Agent's or the
Lenders' rights or the priority of their Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. The Company will
---------------------------------------
perform and comply in all material respects with all its obligations under
the Contracts and all its other Contractual Obligations relating to the
Collateral.
(g) Payment of Obligations. The Company will pay promptly when due
----------------------
all material taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if (i) the validity thereof is
being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any material danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein and (iii) such charge
is adequately reserved against on the Company's books in accordance with
GAAP.
(h) Limitation on Liens on Collateral. The Company will not create,
---------------------------------
incur or permit to exist, will take all commercially reasonable actions to
defend the Collateral against, and will take such other commercially
reasonable action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and other than as permitted
pursuant to the Credit Agreement, and will take all commercially reasonable
actions to defend the right, title and interest of the Administrative Agent
and the Lenders in and to any of the Collateral against the claims and
demands of all Persons whomsoever.
<PAGE>
12
(i) Limitations on Dispositions of Collateral. The Company will not
-----------------------------------------
sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except for sales of assets permitted by
the Credit Agreement. Concurrently with any such permitted disposition,
the property acquired by a transferee in such disposition shall
automatically be released from the security interest created by this
Security Agreement (the "Security Interest"). It is acknowledged and
-----------------
agreed that notwithstanding any release of property from the Security
Interest in accordance with the foregoing provisions of this Section, the
Security Interest shall in any event continue in the Proceeds of
Collateral. The Administrative Agent shall promptly execute and deliver
(and, when appropriate, shall cause any separate agent, co-agent or trustee
to execute and deliver) any releases, instruments or documents reasonably
requested by the Company to accomplish or confirm the release of Collateral
provided by this Section. Any such release of Collateral provided by the
Administrative Agent shall specifically describe that portion of the
Collateral to be released, shall be expressed to be unconditional and shall
be without recourse or warranty (other than a warranty that the
Administrative Agent has not assigned its rights and interests to any other
Person). The Company shall pay all of the Administrative Agent's
reasonable expenses in connection with any release of Collateral.
(j) Limitations on Modifications, Waivers, Extensions of Agreements
---------------------------------------------------------------
Giving Rise to Accounts. The Company will not (i) amend, modify, terminate
-----------------------
or waive any provision of any Contract, agreement or lease giving rise to
an Account or License in any manner which could reasonably be expected to
materially adversely affect the value of such Contract, Account or License
as Collateral, except in a manner consistent with the ordinary and
customary conduct of its business, (ii) fail to exercise promptly and
diligently each and every material right which it may have under each
material Contract, agreement or lease giving rise to an Account or License
(other than any right of termination), except in a manner consistent with
the ordinary and customary conduct of its business or (iii) fail to deliver
to the Administrative Agent upon its reasonable request a copy of each
material demand, notice or document received by it relating in any way to
any material Contract, agreement or lease giving rise to an Account or
License.
(k) Limitations on Discounts, Compromises, Extensions of Accounts.
-------------------------------------------------------------
Other than in the ordinary course of business as generally conducted by the
Company over a period of time, the Company will not grant any extension of
the time of payment of any of the Accounts, compromise, compound or settle
the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit
or discount whatsoever thereon.
(l) Maintenance of Equipment. The Company will maintain each item of
------------------------
Equipment in good operating condition, ordinary wear and tear and
immaterial impairments of value and damage by the elements excepted, and
will provide all maintenance, service and repairs necessary for such
purpose.
<PAGE>
13
(m) Further Identification of Collateral. The Company will furnish
------------------------------------
to the Administrative Agent from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.
(n) Notices. The Company will advise the Administrative Agent and
-------
the Lenders promptly, in reasonable detail, at their respective addresses
set forth in the Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted under the Credit Agreement) on, or claim
asserted against, any of the Collateral and (ii) of the occurrence of any
other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or on the Liens created
hereunder.
(o) Changes in Locations, Name, etc. The Company will not (i)
-------------------------------
change the location of its chief executive office/chief place of business
from that specified in Section 4(g) or remove its books and records from
the location specified in Section 4(c), (ii) remove any material amount of
the Inventory or Equipment to, or keep any material amount of Inventory or
Equipment at, a location other than those listed on Schedule IV hereto, or
(iii) change its name (including the adoption of any new trade name),
identity or corporate structure to such an extent that any financing
statement filed by the Administrative Agent in connection with this
Security Agreement would become seriously misleading, unless it shall have
provided at least 15 days prior written notice to the Administrative Agent
of any such event and provide the Administrative Agent with the new
location of its chief executive office/chief place of business and its
books and records, the location of the Inventory and Equipment and the
change in the Company's name, as the case may be. Any notice given
pursuant to this Section 5(o) shall be deemed to amend Section 4(c) and
4(g) hereof or Schedule IV hereto, as the case may be. In connection with
any actions permitted pursuant to clause (i) of this Section 5(o), the
Administrative Agent shall be entitled to receive any legal opinions it
reasonably requests as to the continued perfection of the security interest
granted hereby in the Collateral, which opinions shall be deemed
satisfactory to the Administrative Agent if substantially similar to the
perfection opinions given by Gibson, Dunn & Crutcher on the Closing Date.
(p) Copyrights. The Company (i) will employ the Copyright for each
----------
material published work with such notice of copyright as may be required by
law to secure copyright protection and (ii) will not do any act or
knowingly omit to do any act whereby any material Copyright may become
invalidated and:
(A) will not do any act, or omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) shall notify the Administrative Agent immediately if it
knows, or has reason to know, that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without
<PAGE>
14
limitation, the institution of, or any such determination or
development in, any court or tribunal in the United States or any
other country) regarding the Company's ownership of any such Copyright
or its validity;
(C) will take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration
of each material Copyright owned by the Company including, without
limitation, filing of applications for renewal, where necessary; and
(D) will promptly notify the Administrative Agent of any
material infringement of any material Copyright of the Company of
which it becomes aware and will take such actions as it shall
reasonably deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and
all damages for such infringement.
(q) Patents and Trademarks.
----------------------
(i) The Company (either itself or through licensees) will,
except with respect to any Trademark that the Company shall reasonably
determine is of immaterial economic value to it or otherwise
reasonably determines not to do so, (A) continue to use each Trademark
on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists
in order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (B) maintain as in the past the quality of
products and services offered under such Trademark, (C) use reasonable
efforts to employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless within 45
days after such use or adoption the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected security
interest in such mark pursuant to this Security Agreement, and (E) not
(and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) The Company will not, except with respect to any Patent that
the Company shall reasonably determine is of immaterial economic value
to it or otherwise reasonably determine so to do, do any act, or omit
to do any act, whereby any Patent may become abandoned or dedicated.
(iii) The Company will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any
application relating to any Patent, or any application or registration
relating to any Trademark may become
<PAGE>
15
abandoned or dedicated, or of any adverse determination or material
development (including, without limitation, the institution of, or any
such determination or development in, any proceeding in the United
States Patent and Trademark Office or any court or tribunal in any
country) regarding the Company's ownership of any Patent or Trademark
or its right to register the same or to keep and maintain the same.
(iv) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for any
Patent or for the registration of any Trademark with the United States
Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, the Company shall
report such filing to the Administrative Agent and the Lenders within
five Business Days after the last day of the fiscal quarter in which
such filing occurs. Upon request of the Administrative Agent, the
Company shall execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may request to
evidence the Administrative Agent's and the Lenders' security interest
in any Patent or Trademark and the goodwill and general intangibles of
the Company relating thereto or represented thereby, and the Company
hereby appoints and constitutes the Administrative Agent its attorney-
in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest and is
irrevocable until the Obligations are paid in full, the Commitments
are terminated and no Letters of Credit are outstanding.
(v) The Company, except with respect to any Patent or Trademark
the Company shall reasonably determine is of immaterial economic value
to it or it otherwise reasonably determines not to so do and except
with respect to any Trademark that is not registrable, will take all
reasonable and necessary steps, including, without limitation, in any
proceeding before the United States Patent and Trademark Office, or
any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to
obtain the relevant registration or Patent) and to maintain each
Patent and each registration of Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability when appropriate.
(vi) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party,
the Company shall promptly notify the Administrative Agent and the
Lenders after it learns thereof and shall, unless the Company shall
reasonably determine that such Patent or Trademark is of immaterial
economic value to the Company, which determination the Company shall
promptly report to the Administrative Agent and the Lenders, promptly
sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement,
<PAGE>
16
misappropriation or dilution, or take such other actions as the
Company shall reasonably deem appropriate under the circumstances to
protect such Patent or Trademark.
(r) Vehicles.
--------
(i) The Company will maintain each Vehicle in good operating
condition, ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted, and will provide all maintenance,
service and repairs necessary for such purpose.
(ii) Within 30 days of the Administrative Agent's request, all
applications for certificates of title/ownership indicating the
Administrative Agent's security interest in the Vehicle covered by
such certificate, and any other necessary documentation, shall be
filed in each office in each jurisdiction which the Administrative
Agent shall deem advisable to perfect its and the Lenders' security
interests in the Vehicles; after such request, no Vehicle shall be
removed from the state which has issued the certificate of
title/ownership therefor for a period in excess of four months.
6. Administrative Agent's Appointment as Attorney-in-Fact.
------------------------------------------------------
(a) Powers. The Company hereby irrevocably constitutes and appoints
------
the Administrative Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time after the
occurrence, and during the continuation, of an Event of Default in the
Administrative Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Security Agreement, and,
without limiting the generality of the foregoing, the Company hereby gives
the Administrative Agent the power and right, on behalf of the Company,
without notice to or assent by the Company, to do the following:
(i) in the name of the Company or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account, Instrument, License or General Intangible or with respect
to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Administrative Agent for the purpose of collecting
any and all such moneys due under any Account, Instrument, License or
General Intangible or with respect to any other Collateral whenever
payable;
<PAGE>
17
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, provided that if such taxes are
--------
being contested in good faith and by appropriate proceedings, the
Administrative Agent and the Lenders will consult with the Company
before making any such payment; and
(iii) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) to sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of
any Collateral; (E) to defend any suit, action or proceeding brought
against the Company with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described in
clause (E) above and, in connection therewith, to give such discharges
or releases as the Administrative Agent may deem appropriate; (G) to
assign any Patent or Trademark (along with the goodwill of the
business to which any such Trademark pertains), throughout the world
for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and
(H) generally, to sell, transfer, pledge and make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative Agent's
option and the Company's expense, at any time, or from time to time,
all acts and things which the Administrative Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and the
Administrative Agent's and the Lenders' Liens thereon and to effect
the intent of this Security Agreement, all as fully and effectively as
the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Company also authorizes the Administrative
------------
Agent and the Lenders, at any time and from time to time, to execute, in
connection with the sale provided for in Section 8 hereof, any indorsement,
assignments or other instruments of conveyance or transfer with respect to
the Collateral.
(c) No Duty on Administrative Agent's or Lenders' Part. The powers
--------------------------------------------------
conferred on the Administrative Agent and the Lenders hereunder are solely
to protect the
<PAGE>
18
Administrative Agent's and the Lenders' interests in the Collateral and
shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall
be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither they nor any of their officers,
directors, employees or agents shall be responsible to the Company for any
act or failure to act hereunder, except for their own gross negligence or
willful misconduct or failure to comply with mandatory provisions of
applicable law.
7. Performance by Administrative Agent of Company's Obligations. If
------------------------------------------------------------
the Company fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the
Administrative Agent incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to 2% plus the
Alternate Base Rate, shall be payable by the Company to the Administrative Agent
on demand and shall constitute Obligations secured hereby; provided, however,
that the Administrative Agent shall in any event first have given the Company
written notice of its intent to do the same and the Company shall not have,
within 30 days of such notice (or such shorter period as the Administrative
Agent may reasonably determine is necessary in order to preserve the benefits of
this Security Agreement with respect to any material portion of the Collateral),
paid such claim or obtained to the Administrative Agent's satisfaction the
release of the claim or Lien to which such notice relates.
8. Remedies. If an Event of Default shall occur and be continuing,
--------
the Administrative Agent on behalf of the Lenders may exercise, in addition to
all other rights and remedies granted to them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby waived and released. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs
<PAGE>
19
and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Administrative
Agent may elect subject to subsection 5.9 of the Credit Agreement, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Administrative Agent account for the
surplus, if any, to the Company. To the extent permitted by applicable law, the
Company waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder, except to the extent arising from the gross negligence or
willful misconduct of the Administrative Agent or such Lender. If any notice of
a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. The Company shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Administrative Agent or any Lender to collect such
deficiency.
9. Amendments, etc. with Respect to the Obligations. The Company
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or any Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the other Credit Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Administrative
Agent, the Issuing Lender or any Lender may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time held
by the Administrative Agent, the Issuing Lender or any Lender for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. None
of the Administrative Agent, the Issuing Lender or any Lender shall have any
obligation to protect, secure, perfect or insure this or any other Lien at any
time held by it as security for the Obligations or any property subject thereto.
The Company waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent, the Issuing Lender or any Lender upon this Security
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Security
Agreement; and all dealings between the Company and the Administrative Agent,
the Issuing Lender or any Lender, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Security
<PAGE>
20
Agreement. The Company waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Company with respect
to the Obligations.
10. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, any Lender, nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Company or otherwise.
11. Delegation of Duties. The Administrative Agent may execute any
--------------------
of its duties under this Security Agreement by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care, except as otherwise provided in subsection 11.3 of the
Credit Agreement.
12. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
13. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Section Headings. The section headings used in this Security
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Administrative
------------------------------
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 16 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, the Issuing Lender or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
the Issuing Lender or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Issuing Lender or such Lender would otherwise have on
any future occasion. The rights and remedies herein provided are
<PAGE>
21
cumulative, may be exercised singly or concurrently and are not exclusive of any
rights or remedies provided by law.
16. Integration; Waivers and Amendments; Successors and Assigns;
------------------------------------------------------------
Governing Law. This Security Agreement represents the entire agreement of the
- -------------
Company with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Administrative Agent, provided that any
--------
provision of this Security Agreement may be waived by the Administrative Agent
in a written letter or agreement executed by the Administrative Agent or by
telex or facsimile transmission from the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Company and
shall inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
17. Notices. All notices, requests and demands to or upon the
-------
Company or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage prepaid, or, in the case of telecopy notice, when sent, or, in the case
of telex notice, when sent, answerback received, addressed to a party at the
address provided for such party in the Credit Agreement.
18. Counterparts. This Security Agreement may be executed by one or
------------
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
19. Authority of Administrative Agent. The Company acknowledges that
---------------------------------
the rights and responsibilities of the Administrative Agent under this Security
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Company, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and the Company shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.
<PAGE>
22
20. Releases. The Administrative Agent and the Lenders agree to
--------
cooperate with the Company and its Subsidiaries with respect to any sale
permitted by subsection 9.5 of the Credit Agreement and promptly take such
action and execute and deliver such instruments and documents necessary to
release the Liens and security interests created hereby relating to any of the
assets or property affected by any sale permitted by subsection 9.5 of the
Credit Agreement including, without limitation, any necessary Uniform Commercial
Code amendment, termination or partial termination statement.
21. Termination. This Security Agreement (other than with respect to
-----------
any cash collateral securing any outstanding Letter of Credit) shall terminate
when all the Obligations have been paid in full, the Commitments are terminated
and either no Letters of Credit are outstanding or each outstanding Letter of
Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent. Upon such termination, the
Administrative Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such person or persons as the Company shall
designate, or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) (other than with respect to any
cash collateral securing any outstanding Letter of Credit) as shall not have
been sold or otherwise applied by the Administrative Agent pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments or reassignment and release. Any such reassignment and release
shall be without recourse upon or warranty by the Administrative Agent (other
than a warranty that the Administrative Agent has not assigned its rights and
interests hereunder to any Person) and at the expense of the Company.
<PAGE>
23
IN WITNESS WHEREOF, the Company and the Administrative Agent have
caused this Security Agreement to be duly executed and delivered as of the date
first above written.
SIMMONS ACQUISITION CORP.
By:/s/ John M. Kenney
---------------------------------
Title: Vice President & Assistant
Secretary
CHEMICAL BANK, as Administrative Agent
By:/s/ Scott S. Ward
---------------------------------
Title: Vice President
<PAGE>
24
Schedule I to
Security Agreement
Copyrights and Copyright Licenses
---------------------------------
<PAGE>
25
Schedule II to
Security Agreement
Patents and Patent Licenses
---------------------------
<PAGE>
Schedule III to
Security Agreement
Trademarks and Trademark Licenses
---------------------------------
<PAGE>
27
Schedule IV to
Security Agreement
Locations of Inventory and Equipment Locations
----------------------------------------------
<PAGE>
HOLDINGS PLEDGE AGREEMENT
-------------------------
PLEDGE AGREEMENT, dated as of March 22, 1996, made by SIMMONS HOLDINGS
INC., a Delaware corporation (the "Pledgor"), in favor of CHEMICAL BANK, a New
-------
York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the several lenders (the "Lenders") from time to
-------------------- -------
time parties to the Credit Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Simmons Acquisition Corp., a Delaware corporation (to be merged with and
into Simmons Company, the "Company"), the Lenders and the Administrative Agent.
-------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make loans to, and the Issuing Lender (as defined in the Credit
Agreement) has agreed to issue and certain of the Lenders have agreed to
participate in certain letters of credit for the account of the Company upon the
terms and subject to the conditions set forth therein, such loans being
evidenced by the notes issued by the Company;
WHEREAS, the Pledgor is the owner of the shares of Pledged Stock (as
hereinafter defined) issued by the Company listed on Schedule I hereto; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Pledgor shall have executed and
delivered this Pledge Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Issuing Lender and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective loans and
the Issuing Lender to issue and the Lenders to participate in the letters of
credit under the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms that are
-------------
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
<PAGE>
2
"Code" means the Uniform Commercial Code from time to time in effect
----
in the State of New York.
"Collateral" means the Pledged Stock and all Proceeds.
----------
"Obligations" means (i) the unpaid principal amount of, and interest
-----------
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such post-
filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent, the
Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
any Letter of Credit or L/C Application, the other Credit Documents and any
other document executed and delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all reasonable fees and disbursements of counsel to the
Administrative Agent, the Issuing Lender or to the Lenders that are
required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended,
----------------
supplemented or otherwise modified from time to time.
"Pledged Stock" means the shares of capital stock of the Company
-------------
listed on Schedule I hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted by the
Company to the Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds", as such term is defined in Section 9-
--------
306(1) of the Code on the date hereof, of the Pledged Stock, and, in any
event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
2. Pledge; Grant of Security Interest. The Pledgor hereby delivers
----------------------------------
to the Administrative Agent, for the ratable benefit of the Lenders, all
certificates or instruments representing or evidencing the Pledged Stock on the
date hereof, and hereby transfers and grants to the Administrative Agent, for
the ratable benefit of the Lenders, a first priority security interest in all of
the Pledgor's right, title and interest in the Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
------------
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver
<PAGE>
3
an undated stock power covering such certificate, duly executed in blank by the
Pledgor.
4. Representations and Warranties. The Pledgor represents and
------------------------------
warrants that:
(a) the shares of Pledged Stock constitute (i) all the issued and
outstanding shares of all classes of the Capital Stock of the Company owned by
the Pledgor and (ii) on the date hereof, at least 84% of the issued and
outstanding shares of all classes of the Capital Stock of the Company;
(b) all the shares of Pledged Stock have been duly and validly issued
and are fully paid and nonassessable;
(c) the Pledgor is the record and beneficial owner of the Pledged
Stock, free of any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Pledge Agreement; and
(d) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the Lien granted pursuant to this
Pledge Agreement will constitute a valid, perfected first priority Lien on the
Collateral (except, with respect to Proceeds, only to the extent permitted by
Section 9-306 of the Code), enforceable as such against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Pledgor on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement, on and as of such Borrowing
Date as though made hereunder on and as of such date.
5. Covenants. The Pledgor covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Pledge Agreement until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) If the Pledgor shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of capital stock of the Company, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Pledgor shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received, duly indorsed
by the Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by the
Pledgor and with, if the Administrative Agent so
<PAGE>
4
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
the Pledgor will not (i) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Collateral, or (ii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for the
Lien provided for by this Pledge Agreement. The Pledgor will defend the right,
title and interest of the Administrative Agent, the Issuing Lender and the
Lenders in and to the Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Pledge
Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative Agent,
the Issuing Lender and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
-----------------------------
have occurred and be continuing, the Pledgor shall be permitted to receive all
cash dividends paid by the Company to the extent permitted in the Credit
Agreement in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock, provided, however, that the
-------- -------
Pledgor agrees that it shall not vote in any way which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, the Security Documents or any of the other Credit Documents. The
Administrative Agent shall, at the Pledgor's sole cost and expense, execute and
deliver (or cause to be executed and delivered) to the Pledgor all proxies and
other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to this Section 6.
7. Rights of the Lenders and the Administrative Agent. (a) If an
--------------------------------------------------
Event of Default shall occur and be continuing, (i) the Administrative Agent
shall have the right to receive any and all cash dividends paid in respect of
the Pledged Stock and make application thereof to the Obligations in such order
as the Administrative Agent may determine, and (ii) all shares of the Pledged
Stock may be registered in the name of the Administrative Agent or its nominee,
and,
<PAGE>
5
subject to the terms of this Agreement, the Administrative Agent or its nominee
may thereafter exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders of the Company
or otherwise and (B) any and all rights of conversion, exchange, subscription
and any other rights, privileges or options pertaining to such shares of the
Pledged Stock as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Company, or upon the
exercise by the Pledgor or the Administrative Agent of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it and except for
its gross negligence or willful misconduct or failure to comply with the
provisions of Section 12, but the Administrative Agent shall have no duty to the
Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent, the Issuing Lender and
the Lenders hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent, the Issuing Lender or any Lender of any right or
remedy against any other Person which may be or become liable in respect of all
or any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. None of the
Administrative Agent, the Issuing Lender and any Lender shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Administrative Agent be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The Administrative Agent agrees
to release promptly to the Pledgor any dividends, cash, securities, instruments
and other property paid, payable or otherwise distributed in respect of the
Collateral which it may receive under Section 7(a) if, prior to the occurrence
of an acceleration of any of the Obligations, all Defaults and Events of Default
have been waived or are no longer continuing.
(c) The Administrative Agent may execute any of its duties under this
Pledge Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care, except
as otherwise provided in subsection 11.3 of the Credit Agreement.
8. Remedies. In the event that any portion of the Obligations has
--------
been declared or becomes due and payable in accordance with the terms of the
Credit Agreement, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any
<PAGE>
6
kind (except any notice required by law referred to below) to or upon the
Pledgor, the Company or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent, the Issuing
Lender or any Lender or elsewhere upon such terms and conditions as it may deem
commercially reasonable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent, the Issuing Lender or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Pledgor, which right
or equity is hereby waived and released. The Administrative Agent promptly
shall apply any Proceeds from time to time held by it and the net proceeds of
any such collection, recovery, receipt, appropriation, realization or sale,
after deducting all reasonable costs and expenses of every kind incurred in
respect thereof or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent, the Issuing Lender and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel to
the Administrative Agent, to the payment in whole or in part of the Obligations,
in such order as the Administrative Agent may elect subject to subsection 5.9 of
the Credit Agreement, and only after such application and after the payment by
the Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Pledgor. To the
extent permitted by applicable law, the Pledgor waives all claims, damages and
demands it may acquire against the Administrative Agent, the Issuing Lender or
any Lender arising out of the lawful exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Pledgor further waives
and agrees not to assert any rights or privileges which it may acquire under
Section 9-112 of the Code. The Pledgor shall remain liable for any deficiency
if the proceeds of any sale or other disposition of the Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Administrative Agent or any Lender to collect such
deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
----------------------------------
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 8, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Pledgor will cause the Company to (i)
--------------
execute and deliver, and cause the directors and officers of the Company to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for
<PAGE>
7
a period of 90 days from the date of the first public offering of the Pledged
Stock, or that portion thereof to be sold, and (iii) make all amendments thereto
and/or to the related prospectus that, in the opinion of the Administrative
Agent, are necessary or advisable, all in conformity with the requirements of
the Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Pledgor agrees to cause the Company to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions that the Administrative Agent shall reasonably designate and to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) that will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale conducted
in a manner that the Administrative Agent in good faith believes to be
commercially reasonable under the circumstances shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay the sale of any of the Pledged Stock for the period
of time necessary to permit the Company to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the Company would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock, pursuant to this Section 9 valid and
binding and in compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 9 will cause irreparable injury to the Administrative Agent, the
Issuing Lender and the Lenders, that the Administrative Agent, the Issuing
Lender and the Lenders have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section 9
shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants.
10. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Pledgor hereunder, or any setoff or application of funds of the Pledgor by
any Lender, or the receipt of any amounts by the Administrative Agent, the
Issuing Lender or any Lender with respect to any of the Collateral, the Pledgor
shall not be entitled to be subrogated to any of the rights of the
Administrative Agent, the Issuing Lender or any Lender against the Company or
against any other collateral security held by the Administrative Agent, the
Issuing Lender or any Lender for the payment of the Obligations, nor shall the
Pledgor seek any reimbursement from the Company in respect of payments made by
the Pledgor in connection with the Collateral, or
<PAGE>
8
amounts realized by the Administrative Agent, the Issuing Lender or any Lender
in connection with the Collateral, and any such rights of subrogation and
reimbursement of the Pledgor are hereby waived until all amounts owing to the
Administrative Agent and the Lenders by the Company on account of the
Obligations are paid in full, the Commitments are terminated and either no
Letters of Credit are outstanding or each outstanding Letter of Credit has been
cash collateralized so that it is fully secured to the satisfaction of the
Administrative Agent.
11. Amendments, etc. with Respect to the Obligations. The Pledgor
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or such Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the Security Documents, the other
Credit Documents, any Interest Rate Agreement entered into with any Lender or
Lenders and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Lenders (or the Required Lenders, as the case may be) may deem advisable
from time to time, and any guarantee, right of offset or other collateral
security at any time held by the Administrative Agent, the Issuing Lender or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. None of the Administrative Agent, the Issuing Lender
and the Lenders shall have any obligation to protect, secure, perfect or insure
any other Lien at any time held by it as security for the Obligations or any
property subject thereto. The Pledgor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative Agent, the Issuing Lender or any
Lender upon this Pledge Agreement; the Obligations, and any of them shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Pledge Agreement; and all dealings between the Company and the
Pledgor, on the one hand, and the Administrative Agent, the Issuing Lender and
the Lenders, on the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Pledge Agreement. The Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Company or the Pledgor with respect to the
Obligations.
12. Limitation on Duties Regarding Collateral. The Administrative
-----------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. None of the Administrative Agent, the Issuing Lender, any Lender nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize
<PAGE>
9
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Section Headings. The section headings used in this Pledge
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Administrative
------------------------------
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 17 hereof) be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default of any obligation under
any Credit Document or in any breach of any of the terms and conditions hereof
or thereof. No failure to exercise, nor any delay in exercising, on the part of
the Administrative Agent, the Issuing Lender or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Issuing Lender or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Administrative Agent, the Issuing Lender or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
17. Integration; Waivers and Amendments; Successors and Assigns;
------------------------------------------------------------
Governing Law. This Pledge Agreement represents the entire agreement of the
- -------------
Pledgor with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, provided that any provision of this
Pledge Agreement may be waived by the Administrative Agent in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Pledge Agreement shall be
binding upon the successors and assigns of the Pledgor and shall inure to the
benefit of the Administrative Agent, the Issuing Lender and the Lenders and
their respective successors and assigns. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED
<PAGE>
10
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
18. Notices. Notices by the Administrative Agent to the Pledgor or
-------
the Company may be given by mail, by telex or by facsimile transmission,
addressed or transmitted to the Pledgor or the Company at its address or
transmission number set forth in subsection 12.2 of the Credit Agreement in the
case of the Company and on Schedule II hereto in the case of the Pledgor and
shall be effective (a) in the case of mail, three days after deposit in the
postal system, first class postage pre-paid, and (b) in the case of telex or
facsimile notices, when sent. The Pledgor and the Company may change their
respective addresses and transmission numbers by written notice to the
Administrative Agent.
19. Counterparts. This Pledge Agreement may be executed by one or
------------
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
20. Irrevocable Authorization and Instruction to Company. The
----------------------------------------------------
Pledgor hereby authorizes and instructs the Company to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees that the
Company shall be fully protected in so complying.
21. Authority of Administrative Agent. The Pledgor acknowledges that
---------------------------------
the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither the Pledgor nor the Company shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
22. Termination. This Pledge Agreement shall terminate when all the
-----------
Obligations have been fully paid and performed and the Commitments terminated.
Upon such termination, the Administrative Agent shall on its behalf and on
behalf of the Lenders reassign and redeliver (or cause to be reassigned and
redelivered) to the Pledgor, or to such person or persons as the Pledgor shall
designate or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) as shall not have been sold or
otherwise applied by the Administrative Agent pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or warranty by the Administrative Agent (other than
<PAGE>
11
a warranty that the Administrative Agent has not assigned its rights and
interests hereunder to any other Person) and at the sole cost and expense of the
Pledgor.
<PAGE>
12
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
SIMMONS HOLDINGS, INC.
By:/s/ John M. Kenney
--------------------------------
Name: John M. Kenney
Title:Vice President & Assistant
Secretary
CHEMICAL BANK, as Administrative
Agent
By:/s/ Scott S. Ward
--------------------------------
Name: Scott S. Ward
Title:Vice President
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The Company referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. The
Company agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. The Company further agrees that the terms of Section 9(c) of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
SIMMONS ACQUISITION CORP.
By:/s/ John M. Kenney
--------------------------------
Name: John M. Kenney
Title:Vice President
<PAGE>
SCHEDULE I
----------
Holdings Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
----------------------------
Class Stock Certi- No. of
Issuer of Stock ficate No. Shares
------ -------- ------------ ------
<PAGE>
SCHEDULE II
-----------
Holdings Pledge Agreement
ADDRESS OF PLEDGOR
------------------
Simmons Holdings, Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Chris O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Simmons Acquisition Corp.
One Concourse Parkway Suite 600
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Telecopy: (770) 392-2565
With a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telex: 177920 GIBTRASK NYK
Telecopy: (212) 949-7606
<PAGE>
HOLDINGS GUARANTEE
------------------
HOLDINGS GUARANTEE, dated as of March 22, 1996, made by SIMMONS
HOLDINGS, INC., a Delaware corporation (the "Guarantor") in favor of CHEMICAL
---------
BANK, a New York banking corporation, as administrative agent (in such capacity,
the "Administrative Agent") for the banks and other financial institutions (the
--------------------
"Lenders") that are parties to the Credit Agreement (as hereafter defined).
-------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Simmons Acquisition Corp., a Delaware corporation (to be
merged with and into Simmons Company, the "Company"), is party to a Credit
-------
Agreement, dated as of the date hereof, with the Administrative Agent and the
Lenders (as the same may be amended, supplemented or otherwise modified from
time to time, the "Credit Agreement");
----------------
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
severally agreed to make certain extensions of credit to the Company;
WHEREAS, the Guarantor owns directly at least 84% of the issued and
outstanding common and preferred stock of the Company;
WHEREAS, the Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit; and
WHEREAS, under the Credit Agreement, the obligation of the Lenders to
make the extensions of credit to the Company on and after the date hereof is
conditioned upon, among other things, the execution and delivery by the
Guarantor of this Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to make their respective
extensions of credit to the Company under the Credit Agreement, the Guarantor
hereby agrees with and for the benefit of the Administrative Agent and the
Lenders as follows:
1. Defined Terms. As used in this Guarantee, terms defined in the
-------------
Credit Agreement or in the preamble or recitals hereto are used herein as
therein defined, and the following term shall have the following meaning:
<PAGE>
2
"Obligations" shall mean (i) the unpaid principal amount of, and
-----------
interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for such post-filing or post-petition interest is allowed), the
Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or the Lenders that
are required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
2. Guarantee. (a) The Guarantor hereby, unconditionally and
---------
irrevocably, guarantees to the Administrative Agent and the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and the Guarantor further agrees
to pay any and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the
Administrative Agent, the Issuing Lender or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, the Guarantor under this Guarantee.
(b) No payment or payments made by any of the Company, the Guarantor,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Company, the Guarantor, any other
guarantor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations, remain liable for the
Obligations until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent.
(c) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guarantee for such purpose.
<PAGE>
3
3. Right of Set-off. Upon the occurrence of any Event of Default
----------------
under any Credit Document, the Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to the Guarantor, any
such notice being expressly waived by the Guarantor, to set off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
such Lender may elect, against and on account of the obligations and liabilities
of the Guarantor to such Lender hereunder or under the Credit Agreement, the
Notes, or the other Credit Documents, as such Lender may elect, whether or not
the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. Each Lender agrees to notify the Guarantor promptly of any such set-
off and the application made by such Lender, provided that the failure to give
--------
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this paragraph are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Guarantor hereunder or any set-off or application of funds of the Guarantor
by any Lender, the Guarantor shall not be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Company or any
collateral security or guarantee or right of offset held by any Lender for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company in respect of payments made
by the Guarantor hereunder, and any such rights of subrogation and reimbursement
of the Guarantor are hereby waived until all amounts owing to the Administrative
Agent and the Lenders by the Company on account of the Obligations are paid in
full, the Commitments are terminated and either no Letters of Credit are
outstanding or each each outstanding Letter of Credit has been cash
collateralized so that it is fully secured to the satisfaction of the
Administrative Agent.
5. Amendments, etc. with respect to the
------------------------------------
Obligations; Waiver of Rights. The Guarantor shall remain obligated hereunder
- -----------------------------
notwithstanding that, without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor, any demand for payment
of any of the Obligations made by the Administrative Agent, the Issuing Lender
or any Lender may be rescinded by such party and any of the Obligations
continued, and the Obligations, or the liability of any other party upon or for
any part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent, the Issuing Lender or any
Lender and the Credit Agreement, the Notes, the other Credit Documents, any
Letter of Credit, any Interest Rate Agreement with any Lender or Lenders and any
other collateral security document or other guarantee or document in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent, the Issuing Lender and/or any Lender may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the
<PAGE>
4
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against the Guarantor, the Administrative Agent or any
Lender may, but shall be under no obligation to, make a similar demand on any
other guarantor, and any failure by the Administrative Agent or any Lender to
make any such demand or to collect any payments from any such other guarantor or
any release of any such other guarantor shall not relieve the Guarantor in
respect of which a demand or collection is not made, and shall not impair or
affect the rights and remedies, express or implied, or as a matter of law, of
the Administrative Agent or any Lender against the Guarantor. For the purposes
hereof "demand" shall include the commencement and continuance of any legal
proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Issuing Lender or any Lender upon this Guarantee or acceptance of this
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee; and all dealings between the Company or
the Guarantor and the Administrative Agent, the Issuing Lender or any Lender
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. The Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or the Guarantor with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, the Notes, any
other Credit Document, the Letters of Credit, any Interest Rate Agreement with
any Lender or Lenders, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent, the Issuing Lender or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company, the Guarantor or any other Person against the Administrative Agent,
the Issuing Lender or any Lender, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Company or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any of the Company for the Obligations, or of the Guarantor under
this Guarantee, in bankruptcy or in any other instance. When pursuing its
rights and remedies hereunder against the Guarantor, the Administrative
Agent and/or any Lender may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Company or any other Person or
against any collateral security or guarantee for the Obligations or any right of
offset with respect thereto, and any failure by the Administrative Agent or any
Lender to pursue such other rights or remedies or to collect any payments from
the Company or any such other Person or to realize upon any such collateral
security or guarantee or to exercise any such right of offset, or any release of
the Company or any such other Person or any such collateral security, guarantee
or right of offset, shall not relieve the Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative
<PAGE>
5
Agent or any Lender against the Guarantor. This Guarantee shall remain in full
force and effect and be binding in accordance with and to the extent of its
terms upon the Guarantor and the successors and assigns thereof, and shall inure
to the benefit of the Administrative Agent and the Lenders, and their respective
successors, indorsees, transferees and assigns, until all the Obligations and
the obligations of the Guarantor under this Guarantee shall have been satisfied
by payment in full, either no Letters of Credit are outstanding or each
outstanding Letter of Credit has been cash collateralized so that it is fully
secured to the satisfaction of the Administrative Agent and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Company may be free from any Obligations.
7. Reinstatement. This Guarantee shall continue to be effective, or
-------------
be reinstated, as the case may be, if at any time payment, or any part thereof,
of the Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or of the Guarantor, or upon or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or the Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. Payments. The Guarantor hereby guarantees that payments
--------
hereunder will be paid in Dollars to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 270 Park
Avenue, New York, New York 10017, U.S.A. or at such other office as the
Administrative Agent may notify to the Guarantor in accordance with Section 15.
9. Representations and Warranties. The Guarantor hereby represents
------------------------------
and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority and the legal right to own and operate
its property, to lease the property it operates and to conduct the business
in which it is currently engaged;
(b) it is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct or proposed conduct of its business
requires such qualification and is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not
reasonably be expected to have a material adverse effect on its business,
operations, assets or financial or other condition or on its ability to
perform its obligations under this Guarantee or the other Credit Documents
to which it is a party;
(c) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee
and the other Credit Documents to which the Guarantor is a party and to
grant the Liens granted by it pursuant to the other Credit Documents to
which the Guarantor is a party, and has taken all
<PAGE>
6
necessary corporate action to authorize the execution, delivery and
performance of this Guarantee and the other Credit Documents to which the
Guarantor is a party and to grant the Liens granted by it pursuant to the
other Credit Documents to which it is a party;
(d) it owns at least 84% of the issued and outstanding shares of all
classes of Capital Stock of the Company and has Subsidiaries only as
specified and permitted under the terms of the Credit Agreement;
(e) no consent, license, permit, approval or authorization of, or
filing with, or notice or report to, or registration, filing or declaration
with, or other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without
limitation, any stockholder or creditor of such Guarantor), is required in
connection with the execution, delivery, performance, validity or
enforceability by or against the Guarantor of this Guarantee and the other
Credit Documents to which the Guarantor is a party;
(f) this Guarantee and the other Credit Documents to which the
Guarantor is a party have been duly executed and delivered on behalf of the
Guarantor and each of this Guarantee and the other Credit Documents to
which the Guarantor is a party constitutes a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity;
(g) the execution, delivery and performance of this Guarantee and the
other Credit Documents to which the Guarantor is a party do not and will
not violate any Requirement of Law or any material Contractual Obligation
of the Guarantor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation other than the Liens created
by the Holdings Pledge Agreement;
(h) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or the other
Credit Documents to which the Guarantor is a party or any of the
transactions contemplated hereby or thereby or (ii) which could have a
material adverse effect on the business, operations, property or financial
condition of the Guarantor and its Subsidiaries taken as a whole or on the
ability of the Guarantor to perform its obligations under this Guarantee or
the other Credit Documents to which it is a party; and
(i) the Guarantor has filed or caused to be filed all tax returns
required to be filed by it, and has paid all taxes due on said returns or
on any assessments made against it (other than (a) those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings for which adequate reserves have been provided on its
<PAGE>
7
books and (b) those which, individually or in the aggregate, are not
material to the Guarantor and its Subsidiaries taken as a whole).
The Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Guarantor on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement on and as of such Borrowing
Date as though made hereunder on and as of such Borrowing Date.
10. Covenants. The Guarantor hereby covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Guarantee until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent, the Guarantor shall engage in no
business other than holding the Capital Stock of the Company, and businesses
incidental thereto.
11. Severability. Any provision of this Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this
------------------
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative
------------------------------
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to paragraph 14 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or event of default under any Credit Document or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
14. Integration; Waivers and Amendments; Successors and Assigns;
------------------------------------------------------------
Governing Law. This Guarantee represents the entire agreement of the Guarantor
- -------------
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or
<PAGE>
8
otherwise modified except by a written instrument executed by the Guarantor and
the Administrative Agent, provided that any provision of this Guarantee may be
--------
waived by the Administrative Agent and the Lenders in a letter or agreement
executed by the Administrative Agent or by telex or facsimile transmission from
the Administrative Agent. This Guarantee shall be binding upon the successors
and assigns of the Guarantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their respective successors and
assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. Notices. All notices, requests and demands to or upon the
-------
Guarantor or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage pre-paid, or, in the case of telecopy notice, confirmation of receipt
received, or, in the case of telex notice, when sent, answerback received,
addressed to a party at the address provided for such party in the Credit
Agreement or Schedule I hereto, as the case may be, or to such other address as
may be hereafter notified to the parties hereto.
16. Counterparts. This Guarantee may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. Authority of Administrative Agent. The Guarantor acknowledges
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Guarantor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.
18. Submission to Jurisdiction; Waivers. (a) The Guarantor hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Credit Document, or for
recognition and enforcement of any judgment in respect thereof, to the non-
exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action
<PAGE>
9
or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be affected by mailing a copy thereof by registered or certified mail,
postage prepaid, to the Guarantor at its address set forth on Schedule I
hereto or at such other address of which the Administrative Agent shall
have been notified pursuant to paragraph 14; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in other jurisdiction.
(b) The Guarantor and the Administrative Agent, on behalf of itself
and the Lenders, hereby unconditionally waive trial by jury in any legal action
or proceeding referred to in paragraph (a) above.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
SIMMONS HOLDINGS, INC.
By:/s/ John M. Kenney
-------------------------------
Name: John M. Kenney
Title:Vice President & Assistant
Secretary
CHEMICAL BANK, as Administrative
Agent
By:/s/ Scott S. Ward
-------------------------------
Name: Scott S. Ward
Title:Vice President
<PAGE>
SCHEDULE I
Holdings Guarantee
------------------
Address of Guarantor
--------------------
Simmons Holdings , Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Chris O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attention: Jonathan C. Daiker, Chief Financial
Officer
Telecopy: (770) 392-2565
With a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT A
TO THE
CREDIT AGREEMENT
----------------
FORM OF TRANCHE A TERM LOAN NOTE
$__________ New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, SIMMONS ACQUISITION CORP., a
Delaware corporation (to be merged with and into Simmons Company, the
"Company"), promises to pay to the order of _______________ (the "Lender") at
------- ------
the office of Chemical Bank, 270 Park Avenue, New York, New York 10017, in
lawful money of the United States of America and in immediately available funds,
the principal amount of ____________________ DOLLARS ($__________), or, if less,
the aggregate unpaid principal amount of all loans made by the Lender pursuant
to subsection 2.1 of the Credit Agreement referred to below, which sum shall be
due and payable in such amounts and on such dates as are set forth in the Credit
Agreement, dated as of ___________, 1996 among the Company, the Lender and
certain other banks and financial institutions parties thereto, and Chemical
Bank, as administrative agent (as the same may be from time to time amended,
supplemented or otherwise modified, the "Credit Agreement"; terms defined
----------------
therein being used herein as so defined). The undersigned further agrees to pay
interest at said office, in like money, from the date hereof on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsection 5.5 of the Credit Agreement. The holder of this
Note is authorized to record the date, Type and amount of the Tranche A Term
Loan made by the Lender pursuant to subsection 2.1 of the Credit Agreement, the
date and amount of each payment or prepayment of principal hereof, and the date
of each interest rate conversion or continuation pursuant to subsection 5.2 of
the Credit Agreement and the principal amount subject thereto, on the schedules
annexed hereto and made a part hereof and any such recordation shall constitute
prima facie evidence of the information so recorded, provided that the failure
- ----- ----- --------
of the Lender to make such recordation (or any error in such recordation) shall
not affect the obligations of the Company hereunder or under the Credit
Agreement.
This Note is one of the Tranche A Term Loan Notes referred to in the
Credit Agreement and is entitled to the benefits thereof and is subject to
optional and mandatory prepayment in whole or in part as provided therein.
This Note is secured and guaranteed as provided in the Security
Documents and the Guarantees. Reference is hereby made to the Security
Documents and the Guarantees for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security and guarantees, the terms and conditions upon which the security
interest and each guarantee was granted and the rights of the holder of this
Note in respect thereof. The undersigned agrees to pay all costs and expenses
incurred by the Lender in connection with
<PAGE>
2
the enforcement of its rights and remedies under the Credit Agreement, this
Note, the Security Documents and each other Credit Document.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE
REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SIMMONS ACQUISITION CORP.
By:_____________________________
Title:
<PAGE>
Schedule A to Tranche A
Term Loan Note
-----------------------
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
-------------------------------------------
<TABLE>
<CAPTION>
Unpaid Principal
Amount of Amount Balance of
Alternate Converted to Alternate Base
Base Rate Alternate Amount of Amount Converted Rate Notation
Date Loans Base Rate Loans Principal Repaid to Eurodollar Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C>
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule B to Tranche A
Term Loan Note
-------------------------
EURODOLLAR LOANS
AND REPAYMENTS OF EURODOLLAR LOANS
----------------------------------
Interest
Amount Period and Amount Unpaid
Amount Converted Eurodollar Converted Principal
of Euro- to Euro- Rate with Amount of to Alternate Balance of
dollar dollar Respect Principal Base Rate Eurodollar Notation
Date Loans Loans Thereto Repaid Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
</TABLE>
<PAGE>
EXHIBIT B
TO THE
CREDIT AGREEMENT
----------------
FORM OF TRANCHE B TERM LOAN NOTE
$__________ New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, SIMMONS ACQUISITION CORP., a
Delaware corporation (to be merged with and into Simmons Company, the
"Company"), promises to pay to the order of _______________ (the "Lender") at
------- ------
the office of Chemical Bank, 270 Park Avenue, New York, New York 10017, in
lawful money of the United States of America and in immediately available funds,
the principal amount of ____________________ DOLLARS ($__________), or, if less,
the aggregate unpaid principal amount of all loans made by the Lender pursuant
to subsection 3.1 of the Credit Agreement referred to below, which sum shall be
due and payable in such amounts and on such dates as are set forth in the Credit
Agreement, dated as of ___________, 1996 among the Company, the Lender and
certain other banks and financial institutions parties thereto, and Chemical
Bank, as administrative agent (as the same may be from time to time amended,
supplemented or otherwise modified, the "Credit Agreement"; terms defined
----------------
therein being used herein as so defined). The undersigned further agrees to pay
interest at said office, in like money, from the date hereof on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsection 5.5 of the Credit Agreement. The holder of this
Note is authorized to record the date, Type and amount of the Tranche B Term
Loan made by the Lender pursuant to subsection 3.1 of the Credit Agreement, the
date and amount of each payment or prepayment of principal hereof, and the date
of each interest rate conversion or continuation pursuant to subsection 5.2 of
the Credit Agreement and the principal amount subject thereto, on the schedules
annexed hereto and made a part hereof and any such recordation shall constitute
prima facie evidence of the information so recorded, provided that the failure
- ----- ----- --------
of the Lender to make such recordation (or any error in such recordation) shall
not affect the obligations of the Company hereunder or under the Credit
Agreement.
This Note is one of the Tranche B Term Loan Notes referred to in the
Credit Agreement and is entitled to the benefits thereof and is subject to
optional and mandatory prepayment in whole or in part as provided therein.
This Note is secured and guaranteed as provided in the Security
Documents and the Guarantees. Reference is hereby made to the Security
Documents and the Guarantees for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security and guarantees, the terms and conditions upon which the security
interest and each guarantee was granted and the rights of the holder of this
Note in respect thereof. The undersigned agrees to pay all costs and expenses
incurred by the Lender in connection with
<PAGE>
2
the enforcement of its rights and remedies under the Credit Agreement, this
Note, the Security Documents and each other Credit Document.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE
REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SIMMONS ACQUISITION CORP.,
By:_____________________________
Title:
<PAGE>
Term Loan Note
-----------------------
<TABLE>
<CAPTION>
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
-------------------------------------------
Unpaid Principal
Amount of Amount Balance of
Alternate Converted to Alternate Base
Base Rate Alternate Amount of Amount Converted Rate Notation
Date Loans Base Rate Loans Principal Repaid to Eurodollar Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C>
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
- ------ --------- --------------- ---------------- ------------------- ---------------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule B to Tranche B
Term Loan Note
-------------------------
EURODOLLAR LOANS
AND REPAYMENTS OF EURODOLLAR LOANS
----------------------------------
Interest
Amount Period and Amount Unpaid
Amount Converted Eurodollar Converted Principal
of Euro- to Euro- Rate with Amount of to Alternate Balance of
dollar dollar Respect Principal Base Rate Eurodollar Notation
Date Loans Loans Thereto Repaid Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
</TABLE>
<PAGE>
EXHIBIT C
TO THE
CREDIT AGREEMENT
----------------
FORM OF REVOLVING CREDIT NOTE
$__________ New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, SIMMONS ACQUISITION CORP., a
Delaware corporation (to be merged with and into Simmons Company, the
"Company"), hereby promises to pay to the order of ________________ (the
-------
"Lender") on the Revolving Credit Termination Date, as defined in the Credit
------
Agreement referred to below, at the office of Chemical Bank, located at 270 Park
Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) _______________ DOLLARS ($__________) and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender to the Company
pursuant to subsection 4.1 of the Credit Agreement defined below. The Company
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time from the date hereof at the rates, and
on the dates, specified in subsection 5.5 of such Credit Agreement. The holder
of this Note is authorized to record the Borrowing Date, Type and amount of each
Revolving Credit Loan made by the Lender pursuant to subsection 4.1 of the
Credit Agreement, the date and amount of each payment or prepayment of principal
hereof, and the date of each interest rate conversion or continuation pursuant
to subsection 5.2 of the Credit Agreement and the principal amount subject
thereto, on the schedules annexed hereto and made a part hereof and any such
recordation shall constitute prima facie evidence of the accuracy of the
----- -----
information so recorded; provided, however, that the failure of the Lender to
-------- -------
make any such recordation (or any error in such recordation) shall not affect
the obligations of the Company hereunder or under the Credit Agreement.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of ___________, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
----------------
Company, the Lender, the several other lenders from time to time parties
thereto, and Chemical Bank, as administrative agent, is subject to the
provisions thereof and is subject to optional and mandatory prepayment in whole
or in part as provided therein. Terms used herein which are defined in the
Credit Agreement shall have such defined meanings unless otherwise defined
herein or unless the context otherwise requires.
This Note is secured and guaranteed as provided in the Security
Documents and the Guarantees. Reference is hereby made to the Security
Documents and the Guarantees for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security and guarantees, the terms and conditions upon which the security
<PAGE>
2
interest and each guarantee was granted and the rights of the holder of this
Note in respect thereof. The undersigned hereby agrees to pay all costs and
expenses incurred by the Lender in connection with the enforcement of its rights
and remedies under the Credit Agreement, this Note, the Security Documents and
each other Credit Document.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE
REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SIMMONS ACQUISITION CORP.
By:
--------------------------------
Title:
<PAGE>
<TABLE>
<CAPTION>
Schedule A to Revolving
Credit Note
-----------------------
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
-------------------------------------------
Unpaid
Amount Principal
Amount of Converted to Amount Balance of
Alternate Alternate Amount of Converted to Alternate
Base Rate Base Rate Principal Eurodollar Base Rate Notation
Date Loans Loans Repaid Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C>
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
- ------ ----------- -------------- ----------- -------------- ------------ -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule B to Revolving
Credit Note
-----------------------
EURODOLLAR LOANS
AND REPAYMENTS OF EURODOLLAR LOANS
----------------------------------
Interest
Amount Period and Amount Unpaid
Amount Converted Eurodollar Converted Principal
of Euro- to Euro- Rate with Amount of to Alternate Balance of
dollar dollar Respect Principal Base Rate Eurodollar Notation
Date Loans Loans Thereto Repaid Loans Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
- ------ --------- --------- --------- --------- ------------ ---------- ---------
</TABLE>
<PAGE>
EXHIBIT D
TO THE
CREDIT AGREEMENT
----------------
FORM OF SWING LINE NOTE
$7,500,000 New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, SIMMONS ACQUISITION CORP., a
Delaware corporation (to be merged with and into Simmons Company, the
"Company"), promises to pay to the order of CHEMICAL BANK ("Chemical") on the
------- --------
Revolving Credit Termination Date (as defined in the Credit Agreement described
below), at the office of Chemical Bank, 270 Park Avenue, New York, New York
10017, in lawful money of the United States of America and in immediately
available funds, the principal amount of the lesser of (a) SEVEN MILLION FIVE
HUNDRED THOUSAND DOLLARS ($7,500,000) and (b) the aggregate unpaid principal
amount of all Swing Line Loans made by Chemical to the undersigned pursuant to
subsection 4.4 of the Credit Agreement defined below. The Company further
agrees to pay interest on the unpaid principal amount hereof in like money from
time to time from the date hereof at the rates and on the dates specified in
subsection 5.5 of the Credit Agreement. Chemical is authorized to record the
Borrowing Date, the amount of each Swing Line Loan and the date and amount of
each payment or prepayment of principal thereof, on the schedule annexed hereto
and made a part hereof (or on a continuation thereof which shall be attached
hereto and made a part hereof) and any such recordation shall constitute prima
-----
facie evidence of the accuracy of the information so recorded; provided that the
- ----- --------
failure of Chemical to make such recordation (or any error in such recordation)
shall not affect the obligations of the Company hereunder or under the Credit
Agreement.
This Note is the Swing Line Note referred to in the Credit Agreement,
dated as of ____________, 1996 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"; terms defined therein being used
----------------
herein as so defined), among the Company, Chemical, the several other lenders
from time to time parties thereto, and Chemical, as administrative agent, and is
entitled to the benefits thereof and is subject to prepayment in whole or in
part, as provided therein and in the Security Documents and the Guarantees.
This Note is secured and guaranteed as provided in the Security
Documents and the Guarantees. Reference is hereby made to the Security
Documents and the Guarantees for a description of the properties and assets in
which a security interest has been granted, the nature and extent of the
security and guarantees, the terms and conditions upon which the security
interest and each guarantee was granted and the rights of the holder of this
Note in respect thereof. The undersigned hereby agrees to pay all costs and
expenses incurred by Chemical in connection
<PAGE>
2
with the enforcement of its rights and remedies under the Credit Agreement, the
Notes, the Security Documents and each other Credit Document.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note may become, or may be declared to be, immediately due and payable as
provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE
REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE
CREDIT AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SIMMONS ACQUISITION CORP.
By:
-----------------------------
Title:
<PAGE>
Schedule
to Swing
Line Note
---------
SWING LINE
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
Amount Amount
of Swing of Unpaid
Line Principal Principal Notation
Date Loans Repaid Balance Made By
- ---- ----- --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
- ---- ------ --------- --------- --------
<PAGE>
EXHIBIT F TO
CREDIT AGREEMENT
----------------
FORM OF
COMPANY SECURITY AGREEMENT
--------------------------
SECURITY AGREEMENT, dated as of March 22, 1996 made by SIMMONS
ACQUISITION CORP., a Delaware corporation (to be merged with and into Simmons
Company, the "Company"), in favor of CHEMICAL BANK, a New York banking
-------
corporation, as administrative agent (in such capacity, the "Administrative
--------------
Agent") for the several lenders (the "Lenders") from time to time parties to the
- ----- -------
Credit Agreement (as defined below).
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and the Administrative Agent, the
- ---------
Lenders have severally agreed to make loans to, and the Issuing Lender (as
defined in the Credit Agreement) has agreed to issue and certain of the other
Lenders have agreed to participate in letters of credit for the account of, the
Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Company shall have executed and
delivered this Security Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective loans to, and to issue or participate in letters of credit
for the account of, the Company under the Credit Agreement, the Company hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
1. Defined Terms. Unless otherwise defined herein or in the
-------------
preamble or recitals hereto, terms which are defined in the Credit Agreement and
used herein are so used as so defined; the following terms which are defined in
the Uniform Commercial Code in effect in the State of New York on the date
hereof are used herein as so defined: Chattel Paper, Farm Products, Documents,
Goods, Instruments and Inventory; and the following terms shall have the
following meanings:
"Accounts" means all accounts receivable, book debts, notes, drafts,
--------
instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to the
Company (including under any trade names,
<PAGE>
2
styles or divisions thereof) whether arising out of personal property owned
or leased by it, Goods sold by it or services rendered by it or from any
other transaction, whether or not the same involves the lease of personal
property, sale of Goods or performance of services by the Company
(including, without limitation, any such obligation which would be
characterized as an account, general intangible or chattel paper under the
Code) and all of the Company's rights in, to and under all purchase orders
now owned or hereafter received or acquired by it for Goods or services,
and all of the Company's rights to any Goods represented by any of the
foregoing (including returned or repossessed Goods and unpaid seller's
rights) and all moneys due or to become due to the Company under all
contracts for the sale of Goods and/or the performance of services by it
(whether or not yet earned by performance), under any lease of real or
personal property (to the extent the grant of such a security interest is
permitted by applicable law and is not prohibited by such lease), or under
any franchise agreement, or in connection with any other transaction, now
in existence or hereafter arising, including without limitation the right
to receive the proceeds of said purchase orders and contracts and rents
under such leases, and all collateral security and guarantees of any kind
given by any Person with respect to any of the foregoing.
"Code" means the Uniform Commercial Code as from time to time in
----
effect in the State of New York.
"Collateral" has the meaning assigned to it in Section 2 of this
----------
Security Agreement.
"Contract" means, with respect to an Account, any agreement relating
--------
to the terms of payment or the terms of performance thereof, including,
without limitation, (a) all rights of the Company to receive moneys due and
to become due to it thereunder or in connection therewith, (b) all rights
of the Company to damages arising out of, or for, breach or default in
respect thereof and (c) all rights of the Company to perform and to
exercise all remedies thereunder.
"Copyright License" means any written agreement, naming the Company,
-----------------
as licensor or licensee, granting any right in the United States to use any
Copyright including, without limitation, any referred to in Schedule I
hereto.
"Copyrights" means all of the following to the extent the Company now
----------
or hereafter has any right, title or interest: (a) all United States
copyrights and all registrations and applications therefor, including,
without limitation, any referred to in Schedule I hereto, and (b) all
renewals of such copyrights.
"Equipment" means all machinery, equipment and furniture, now owned or
---------
hereafter acquired by the Company or in which the Company now has or
hereafter may acquire any right, title or interest and any and all
additions, substitutions and replacements thereof, wherever located,
together with all attachments, components, parts, equipment and
<PAGE>
3
accessories installed therein or affixed thereto, including, but not
limited to, all equipment as defined in Section 9-109(2) of the Code.
"General Intangibles" has the meaning given to it in the Code and
-------------------
includes, whether or not so included in such meaning, any franchise
agreements or rights in favor of or granted by the Company to know-how,
trade secrets, product or service development ideas and designs,
advertising commercials, renderings, strategies and plans, blueprints,
architectural drawings, site location, personnel and franchisee
information, proprietary information, computer and software technology and
programs, contracts with distributors, and any similar items, all interest
rate, foreign currency or similar agreements and general intangibles
attributable to the Capital Stock of each of the Subsidiaries of the
Company.
"License" means any Copyright License, Patent License or Trademark
-------
License.
"Obligations" means (i) the unpaid principal amount of, and interest
-----------
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such post-
filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent, the
Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
any Letter of Credit or L/C Application, the other Credit Documents and any
other document executed and delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all reasonable fees and disbursements of counsel to the
Administrative Agent, the Issuing Lender or to the Lenders that are
required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Patent License" means any agreement, whether written or oral,
--------------
providing for the grant by or to the Company of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule II hereto.
"Patents" means (a) all letters patent of the United States or any
-------
other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule II hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country,
including, without limitation, any thereof referred to in Schedule II
hereto.
"Proceeds" means "proceeds", as such term is defined in Section 9-
--------
306(1) of the Code and, to the extent not included in such definition,
shall include, without limitation, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit payable to the
Company, from time to time with respect to any of the Collateral, (b) all
<PAGE>
4
payments (in any form whatsoever) paid or payable to the Company from time
to time in connection with any taking of all or any part of the Collateral
by any Governmental Authority or any Person acting under color of
Governmental Authority, (c) all judgments in favor of the Company in
respect of the Collateral and (d) all other amounts from time to time paid
or payable or received or receivable under or in connection with any of the
Collateral.
"Security Agreement" means this Security Agreement, as amended,
------------------
supplemented or otherwise modified from time to time.
"Trademark License" means any agreement, written or oral, providing
-----------------
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule III
hereto.
"Trademarks" means (a) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule III hereto, and (b) all renewals thereof.
"Vehicles" means all cars, trucks, trailers and other vehicles covered
--------
by a certificate of title law of any state.
2. Grant of Security Interest. (a) As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Administrative Agent for the ratable benefit of the Lenders a
security interest in all of the following property now owned or at any time
hereafter acquired by the Company or in which the Company now has or at any time
in the future may acquire any right, title or interest (collectively, the
"Collateral"):
----------
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Copyrights;
(v) all Copyright Licenses;
(vi) all Documents;
<PAGE>
5
(vii) all Equipment;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) all Patents;
(xii) all Patent Licenses;
(xiii) all Trademarks;
(xiv) all Trademark Licenses;
(xv) all Vehicles;
(xvi) all other Goods and personal property of the Company,
whether tangible or intangible and whether now or
hereafter owned by the Company, and wherever located; and
(xvii) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Administrative Agent and Lenders; Limitations on
----------------------------------------------------------
Administrative Agent's and Lenders' Obligations.
- -----------------------------------------------
(a) Company Remains Liable under Accounts, Licenses, Contracts, Etc.
---------------------------------------------------------------
Anything herein to the contrary notwithstanding, the Company shall remain
liable under each of the Accounts, Licenses and Contracts to observe and
perform all the material conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account, License or Contract. Neither
the Administrative Agent nor any Lender shall have any obligation or
liability under any Account, License or Contract by reason of or arising
out of this Security Agreement or the receipt by the Administrative Agent
or any Lender of any payment relating to such Account, License or Contract
pursuant hereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of the Company
under or pursuant to any Account, License or Contract, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
under any Account, License or Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to it or to which it may be entitled
at any time or times.
<PAGE>
6
(b) Notice to Account Debtors and Contracting Parties. At any time
-------------------------------------------------
after an Event of Default has occurred and so long as such Event of Default
shall be continuing, upon the request of the Administrative Agent the
Company shall, and the Administrative Agent may (with concurrent notice to
the Company thereof), notify account debtors on the Accounts and parties to
the Contracts and Licenses that the Accounts, Contracts and Licenses have
been assigned to the Administrative Agent for the ratable benefit of the
Lenders and that payments in respect thereof shall be made directly to the
Administrative Agent. At any time after an Event of Default shall have
occurred and be continuing, the Administrative Agent may in its own name or
in the name of others communicate with account debtors on the Accounts and
parties to the Contracts and Licenses to verify with them to its
satisfaction the existence, amount and terms thereof.
(c) Verification of Accounts and Inventory. The Administrative Agent
--------------------------------------
shall have the right to make test verifications of the Accounts and
Inventory in any reasonable manner and through any medium that it considers
advisable, and the Company agrees to furnish all such assistance and
information as the Administrative Agent may reasonably require in
connection therewith provided that, so long as no Event of Default shall
have occurred and be continuing, any such verification shall be conducted
in the name of the Company or in such other manner as shall not disclose
the Administrative Agent's identity or interest in the Collateral. The
Administrative Agent may after the occurrence and during the continuance of
an Event of Default in its own name or in the name of others communicate
with account debtors in order to verify with them to the Administrative
Agent's satisfaction the existence, amount and terms of any Accounts and/or
Inventory.
4. Representations and Warranties. The Company hereby represents
------------------------------
and warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
---------------------
Administrative Agent for the ratable benefit of the Lenders pursuant to
this Security Agreement and the other Liens permitted to exist on the
Collateral pursuant to the Credit Agreement, the Company owns each item of
the Collateral free and clear of any and all Liens. No security agreement,
financing statement or other public notice with respect to all or any part
of the Collateral is on file or of record in any public office, except (i)
such as may have been filed in favor of the Administrative Agent, for the
ratable benefit of the Lenders, pursuant to this Security Agreement, or
(ii) as may be permitted pursuant to the Credit Agreement.
(b) Perfected First Priority Liens. The Liens granted pursuant to
------------------------------
this Security Agreement constitute perfected Liens on the Collateral in
favor of the Administrative Agent, for the ratable benefit of the Lenders,
to the extent that (i) such Liens constitute Liens on General Intangibles,
or (ii) such Liens constitute Liens on Equipment located in a jurisdiction
listed on Schedule IV, or (iii) such Liens can be perfected by filing a
financing statement under the Uniform Commercial Code, as in effect in the
relevant jurisdiction, or (iv) such Liens constitute Liens on Vehicles the
perfection of which has
<PAGE>
7
been requested pursuant to subsection 5(r), which Lien has been properly
notated on certificates of title received by the Company, in respect of
such Liens that can be perfected by notation thereof on the certificates of
title in respect of such Vehicles in accordance with the law of the
relevant jurisdiction, or (v) the Company is required to deliver such
Collateral to the Administrative Agent pursuant to Section 5(a) hereof,
which are prior to all other Liens on the Collateral created by the Company
and in existence on the date hereof, except for Liens permitted to exist on
the Collateral pursuant to the Credit Agreement, and which are enforceable
as such against all creditors of and purchasers from the Company.
(c) Accounts and Records. The amount represented by the Company to
--------------------
the Administrative Agent from time to time as owing by each account debtor
or by all account debtors in respect of the Accounts will at such time be
the correct amount actually owing by such account debtor or debtors
thereunder in all material respects, subject to adjustments in the ordinary
course of business. No amount payable to the Company under or in
connection with any Account, Contract or License in excess of $100,000 is
evidenced by any Instrument or Chattel Paper which has not been delivered
to the Administrative Agent. The place where the Company keeps its records
concerning the Accounts and the other Collateral is One Concourse Parkway,
Suite 600, Atlanta, Georgia 30328.
(d) Consents. Each Contract and License is in full force and effect
--------
and, to the best knowledge of the Company, constitutes a valid and legally
enforceable obligation of the other obligor in respect thereof or parties
thereto, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally. No consent or authorization of, filing with
or other act by or in respect of any Governmental Authority is required in
connection with the execution, delivery, performance, validity or
enforceability of any of the Accounts, Licenses or Contracts by any party
thereto other than those which have been duly obtained, made or performed,
are in full force and effect and do not subject the scope of any such
Account, License or Contract to any material adverse limitation, either
specific or general in nature. Neither the Company nor (to the best of the
Company's knowledge) any other party to any Account, License or Contract is
in default in the performance or observance of any of the terms thereof.
The Company has fully performed all its material obligations under each
License and Contract to the extent such obligations are required to be
performed on or prior to the date hereof. The right, title and interest of
the Company in, to and under each Account, License and Contract are not
subject to any defense, offset, counterclaim or claim which would
materially adversely affect the value of such Account, License or Contract
as Collateral, nor have any of the foregoing been asserted or alleged
against the Company as to any of the foregoing.
(e) Inventory. The Inventory is kept at the locations listed on
---------
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(l) hereof.
<PAGE>
8
(f) Equipment. The Equipment is kept at the locations listed on
---------
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(o) hereof.
(g) Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at One Concourse Parkway, Suite 600,
Atlanta, Georgia 30328.
(h) Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
(i) Patents, Trademarks and Copyrights. Schedule II hereto includes
----------------------------------
all material Patents and Patent Licenses owned by the Company in its own
name as of the date hereof. Schedule III hereto includes all material
Trademarks and Trademark Licenses owned by the Company in its own name as
of the date hereof. Schedule I hereto includes all material Copyrights in
which the Company has any colorable claim of ownership as of the date
hereof. To the best of the Company's knowledge, each Patent and Trademark
is valid, subsisting, unexpired and enforceable and has not been abandoned.
Except as set forth in Schedule II or Schedule III, none of such Patents
and Trademarks is the subject of any licensing or franchise agreement. All
licenses of the Company's Trademarks are in force and, to the best
knowledge of the Company, not in default. No holding, decision or judgment
has been rendered by any Governmental Authority with respect to any Patent
or Trademark which would limit, cancel or question the validity of any
Patent or Trademark. No action or proceeding is pending or, to the
knowledge of the Company, threatened (i) seeking to limit, cancel or
question the validity of any material Patent or Trademark or the Company's
ownership thereof, or (ii) which, if adversely determined, would have a
material adverse effect on the value of any material Patent or Trademark.
(j) Power and Authority; Authorization. The Company has the
----------------------------------
corporate power and authority and the right to execute and deliver, to
perform its obligations under, and to grant the Lien on the Collateral
pursuant to, this Security Agreement and has taken all necessary corporate
action to authorize its execution, delivery and performance of, and grant
of the Lien on the Collateral pursuant to, this Security Agreement.
(k) Governmental Obligors. Governmental Authorities are party to
---------------------
approximately 5% of the total Contracts of the Company and its
Subsidiaries.
(l) No Litigation. No litigation, investigation or proceeding of or
-------------
before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or against
any of its properties or revenues with respect to this Security Agreement
or any of the transactions contemplated hereby which would have a material
adverse effect upon any material portion of the Collateral or the granting
of the security interests hereby.
<PAGE>
9
5. Covenants. The Company covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Security Agreement until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
--------------------------------------------------------------
(i) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Company, the Company
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Company also
hereby authorizes the Administrative Agent to file any such financing or
continuation statement without the signature of the Company to the extent
permitted by applicable law. A carbon, photographic or other reproduction
of this Security Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
(ii) If any amounts payable under or in connection with any of the
Collateral having a face value in excess of $1,000,000 in the aggregate at
any one time outstanding shall be or become evidenced by any Instruments or
Chattel Paper, such Instruments or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant
to this Security Agreement. So long as no Default or Event of Default has
occurred and is continuing, upon request by the Company, the Administrative
Agent shall make available any pledged Collateral to the Company, or its
designee, that the Company specifies is required for the purpose of
ultimate sale, exchange, presentation, collection, renewal, registration or
transfer thereof, provided that in each case arrangements reasonably
--------
satisfactory to the Administrative Agent shall be made for the return of
such pledged Collateral within 21 days from the time of delivery by the
Administrative Agent, except for pledged Collateral that has been fully
repaid, satisfied, or transferred as permitted hereunder.
(iii) Notwithstanding anything set forth in this Security Agreement
to the contrary, so long as no Default or Event of Default has occurred and
is continuing, the Company shall not be required to deliver to the
Administrative Agent any Instruments or Chattel Paper to be held by the
Administrative Agent as Collateral pursuant to this Security Agreement so
long as the aggregate amount evidenced by all such Instruments and Chattel
Paper does not exceed $1,000,000 at any one time outstanding.
(b) Indemnification. The Company agrees to pay, and to save the
---------------
Administrative Agent and the Lenders harmless from, any and all
liabilities, costs and expenses (including, without limitation, reasonable
legal fees and expenses) (i) with
<PAGE>
10
respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from,
any delay by the Company in complying with any Requirement of Law
applicable to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Security Agreement; provided, that the
--------
Company shall not be liable for the payment of any portion of such
liabilities, costs or expenses resulting from the gross negligence or
willful misconduct of the Administrative Agent or any of the Lenders.
Without limiting the preceding sentence, the Company will indemnify and
save and keep harmless the Administrative Agent and each Lender from and
against all expense, loss or damage suffered by reason of any counterclaim
of the account debtor or obligor thereunder, arising out of a breach by the
Company of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from the Company.
(c) Maintenance of Records. The Company will keep and maintain at
----------------------
its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments
received and all credits granted with respect to the Accounts, Contracts
and Licenses. The Company will mark its internal books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Administrative Agent's and the
Lenders' further security, the Administrative Agent, for the ratable
benefit of the Lenders, shall have a security interest in all of the
Company's books and records pertaining to the Collateral, and the Company
shall make available for review any such books and records to the
Administrative Agent or to its representatives during normal business hours
at the reasonable request of the Administrative Agent. The Company shall
permit representatives of any Lender, upon reasonable notice (but no more
frequently than monthly unless a Default or Event of Default shall have
occurred and be continuing), to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be requested upon reasonable
notice, and to discuss the business, operations, assets and financial and
other condition of the Company and its Subsidiaries with officers and
employees thereof and with their independent certified public accountants.
(d) Right of Inspection. The Administrative Agent and the Lenders
-------------------
shall upon reasonable notice (but no more frequently than monthly) unless a
Default or Event of Default shall have occurred and be continuing, have
full and free reasonable access during normal business hours to all the
books, correspondence and records of the Company, and the Administrative
Agent and the Lenders and their respective representatives may examine the
same, take extracts therefrom and make photocopies thereof at any
reasonable time and as may be reasonably required upon reasonable notice,
and the Company agrees to render to the Administrative Agent at the
Company's cost and expense, and to the Lenders, such clerical and other
assistance as may be reasonably requested with regard thereto. The
Administrative Agent and the Lenders shall keep such
<PAGE>
11
information thereby obtained confidential to the extent set forth in
subsection 12.6(f) of the Credit Agreement.
(e) Compliance with Laws, etc. The Company will comply in all
--------------------------
material respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of the Company's business;
provided, however, that the Company may contest any Requirement of Law in
-------- -------
any reasonable manner which shall not, in the reasonable opinion of the
Administrative Agent, adversely affect the Administrative Agent's or the
Lenders' rights or the priority of their Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. The Company will
---------------------------------------
perform and comply in all material respects with all its obligations under
the Contracts and all its other Contractual Obligations relating to the
Collateral.
(g) Payment of Obligations. The Company will pay promptly when due
----------------------
all material taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if (i) the validity thereof is
being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any material danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein and (iii) such charge
is adequately reserved against on the Company's books in accordance with
GAAP.
(h) Limitation on Liens on Collateral. The Company will not create,
---------------------------------
incur or permit to exist, will take all commercially reasonable actions to
defend the Collateral against, and will take such other commercially
reasonable action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby and other than as permitted
pursuant to the Credit Agreement, and will take all commercially reasonable
actions to defend the right, title and interest of the Administrative Agent
and the Lenders in and to any of the Collateral against the claims and
demands of all Persons whomsoever.
(i) Limitations on Dispositions of Collateral. The Company will not
-----------------------------------------
sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except for sales of assets permitted by
the Credit Agreement. Concurrently with any such permitted disposition,
the property acquired by a transferee in such disposition shall
automatically be released from the security interest created by this
Security Agreement (the "Security Interest"). It is acknowledged and
-----------------
agreed that notwithstanding any release of property from the Security
Interest in accordance with the foregoing provisions of this Section, the
Security Interest shall in any event continue in the Proceeds of
Collateral. The Administrative Agent shall promptly execute and deliver
(and, when appropriate, shall cause any separate agent, co-agent or trustee
to execute and deliver) any releases, instruments or documents reasonably
requested by the Company to accomplish
<PAGE>
12
or confirm the release of Collateral provided by this Section. Any such
release of Collateral provided by the Administrative Agent shall
specifically describe that portion of the Collateral to be released, shall
be expressed to be unconditional and shall be without recourse or warranty
(other than a warranty that the Administrative Agent has not assigned its
rights and interests to any other Person). The Company shall pay all of
the Administrative Agent's reasonable expenses in connection with any
release of Collateral.
(j) Limitations on Modifications, Waivers, Extensions of Agreements
---------------------------------------------------------------
Giving Rise to Accounts. The Company will not (i) amend, modify, terminate
-----------------------
or waive any provision of any Contract, agreement or lease giving rise to
an Account or License in any manner which could reasonably be expected to
materially adversely affect the value of such Contract, Account or License
as Collateral, except in a manner consistent with the ordinary and
customary conduct of its business, (ii) fail to exercise promptly and
diligently each and every material right which it may have under each
material Contract, agreement or lease giving rise to an Account or License
(other than any right of termination), except in a manner consistent with
the ordinary and customary conduct of its business or (iii) fail to deliver
to the Administrative Agent upon its reasonable request a copy of each
material demand, notice or document received by it relating in any way to
any material Contract, agreement or lease giving rise to an Account or
License.
(k) Limitations on Discounts, Compromises, Extensions of Accounts.
-------------------------------------------------------------
Other than in the ordinary course of business as generally conducted by the
Company over a period of time, the Company will not grant any extension of
the time of payment of any of the Accounts, compromise, compound or settle
the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit
or discount whatsoever thereon.
(l) Maintenance of Equipment. The Company will maintain each item of
------------------------
Equipment in good operating condition, ordinary wear and tear and
immaterial impairments of value and damage by the elements excepted, and
will provide all maintenance, service and repairs necessary for such
purpose.
(m) Further Identification of Collateral. The Company will furnish
------------------------------------
to the Administrative Agent from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Administrative Agent may reasonably
request, all in reasonable detail.
(n) Notices. The Company will advise the Administrative Agent and
-------
the Lenders promptly, in reasonable detail, at their respective addresses
set forth in the Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted under the Credit Agreement) on, or claim
asserted against, any of the Collateral and (ii) of the occurrence of any
other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or on the Liens created
hereunder.
<PAGE>
13
(o) Changes in Locations, Name, etc. The Company will not (i)
--------------------------------
change the location of its chief executive office/chief place of business
from that specified in Section 4(g) or remove its books and records from
the location specified in Section 4(c), (ii) remove any material amount of
the Inventory or Equipment to, or keep any material amount of Inventory or
Equipment at, a location other than those listed on Schedule IV hereto, or
(iii) change its name (including the adoption of any new trade name),
identity or corporate structure to such an extent that any financing
statement filed by the Administrative Agent in connection with this
Security Agreement would become seriously misleading, unless it shall have
provided at least 15 days prior written notice to the Administrative Agent
of any such event and provide the Administrative Agent with the new
location of its chief executive office/chief place of business and its
books and records, the location of the Inventory and Equipment and the
change in the Company's name, as the case may be. Any notice given
pursuant to this Section 5(o) shall be deemed to amend Section 4(c) and
4(g) hereof or Schedule IV hereto, as the case may be. In connection with
any actions permitted pursuant to clause (i) of this Section 5(o), the
Administrative Agent shall be entitled to receive any legal opinions it
reasonably requests as to the continued perfection of the security interest
granted hereby in the Collateral, which opinions shall be deemed
satisfactory to the Administrative Agent if substantially similar to the
perfection opinions given by Gibson, Dunn & Crutcher on the Closing Date.
(p) Copyrights. The Company (i) will employ the Copyright for each
----------
material published work with such notice of copyright as may be required by
law to secure copyright protection and (ii) will not do any act or
knowingly omit to do any act whereby any material Copyright may become
invalidated and:
(A) will not do any act, or omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) shall notify the Administrative Agent immediately if it
knows, or has reason to know, that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or any
such determination or development in, any court or tribunal in the
United States or any other country) regarding the Company's ownership
of any such Copyright or its validity;
(C) will take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration
of each material Copyright owned by the Company including, without
limitation, filing of applications for renewal, where necessary; and
(D) will promptly notify the Administrative Agent of any
material infringement of any material Copyright of the Company of
which it becomes aware and will take such actions as it shall
reasonably deem appropriate under the
<PAGE>
14
circumstances to protect such Copyright, including, where appropriate,
the bringing of suit for infringement, seeking injunctive relief and
seeking to recover any and all damages for such infringement.
(q) Patents and Trademarks.
----------------------
(i) The Company (either itself or through licensees) will,
except with respect to any Trademark that the Company shall reasonably
determine is of immaterial economic value to it or otherwise
reasonably determines not to do so, (A) continue to use each Trademark
on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists
in order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (B) maintain as in the past the quality of
products and services offered under such Trademark, (C) use reasonable
efforts to employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless within 45
days after such use or adoption the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected security
interest in such mark pursuant to this Security Agreement, and (E) not
(and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) The Company will not, except with respect to any Patent that
the Company shall reasonably determine is of immaterial economic value
to it or otherwise reasonably determine so to do, do any act, or omit
to do any act, whereby any Patent may become abandoned or dedicated.
(iii) The Company will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any
application relating to any Patent, or any application or registration
relating to any Trademark may become abandoned or dedicated, or of any
adverse determination or material development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country) regarding
the Company's ownership of any Patent or Trademark or its right to
register the same or to keep and maintain the same.
(iv) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file an application for any
Patent or for the registration of any Trademark with the United States
Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, the Company shall
report such filing to the Administrative Agent and the Lenders within
five Business Days after the last day of the fiscal quarter in which
such filing occurs. Upon request of the Administrative Agent, the
Company shall execute and deliver any and all agreements, instruments,
documents, and papers
<PAGE>
15
as the Administrative Agent may request to evidence the Administrative
Agent's and the Lenders' security interest in any Patent or Trademark
and the goodwill and general intangibles of the Company relating
thereto or represented thereby, and the Company hereby appoints and
constitutes the Administrative Agent its attorney-in-fact to execute
and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed; such power being
coupled with an interest and is irrevocable until the Obligations are
paid in full, the Commitments are terminated and no Letters of Credit
are outstanding.
(v) The Company, except with respect to any Patent or Trademark
the Company shall reasonably determine is of immaterial economic value
to it or it otherwise reasonably determines not to so do and except
with respect to any Trademark that is not registrable, will take all
reasonable and necessary steps, including, without limitation, in any
proceeding before the United States Patent and Trademark Office, or
any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to
obtain the relevant registration or Patent) and to maintain each
Patent and each registration of Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability when appropriate.
(vi) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third party,
the Company shall promptly notify the Administrative Agent and the
Lenders after it learns thereof and shall, unless the Company shall
reasonably determine that such Patent or Trademark is of immaterial
economic value to the Company, which determination the Company shall
promptly report to the Administrative Agent and the Lenders, promptly
sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions
as the Company shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(r) Vehicles.
--------
(i) The Company will maintain each Vehicle in good operating
condition, ordinary wear and tear and immaterial impairments of value
and damage by the elements excepted, and will provide all maintenance,
service and repairs necessary for such purpose.
(ii) Within 30 days of the Administrative Agent's request, all
applications for certificates of title/ownership indicating the
Administrative Agent's security interest in the Vehicle covered by
such certificate, and any other necessary documentation, shall be
filed in each office in each jurisdiction which the Administrative
Agent shall deem advisable to perfect its and the Lenders' security
interests in the Vehicles; after such request, no Vehicle shall be
removed
<PAGE>
16
from the state which has issued the certificate of title/ownership
therefor for a period in excess of four months.
6. Administrative Agent's Appointment as Attorney-in-Fact.
------------------------------------------------------
(a) Powers. The Company hereby irrevocably constitutes and appoints
------
the Administrative Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time after the
occurrence, and during the continuation, of an Event of Default in the
Administrative Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary
or desirable to accomplish the purposes of this Security Agreement, and,
without limiting the generality of the foregoing, the Company hereby gives
the Administrative Agent the power and right, on behalf of the Company,
without notice to or assent by the Company, to do the following:
(i) in the name of the Company or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under
any Account, Instrument, License or General Intangible or with respect
to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Administrative Agent for the purpose of collecting
any and all such moneys due under any Account, Instrument, License or
General Intangible or with respect to any other Collateral whenever
payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, provided that if such taxes are
--------
being contested in good faith and by appropriate proceedings, the
Administrative Agent and the Lenders will consult with the Company
before making any such payment; and
(iii) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) to sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of
any Collateral; (E) to defend any suit, action or proceeding brought
against the Company with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described in
clause (E) above and, in connection
<PAGE>
17
therewith, to give such discharges or releases as the Administrative
Agent may deem appropriate; (G) to assign any Patent or Trademark
(along with the goodwill of the business to which any such Trademark
pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Administrative Agent shall in
its sole discretion determine; and (H) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though the
Administrative Agent were the absolute owner thereof for all purposes,
and to do, at the Administrative Agent's option and the Company's
expense, at any time, or from time to time, all acts and things which
the Administrative Agent reasonably deems necessary to protect,
preserve or realize upon the Collateral and the Administrative Agent's
and the Lenders' Liens thereon and to effect the intent of this
Security Agreement, all as fully and effectively as the Company might
do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Company also authorizes the Administrative
------------
Agent and the Lenders, at any time and from time to time, to execute, in
connection with the sale provided for in Section 8 hereof, any indorsement,
assignments or other instruments of conveyance or transfer with respect to
the Collateral.
(c) No Duty on Administrative Agent's or Lenders' Part. The powers
--------------------------------------------------
conferred on the Administrative Agent and the Lenders hereunder are solely
to protect the Administrative Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the Administrative Agent or
any Lender to exercise any such powers. The Administrative Agent and the
Lenders shall be accountable only for amounts that they actually receive as
a result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to the
Company for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct or failure to comply with mandatory
provisions of applicable law.
7. Performance by Administrative Agent of Company's Obligations. If
------------------------------------------------------------
the Company fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the
Administrative Agent incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to 2% plus the
Alternate Base Rate, shall be payable by the Company to the Administrative Agent
on demand and shall constitute Obligations secured hereby; provided, however,
that the Administrative Agent shall in any event first have given the Company
written notice of its intent to do the same and the Company shall not have,
within 30 days of such notice (or such shorter period as the Administrative
Agent may reasonably determine is necessary in order to preserve the benefits of
this Security Agreement with respect to any material portion of the Collateral),
paid such claim
<PAGE>
18
or obtained to the Administrative Agent's satisfaction the release of the claim
or Lien to which such notice relates.
8. Remedies. If an Event of Default shall occur and be continuing,
--------
the Administrative Agent on behalf of the Lenders may exercise, in addition to
all other rights and remedies granted to them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby waived and released. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Administrative Agent may elect subject
to subsection 5.9 of the Credit Agreement, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Company. To the extent permitted by applicable law, the Company waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder, except
to the extent arising from the gross negligence or willful misconduct of the
Administrative Agent or such Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
9. Amendments, etc. with Respect to the Obligations. The Company
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made
<PAGE>
19
by the Administrative Agent, the Issuing Lender or any Lender may be rescinded
by the Administrative Agent, the Issuing Lender or any Lender, and any of the
Obligations continued, and the Obligations, or the liability of the Company or
any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Administrative Agent, the
Issuing Lender or any Lender, and the Credit Agreement, the Notes, the other
Credit Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or
part, as the Administrative Agent, the Issuing Lender or any Lender may deem
advisable from time to time, and any guarantee, right of offset or other
collateral security at any time held by the Administrative Agent, the Issuing
Lender or any Lender for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. None of the Administrative Agent, the Issuing
Lender or any Lender shall have any obligation to protect, secure, perfect or
insure this or any other Lien at any time held by it as security for the
Obligations or any property subject thereto. The Company waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent, the Issuing
Lender or any Lender upon this Security Agreement; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Security Agreement; and all dealings between the Company
and the Administrative Agent, the Issuing Lender or any Lender, shall likewise
be conclusively presumed to have been had or consummated in reliance upon this
Security Agreement. The Company waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Company with
respect to the Obligations.
10. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. Neither
the Administrative Agent, any Lender, nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Company or otherwise.
11. Delegation of Duties. The Administrative Agent may execute any
--------------------
of its duties under this Security Agreement by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Administrative Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care, except as otherwise provided in subsection 11.3 of the
Credit Agreement.
12. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
<PAGE>
20
13. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Section Headings. The section headings used in this Security
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Administrative
------------------------------
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 16 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, the Issuing Lender or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
the Issuing Lender or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Issuing Lender or such Lender would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
16. Integration; Waivers and Amendments; Successors and Assigns;
------------------------------------------------------------
Governing Law. This Security Agreement represents the entire agreement of the
- -------------
Company with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Administrative Agent, provided that any
--------
provision of this Security Agreement may be waived by the Administrative Agent
in a written letter or agreement executed by the Administrative Agent or by
telex or facsimile transmission from the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Company and
shall inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
17. Notices. All notices, requests and demands to or upon the
-------
Company or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage prepaid, or, in the case of telecopy notice, when sent, or, in the case
of telex notice,
<PAGE>
21
when sent, answerback received, addressed to a party at the address provided for
such party in the Credit Agreement.
18. Counterparts. This Security Agreement may be executed by one or
------------
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
19. Authority of Administrative Agent. The Company acknowledges that
---------------------------------
the rights and responsibilities of the Administrative Agent under this Security
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Company, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and the Company shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.
20. Releases. The Administrative Agent and the Lenders agree to
--------
cooperate with the Company and its Subsidiaries with respect to any sale
permitted by subsection 9.5 of the Credit Agreement and promptly take such
action and execute and deliver such instruments and documents necessary to
release the Liens and security interests created hereby relating to any of the
assets or property affected by any sale permitted by subsection 9.5 of the
Credit Agreement including, without limitation, any necessary Uniform Commercial
Code amendment, termination or partial termination statement.
21. Termination. This Security Agreement (other than with respect to
-----------
any cash collateral securing any outstanding Letter of Credit) shall terminate
when all the Obligations have been paid in full, the Commitments are terminated
and either no Letters of Credit are outstanding or each outstanding Letter of
Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent. Upon such termination, the
Administrative Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such person or persons as the Company shall
designate, or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) (other than with respect to any
cash collateral securing any outstanding Letter of Credit) as shall not have
been sold or otherwise applied by the Administrative Agent pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments or reassignment and release. Any such reassignment and release
shall be without recourse upon or warranty by the Administrative Agent (other
than a warranty that the Administrative Agent has not assigned its rights and
interests hereunder to any Person) and at the expense of the Company.
<PAGE>
22
IN WITNESS WHEREOF, the Company and the Administrative Agent have
caused this Security Agreement to be duly executed and delivered as of the date
first above written.
SIMMONS ACQUISITION CORP.
By:
---------------------------------
Title:
CHEMICAL BANK, as Administrative Agent
By:
---------------------------------
Title:
<PAGE>
Schedule I to
Security Agreement
Copyrights and Copyright Licenses
---------------------------------
<PAGE>
Schedule II to
Security Agreement
Patents and Patent Licenses
---------------------------
<PAGE>
Schedule III to
Security Agreement
Trademarks and Trademark Licenses
---------------------------------
<PAGE>
Schedule IV to
Security Agreement
Locations of Inventory and Equipment Locations
----------------------------------------------
<PAGE>
EXHIBIT G TO
CREDIT AGREEMENT
----------------
HOLDINGS GUARANTEE
------------------
HOLDINGS GUARANTEE, dated as of , 1996, made by SIMMONS
--------
HOLDINGS, INC., a Delaware corporation (the "Guarantor") in favor of CHEMICAL
---------
BANK, a New York banking corporation, as administrative agent (in such capacity,
the "Administrative Agent") for the banks and other financial institutions (the
--------------------
"Lenders") that are parties to the Credit Agreement (as hereafter defined).
-------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Simmons Acquisition Corp., a Delaware corporation (to be
merged with and into Simmons Company, the "Company"), is party to a Credit
-------
Agreement, dated as of the date hereof, with the Administrative Agent and the
Lenders (as the same may be amended, supplemented or otherwise modified from
time to time, the "Credit Agreement");
----------------
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
severally agreed to make certain extensions of credit to the Company;
WHEREAS, the Guarantor owns directly at least 84% of the issued and
outstanding common and preferred stock of the Company;
WHEREAS, the Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit; and
WHEREAS, under the Credit Agreement, the obligation of the Lenders to
make the extensions of credit to the Company on and after the date hereof is
conditioned upon, among other things, the execution and delivery by the
Guarantor of this Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to make their respective
extensions of credit to the Company under the Credit Agreement, the Guarantor
hereby agrees with and for the benefit of the Administrative Agent and the
Lenders as follows:
1. Defined Terms. As used in this Guarantee, terms defined in the
-------------
Credit Agreement or in the preamble or recitals hereto are used herein as
therein defined, and the following term shall have the following meaning:
<PAGE>
2
"Obligations" shall mean (i) the unpaid principal amount of, and
-----------
interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for such post-filing or post-petition interest is allowed), the
Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or the Lenders that
are required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
2. Guarantee. (a) The Guarantor hereby, unconditionally and
---------
irrevocably, guarantees to the Administrative Agent and the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and the Guarantor further agrees
to pay any and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the
Administrative Agent, the Issuing Lender or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, the Guarantor under this Guarantee.
(b) No payment or payments made by any of the Company, the Guarantor,
any other guarantor or any other Person or received or collected by the
Administrative Agent or any Lender from the Company, the Guarantor, any other
guarantor or any other Person by virtue of any action or proceeding or any set-
off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations, remain liable for the
Obligations until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent.
(c) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guarantee for such purpose.
<PAGE>
3
3. Right of Set-off. Upon the occurrence of any Event of Default
----------------
under any Credit Document, the Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to the Guarantor, any
such notice being expressly waived by the Guarantor, to set off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
such Lender may elect, against and on account of the obligations and liabilities
of the Guarantor to such Lender hereunder or under the Credit Agreement, the
Notes, or the other Credit Documents, as such Lender may elect, whether or not
the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. Each Lender agrees to notify the Guarantor promptly of any such set-
off and the application made by such Lender, provided that the failure to give
--------
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this paragraph are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made by
--------------
the Guarantor hereunder or any set-off or application of funds of the Guarantor
by any Lender, the Guarantor shall not be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Company or any
collateral security or guarantee or right of offset held by any Lender for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company in respect of payments made
by the Guarantor hereunder, and any such rights of subrogation and reimbursement
of the Guarantor are hereby waived until all amounts owing to the Administrative
Agent and the Lenders by the Company on account of the Obligations are paid in
full, the Commitments are terminated and either no Letters of Credit are
outstanding or each each outstanding Letter of Credit has been cash
collateralized so that it is fully secured to the satisfaction of the
Administrative Agent.
5. Amendments, etc. with respect to the Obligations; Waiver of Rights.
------------------------------------------------------------------
The Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against the Guarantor and without notice to or further
assent by the Guarantor, any demand for payment of any of the Obligations made
by the Administrative Agent, the Issuing Lender or any Lender may be rescinded
by such party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent, the Issuing Lender or any Lender and the Credit Agreement, the Notes, the
other Credit Documents, any Letter of Credit, any Interest Rate Agreement with
any Lender or Lenders and any other collateral security document or other
guarantee or document in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent,
the Issuing Lender and/or any Lender may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at
<PAGE>
4
any time held by it as security for the Obligations or for this Guarantee or
any property subject thereto. When making any demand hereunder against the
Guarantor, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on any other guarantor, and any failure
by the Administrative Agent or any Lender to make any such demand or to
collect any payments from any such other guarantor or any release of any such
other guarantor shall not relieve the Guarantor in respect of which a demand or
collection is not made, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or any
Lender against the Guarantor. For the purposes hereof "demand" shall include
the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Issuing Lender or any Lender upon this Guarantee or acceptance of this
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee; and all dealings between the Company or
the Guarantor and the Administrative Agent, the Issuing Lender or any Lender
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. The Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or the Guarantor with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, the Notes, any
other Credit Document, the Letters of Credit, any Interest Rate Agreement with
any Lender or Lenders, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent, the Issuing Lender or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company, the Guarantor or any other Person against the Administrative Agent,
the Issuing Lender or any Lender, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Company or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any of the Company for the Obligations, or of the Guarantor under
this Guarantee, in bankruptcy or in any other instance. When pursuing its
rights and remedies hereunder against the Guarantor, the Administrative Agent
and/or any Lender may, but shall be under no obligation to, pursue such rights
and remedies as it may have against the Company or any other Person or against
any collateral security or guarantee for the Obligations or any right of offset
with respect thereto, and any failure by the Administrative Agent or any Lender
to pursue such other rights or remedies or to collect any payments from the
Company or any such other Person or to realize upon any such collateral security
or guarantee or to exercise any such right of offset, or any release of the
Company or any such other Person or any such collateral security, guarantee or
right of offset, shall not relieve the Guarantor of any liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent or any Lender against
the Guarantor. This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon the Guarantor and
the successors and assigns thereof, and shall inure to the benefit of the
Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and
<PAGE>
5
assigns, until all the Obligations and the obligations of the Guarantor under
this Guarantee shall have been satisfied by payment in full, either no Letters
of Credit are outstanding or each outstanding Letter of Credit has been cash
collateralized so that it is fully secured to the satisfaction of the
Administrative Agent and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Company may
be free from any Obligations.
7. Reinstatement. This Guarantee shall continue to be effective, or
-------------
be reinstated, as the case may be, if at any time payment, or any part thereof,
of the Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or of the Guarantor, or upon or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or the Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. Payments. The Guarantor hereby guarantees that payments
--------
hereunder will be paid in Dollars to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 270 Park
Avenue, New York, New York 10017, U.S.A. or at such other office as the
Administrative Agent may notify to the Guarantor in accordance with Section 15.
9. Representations and Warranties. The Guarantor hereby represents
------------------------------
and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority and the legal right to own and operate
its property, to lease the property it operates and to conduct the business
in which it is currently engaged;
(b) it is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct or proposed conduct of its business
requires such qualification and is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not
reasonably be expected to have a material adverse effect on its business,
operations, assets or financial or other condition or on its ability to
perform its obligations under this Guarantee or the other Credit Documents
to which it is a party;
(c) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee
and the other Credit Documents to which the Guarantor is a party and to
grant the Liens granted by it pursuant to the other Credit Documents to
which the Guarantor is a party, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Guarantee and the other Credit Documents to which the Guarantor is a party
and to grant the Liens granted by it pursuant to the other Credit Documents
to which it is a party;
<PAGE>
6
(d) it owns at least 84% of the issued and outstanding shares of all
classes of Capital Stock of the Company and has Subsidiaries only as
specified and permitted under the terms of the Credit Agreement;
(e) no consent, license, permit, approval or authorization of, or
filing with, or notice or report to, or registration, filing or declaration
with, or other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without
limitation, any stockholder or creditor of such Guarantor), is required in
connection with the execution, delivery, performance, validity or
enforceability by or against the Guarantor of this Guarantee and the other
Credit Documents to which the Guarantor is a party;
(f) this Guarantee and the other Credit Documents to which the
Guarantor is a party have been duly executed and delivered on behalf of the
Guarantor and each of this Guarantee and the other Credit Documents to
which the Guarantor is a party constitutes a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity;
(g) the execution, delivery and performance of this Guarantee and the
other Credit Documents to which the Guarantor is a party do not and will
not violate any Requirement of Law or any material Contractual Obligation
of the Guarantor and will not result in the creation or imposition of any
Lien on any of the properties or revenues of the Guarantor pursuant to any
Requirement of Law or Contractual Obligation other than the Liens created
by the Holdings Pledge Agreement;
(h) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues (i) with respect to this Guarantee or the other
Credit Documents to which the Guarantor is a party or any of the
transactions contemplated hereby or thereby or (ii) which could have a
material adverse effect on the business, operations, property or financial
condition of the Guarantor and its Subsidiaries taken as a whole or on the
ability of the Guarantor to perform its obligations under this Guarantee or
the other Credit Documents to which it is a party; and
(i) the Guarantor has filed or caused to be filed all tax returns
required to be filed by it, and has paid all taxes due on said returns or
on any assessments made against it (other than (a) those the amount or
validity of which is currently being contested in good faith by appropriate
proceedings for which adequate reserves have been provided on its books and
(b) those which, individually or in the aggregate, are not material to the
Guarantor and its Subsidiaries taken as a whole).
The Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Guarantor on each Borrowing Date occurring on or
after the date hereof under
<PAGE>
7
the Credit Agreement on and as of such Borrowing Date as though made hereunder
on and as of such Borrowing Date.
10. Covenants. The Guarantor hereby covenants and agrees with the
---------
Administrative Agent and the Lenders that, from and after the date of this
Guarantee until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent, the Guarantor shall engage in no
business other than holding the Capital Stock of the Company, and businesses
incidental thereto.
11. Severability. Any provision of this Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this
------------------
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative
------------------------------
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to paragraph 14 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or event of default under any Credit Document or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
14. Integration; Waivers and Amendments; Successors and Assigns;
------------------------------------------------------------
Governing Law. This Guarantee represents the entire agreement of the Guarantor
- -------------
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Administrative Agent, provided that any provision of this
--------
Guarantee may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Guarantee shall be binding
upon the successors and assigns of the Guarantor and shall inure to the benefit
of the Administrative Agent and the Lenders and their respective successors and
assigns. THIS
<PAGE>
8
GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
15. Notices. All notices, requests and demands to or upon the
-------
Guarantor or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage pre-paid, or, in the case of telecopy notice, confirmation of receipt
received, or, in the case of telex notice, when sent, answerback received,
addressed to a party at the address provided for such party in the Credit
Agreement or Schedule I hereto, as the case may be, or to such other address as
may be hereafter notified to the parties hereto.
16. Counterparts. This Guarantee may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. Authority of Administrative Agent. The Guarantor acknowledges
---------------------------------
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Guarantor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.
18. Submission to Jurisdiction; Waivers. (a) The Guarantor hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Credit Document, or for
recognition and enforcement of any judgment in respect thereof, to the non-
exclusive general jurisdiction of the courts of the State of New York, the
courts of the United States for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be affected by mailing a copy thereof by registered or certified mail,
postage prepaid, to the Guarantor at its address set forth on Schedule I
hereto or at such other address of which the Administrative Agent shall
have been notified pursuant to paragraph 14; and
<PAGE>
9
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in other jurisdiction.
(b) The Guarantor and the Administrative Agent, on behalf of itself
and the Lenders, hereby unconditionally waive trial by jury in any legal action
or proceeding referred to in paragraph (a) above.
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered by its duly authorized officer as of the day
and year first above written.
SIMMONS HOLDINGS, INC.
By:
-------------------------------
Name:
Title:
CHEMICAL BANK, as Administrative
Agent
By:
-------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Holdings Guarantee
------------------
Address of Guarantor
--------------------
Simmons Holdings , Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Chris O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attention: Jonathan C. Daiker, Chief Financial
Officer
Telecopy: (770) 392-2565
With a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT H TO
CREDIT AGREEMENT
----------------
FORM OF
HOLDINGS PLEDGE AGREEMENT
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PLEDGE AGREEMENT, dated as of , 1996, made by SIMMONS HOLDINGS
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INC., a Delaware corporation (the "Pledgor"), in favor of CHEMICAL BANK, a New
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York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the several lenders (the "Lenders") from time to
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time parties to the Credit Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
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among Simmons Acquisition Corp., a Delaware corporation (to be merged with and
into Simmons Company, the "Company"), the Lenders and the Administrative Agent.
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W I T N E S S E T H :
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WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make loans to, and the Issuing Lender (as defined in the Credit
Agreement) has agreed to issue and certain of the Lenders have agreed to
participate in certain letters of credit for the account of the Company upon the
terms and subject to the conditions set forth therein, such loans being
evidenced by the notes issued by the Company;
WHEREAS, the Pledgor is the owner of the shares of Pledged Stock (as
hereinafter defined) issued by the Company listed on Schedule I hereto; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Pledgor shall have executed and
delivered this Pledge Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Issuing Lender and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective loans and
the Issuing Lender to issue and the Lenders to participate in the letters of
credit under the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms that are
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defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
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"Code" means the Uniform Commercial Code from time to time in effect
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in the State of New York.
"Collateral" means the Pledged Stock and all Proceeds.
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"Obligations" means (i) the unpaid principal amount of, and interest
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on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such post-
filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent, the
Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
any Letter of Credit or L/C Application, the other Credit Documents and any
other document executed and delivered or given in connection therewith or
herewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all reasonable fees and disbursements of counsel to the
Administrative Agent, the Issuing Lender or to the Lenders that are
required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended,
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supplemented or otherwise modified from time to time.
"Pledged Stock" means the shares of capital stock of the Company
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listed on Schedule I hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted by the
Company to the Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds", as such term is defined in Section 9-
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306(1) of the Code on the date hereof, of the Pledged Stock, and, in any
event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
2. Pledge; Grant of Security Interest. The Pledgor hereby delivers
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to the Administrative Agent, for the ratable benefit of the Lenders, all
certificates or instruments representing or evidencing the Pledged Stock on the
date hereof, and hereby transfers and grants to the Administrative Agent, for
the ratable benefit of the Lenders, a first priority security interest in all of
the Pledgor's right, title and interest in the Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
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Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor.
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4. Representations and Warranties. The Pledgor represents and
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warrants that:
(a) the shares of Pledged Stock constitute (i) all the issued and
outstanding shares of all classes of the Capital Stock of the Company owned by
the Pledgor and (ii) on the date hereof, at least 84% of the issued and
outstanding shares of all classes of the Capital Stock of the Company;
(b) all the shares of Pledged Stock have been duly and validly issued
and are fully paid and nonassessable;
(c) the Pledgor is the record and beneficial owner of the Pledged
Stock, free of any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Pledge Agreement; and
(d) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the Lien granted pursuant to this
Pledge Agreement will constitute a valid, perfected first priority Lien on the
Collateral (except, with respect to Proceeds, only to the extent permitted by
Section 9-306 of the Code), enforceable as such against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Pledgor on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement, on and as of such Borrowing
Date as though made hereunder on and as of such date.
5. Covenants. The Pledgor covenants and agrees with the
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Administrative Agent and the Lenders that, from and after the date of this
Pledge Agreement until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) If the Pledgor shall, as a result of its ownership of the Pledged
Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of capital stock of the Company, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Pledgor shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received, duly indorsed
by the Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by the
Pledgor and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations.
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(b) Without the prior written consent of the Administrative Agent,
the Pledgor will not (i) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Collateral, or (ii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for the
Lien provided for by this Pledge Agreement. The Pledgor will defend the right,
title and interest of the Administrative Agent, the Issuing Lender and the
Lenders in and to the Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Pledge
Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative Agent,
the Issuing Lender and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
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have occurred and be continuing, the Pledgor shall be permitted to receive all
cash dividends paid by the Company to the extent permitted in the Credit
Agreement in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock, provided, however, that the
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Pledgor agrees that it shall not vote in any way which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, the Security Documents or any of the other Credit Documents. The
Administrative Agent shall, at the Pledgor's sole cost and expense, execute and
deliver (or cause to be executed and delivered) to the Pledgor all proxies and
other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to this Section 6.
7. Rights of the Lenders and the Administrative Agent. (a) If an
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Event of Default shall occur and be continuing, (i) the Administrative Agent
shall have the right to receive any and all cash dividends paid in respect of
the Pledged Stock and make application thereof to the Obligations in such order
as the Administrative Agent may determine, and (ii) all shares of the Pledged
Stock may be registered in the name of the Administrative Agent or its nominee,
and, subject to the terms of this Agreement, the Administrative Agent or its
nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the Company or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without
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limitation, the right to exchange at its discretion any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of the Company, or upon the
exercise by the Pledgor or the Administrative Agent of any right, privilege or
option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it and except for
its gross negligence or willful misconduct or failure to comply with the
provisions of Section 12, but the Administrative Agent shall have no duty to the
Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent, the Issuing Lender and
the Lenders hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent, the Issuing Lender or any Lender of any right or
remedy against any other Person which may be or become liable in respect of all
or any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. None of the
Administrative Agent, the Issuing Lender and any Lender shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Administrative Agent be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The Administrative Agent agrees
to release promptly to the Pledgor any dividends, cash, securities, instruments
and other property paid, payable or otherwise distributed in respect of the
Collateral which it may receive under Section 7(a) if, prior to the occurrence
of an acceleration of any of the Obligations, all Defaults and Events of Default
have been waived or are no longer continuing.
(c) The Administrative Agent may execute any of its duties under this
Pledge Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care, except
as otherwise provided in subsection 11.3 of the Credit Agreement.
8. Remedies. In the event that any portion of the Obligations has
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been declared or becomes due and payable in accordance with the terms of the
Credit Agreement, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor, the Company or any other Person (all and each
of which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-
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counter market, at any exchange, broker's board or office of the Administrative
Agent, the Issuing Lender or any Lender or elsewhere upon such terms and
conditions as it may deem commercially reasonable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. The Administrative Agent, the Issuing Lender or any Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby waived and released. The
Administrative Agent promptly shall apply any Proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent, the Issuing Lender and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to the Administrative Agent, to the payment in whole or
in part of the Obligations, in such order as the Administrative Agent may elect
subject to subsection 5.9 of the Credit Agreement, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the Administrative
Agent, the Issuing Lender or any Lender arising out of the lawful exercise by
them of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Pledgor further waives and agrees not to assert any rights or
privileges which it may acquire under Section 9-112 of the Code. The Pledgor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Administrative Agent or
any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
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Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 8, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Pledgor will cause the Company to (i)
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execute and deliver, and cause the directors and officers of the Company to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of 90 days from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus that, in the
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Pledgor agrees to cause the Company to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions that the
Administrative Agent shall reasonably designate and to make available to its
security holders, as soon as
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practicable, an earnings statement (which need not be audited) that will satisfy
the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale conducted
in a manner that the Administrative Agent in good faith believes to be
commercially reasonable under the circumstances shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay the sale of any of the Pledged Stock for the period
of time necessary to permit the Company to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the Company would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Pledged Stock, pursuant to this Section 9 valid and
binding and in compliance with any and all other applicable Requirements of Law.
The Pledgor further agrees that a breach of any of the covenants contained in
this Section 9 will cause irreparable injury to the Administrative Agent, the
Issuing Lender and the Lenders, that the Administrative Agent, the Issuing
Lender and the Lenders have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section 9
shall be specifically enforceable against the Pledgor, and the Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants.
10. No Subrogation. Notwithstanding any payment or payments made by
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the Pledgor hereunder, or any setoff or application of funds of the Pledgor by
any Lender, or the receipt of any amounts by the Administrative Agent, the
Issuing Lender or any Lender with respect to any of the Collateral, the Pledgor
shall not be entitled to be subrogated to any of the rights of the
Administrative Agent, the Issuing Lender or any Lender against the Company or
against any other collateral security held by the Administrative Agent, the
Issuing Lender or any Lender for the payment of the Obligations, nor shall the
Pledgor seek any reimbursement from the Company in respect of payments made by
the Pledgor in connection with the Collateral, or amounts realized by the
Administrative Agent, the Issuing Lender or any Lender in connection with the
Collateral, and any such rights of subrogation and reimbursement of the Pledgor
are hereby waived until all amounts owing to the Administrative Agent and the
Lenders by the Company on account of the Obligations are paid in full, the
Commitments are terminated and either no Letters of Credit are outstanding or
each outstanding Letter of Credit has been cash collateralized so that it is
fully secured to the satisfaction of the Administrative Agent.
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11. Amendments, etc. with Respect to the Obligations. The Pledgor
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shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or such Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the Security Documents, the other
Credit Documents, any Interest Rate Agreement entered into with any Lender or
Lenders and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Lenders (or the Required Lenders, as the case may be) may deem advisable
from time to time, and any guarantee, right of offset or other collateral
security at any time held by the Administrative Agent, the Issuing Lender or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. None of the Administrative Agent, the Issuing Lender
and the Lenders shall have any obligation to protect, secure, perfect or insure
any other Lien at any time held by it as security for the Obligations or any
property subject thereto. The Pledgor waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative Agent, the Issuing Lender or any
Lender upon this Pledge Agreement; the Obligations, and any of them shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Pledge Agreement; and all dealings between the Company and the
Pledgor, on the one hand, and the Administrative Agent, the Issuing Lender and
the Lenders, on the other, shall likewise be conclusively presumed to have been
had or consummated in reliance upon this Pledge Agreement. The Pledgor waives
diligence, presentment, protest, demand for payment and notice of default or
nonpayment to or upon the Company or the Pledgor with respect to the
Obligations.
12. Limitation on Duties Regarding Collateral. The Administrative
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Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. None of the Administrative Agent, the Issuing Lender, any Lender nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
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herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. Severability. Any provision of this Pledge Agreement which is
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prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any
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such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15. Section Headings. The section headings used in this Pledge
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Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Administrative
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Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 17 hereof) be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default of any obligation under
any Credit Document or in any breach of any of the terms and conditions hereof
or thereof. No failure to exercise, nor any delay in exercising, on the part of
the Administrative Agent, the Issuing Lender or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Issuing Lender or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Administrative Agent, the Issuing Lender or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
17. Integration; Waivers and Amendments; Successors and Assigns;
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Governing Law. This Pledge Agreement represents the entire agreement of the
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Pledgor with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, provided that any provision of this
Pledge Agreement may be waived by the Administrative Agent in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Pledge Agreement shall be
binding upon the successors and assigns of the Pledgor and shall inure to the
benefit of the Administrative Agent, the Issuing Lender and the Lenders and
their respective successors and assigns. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
18. Notices. Notices by the Administrative Agent to the Pledgor or
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the Company may be given by mail, by telex or by facsimile transmission,
addressed or transmitted to the Pledgor or the Company at its address or
transmission number set forth in subsection 12.2 of the Credit Agreement in the
case of the Company and on Schedule II hereto in the case of the Pledgor and
shall be effective (a) in the case of mail, three days after deposit in the
postal system, first class postage pre-paid, and (b) in the case of telex or
facsimile notices, when sent. The Pledgor and the Company may change their
respective addresses and transmission numbers by written notice to the
Administrative Agent.
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19. Counterparts. This Pledge Agreement may be executed by one or
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more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
20. Irrevocable Authorization and Instruction to Company. The
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Pledgor hereby authorizes and instructs the Company to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees that the
Company shall be fully protected in so complying.
21. Authority of Administrative Agent. The Pledgor acknowledges that
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the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither the Pledgor nor the Company shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
22. Termination. This Pledge Agreement shall terminate when all the
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Obligations have been fully paid and performed and the Commitments terminated.
Upon such termination, the Administrative Agent shall on its behalf and on
behalf of the Lenders reassign and redeliver (or cause to be reassigned and
redelivered) to the Pledgor, or to such person or persons as the Pledgor shall
designate or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) as shall not have been sold or
otherwise applied by the Administrative Agent pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or warranty by the Administrative Agent (other than a warranty that the
Administrative Agent has not assigned its rights and interests hereunder to any
other Person) and at the sole cost and expense of the Pledgor.
<PAGE>
11
IN WITNESS WHEREOF, the undersigned have caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
SIMMONS HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
CHEMICAL BANK, as Administrative Agent
By:
--------------------------------
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The Company referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. The
Company agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. The Company further agrees that the terms of Section 9(c) of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
SIMMONS ACQUISITION CORP.
By:
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
----------
Holdings Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
----------------------------
Class Stock Certi- No. of
Issuer of Stock ficate No. Shares
- ------ -------- ------------ ------
<PAGE>
SCHEDULE II
-----------
Holdings Pledge Agreement
ADDRESS OF PLEDGOR
------------------
Simmons Holdings, Inc.
c/o INVESTCORP International, Inc.
280 Park Avenue
Floor 37 West
New York, New York 10017
Attention: Chris O'Brien
Telex: 4976829 INCORP
Telecopy: (212) 983-7073
With a copy to:
Simmons Acquisition Corp.
One Concourse Parkway Suite 600
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Telecopy: (770) 392-2565
With a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
Telex: 177920 GIBTRASK NYK
Telecopy: (212) 949-7606
<PAGE>
EXHIBIT I to
CREDIT AGREEMENT
----------------
FORM OF
LETTER OF CREDIT PARTICIPATION CERTIFICATE
------------------------------------------
[Date]
[Name of Participating Lender]
[Address of Participating Lender]
Dear Sirs:
Pursuant to subsection 4.8(b) of the Credit Agreement,
dated as of ____________, 1996 (as the same may from time to time
be amended, supplemented or otherwise modified, the "Credit
Agreement"; terms defined in the Credit Agreement being used
herein with their respective defined meanings) among Simmons
Acquisition Corp., the Lenders parties thereto, and Chemical
Bank, as Administrative Agent, the undersigned hereby
acknowledges receipt from you on the date hereof of the L/C
Participating Interest in the amount of _______________ DOLLARS
($_________) in the following Letter of Credit and the L/C
Application relating thereto:
[Describe Letter of Credit (i.e. Letter of Credit
number, face amount, date of issuance and beneficiary)]
Very truly yours,
CHEMICAL BANK
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT J TO
CREDIT AGREEMENT
----------------
FORM OF
SWING LINE LOAN PARTICIPATION CERTIFICATE
-----------------------------------------
[Date]
[Name of Lender]
______________
______________
Dear Sirs:
Pursuant to subsection 4.4(d) of the Credit Agreement, dated as of
____________, 1996 among Simmons Acquisition Corp., the several lenders (the
"Lenders") parties thereto and Chemical Bank, as Administrative Agent for the
-------
Lenders, the undersigned hereby acknowledges receipt from you of $__________ as
payment for a participating interest in the following Swing Line Loan:
Date of Swing Line Loan: ______________________________________
Principal Amount of Swing Line Loan: __________________________
Very truly yours,
CHEMICAL BANK
By:_________________________
Name:
Title:
<PAGE>
EXHIBIT K TO
CREDIT AGREEMENT
----------------
FORM OF
SECTION 5.11(d)(2) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of
____________, 1996 among Simmons Acquisition Corp., the Lenders from time to
time party thereto, and Chemical Bank, as Administrative Agent (the "Credit
Agreement"). Pursuant to the provisions of Section 5.11(d)(2) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF LENDER]
By:
-------------------------------
Title:
Date:
<PAGE>
EXHIBIT M-1 TO
CREDIT AGREEMENT
----------------
FORM OF
COMPANY CLOSING CERTIFICATE
Pursuant to subsection 7.1(n) of the Credit Agreement dated as of
____________, 1996 (the "Credit Agreement"; terms defined therein and not
otherwise defined herein are used herein as therein defined) among Simmons
Acquisition Corp. (the "Company"), the lenders party thereto (the "Lenders") and
Chemical Bank, as administrative agent for the Lenders (in such capacity, the
"Administrative Agent"), the undersigned [Insert Title] of the Company hereby
certifies as follows:
1. The representations and warranties of the Company (i) set forth in
Section 6 of the Credit Agreement or (ii) which are contained in the other
Credit Documents to which the Company is party are true and correct in all
material respects on and as of the date hereof with the same effect as if
made on and as of the date hereof except for representations and warranties
stated to relate to a specific earlier date, in which case such
representations and warranties were true and correct in all material
respects as of such earlier date;
2. No Default or Event of Default has occurred and is continuing as
of the date hereof or after giving effect to any Loans to be made on the
date hereof;
3. Simultaneously with the consummation of the transactions
contemplated by the Credit Agreement on the Closing Date, the Acquisition
has been consummated for an aggregate purchase price not exceeding
$285,000,000, including fees, costs and expenses incurred in connection
therewith, pursuant to the Acquisition Documents, all of the conditions
precedent set forth in Article VII of the Stock Purchase Agreement have
been satisfied or waived by the Sellers, and no material provision of the
Stock Purchase Agreement has been amended, supplemented, waived or
otherwise modified;
4. The Company has been capitalized with $85,000,000, of which at
least $80,000,000 shall be in cash and the remainder in Capital Stock of
Simmons from the issuance of its Capital Stock to Holdings.
5. _______________ is the duly elected and qualified [Assistant]
Secretary of the Company and the signature set forth on the signature line
for such officer is such officer's true and genuine signature;
and the undersigned [Assistant] Secretary of the Company hereby certifies as
follows:
6. There are no liquidation or dissolution proceedings pending or to
my knowledge threatened against the Company nor has any other event
occurred affecting or threatening the corporate existence of the Company;
<PAGE>
2
7. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware;
8. Attached hereto as Exhibit I is a true and complete copy of
resolutions duly adopted by the Board of Directors of the Company on
____________, 1996; such resolutions have not in any way been amended,
supplemented, modified, revoked or rescinded and have been in full force
and effect since their adoption to and including the date hereof and are
now in full force and effect; attached hereto as Exhibit II is a true and
complete copy of the By-Laws of the Company as in effect on the date
hereof; and attached hereto as Exhibit III is a true and complete copy of
the Certificate of Incorporation of the Company, as amended, as in effect
at all times since __________, to and including the date hereof; and
9. The following persons are now duly elected and qualified officers
of the Company each holding the office indicated next to his name below,
and the signature appearing opposite his name below is the true and genuine
signature of such officer, and such officer is duly authorized to execute
and deliver, on behalf of the Company, the Credit Documents to which the
Company is a party and any certificate or other document to be delivered by
the Company pursuant to the Credit Documents;
Name Office Signature
---- ------ ---------
___________________
___________________
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Certificate as of ____________, 1996.
____________________________ ______________________________
Name: Name:
Title: Title:
EXHIBIT 10.12
AGREEMENT FOR MANAGEMENT
ADVISORY, STRATEGIC PLANNING AND
CONSULTING SERVICES
THIS AGREEMENT is made effective as of the day of March, 1996, by and
between INVESTCORP International Inc., a Delaware corporation ("III"), and
Simmons Company, a Delaware corporation ("Simmons").
WHEREAS, III, by and through its officers, employees, agents and affiliates
has developed, in connection with the conduct of its business and affairs,
various areas of expertise in the fields of management, finance, marketing and
strategic planning; and
WHEREAS, Simmons desires to avail itself of the expertise of III in those
areas hereinabove enumerated, and in which III is acknowledged to have
expertise, for a period of five years from the effective date hereof, said five-
year period being referred to as the "Term";
NOW, THEREFORE, the parties do hereby agree as follows:
1. Appointment. Simmons hereby appoints III to render management advisory,
-------------
strategic planning and consulting services to Simmons during the Term as herein
contemplated.
2. Services of III. During the Term, III shall render to Simmons, by and
-----------------
through such of its officers, employees, agents and affiliates as III, in its
sole discretion, shall designate from time to time, management advisory,
strategic planning and consulting services. Said services shall consist of
advice concerning management, finance, marketing, possible acquisitions,
restructurings, strategic planning, and such other services as shall be
requested from time to time by the Board of Directors of Simmons.
3. Fees. In consideration of III's performance of the above-described
------
services, Simmons shall pay to III, in cash, fees for consulting services at the
rate of $1,000,000 per year for the duration of the Term, such payments to be
made in advance in the following manner: an initial payment on March__, 1996 in
the amount of $3,000,000 covering the first three years of the Term, and
thereafter payments of $1,000,000 per year divided into quarterly payments of
$250,000 to made on March , 1999 for the first three month period following
the third year of the Term and on the first day of the first
<PAGE>
month of each succeeding three-month period throughout the remainder of the Term
(collectively, the "Fee"). All such payments made pursuant to this Agreement
shall be non-refundable in all circumstances. It is recognized that the services
provided under this Agreement will not be evenly distributed over time and that
a significant portion of such services will be performed early in the period of
time covered by this Agreement. It is also recognized that, subject to the terms
of this Agreement, Simmons is committed to pay the full amount payable
hereunder.
4. Reimbursements. Within 15 calendar days of being given III's invoice,
----------------
Simmons shall reimburse III for its actual out-of-pocket expenses incurred in
connection with the performance of services pursuant to this Agreement (such
out-of-pocket expenses to exclude rent, salaries or similar overhead charges of
III or its affiliates).
5. Default. In the event that Simmons fails to pay any part of the Fee, as
---------
set forth in Paragraph 3 above, when and as due and Simmons does not cure such
failure prior to the 10th day following the date notice of such failure is given
by III, then Simmons shall be in default under this Agreement and III shall be
entitled to receive payment in full of the unpaid portion of the Fee upon making
written demand upon Simmons for such payment. Upon delivery of such written
demand and prior to payment in full, III shall be excused from rendering any
further services pursuant to this Agreement. The aforesaid right and privilege
of III to withhold services is intended to be in addition to any and all other
remedies available because of Simmons' default, including III's right to payment
of all fees set forth herein. Further, in the event of a default by Simmons,
Simmons agrees to reimburse III for any and all costs and expenses incurred by
III, including, without limitation, reasonable counsel fees and expenses in
connection with such default and with any litigation or other proceedings
instituted for the collection of payments due hereunder.
6. Permissible Activities. Nothing herein shall in any way preclude III from
------------------------
engaging in any business activities or from performing services for its own
account or for the account of others.
7. Indemnification. Simmons shall indemnify and hold harmless III and its
-----------------
directors, officers, employees, agents and controlling persons (each being an
"Indemnified Party") from and against any and all losses, claims, damages and
liabilities, joint or several, to which such Indemnified Party may become
subject under any applicable federal or state law, or otherwise, relating to or
arising out of the management, strategic planning and consulting services
contemplated by this Agreement. Simmons shall reimburse any
2
<PAGE>
Indemnified Party for all costs and expenses (including reasonable counsel fees
and expenses) incurred in connection with the investigation of, preparation for
or defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a party. Simmons
shall not be liable under the foregoing indemnification provision to the extent
that any loss, claim, damage, liability or expense is found in a final judgment
by a court of competent jurisdiction to have resulted primarily from the bad
faith or gross negligence of III.
8. Termination. This Agreement shall automatically terminate upon the earlier
------------
of (i) the expiration of the Term and (ii) a Redemption Event (as defined in the
Amended and Restated Certificate of Incorporation of the Company, as in effect
on the date hereof) provided, however, that upon such termination III shall not
-------- ---------
be required to refund any portion of the Fee previously paid by the Company in
accordance with this Agreement. Termination of this Agreement shall not relieve
any party hereto of any rights or obligations which are accrued but unsatisfied
at the time of termination.
9. Amendments. No amendment or waiver of any provision of this Agreement, or
------------
consent to any departure by either party from any such provision, shall in any
event be effective unless the same shall be in writing and signed by the parties
to this Agreement, and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
10. Notices. Any and all notices hereunder shall, in the absence of
---------
receipted hand delivery, be deemed duly given when mailed if sent by registered
or certified mail, return receipt requested, and the mailing date shall be
deemed the date from which all time periods pertaining to a date of notice shall
run. Notices shall be addressed to the parties at the following addresses:
If to III, to:
INVESTCORP International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention: Christopher J. O'Brien
with a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
47th Floor
3
<PAGE>
New York, New York 10166-0193
Attention: Charles K. Marquis
If to Simmons, to:
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attention: Chief Executive Officer
11. Entire Agreement. This Agreement shall constitute the entire agreement
------------------
between the parties with respect to the subject matter hereof, and shall
supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
12. Assignment. This Agreement shall be assignable by either party hereto,
------------
provided that the non-assigning party consents in writing to such assignment.
13. Applicable Law. This Agreement shall be construed and enforced in
----------------
accordance with the laws of Delaware and shall inure to the benefit of, and be
binding upon, III and Simmons and their respective successors and assigns.
14. No Continuing Waiver. The waiver by any party of any breach of this
----------------------
Agreement shall not operate or be construed to be a waiver of any subsequent
breach.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement for
Management Advisory, Strategic Planning and Consulting Services to be executed
and delivered by its duly authorized officer or agent as set forth below.
INVESTCORP INTERNATIONAL, INC.
By: /s/
-------------------
Name:
Title:
SIMMONS COMPANY
By: /s/
-------------------
Name:
Title:
5
<PAGE>
EXHIBIT I
Form of Legal Opinions
----------------------
Pursuant to Section 8.5(c) of the Stock Purchase Agreement, the Trustee
shall receive legal opinions, dated as of the Closing Date from Jones, Day,
Reavis & Pogue, as counsel to the Company (at the time of the acquisition the
Shares) and from Gibson, Dunn & Crutcher, as counsel to Buyer, Holdings and the
Company (following the acquisition of the Shares), as applicable, subject to
usual and customary qualifications and assumptions, with respect to the
following matters.
A. The Company:
---------------
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own or lease its properties and to conduct its
business as it is currently conducted.
2. Except as set forth in the final sentence of this paragraph, the
authorized capital stock and the number of shares of capital stock issued and
outstanding of the Company as of the date hereof and prior to the Merger (the
"Pre-Merger Capital Stock") and immediately after the Merger (the "Post-Merger
Capital Stock") are as set forth in Section 3.2 to the Stock Purchase Agreement.
To our knowledge, as of the date hereof all of the shares of Pre-Merger Capital
Stock are duly and validly issued, fully paid and nonassessable, and free of any
statutory preemptive rights. Except for the agreements disclosed on Schedule 1
attached hereto or entered into in connection with the Stock Purchase Agreement
or referenced therein, to our knowledge the Company is not a party to any
agreement, arrangement, warrant, option, put, call, rights, options, or other
employee benefit plans, or other commitments or understandings, relating to the
issuance, sale, purchase, redemption, conversion or exchange of any shares of
the Pre-Merger Capital Stock or Post Merger Capital Stock.
We note that certificates representing previously issued shares of the
Company's capital stock have been lost or that such certificates have not been
canceled in the stock records at the time of subsequent transfer of shares
represented thereby. In expressing the foregoing opinions, we are not passing on
the effect of the loss or non-cancellation of any such certificates.
3. The Company has the corporate power and authority to execute, deliver
and perform the terms and provisions of the Stock Purchase Agreement and the
ESOP Amendments (the "Transaction Documents") and the Company has taken or
caused to be taken all necessary corporate action to authorize the same.
<PAGE>
4. The Transaction Documents have been duly executed and delivered by the
Company.
5. Neither the execution and delivery by the Company of the Transaction
Documents nor the performance by the Company of its obligations thereunder
violates any provision of the Certificate of Incorporation or Bylaws of the
Company, each as amended and restated to date.
B. Buyer and Holdings
------------------
1. Buyer and Holdings have been duly incorporated and are validly
existing as corporations in good standing under the laws of the State of
Delaware with corporate power and authority to own or lease their properties and
to conduct their business as they are currently conducted.
2. The authorized capital stock and the number of shares of capital stock
issued and outstanding of Holdings as of the date hereof is as set forth in
Section 5.1 to the Stock Purchase Agreement. To our knowledge, as of the date
hereof, all of the shares of capital stock are duly and validly issued, fully
paid and nonassessable, and free of any statutory preemptive rights. Except for
the agreements disclosed on Schedule 1 attached hereto or entered into in
connection with the Stock Purchase Agreement or referenced therein, to our
knowledge Holdings is not a party to any agreement, arrangement, warrant,
option, put, call, rights, or other employee benefit plans, or other commitments
or understandings, relating to the issuance, sale, purchase, redemption,
conversion, exchange or transfer of any shares of Holdings capital stock.
3. Buyer and Holdings have the corporate power and authority to execute,
delivery and perform the terms and provisions of the Stock Purchase Agreement,
the Merger Agreement, and the New Stockholders Agreement and any other agreement
or document made pursuant thereto (the "Transaction Documents") and they have
taken or caused to be taken all necessary corporate action to authorize the
same.
4. Each Transaction Document to which Holdings is a party has been duly
executed and delivered by Holdings, and each Transaction Document to which Buyer
is a party has been duly executed and delivered by Buyer.
6. Neither the execution and delivery by Holdings or Buyer, as
applicable, of the Transaction Documents, nor the performance by it of its
obligations thereunder, violates any provision of the Certificate of
Incorporation or Bylaws of Holdings or Buyer or, to our knowledge, any agreement
or other arrangement to which Holdings or Buyer is a party or by which its
properties are bound.
2
<PAGE>
EXHIBIT J
---------
MANAGEMENT OPTIONS
------------------
Number of Class C Shares: Up to 3,051,465
Exercise Price Per Share: Not less than $2.66
<PAGE>
EXHIBIT K-1
CERTIFICATE OF INCORPORATION OF
SIMMONS ACQUISITION CORP.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code, and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: the Name of the corporation (hereinafter called the "Corporation") is
SIMMONS ACQUISITION CORP.
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, in the City of Wilmington, County of New Castle, and the name of the
registered agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1,000). The par value of each of such shares
is one cent ($.01). All such shares are of one class and are shares of Common
Stock.
No holder of any of the shares of the stock of the Corporation, whether now
or hereafter authorized and issued, shall be entitled as of right to purchase or
subscribe for any unissued stock of any class, or any additional shares of any
class to be issued by reason of any increase of the authorized capital stock of
any class of the Corporation, or by reason of any issuance of bonds,
certificates of indebtedness, debentures, or other securities convertible into
stock of any class of the Corporation or carrying any right to purchase stock of
any class of the Corporation, but any such unissued stock or any such additional
authorized issue of any stock, or other securities convertible into stock or
carrying any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms,
<PAGE>
corporations or associations, and upon such terms, as may be deemed advisable by
the Board of Directors in the exercise of its discretion.
FIFTH: The name and the mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
- ----- ---------------
Anne Martin 1013 Centre Road
Wilmington, DE 19805
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors, or any class of them, and/or between this
Corporation and its stockholders, or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors, or class of creditors, and/or
of the stockholders, or class of stockholders, of this Corporation, as the case
may be, to be summoned in such manner as said court directs. If a majority in
number representing three-fourths in value of the creditors, or class of
creditors, and/or of the stockholders, or class of stockholders, of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, said compromise or arrangement and said reorganization shall, if
sanctioned by the court to which said application has been made, be binding on
all the creditors, or class of creditors, and/or on all the stockholders, or
class of stockholders, of this Corporation, as the case may be, and also on this
Corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, its directors, and its stockholders, or any
class of stockholders, as the case may be, it is further provided;
1. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute
2
<PAGE>
the whole Board of Directors shall be fixed by, or in the manner provided in,
the Bylaws. The phrase "whole Board" and the phrase "total number of directors"
shall be deemed to have the same meaning, to wit, the total number of directors
which the Corporation would have if there were no vacancies. No election of
directors need be by written ballot.
2. After the original or other Bylaws of the Corporation have been
adopted, amended or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and after the Corporation has received any payment for any of
its stock, the power to adopt, amend or repeal the Bylaws of the Corporation
may be exercised by the Board of Directors of the Corporation; provided,
however, that any provisions for the classification of directors of the
Corporation for staggered terms pursuant to the provisions of Subsection
(d) of Section 141 of the General Corporation Law of the State of Delaware
shall be set forth in an initial bylaw or in a bylaw adopted by the stockholders
entitled to a vote in the Corporation unless provisions for such classification
shall be set forth in this Certificate of Incorporation.
3. Whenever the Corporation shall be authorized to issue only one class
of stock, each outstanding share shall entitle the holder thereof to notice of,
and the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
Certificate of Incorporation shall entitle the holder thereof to the right to
vote at any meeting of stockholders except as the provisions of Paragraph (2) of
Subsection (b) of Section 242 of the General Corporation Law of the State of
Delaware shall otherwise require; provided that no share of any such class which
otherwise denied voting power shall entitle the holder thereof to vote upon the
increase or decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the provisions of Paragraph (7) of
Subsection (b) of Section 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other
3
<PAGE>
matters referred to in, or covered by, said section, and the indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in
their official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered or repealed, and other provisions
authorized by the laws the State of Delaware at the time in force may be added
or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on February 1, 1996.
------------------------------
Anne Martin
Incorporator
4
Exhibit 10.13
EXHIBIT 1
SIMMONS HOLDINGS, INC.
MANAGEMENT STOCK INCENTIVE PLAN
1. Establishment and Purpose of the Plan. This Management Stock
-------------------------------------
Incentive Plan (the "Plan") is established by Simmons Holdings, Inc., a Delaware
corporation ("Issuer"), as of March 22, 1996. The Plan is designed to enable
Issuer to attract, retain, reward and motivate members of the management and
certain other officers, key employees, non-employee directors and service
providers of Issuer, Simmons Company, a Delaware corporation ("Employer") and
its subsidiaries, by providing for or increasing their proprietary interest in
Issuer. The Plan provides for the grant of options ("Options") that qualify as
incentive stock options ("Incentive Stock Options") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as Options that
do not so qualify ("Non-Qualified Options"), for the grant of stock appreciation
rights ("Stock Appreciation Rights"), for the grant of the right to receive
stock at the end of a specified deferral period ("Deferred Stock"), and for the
sale or grant of restricted stock ("Restricted Stock").
2. Stock Subject to Plan. The maximum number of shares of stock
---------------------
that may be subject to Options or Stock Appreciation Rights granted hereunder
and the number of shares of stock that may be granted or sold as Deferred Stock
or Restricted Stock hereunder shall not in the aggregate exceed 5,488,070 shares
of the Class C Stock, $.01 par value (the "Shares"), of Issuer, subject to
adjustment under Section 14 hereof. The Shares that may be subject to Options,
Stock Appreciation Rights, or Deferred Stock granted and Restricted Stock sold
or granted under the Plan may be authorized and unissued Shares or Shares
reacquired by Issuer and held as treasury stock.
Shares that are subject to the unexercised portions of any
Options or Stock Appreciation Rights that expire, terminate or are canceled,
Shares of Deferred Stock that are not delivered, Shares of Restricted Stock that
are reacquired by Issuer pursuant to the restrictions thereon, and Shares
withheld or surrendered in payment of any exercise price of Options or taxes
relating to Options, Stock Appreciation Rights, Deferred Stock or Restricted
Stock, shall again be available for the grant of Options, Stock Appreciation
Rights or Deferred Stock and the sale or grant of Restricted Stock under the
Plan. If a Stock Appreciation Right is exercised, any Option or portion thereof
that is surrendered in connection with such exercise shall terminate and the
Shares theretofore subject to the Option or portion thereof shall not be
available for further use under the Plan.
In addition to the grant of Options, Stock Appreciation Rights,
Deferred Stock and Restricted Stock to Participants (as hereinafter defined),
Issuer may also issue Restricted Stock to non-Participants to be held for the
benefit of the Participants.
3. Shares Subject to Certificate of Designation. All Shares
--------------------------------------------
issuable under Options, Stock Appreciation Rights or Deferred Stock and all
Shares of Restricted Stock sold or
<PAGE>
granted pursuant to this Plan shall be subject to the terms and restrictions
contained in the Certificate of Designation of issuer. A copy of the
Certificate of Designation shall be delivered or otherwise made available to
the recipient of an Option, Stock Appreciation Right, Deferred Stock or
Restricted Stock at the time of grant or issuance.
4. Administration. The Plan shall be administered by a committee
--------------
(the "Committee") appointed by the Board of Directors (the "Board") of issuer.
If no persons are designated by the Board to serve on the Committee, the Plan
shall be administered by the Board and all references herein to the Committee
shall refer to the Board. The Board shall have the discretion to add, remove or
replace members of the Committee, and shall have the sole authority to fill
vacancies on the Committee.
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting. The Committee shall have the sole authority,
in its absolute discretion, to adopt, amend, and rescind such rules and
regulations as, in its opinion, may be advisable in the administration of the
Plan, to construe and interpret the Plan, the rules and regulations, and the
agreements and other instruments evidencing Options, Stock Appreciation Rights
and Deferred Stock granted and Restricted Stock sold or granted under the Plan
and to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations, and interpretations
of the Committee shall be final and conclusive upon the Eligible Participants,
as hereinafter defined. Notwithstanding the foregoing, any dispute arising
under any Agreement (as defined below) shall be resolved pursuant to the
dispute resolution mechanism set forth in such Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms thereof,
including the provisions relating to the exercisability of Options and Stock
Appreciation Rights, lapse and nonlapse restrictions upon the Shares obtained or
obtainable under the Plan and the termination and/or forfeiture of Options,
Stock Appreciation Rights, Deferred Stock and Restricted Stock under the Plan.
The terms upon which Options, Stock Appreciation Rights and Deferred Stock are
granted and Restricted Stock is sold or granted shall be evidenced by a written
agreement executed by Issuer and the Participant to whom such Options, Stock
Appreciation Rights, Deferred Stock or Restricted Stock are sold or granted (the
"Agreement").
5. Eligibility. Persons who shall be eligible for grants of
-----------
Options, Stock Appreciation Rights, or Deferred Stock or sales or grants of
Restricted Stock hereunder ("Eligible Participants") shall be those employees,
non-employee directors or service providers of issuer, Employer or a subsidiary
of Employer who are members of a select group of management or other key persons
that the Committee may from time to time designate to participate under the Plan
("Participants") through grants of Non-Qualified Options, Incentive Stock
Options, Stock Appreciation Rights, Deferred Stock, and/or through sales or
grants of Restricted Stock.
6. Terms and Conditions of Options. No Incentive Stock Option shall
-------------------------------
be granted for a term of more than ten years or to a Participant who is not an
employee, except that if such Incentive Stock Option is granted to a Participant
who on the date of grant is treated under Section 424(d) of the Code as owning
stock (not including stock purchasable under
2
<PAGE>
outstanding options) possessing more than ten percent of the total combined
voting power of all classes of issuer's stock, the term shall not be more
than five years. No Non-Qualified Option shall be granted for a term of more
than ten years and thirty days. Options may, in the discretion of the
Committee, be granted with associated Stock Appreciation Rights or be amended
so as to provide for associated Stock Appreciation Rights. The Agreement may
contain such other terms, provisions, and conditions as may be determined by
the Committee as long as such terms, conditions and provisions are not
inconsistent with the Plan. The Committee shall designate as such those Options
intended to be eligible to qualify and be treated as Incentive Stock Options
and, correspondingly, those Options not intended to be eligible to qualify and
be treated as Incentive Stock Options.
7. Exercise Price of Options. The exercise price for each Non-
-------------------------
Qualified Option granted hereunder shall be set forth in the Agreement. For so
long as required under Section 422 of the Code and the regulations promulgated
thereunder (or any successor statute or rules), the exercise price of any Option
intended to be eligible to qualify and be treated as an Incentive Stock Option
shall not be less than the fair market value of the Shares on the date such
Incentive Stock Option is granted, except that if such Incentive Stock Option is
granted to a Participant who on the date of grant is treated under Section
424(d) of the Code as owning stock (not including stock purchasable under
outstanding options) possessing more than ten percent of the total combined
voting power of all classes of Issuer's stock, the exercise price shall not be
less than one hundred ten percent (110%) of the fair market value of the Shares
on the date such Incentive Stock Option is granted.
For all Options granted within six months of the date of adoption of
the Plan, the fair market value of the Shares subject to the Option shall be
$2.66. Thereafter, the fair market value of Shares for the purposes of this
Plan shall be determined by the Board, whose valuation shall be binding upon
each Optionee.
Payment for Shares purchased upon exercise of any Option granted
hereunder shall be in cash at the time of exercise, except that, if either the
Agreement so provides or the Committee so permits, and if Issuer is not then
prohibited from doing so, such payment may be made in whole or in part with
shares of stock of the same class as the stock then subject to the Option. The
Committee also may on an individual basis permit payment or agree to permit
payment by such other alternative means as may be lawful, including by delivery
of an executed exercise notice together with irrevocable instructions to a
broker promptly to deliver to Issuer the amount of sale or loan proceeds
required to pad the exercise price.
8. Non-transferability. Unless provided otherwise in the
-------------------
Agreement, any Option granted under this Plan shall by its terms be
nontransferable by the Participant other than by will or the laws of descent and
distribution (in which case such descendant or beneficiary shall be subject to
all terms of the Plan applicable to Participants) and is exercisable during the
Participant's lifetime only by the Participant or by the Participant's guardian
or legal representative.
9. Incentive Stock Options. The provisions of the Plan are
-----------------------
intended to satisfy the requirements set forth in Section 422 of the Code and
the regulations promulgated thereunder
3
<PAGE>
(including the aggregate fair market value limits set forth in Section 422(d)
of the Code) with respect to Incentive Stock Options granted under the Plan.
For so long as required under Section 422 of the Code and the regulations
promulgated thereunder (or any successor statute or rules), during the term of
the Plan, the aggregate fair market value of the Shares with respect to which
Incentive Stock Options are first exercisable by an Eligible Participant who is
an employee during any calendar year shall not exceed $100,000. For the
purpose of this Section 9, the fair market value of the Shares shall be
determined at the time the Incentive Stock Option is granted.
10. Stock Appreciation Rights. The Committee may, under such terms
-------------------------
and conditions as it deems appropriate, grant to any Eligible Participant
selected by the Committee Stock Appreciation Rights, which may or may not be
associated with Options. Upon exercise of a Stock Appreciation Right, the
Participant shall be entitled to receive payment of an amount equal to the
excess of the fair market value, as defined by the Committee, of the underlying
Shares on the date of exercise over the Stock Appreciation Right's exercise
price. Such payment may be made in additional Shares valued at their fair
market value on the date of exercise or in cash, or partly in Shares and
partly in cash, as the Committee may designate. The Committee may require
that any Stock Appreciation Right shall be subject to the condition that the
Committee may at any time in its absolute discretion not allow the exercise
of such Stock Appreciation Right and that the Option, if any, with which the
Stock Appreciation Right is associated be canceled upon exercise of the Stock
Appreciation Right. The Committee may further impose such conditions on the
exercise of Stock Appreciation Rights as may be necessary or desirable to
comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
11. Deferred Stock. The Committee may grant Deferred Stock under the
--------------
Plan (either independently or in connection with the exercise of Options or
Stock Appreciation Rights under the Plan) to Eligible Participants selected by
the Committee. The Committee shall in each case determine the number of Shares
of Deferred Stock to be granted and the terms and duration of the deferral
period to be imposed upon those Shares.
12. Restricted Stock. The Committee may sell or grant Restricted
----------------
Stock under the Plan (either independently or in connection with the exercise of
Options or Stock Appreciation Rights under the Plan) to Eligible Participants
selected by the Committee. The Committee shall in each case determine the
number of Shares of Restricted Stock to be sold or granted, the price at which
such Shares are sold, if applicable, and the terms and duration of the
restrictions to be imposed upon those Shares.
13. Investment Representation. Each Agreement may contain an
-------------------------
agreement that, upon demand by the Committee for such a representation, the
Optionee shall deliver to the Committee at the time of any exercise of an Option
a written representation that the Shares to be acquired upon such exercise are
to be acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation prior
to the delivery of any Shares issued upon exercise of an Option and prior to the
expiration of the Option period shall be a condition precedent to the right of
the Optionee or such other person to purchase any Shares.
4
<PAGE>
14. Adjustments. In the event of any one or more reorganizations,
-----------
recapitalizations, stock splits, reverse stock splits, stock dividends, or
similar events, an appropriate adjustment shall be made in the number, exercise
or sale price and/or type of shares or securities for which Options, Stock
Appreciation Rights or Deferred Stock may thereafter be granted and Restricted
Stock may thereafter be sold or granted under the Plan. The Committee also
shall designate the appropriate changes that shall be made in Options, Stock
Appreciation Rights or Deferred Stock, or rights to purchase Restricted Stock
under the Plan, so as to preserve the value of any such Options, Stock
Appreciation Rights, Deferred Stock or Restricted Stock. The Committee may do
so either at the time the Option, Stock Appreciation Right or Deferred Stock is
granted or Restricted Stock offered or at the time of the event causing the
adjustments. Any such adjustment in outstanding Options or Stock Appreciation
Rights shall be made without changing the aggregate exercise price applicable to
the unexercised portions of such Options or Stock Appreciation Rights. Any such
adjustments in outstanding rights to purchase Restricted Stock shall be made
without changing the aggregate purchase price of such Restricted Stock.
15. Duration of Plan. Neither Options, Stock Appreciation Rights,
----------------
nor Deferred Stock may be granted, and Restricted Stock may not be sold or
granted, under the Plan after March 22, 2006.
16. Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
amend, suspend or terminate the Plan. The Committee may amend the Plan or any
Agreement issued hereunder to the extent necessary for any Option, Stock
Appreciation Right or Deferred Stock granted or Restricted Stock sold or granted
under the Plan to comply with applicable tax or securities laws. If Issuer
shall become a reporting company under the Exchange Act and if the Board
determines that the approval of the stockholders of Issuer is advisable and
necessary for compliance with Exchange Act Rule 16b-3 or Section 162(m) of the
Code, or any successor or similar rule or regulation, no such action of the
Board or the Committee shall be permitted unless taken with or ratified by
such approval.
No Option, Stock Appreciation Right or Deferred Stock may be granted
or Restricted Stock sold or granted during any suspension of the Plan or after
the termination of the Plan. No amendment, suspension or termination of the
Plan or of any Agreement issued hereunder shall, without the consent of the
affected holder of such Option, Stock Appreciation Right, Deferred Stock or
Restricted Stock, alter or impair any fights or obligations in and Option,
Stock Appreciation Right, Deferred Stock or Restricted Stock theretofore
granted or sold to such holder under the Plan.
17. Nature of Plan. This Plan is intended to qualify as a
--------------
compensatory benefit plan within the meaning of Rule 701 under the Securities
Act of 1933. This Plan is intended to constitute an unfunded arrangement for a
select group of management or other key persons.
18. Cancellation of Options. Any Option granted under the Plan may
-----------------------
be canceled at any time with the consent of the holder and a new Option may be
granted to such holder in lieu thereof.
5
<PAGE>
19. Withholding Taxes. Whenever Shares are to be issued with respect
-----------------
to the exercise of Options or amounts are to be paid or income earned with
respect to Stock Appreciation Rights, Deferred Stock or Restricted Stock under
the Plan, the Committee in its discretion may require the Participant to remit
to Issuer, prior to the delivery of any certificate or certificates for such
Shares or the payment of any such amounts, all or any part of the amount
determined in the Committee's discretion to be sufficient to satisfy federal,
state and local withholding tax obligations (the "Withholding Obligation") that
Issuer or its counsel determines may arise with respect to such exercise,
issuance or payment. Pursuant to a procedure established by the Committee or as
set forth in the Agreement, the Participant may (i) request Issuer to withhold
delivery of a sufficient number of Shares or a sufficient amount of the
Participant's compensation, or (ii) deliver a sufficient number of previously
issued Shares, to satisfy the withholding Obligation.
6
<PAGE>
EXHIBIT 2
EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTIZATION
(IN THOUSANDS OF DOLLARS)
(A) (B) (C)
Cumulative Adjustment
Fiscal Year Target Target Factor
----------- ------ ------ --------
1996 38,581 7,934
1997 44,724 83,305 8,794
1998 51,977 135,282 7,477
1999 58,025 193,307 7,977
2000 64,535 257,842 8,154
Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined as Consolidated Net Income (loss) of Issuer and its
subsidiaries as it would appear on a statement of income (loss), which shall
reflect a reduction for all management and employee bonuses payable with respect
to the Fiscal Year, of consolidated Issuer prepared in accordance with U.S.
GAAP, consistently applied; plus (minus), to the extent such amounts are
otherwise taken into account in determining EBITDA (prior to adjustment), the
following:
1. Any provision (benefit) for taxes (including franchise taxes)
deducted (added) in calculating such consolidated net income (loss); plus
2. Any interest expense (net of interest income) deducted in
calculating such consolidated net income (loss); (minus)
3. Costs charged against any purchase accounting reserves
established in connection with the acquisition; (minus)
4. The effects of the reversal of any excess purchase accounting
reserves established in connection with the acquisition; plus
5. Amortization expenses deducted in calculating consolidated net
income (loss); plus
6. Depreciation expenses deducted in calculating consolidated net
income (loss); plus
7. Management fees paid to Investcorp; plus (minus)
8. Any unusual losses (gains) deducted (added) in calculating
consolidated net income (loss). (Unusual items are intended to include
transactions considered outside the
7
<PAGE>
ordinary course of business. EBITDA will be adjusted to eliminate the
effects, if any, of such transactions, the intent being to calculate EBITDA as
if such transactions had not occurred); plus (minus)
9. Any compensation expense (income) deducted (added) in calculating
consolidated net income (loss) attributable to transactions involving equity
securities of Issuer or its subsidiaries; plus
10. SWIFT and UNITE expenses to the extent such amount is not
duplicated above; minus
11. The amount of the adjustment factor set forth in column
(C) above.
EBITDA shall be determined based upon the Bank Case Financial Model dated
February 22, 1996 (2:55 p.m.). The Optionee and his or her representative shall
be provided reasonable opportunity to review the computation of EBITDA and
reasonable access to the data and information supporting such computation, but
the Board's determination shall be conclusive and binding.
8
Exhibit 10.20
SIMMONS COMPANY
LOS ANGELES, CALIFORNIA
and
TEAMSTERS LOCAL 986
AUGUST 1, 1995 TO AUGUST 1, 1998
---- ----
1
<PAGE>
CONTENTS
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
- --------- -
ARTICLE I., DESIGNATION OF BARGAINING AGENCY AND JURISDICTION 4
- ---------- --------------------------------------------------- -
ARTICLE II., GENERAL CONDITIONS . . . . . . . . . . . . . . . 5
- -------------------------------- -
ARTICLE III., DUES DEDUCTION . . . . . . . . . . . . . . . . . 6
- ---------------------------- -
ARTICLE IV., UNION SHOP . . . . . . . . . . . . . . . . . . . . 6
- ----------------------- -
ARTICLE V., OVERTIME . . . . . . . . . . . . . . . . . . . . . 8
- -------------------- -
ARTICLE VI., NEW EQUIPMENT . . . . . . . . . . . . . . . . . . 10
- -------------------------- --
ARTICLE VII., TRANSPORTATION PAY . . . . . . . . . . . . . . . 10
- --------------------------------- --
ARTICLE VIII., TRANSFER . . . . . . . . . . . . . . . . . . . . 10
- ----------------------- --
ARTICLE IX., JOB BIDDING PROMOTIONS . . . . . . . . . . . . . . 11
- ----------------------------------- --
ARTICLE X., DISCHARGE, LAYOFF, LEAVE OF ABSENCE, SENIORITY . . 13
- ---------------------------------------------------------- --
ARTICLE XI., TEAMSTERS PREROGATIVE . . . . . . . . . . . . . . 16
- ---------------------------------- --
ARTICLE XII., HOLIDAYS . . . . . . . . . . . . . . . . . . . . 16
- ---------------------- --
ARTICLE XIII., VACATION . . . . . . . . . . . . . . . . . . . . 17
- ----------------------- --
ARTICLE XIV., SICK LEAVE . . . . . . . , . . . . . . . . . . 19
- ------------------------ --
ARTICLE XV., HEALTH AND WELFARE PLAN . . . . . . . . . . . . . 20
- -------------------------------------- --
ARTICLE XVI., DENTAL PLAN . . . . . . . . . . . . . . . . . . . 20
- ------------------------- --
ARTICLE XVII., PRESCRIPTION DRUG PLAN . . . . . . . . . . . . . 20
- ------------------------------------- --
ARTICLE XVIII., DEATH BENEFIT PLAN . . . . . . . . . . . . . . 20
- ---------------------------------- --
ARTICLE XIX., LIMITED MAINTENANCE OF BENEFITS FOR HEALTH AND
- -------------------------------------------------------------
WELFARE, DENTAL, PRESCRIPTION & DEATH BENEFITS
----------------------------------------------
PLANS . . . . . . . . . . . . . . . . . . . . . . 20
----- --
ARTICLE XX., PENSION PLAN . . . . . . . . . . . . . . . . . . . 21
- ------------------------- --
ARTICLE XVI., GRIEVANCE AND ARBITRATION PROCEDURE . . . . . . . 21
- ------------------------------------------------- --
ARTICLE XXII., PROTECTION OF RIGHTS . . . . . . . . . . . . . . . 23
- ----------------------------------- --
ARTICLE XXIII., STRIKES, STOPPAGES AND LOCKOUTS . . . . . . . . 23
- ---------------------------------------------- --
ARTICLE XXIV., MANAGEMENT RIGHTS . . . . . . . . . . . . . . . 24
- -------------------------------- --
ARTICLE XXV., JURY DUTY . . . . . . . . . . . . . . . . . . . . 25
- ----------------------- --
ARTICLE XXVI., JOB CLASSIFICATIONS AND WAGE RATES . . . . . . . 25
- ------------------------------------------------- --
2
<PAGE>
ARTICLE XXVII., LONG LINE PROVISIONS . . . . . . . . . . . . . 25
- ------------------------------------ --
ARTICLE XXVIII., UNIFORMS . . . . . . . . . . . . . . . . . . . 28
- ------------------------- --
ARTICLE XXIX., TERM OF AGREEMENT . . . . . . . . . . . . . . . 29
- ------------------------------- --
ARTICLE XXX., ROTATION-DRIVERS . . . . . . . . . . . . . . . . . 29
- ------------------------------- --
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
- ----------- --
APPENDIX "A" . . . . . . . . . . . . . . . . . . . . . . . . . . 31
- ------------- --
APPENDIX "B" . . . . . . . . . . . . . . . . . . . . . . . . . . 34
- ------------- --
APPENDIX "C" . . . . . . . . . . . . . . . . . . . . . . . . . . 35
- ------------- --
3
<PAGE>
SIMMONS COMPANY
AND
TEAMSTERS LOCAL 986
PREAMBLE
--------
THIS AGREEMENT is made and entered into as of this first day of August,
1995, at Los Angeles, California by and between SIMMONS COMPANY, hereinafter
referred to as the "Employer" and Miscellaneous Warehousemen, Drivers and
Helpers Union Local No. 986, affiliated with the International Brotherhood of
Teamsters, hereinafter referred to as the "Union," whose jurisdiction comprises
the Los Angeles and Southern California area.
The general purpose for this Agreement is to maintain harmony, cooperation
and understanding between the Employer and the Union; to provide efficient and
economical operation of the Employer's plants; to provide for the protection of
the plant and property, and the rights and privileges of the Union's members.
The Union and the Employer agree that every effort will be made to
administer this Agreement in accordance with the true intent of its terms and
provisions to the end of maintaining sound labor relations. The parties hereto
intend by this Agreement to provide a stabilized relationship between them and
to insure uninterrupted production during the life of said Agreement.
ARTICLE I., DESIGNATION OF BARGAINING AGENCY AND JURISDICTION
----------
1. The Employer recognizes the Union as the sole and exclusive bargaining
agent for all Employees described in Appendix "A" of this Agreement.
"Supervisors" as used in this contract are members of management and will
not be represented by the bargaining unit.
2. "Employees," as used in paragraph 1 above, are defined as those who
regularly perform the duties in the classifications listed in Appendix
"A".
4
<PAGE>
ARTICLE II., GENERAL CONDITIONS
-----------
1. The Employer agrees not to interfere in matters which are solely the
functions of the Union, and the Union agrees not to interfere in matters
which are solely the functions of the Employer.
2. The Union agrees that it will:
(a) Cooperate to maintain high standards of workmanship and job
performance.
(b) Cooperate with the Employer in maintaining efficiency and discipline
and avoiding tardiness, absenteeism and loafing.
(c) Comply with plant rules, regulations and policies.
(d) Cooperate to keep at a minimum the time devoted by officers, stewards
and members in handling grievances.
(e) Not solicit Union members, Union dues or engage in other Union
activities on the Employer's property during working hours without
first obtaining permission from the Employer's office.
3. No side letters or memorandums of agreement dated prior to the date of
this contract shall be binding on the Company or on the Union.
4. Clean Restroom: The Employer and its Employees recognize their mutual
obligation to maintain clean restrooms, and not to write on or otherwise
deface restroom walls or fixtures.
5. Any Employee found to be working for another Employer in the industry in
addition to his regular job with the Employer signatory to this Agreement
may be given his choice of either quitting the other job or being
terminated.
6. All references in this Agreement to the masculine gender shall include the
feminine gender, and vice versa.
5
<PAGE>
ARTICLE III., DUES DEDUCTION
------------
1. Upon presentation of proper authorization signed by the Employees, the
Employer agrees to deduct from the last paycheck of each month Union dues
for the next succeeding month, and further agrees immediately to submit a
list of such deductions accompanied by a check to the Union not later than
the fifteenth (15th) day of each current month. The Employer further
agrees to abide by similar authorizations permitting deduction of
initiation fees and agrees immediately to submit such initiation fees to
the Union.
2. The Union agrees to indemnify the Employer and make it whole against any
claim or action arising out of the Employer's compliance with the
provisions of this Article.
ARTICLE IV., UNION SHOP
------------
1. The Employer and the Union agree that all Employees covered by this
Agreement shall become and remain members of the Union in good standing as
a condition of employment thirty-one (31) days from the date of
employment. The first forty-five (45) days shall be deemed a probationary
period, and the Employer shall have the right to discharge any Employee
within the forty-five (45) day period.
2. Whenever the Employer requires additional Employees for work covered by
this Agreement, the Employer may first call upon the Union to supply
experienced help. In case the Union is unable to supply members acceptable
to the Employer, he may employ from any source available, provided that
all non-union Employees must make application and become members in good
standing thirty-one (31) days from the date of employment. Nothing
contained herein, however, shall be construed to mean that the Employer
shall first call upon the Union for such Employees. If such Employees are
found by the Union to be qualified persons for membership, the Union
agrees to accept such Employees as members of the Union.
6
<PAGE>
3. Upon notice by the Union that any Employee is not in good standing the
Employer shall have a maximum of five (5) days to replace such Employee.
Such replacements shall be employed in accordance with the provisions of
this Agreement applying to new Employees.
4. The Union agrees to indemnify the Employer and make it whole against any
claim or action arising out of the Employer's compliance with the
provisions of this Article.
5. Temp/Part-time Employees: The Company has the right to hire part-time and
temporary employees based on the following:
Part-time Employees will receive holiday pay based on their average daily
pay for the month that the holiday falls in. If scheduled to work the day
before and/or after the holiday, he must do so in order to receive the
holiday pay. The Company will make contributions to the pension plan as
provided in this agreement. The Company will not employ part-time
employees on days when we do not have eight (8) hours scheduled for all
employees and no employees are on layoff. This guarantee shall not apply
where no work is possible because of an act of God or an emergency beyond
the control of the Company. A part-time employee is one who is hired to
regularly work less than the number of hours established as the regular
work week in this agreement. If a full-time, permanent position becomes
available, first consideration will be given to part-time employees.
The Company can employ a temporary employee until the determination is
made that the position is permanent or at the end of six (6) months,
whichever comes first. The Company will not employ temporary employees on
days when we do not have eight hours scheduled for all employees and no
employees, including part-time employees, are on layoff. This guarantee
shall not apply where no work is possible because of an act of God, or an
emergency beyond the control of the Company. If a full-time, permanent
position becomes available, first consideration will be given to part-time
employees.
7
<PAGE>
ARTICLE V., OVERTIME
----------
1. There shall be a guarantee of four (4) hours work or pay for any Employee
who comes to work who has not been informed the day before not to come to
work, except that where no work is possible because of an Act of God or
other conditions beyond the control of the Employer, this guarantee shall
not apply. The guarantee is based on the provision that no casuals are
working on that day. As to Saturday, the guarantee shall be four (4) hours
instead of eight (8) hours if the Employee is not absent from work during
the work week at the direction of the Employer. Failure to notify an
Employee not to report to work on a regularly scheduled work day shall be
considered an order to report to work, unless the Employer attempted to
contact the Employee and was unsuccessful because the Employee had not
provided the Employer with his or her current telephone number or address.
2. Employees shall receive time-and-one-half (1-1/2) of his straight-time
rate for authorized hours worked:
In excess of eight (8) hours in any one (1) day and in excess of forty
(40) hours in any one (1) week. A shift premium of fifteen cents
(15 cents) per hour will be paid for hours worked prior to regular
starting time or after regular time.
3. Whenever reasonably possible, the Employer will notify Employees of the
need to work overtime at least one (1) hour prior to the end of their
regularly scheduled shift. Overtime offered on less than one (1) hour's
notice is not mandatory.
4. All work performed on Saturday shall be paid for at one-and-one-half
(1-1/2) times the regular straight-time hourly rate provided the Employee
has worked all of the hours scheduled for him during five (5) days prior
to such Saturday work. First shift Employees scheduled for Saturday work
shall be notified not later than two (2) hours before the end of their
shift on the preceding Friday. Employees on second shift shall be notified
of Saturday work within the first hour of their shift on the preceding
Friday.
8
<PAGE>
Overtime will be assigned by seniority within classification. However as
it relates to all classifications, the GE rule shall apply. (The GE Rule
means that the Employees with the most seniority can refuse overtime,
provided that Employees with less seniority cannot refuse overtime if they
are qualified to perform the work. If the Employee with the most seniority
is the only one qualified, he or she cannot refuse the overtime).
5. It is understood that the Union will negotiate schedules providing for
starting times prior to 6:00 a.m., for the Employer when operations
require their Employees to begin their regular work shifts prior to 6:00
a.m.
6. The Employer shall have the right to institute a regularly scheduled swing
and/or graveyard shift. The starting time for such shifts shall be set by
agreement between the Union and the Employer according to the needs of
each individual Employer. A shift premium of fifteen cents (15 cents) per
hour will be paid for hours worked prior to regular starting time or after
regular time. Starting times will be as follows:
10:00 a.m. Checkers and Loaders
12:00 p.m. Checkers and Loaders
3:00 p.m. Checkers and Loaders
6:00 p.m. Checkers and Loaders
Starting times will be based on volume and can be flexed up to three (3)
hours before normal starting time with prior shift notice.
7. When an Employee in a single work week works at local and long
line driving for which different non-overtime rates of pay have
been established, his regular rate for that week is the weighted
average of such rates. That is, his total earnings are computed to
include his compensation during the work week from all such rates,
and are then divided by the total number of hours worked at all
jobs. Overtime compensation shall be computed based on such weighted
average.
9
<PAGE>
8. Notwithstanding any other section of this Article V, the Employer has the
right to alter work schedules so as to avoid premium pay in the event
Employer determines that federal, state or local laws or regulations call
for such altered schedules to achieve compliance. Before any such new
schedules are implemented a good faith attempt shall be made by the
parties to negotiate changes in the work schedules. If the parties fail to
agree, the reasonableness of the schedule and pay may be grieved under
Article XXI.
9. Pay for light duty or work hardening program will be sixty-six and two-
thirds percent (66-2/3%) of normal pay.
ARTICLE VI., NEW EQUIPMENT
-----------
1. The Employer recognizes its obligation to assign new equipment of the same
type used in the same classification to Employees occupying that
classification on a seniority basis, provided that new equipment need not
be assigned to any Employee more than once in any two (2) year period and
provided further that the Employer shall be the judge of an Employee's
skill and ability to operate the new equipment in a satisfactory manner.
This clause shall not operate to allow shortline drivers to operate
longline equipment or vice versa. The Employer agrees to maintain its
equipment for the safety of Employees.
ARTICLE VII., TRANSPORTATION PAY
------------
1. The Employer shall pay or provide transportation from warehouse at which
Employees are ordered to report to any other place of work during the day
and return to starting warehouse.
ARTICLE VIII., TRANSFER
-------------
1. Any Employee subject to this Agreement who is transferred during a day to
work carrying a lower rate of pay shall not have his pay reduced to that
of the lower classification.
10
<PAGE>
2. Any Employee, whether experienced or not, transferred to a higher rated
classification shall receive the higher rate for all time worked on such
higher rated classification, except where such transfer has been accepted
without the higher rate of pay by the Union Business Representative.
ARTICLE IX., JOB BIDDING PROMOTIONS
-----------
1. Notice of all permanent vacancies shall be posted on the bulletin board
for a period of twenty-four (24) hours prior to the vacancy being filled
on a permanent basis.
2. Regular Employees desiring to bid on the posted job must insert
their names in a bid box provided by the Employer during the above
twenty-four (24) hours. To be eligible to bid, an Employee must be
on the active payroll for a minimum of six (6) months. Once successful,
an employee may not bid again for a period of six (6) months unless the
parties mutually agree otherwise.
3. The selection of the Employee to fill the vacancy shall be based on skill,
ability, experience and seniority, subject to the grievance procedure. No
Employee bidding for a vacancy shall be discriminated against on the basis
of race or creed.
4. When requested by the Union, the name of the successful bidder will be
posted on the bulletin board.
5. The first thirty (30) calendar days in the new classification shall be
considered a trial period and the successful bidder shall have the right
to return to the position from which he bid if:
(a) He voluntarily requests the transfer within the first thirty (30)
calendar days.
(b) The Employer removes him from the position for failure to perform the
work in an acceptable manner.
11
<PAGE>
The Employer shall review the work performance of the bidding Employee
after fifteen (15) calendar days. If such performance is unacceptable, the
Employer may remove the Employee from the new position, subject to the
grievance and arbitration procedure.
6. The Employer agrees that no inexperienced person will be employed to fill
a vacancy pursuant to Section 1 when it has available Employees who desire
to qualify for the vacancy. Experienced persons my be hired to fill
vacancies for which they are qualified providing no qualified Employee is
available in the plant.
7. Within thirty (30) days after the signing of this Agreement, the Employer
shall post a seniority list on a bulletin board provided by the Employer,
with a copy to the Union, setting forth seniority for all Employees
covered by this Agreement. Provided no exception is filed by the Union
within a period of thirty (30) days after the posting of such notice, the
seniority of all such Employees shall be conclusively presumed to be the
correct seniority rating.
8. The classification of leadmen, and shipping and/or receiving clerks shall
not be subject to job bidding, either on a temporary or permanent basis,
regardless of whether the assignment is for the purpose of training for a
permanent position unless the bidding Employee has had prior experience in
that classification with the same Employer and the present ability
satisfactory to the Employer to perform the work.
9. Any dispute arising under this Article shall be subject to the grievance
procedure, providing the Union shall have the burden of proving that the
Employer's action was arbitrary and capricious.
12
<PAGE>
ARTICLE X., DISCHARGE, LAYOFF, LEAVE OF ABSENCE, SENIORITY
----------
1. The Employer shall be the judge of the skill, ability, competency
and qualifications of its Employees for all purposes under this
Agreement. Subject to the Employer's rights to determine the
competency and qualifications of its Employees, layoff of regular
Employees other than discharges, and recall of laid-off Employees to work
shall be made on the basis of seniority if the senior Employee has the
competency and qualifications for the job to be retained or filled,
including actual experience therein, unless such actual experience is not
required. The Employer's judgments are subject to the grievance and
arbitration procedure, provided the Union shall have the burden of proving
that such judgment(s) are arbitrary and capricious.
2. Progressive disciplinary action will be administered in the following four
steps:
(a) Corrective interview (verbal).
(b) First warning notice.
(c) Disciplinary suspension with statement that further infraction may
result in termination.
(d) Termination.
3. Each warning notice shall be void after fourteen (14) months from the date
of the warning notice. Serious infraction(s) which would justify any
disciplinary layoff shall not be construed to constitute a warning notice.
The Employer may discharge any regular Employee for cause, such as
drinking while on duty, proven dishonesty or failure to perform his work
in a satisfactory manner, possessing, using, selling or being under the
influence of intoxicants or narcotics on Company premises, bringing
weapons or explosives into or onto Company premises, violation of any
posted Company rules involving a major infraction; however, prior to the
discharging of any regular Employee, the Employer agrees to consult with
the Union representative first, provided, however, that no Employee shall
be discharged or discriminated against for upholding Union principles and
taking part in normal Union activities.
13
<PAGE>
4. An Employee with one (1) year or more of seniority shall retain
seniority for one year following his layoff. An Employee with less than
one (1) year of seniority shall retain seniority for a period of six (6)
months following his layoff.
5. A leave of absence may be granted to an Employee for personal reasons for
up to thirty (30) calendar days. A leave of absence will be granted for
bona fide illness or disability resulting from an off-the-job accident for
up to sixty (60) calendar days or FMLA provisions if applicable.
Extensions may be arranged by mutual agreement between the parties. A
leave of absence may be granted for disability resulting from an accident
---
compensable under the California Workers' Compensation law for up to one
(1) year. When an Employee is absent from work for an extended period of
time due to illness or accident, the Employer may require suitable proof
of such illness or accident. Suitable proof shall be a bona fide doctor's
release that the Employee is released for full duty in his regular
classification.
6. Seniority shall be based on length of continuous service with the
individual Company. If an Employee was not a member of Teamsters Local
986, but was an Employee that was transferred from United Steelworkers
Union Local 515 into Teamsters Local 986 by Simmons, the anniversary date
of that Employee with the Employer shall be used for the purpose of his
vacation and holidays only, and his seniority shall begin from the first
day he became a Teamster to denote his seniority with the Teamsters
jurisdiction. Sick leave eligibility shall be governed by Article XV.
7. Seniority shall control layoffs due to lack of work and recalls after such
layoffs. When there is an excess in any one classification, the least
senior Employee in that classification shall be laid off from that
classification. If he has greater seniority than any Employee in a lower
rated classification and possesses the skill, ability and experience
required in the lower-rated classification, he shall have the right to
bump the least senior Employee in such lower-rated classification. The
least senior Employee so bumped will be laid off.
14
<PAGE>
8. An Employee bumping into another classification shall have a reasonable
period of time, not to exceed ten (10) days, to demonstrate his
qualifications to perform the work required.
9. All seniority rights shall be lost:
(a) When an Employee quits.
(b) When an Employee is discharged for cause.
(c) When an Employee fails to return to work from layoff within four (4)
working days after the Employer's notice of recall is sent by
registered or certified mail to the last known address of such
Employee as shown in the Employer's records, unless circumstances
beyond his control such as illness or comparable legitimate cause
prevent him or his representative from giving notice of inability to
return, or he is required to give his current Employer severance
notice not to exceed five (5) consecutive working days. Each Employee
must keep the Employer and Union informed of his current mailing
address and telephone number.
(d) When an Employee is absent for two (2) consecutive working days
without advising the Employer's Operations Manager or his designee,
unless circumstances beyond his control such as illness or comparable
legitimate cause prevent him or his representative from giving such
notice.
(e) When an Employee overstays a leave of absence, unless the Employer
has given prior written authorization extending the leave of absence.
(f) When an Employee gives a false reason for obtaining a leave of
absence or engages in other unauthorized employment during such
leave.
(g) Upon the Employee's retirement.
10. An Employee failing to report to work for two (2) consecutive working days
without notifying the Employer shall be considered as having voluntarily
quit his job, unless circumstances beyond his control such as illness or
comparable legitimate cause prevent him or his representative from giving
such notice.
15
<PAGE>
11. This entire Article is subject to the grievance and arbitration procedure.
ARTICLE XI., TEAMSTERS PREROGATIVE
-----------
1. The parties intend to preserve the status as of the effective date of this
Agreement of Jurisdiction over work at the Compton/L.A. plant between
employees covered by this Agreement and Employees covered by any other
Collective Bargaining Agreement.
ARTICLE XII., HOLIDAYS
------------
1. All work performed on Sunday shall be paid for at double the regular rate
of pay. All work performed on the holidays listed below shall be paid for
at one-and-one-half (1-1/2) times the regular rate of pay, in addition to
the eight (8) hours holiday pay. The following are recognized as paid
holidays:
New Year's Day
Martin Luther King Jr. Day
Presidents' Day
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Day after Thanksgiving
Christmas Eve Day*
Christmas Day
*Unless Christmas falls on a Thursday in which case the Day after
Christmas will replace Christmas Eve.
2. When the Saturday holiday is not worked, an Employee shall be paid eight
(8) times his straight time hourly rate for such holiday. A Saturday
holiday not worked shall be considered as time worked for purposes of
computing overtime pay for work in excess of forty (40) hours during
16
<PAGE>
the week in which the holiday occurs. When a holiday falls on Sunday, the
following Monday shall be observed. Holidays falling on Saturday shall be
observed, at the discretion of the operations manager, on either the
preceding Friday or the following Monday.
3. If any holiday falls within fifteen (15) calendar days of an employee's
layoff, he shall be paid for a maximum of one (1) holiday, regardless of
his date of recall.
4. After thirty-one (31) calendar days of employment, an Employee shall
become eligible for holiday pay provided he has worked his last scheduled
day before such holiday and his first scheduled day after such holiday.
The requirements of this Section may be excused at the Employer's sole
option.
Employees who accept holiday work assignments and then fail to report for
and perform such work, without reasonable cause acceptable to the Company,
shall not receive holiday pay.
ARTICLE XIII., VACATION
------------
1. Each Employee shall receive one (1) week of vacation pay after one (1)
year of continuous service with the Employer.
Two (2) weeks vacation pay after two (2) years of continuous service with
the Employer.
Three (3) weeks vacation pay after nine (9) years of continuous service
with the Employer.
Four (4) weeks vacation pay after fifteen (15) years of continuous service
with the Employer.
Five (5) weeks vacation pay after twenty (20) years of continuous service
with the Employer.
Eligibility for full vacation shall include a minimum of sixteen hundred
and fifty (1650) hours per year actually worked. Pro rata vacation pay
shall be computed by dividing total hours worked by sixteen hundred and
fifty (1650) hours, excluding any month in which the Employee works less
than eighty-seven (87) hours.
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<PAGE>
2. A week of vacation as used here is understood to be forty (40) hours times
the straight-time hourly rate at time vacation is due.
3. In case of severance of employment either voluntary or by discharge, as
defined in Article X, Section 3, Employees shall be entitled to prorated
vacation computed as follows:
(a) There shall be no credit for such vacation for any time worked during
the first year of employment but, if termination occurs after one (1)
year, then six and two-thirds (6-2/3) hours pay for each full month
or major fraction thereof of time worked after the expiration of the
first year period shall be paid in lieu of vacation plus any unused
vacation not received on the anniversary date of an Employee's first
year. If the period of employment is over nine (9) years, then pay
for any unused and accrued regular annual vacation plus ten (10)
hours pay for each full month or major fraction thereof after the
anniversary date of employment shall be paid in lieu of vacation.
(b) If the period of employment is over fifteen (15) years, then pay for
any unused and accrued regular annual vacation, plus thirteen and
one-third (13-1/3rd) hours pay for each full month or major fraction
thereof after the anniversary date of employment shall be paid in
lieu of vacation.
(c) If the period of employment is over twenty (20) years, then pay for
any unused and accrued regular annual vacation, plus sixteen and two-
thirds (16-2/3) hours pay for each full month or major fraction
thereof after the anniversary date of employment shall be paid in
lieu of vacation.
(d) The major fraction of a month is eighty-seven (87) or more hours in
any month to receive any credit for that month.
4. In arranging vacations, the Employer may specify periods during which no
vacations may be taken on account of rush work and vacation shall be
taken, so far as possible, during slack periods. For vacation bidding
purposes, the Company will post the available vacation dates during the
second week of December for the following year. Vacation bidding will
commence
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<PAGE>
seven (7) days after such posting and will be bid on seniority basis. The
vacation bidding will be completed by January 15.
5. All Employees eligible for vacation has the option of taking vacation or
money in lieu thereof.
6. A paid holiday falling during the paid vacation period shall be paid for
in addition to vacation pay.
7. Vacation pay shall be computed on the basis of one-twelfth (1/12th) of
full vacation pay based on total seniority, for each month worked during
the vacation year. Layoffs up to three (3) months duration shall not
affect eligibility for prorated vacation pay.
8. Vacation pay earned by an Employee must be paid to him on his anniversary
date if the Employee so requests at least five (5) days in advance of his
anniversary date.
9. In no instance shall an Employee be entitled to more than three (3)
consecutive weeks of vacation at any given time.
ARTICLE XIV., SICK LEAVE
------------
1. An Employee must complete one full year of employment to his anniversary
date to be eligible for sick pay. On the first anniversary date he shall
be credited with six (6) days. Thereafter he shall earn one-half (1/2) day
for each full month worked to November 30. Each year on November 30, an
Employee who has worked more than one year (1) may have his unused sick
leave paid off (payable on December 15), but may elect to carry over up to
six (6) earned days. No sick leave shall be payable for absences on
Mondays or Fridays.
On December 1 of each year each Employee who has over one (1) year of
seniority shall be credited with six (6) days of sick leave.
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<PAGE>
ARTICLE XV., HEALTH AND WELFARE PLAN
-----------
1. Health and Welfare benefits for all Employees covered by this Agreement
shall be as set forth in Appendix "B" attached hereto and made a part of
this Agreement.
2. Dependent Vision Care for all Employees covered by this Agreement shall be
as set forth in Appendix "B" attached hereto and made a part of this
Agreement.
ARTICLE XVI., DENTAL PLAN
------------
1. Dental benefits for all Employees covered by this Agreement shall be as
set forth in Appendix "B" attached hereto and made a part of this
Agreement.
ARTICLE XVII., PRESCRIPTION DRUG PLAN
-------------
1. Prescription Drug benefits for all Employees covered by this Agreement
shall be as set forth in Appendix "B" attached hereto and made a part of
this Agreement.
ARTICLE XVIII., DEATH BENEFIT PLAN
--------------
1. Death benefits for all Employees covered by this Agreement shall be as set
forth in Appendix "B" attached hereto and made a part of this Agreement.
ARTICLE XIX., LIMITED MAINTENANCE OF BENEFITS FOR HEALTH AND
-------------
WELFARE, DENTAL, PRESCRIPTION AND DEATH BENEFIT PLANS
1. Company contribution will be two-hundred-fifty-five dollars ($255.00) per
month effective October 1, 1995 for MOB.
Effective October 1, 1997 Company contribution will be two-hundred-sixty-
five dollars ($265.00) per month for MOB.
Deductions from employee will be made weekly and will be on a pre-tax
basis.
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ARTICLE XX., PENSION PLAN
-----------
1. A Pension Plan for all Employees covered by this Agreement shall be as set
forth in Appendix "C" attached hereto and made a part of this Agreement.
ARTICLE XXI., GRIEVANCE AND ARBITRATION PROCEDURE
------------
1. Any regular Employee in the bargaining unit who has any alleged grievance,
dispute or difference including discharge from employment, respecting the
interpretation, intent or meaning of this Agreement shall discuss same
with his department head within forty-eight (48) hours from the date of
the occurrence of the event giving rise to the allegation. If he so
desires, the Employee may request the presence of the steward for this
discussion. If the matter is not settled satisfactorily to the employee,
then the matter shall be reduced to writing and presented to the
Operations Manager or his designated representative and the Union Business
Representative by the steward or the Employee, as the case may be, within
the next two (2) working days after such discussion with the department
head.
2. If an Employee signifies he does not want the steward to intercede for him
in the grievance procedure, he shall sign a waiver to that effect.
3. In the event an agreement cannot be reached between the Union Business
Representative, steward or the Employee, as the case may be, and the
Operations Manager or his designated representative within seven (7)
working days of the presentation of the written grievance to the
Operations Manager or his designee, then a request for arbitration must be
made in writing by the aggrieved party and be submitted to the other party
within ten (10) working days from the date of the presentation of the
written grievance to the Operations Manager or his designee.
4. If the dispute is with respect to the discharge of an Employee, the
written notice with respect thereto must be given to the Operations
Manager or his designee within two (2) working days
21
<PAGE>
after the discharge, and if not adjusted between the parties, any request
for arbitration must be given in writing to the Employer within seven (7)
working days from the date of the discharge.
5. If the parties cannot agree upon an arbitrator to whom such dispute shall
be referred within five (5) working days after such request for
arbitration is made, the Union and the Employer shall jointly request the
Federal Mediation and Conciliation Service to submit a list of seven (7)
names of qualified arbitrators. From this list, each party shall strike
three (3) in alternation with the party striking the first name to be
determined by lot. The remaining name will be empowered as the arbitrator.
6. The decision of the arbitrator shall be final and binding upon each party,
however, the arbitrator shall not have the power to add to, subtract from
or in any way modify the terms of this Agreement, and shall limit his
decision strictly to the interpretation of the language of this Agreement.
In the event an arbitrator awards backpay, he shall reduce such award by
all earnings received by the aggrieved party, including unemployment
compensation, during the period of the award. The expense of the
arbitrator shall be shared equally between the Employer and Union. Any
grievance which is submitted after the time limits set forth above have
expired or any step in the grievance procedure which is not carried out
within the time limits also set forth above, shall be forfeited and waived
by the aggrieved party. Arbitrators are restricted to contractual remedies
not punitive.
7. Time limits may be extended only by mutual agreement in writing signed by
both parties.
8. The express stated time limits in this Article shall be controlling in all
circumstances. Subsequent discussion(s) between the parties concerning the
issue(s) or person(s) involved in the circumstances which give rise to the
grievance shall not be construed by any party, court or arbitrator as
constituting a waiver of any party's right to rely on the express stated
time limits or to rely on any provision that any matter be reduced to
writing, unless the Employer expressly waives, in writing, its rights to
rely on all such provisions prior to continuing any discussions for
22
<PAGE>
the express purpose of negotiating a settlement of the grievance. Unless
otherwise specified herein, no court or arbitrator shall have any power,
authority or jurisdiction to construe this Article, including Section 7,
in any manner which would deprive any party of its right to insist upon
full performance of the requirements contained therein.
ARTICLE XXII., PROTECTION OF RIGHTS
-------------
1. The Union is not in favor of sympathetic strikes and will do everything in
its power to prevent them.
2. The undersigned Employer hereby agrees that no Employee shall be
discharged, or discriminated against in any manner for upholding Union
principles. It shall be the individual right of each Employee to determine
within his own conscience whether to recognize a primary picket line which
has been sanctioned by the Teamsters Joint Council and/or AFL-CIO Central
Labor Body in the area where such picket lines exist.
ARTICLE XXIII., STRIKES, STOPPAGES AND LOCKOUTS
--------------
1. Through the duration of this Agreement, there shall be no strikes,
stoppages, slowdowns, sitdowns, picketing, boycotts, sympathy strikes or
other interference or interruption of production by Employees,
collectively or individually, or by the Union.
2. The Employer shall not lock-out Employees for the duration of this
Agreement.
3. Neither the violation of any provision of this Agreement nor the
commission of any act constituted an unfair labor practice, or otherwise
made unlawful by any federal, state or local law or ordinance, shall
excuse the Employees, the Union or the Employer from their obligation
under the provisions of this Article.
23
<PAGE>
4. Employees who engage in conduct prohibited by this Article shall be
subject to disciplinary action by the Employer, up to and including
discharge, and only the question of the Employee's participation in the
prohibited conduct is subject to the grievance and arbitration procedure.
5. It is expressly understood, however, that this Article dealing with
strikes and lockouts shall not be applicable in cases where the Employer
is delinquent in payments of Health and Welfare, Dental, Prescriptions,
Death Benefit, Pension, Dues Checkoff, in which case the Union retains the
right to strike to enforce payment of such delinquencies as provided in
Appendices "A", "B", and "C." The Union shall not take economic action
pursuant to this section unless the Employer has received a written
notification by registered mail or hand-delivered from the Union that
economic action will be taken on or after thirty (30) calendar days from
the date the letter was mailed or hand-delivered unless the delinquency is
satisfied within the above time period.
ARTICLE XXIV., MANAGEMENT RIGHTS
-------------
1. The Union recognizes that the management of the Employer's operations and
the direction of the working force remain exclusively in the Employer, and
this shall include, but shall not be limited to, the rights to: determine
the size of the work force and the number of Employees, if any, assigned
to any classification; introduce new equipment, machinery, and procedures
and to modify and terminate the use of existing equipment, machinery and
procedures; direct the Employees including but not limited to rights to
promote, demote, layoff, recall, transfer, and classify Employees;
discipline, suspend and discharge for just cause regular full-time
Employees; assign work to Employees outside of their normal
classification(s); formulate financial and accounting procedures;
determine the products to be manufactured and sold, including research and
development; and determine when and whether overtime shall be worked,
provided that the exercise of the foregoing shall not conflict with any of
the express provisions of this Agreement.
2. As regards contracting out or subleasing of work, it shall be understood
and agreed that this shall not be done until after good faith bargaining
with the Union. If agreement fails, the Union shall have the right to
terminate this Agreement as to the Employer involved.
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<PAGE>
ARTICLE XXV., JURY DUTY
------------
1. Any regular Employee who is called to serve on a jury and thereby is
unable to perform his regularly scheduled work shall, on submission of
proper evidence, be paid a sum of money equal to the difference between
his straight-time hourly earnings for the actual time lost and the pay he
receives as a juror, but not to exceed eight (8) hours per day or forty
(40) hours per week for a maximum of one-hundred-twenty (120) hours per
twelve (12) months per Employee if Superior Court jury duty is involved
and eighty (80) hours per twelve (12) months per Employee if Municipal
Court jury duty is required.
2. In the event any Employee is released from jury duty one (1) hour or more
prior to the end of his regularly scheduled shift; the Employee shall
immediately notify the Employer by telephone and the Employer shall have
the option of having the Employee return to work for the balance of the
shift or of paying him the sum of money as provided above.
3. To qualify, an Employee must give the Employer the notice to report for
jury duty within two (2) working days from the date of receipt of the
notice. The Employer reserves the right to request any Employee's excuse
from jury duty.
ARTICLE XXVI., JOB CLASSIFICATIONS AND WAGE RATES
-------------
1. Job classifications and wage rates for all Employees covered by this
Agreement shall be as set forth in Appendix "A" attached hereto and made a
part of this Agreement.
ARTICLE XXVII., LONG LINE PROVISIONS
--------------
1. The following shall cover long line operations. The Employer shall have
the right to use hourly or mileage rates as they relate to the Master
Freight Agreement. If mileage is used, then it shall be understood and
agreed that it shall be equal to but not more than the hourly rate,
including but not limited to overtime, breakdown, impassable roads, forced
layovers, etc:
25
<PAGE>
Regular Contract Rates
----------------------
8-1-92
-----------
(A) The following hourly
rates shall be applicable $12.865
(B) Single Man
operations per mile .299119
(C) Sleeper Cab Operators
Other than doubles
per mile .307916
Doubles per mile .31764
Pursuant to Appendix "A", Section 5 which provides a two dollar ($2.00) per hour
lesser rate for new hires hired after August 1, 1986, the following shall be the
long line rates for Employees hired after August 1, 1986:
Rates For Those Hired After 8/1/86
8-9-91
------------
Hourly Rates $11.115 $10.865
(a) Single man Operations: .25925
(b) Sleep Cab: .268
Doubles per mile: .27782
After every one-hundred-eighty (180) days of service an Employee hired
after August 1, 1986 shall have his hourly rate increased by thirty-four
cents (34 cents) per hour or .0666 cents per mile, until the "regular
contract rates" are reached. Effective August 1, 1990, after every one-
hundred-eighty (180) days of service an Employee hired after August 1, 1986
shall have his hourly rate increased by thirty-four point six cents ($.346)
per hour or .00679 cents per mile.
2. When a long line driver has worked in excess of forty (40) hours in any
calendar week, he shall be paid at the rate of time-and-one-half (1-1/2)
for all work performed in excess of forty (40) hours.
26
<PAGE>
3. In addition to the above, the following conditions shall apply to the long
line operations only:
(a) It is agreed that any job requiring the driver to be away from home
overnight or out of the city after midnight shall be a long line haul,
and work on the job shall be paid for at the rate hereinabove
mentioned.
(b) When two (2) men are used in an operation, one (1) man shall be
designated as the driver and shall receive not less than the
classified rate for all time worked. The second man or helper, shall
receive ten cents (10 cents) per hour less than the driver for all
time. If for any reason it becomes necessary during a trip to
designate the helper as the man responsible for the operation of the
trip, he shall receive not less than the driver's rate for all time
worked.
4. When drivers and helpers are held away from their home terminal overnight
or for their rest period, they shall be compensated on the following basis:
(a) Sixteen (16) hours after arrival the hourly rate shall be paid until
the driver is put to work, but not to exceed eight (8) hours pay. The
sixteen (16) hour period shall start after the hours paid for have
elapsed.
(b) For any and all subsequent work days of twenty-four (24) hours each,
the drivers shall receive a minimum day's pay of eight (8) hours, or
be deadheaded to their home terminal or breaking point.
(c) When a layover falls on a Sunday or other holiday (as set forth in
Article XII) the driver shall be paid subsistence in an amount equal
to the cost of meals and lodging for such Sunday or other holiday.
(d) All deadheading shall be paid at the regular rate of hourly pay.
(e) All drivers covered herein shall be compensated from the time they are
ordered to report for duty at the home terminal.
(f) Subsistence per night shall be paid drivers when they are away from
their home terminal in an amount equal to the reasonable cost of meals
and lodging. The Employer shall have the right to request any driver
to verify subsistence claims with appropriate receipts acknowledging
the driver's payment of reasonable expenses for meals and lodging.
27
<PAGE>
Whether expenses are unreasonable in a given case shall be determined
by the Employer's past practice with the Employee, the run and any
extenuating circumstances that caused the higher expenses.
(g) Layover at any shuttle point not located in a city or town with
sleeping accommodations shall be paid for at driver's regular rate of
hourly pay.
(h) When delays occur by reason of mechanical failure, wrecks or blockades
and the driver is held at the point of delay, the driver, while
required to remain with the vehicle(s) which he is driving, shall be
compensated at the full hourly rate during such delay.
(i) When a driver on mileage is required to make deliveries in any city or
town, he shall be compensated at the full hourly rate for all hours
from the time he starts his first delivery in the city or town until
he completes his last delivery in the city or town, excluding meal
periods, layovers and any other non-working time.
ARTICLE XXVIII., UNIFORMS
---------------
1. The Employer agrees that if any Employee is required to wear any kind of
uniform as a condition of his continued employment, such uniform shall be
furnished and maintained by the Employer free of charge at the standard
required by the Employer.
2. A reasonable deposit may be required as security for the return of such
uniform(s) furnished by the Employer and the Employer shall issue a receipt
to the Employee for such deposit. All items furnished by the Employer shall
be returned by the Employee upon the termination of his employment.
3. As an alternative to Section 2 above, the Employer may elect to have the
Employee sign a written authorization to the effect that the Employer may
deduct from the Employee's last pay check a sum representing the equivalent
value of the uniform(s), unless such Employee returns such uniform(s) in
reasonable condition, with reasonable wear and tear excepted.
28
<PAGE>
ARTICLE XXIX., TERM OF AGREEMENT
-------------
1. THIS AGREEMENT shall remain in full force and effect from August 1, 1995 to
August 1, 1998 and shall continue from year to year thereafter, unless
either party wishes to change, amend or terminate by giving sixty (60) days
notice prior to August 1, 1998.
ARTICLE XXX., ROTATION-DRIVERS
------------
1. The Company can designate eight (8) routes which must be driven once a
month by at least six different drivers. With this exception, the GE rule
will apply on overtime.
29
<PAGE>
SIGNATURES:
IN WITNESS WHEREOF, the parties to this Agreement have hereunto set their hands
and seals this 20th day of February, 1996.
---- --------
MISCELLANEOUS WAREHOUSEMEN,
DRIVERS AND HELPERS UNION
LOCAL 986, an affiliate of
the International Brotherhood
of Teamsters
SIMMONS COMPANY
BY /s/ BY /s/ Ken Barton
--------------------------- -----------------------------
Ken Barton
Senior Vice President
Human Resources
30
<PAGE>
APPENDIX "A"
JOB CLASSIFICATIONS AND WAGE RATES
----------------------------------
1. Employees shall receive time-and-one-half (1-1/2) of his straight time rate
for authorized hours worked in excess of eight (8) hours in any one (1) day
and in excess of forty (40) hours in any one (1) week. A shift premium of
fifteen cents ($.15) per hour will be paid for hours worked prior to
regular starting time or after regular time.
2. The following shall be the minimum hourly wage rates paid for local
operations:
CLASSIFICATIONS WAGES RATES HOUR EFFECTIVE
------------------------ --------------------------
8-1-95 8-1-96 8-1-97
------ ------ ------
Drivers-trucks 12.81 13.01 13.21
Tow Motor & Lift Drivers 12.535 12.685 12.835
Lumber Fork Lift Operators 12.435 12.585 12.735
Checkers/Loaders/Forklift Operator 12.595 12.745 12.895
Warehouse Persons 11.51 11.66 11.81
Drivers Helpers 11.51 11.66 11.81
Shipping and/or Receiving Clerks 13.04 13.19 13.34
Lineman 9.50 9.65 9.80
4. Driver-Semi is defined as a driver of three (3) axle semi trailer.
5. Shipping Clerks who do not work more than twenty percent (20%) of the time
on the same work as the persons they supervise shall not be subject to this
Agreement.
31
<PAGE>
6. The hiring in rate for new personnel hired after August 1, 1986, shall be
two dollars ($2.00) per hour less than the contract classification rate,
but thereafter following every one-hundred-eighty (180) calendar day period
they shall be increased by thirty-four cents (34 cents) per hour until the
rate is reached for the classification in which they are to work. Effective
August 1, 1990 the increase shall be thirty-four point six cents (.346) per
hour until the rate is reached for the classification in which they are to
work.
7. Lead persons shall be paid ten cents (10 cents) per hour above the contract
rate covering those classifications whose work such lead persons are
leading.
8. If it becomes necessary to add, change or combine classifications, Simmons
Company will initially set rates of pay based on existing classifications.
In the event the Company cannot reach an agreement with the Union with
regard to setting rates of pay within fourteen (14) days, the matter will
go to arbitration where the arbitrator will set the rate.
9. In order for the Company to attain flexibility with respect to handling the
receiving of goods or raw materials in the most cost effective manner, the
Company reserves the right to schedule or assign receiving work for up to
six (6) man hours per week to employees who are covered by the Company's
collective bargaining agreement with the United International Upholsterers
Union Local 515.
10. Cross Utilization--The parties agree that providing the Employer with
flexibility in performing the functions needed to manufacture and ship its
product is in the best interest of both the Company and the Union. As a
result, notwithstanding any other provision of this contract, the Company
may, in its sole discretion, utilize employees represented by the Teamsters
to perform work of classifications represented by the Upholstery Industries
Division of the United Steelworkers, provided that the use of such people
to perform such work does not cause the layoff of any person currently
employed in such classification to which the employee is being
32
<PAGE>
borrowed. With respect to retirement and termination of employment, this
process will not be used to reduce the number of permanent employees in the
Teamsters bargaining unit.
33
<PAGE>
APPENDIX "B"
HEALTH and WELFARE, LIFE INSURANCE, DENTAL,
PRESCRIPTION and VISION BENEFITS
Effective October 1, 1995, Company contribution will be two-hundred-fifty-five
dollars ($255.00) per month for the first year for the following benefits:
Health & welfare, dental, prescription, vision and death. Employee contribution
will be fourteen dollars and thirteen cents ($14.13) per week for the first
year. During first and second year, employer contribution remains at two-
hundred-fifty-five dollars ($255) and during the third year, employer
contribution will be two-hundred-sixty-five dollars ($265).
Section 1. The Company will, for the term of this Agreement, become a
- ----------
participant in a Taft Hartley Trust designated as the MULTI UNION SECURITY TRUST
FUND (MUST FUND) for the purpose of providing for the benefit of employees and
their dependents, payments for all of the following: Medical and Hospital
Insurance, Life Insurance, Dental Insurance, Prescription Drug Insurance and
Vision Insurance. The MUST Fund is comprised of a Board of Trustees on which
employees and employers are equally represented.
Section 2. The Company agrees to purchase Medical and Hospital benefits in
- ---------
Foundation Health Plan Summit 5 from the Trust Fund. The Company further agrees
to purchase Life Insurance, Dental Insurance, Prescription Drug Insurance and
Vision Insurance from the MUST Fund. The cost of these programs are Medical Plan
Foundation Health Summit 5--$235.80, $10,000.00 Life Insurance--$6.25, DHS
Dental Insurance--$30.00, Prescription Drug--$23.23, and Vision is $16.25 per
month per eligible employee.
Section 3. The parties recognize that because of circumstances beyond their
- ----------
control, premiums for such plans as are provided herein may change from time to
time; and inasmuch as it is the intention of the parties that the benefits
provided the employees and their dependents shall be maintained throughout the
term of this Agreement, it is agreed that the amount of the monthly payment
shall for the term of this Agreement be the amount as required by the Trustees
of the Fund to maintain the benefits of the plans selected. Any increase that
occurs on or after October 1, 1996 would be shared equally between the Company
and Employee.
34
<PAGE>
APPENDIX "C"
PENSION WITH PEER
-----------------
Commencing with the month of August 1, 1995, the Employer agrees to pay into
the Western Conference of Teamsters Pension Trust Fund, for the account of each
Employee working under this Agreement, a monthly sum computed as follows:
a. One-hundred-nineteen dollars and thirty-seven cents ($119.37) per
month for each Employee on the payroll during the full calendar month
who has worked one-hundred-sixty (160) hours or more during such
month.
b. For each Employee not covered under 'a' above, the payment shall be
computed at the rate of: The sum of sixty-nine cents (69 cents) for
each hour for which compensation is paid to him, said amounts to be
computed monthly.
The above contribution(s) are comprised of sixty-five cents (65 cents) for base
pension coverage and four cents (4 cents) for the purpose of providing the
PROGRAM FOR ENHANCED EARLY RETIREMENT (PEER), for the Bargaining Unit Employees.
The contributions required to provide the Program for Enhanced Early Retirement
will not be taken into consideration for benefit accrual purposes under the
Plan. The additional contribution for the PEER must be at all times 6.5% of the
basic contribution, and cannot be decreased or discontinued at any time.
Time paid for but not worked, such as holidays and vacation time, shall be
considered as time worked for the purpose of this paragraph.
The total amount due for each calendar month shall be remitted in a lump sum not
later than ten (1O) days after the last business day of such month. The
Employer agrees to abide by such rules as may be established by the Trustees of
said Trust Fund to facilitate the determination of the hours for which
contributions are due, the prompt and orderly collection of such amounts, and
the accurate reporting and recording of such hours and such amounts paid on
account of each member of the bargaining unit. Failure to make all payments
herein provided for, within the time specified, shall be a breach of this
Agreement.
All part-time employees will have pension contributions made by the Employer in
accordance with the Western Conference of Teamsters Trust Agreement.
35
Exhibit 10.24
AGREEMENT
ENTERED INTO THE 10TH DAY OF DECEMBER 1995
BY AND BETWEEN
SIMMONS COMPANY
AND
THE INTERNATIONAL ASSOCIATION OF
MACHINISTS AND AEROSPACE WORKERS
LOCAL NO. 315 OF DISTRICT NO. 15
AFL-CIO
<PAGE>
TABLE OF CONTENTS
ARTICLE I - UNION RECOGNITION AND SECURITY . . . . . . . . 2
1.03 Non-Discrimination . . . . . . . . . . . . . . . . . 2
1.04 Check-Off . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II SENIORITY . . . . . . . . . . . . . . . . . . . 3
2.03 Transfer Out of Bargaining Unit . . . . . . . . . . . 3
2.04 Continuity of Service . . . . . . . . . . . . . . . . 3
2.05A Procedure to Follow in Event of Slackness of Work . 4
2.05B 32 Hour Workweek Layoff . . . . . . . . . . . . . . 4
2.06 Seniority of Shop Stewards . . . . . . . . . . . . . 5
2.07 Shift Preference . . . . . . . . . . . . . . . . . . 5
2.08 Exceptions to Seniority . . . . . . . . . . . . . . 5
2.09 Labor Turnover . . . . . . . . . . . . . . . . . . . 6
2.10 Leave of Absence for Union Business . . . . . . . . 6
2.11 Leave of Absence for Personal Reasons . . . . . . . 6
2.12 Consolidation of Classifications . . . . . . . . . . 7
ARTICLE III - WORKWEEK, OVERTIME AND HOLIDAYS . . . . . . 8
3.01 Workweek . . . . . . . . . . . . . . . . . . . . . . 8
3.02 Work Schedule . . . . . . . . . . . . . . . . . . . 8
3.03 Management Rights Clause . . . . . . . . . . . . . . 9
3.04 Overtime . . . . . . . . . . . . . . . . . . . . . 10
3.05 Shift Premiums . . . . . . . . . . . . . . . . . . 11
3.06 Reporting Pay . . . . . . . . . . . . . . . . . . 11
3.07 Emergency Work . . . . . . . . . . . . . . . . . . 12
3.08 Holidays . . . . . . . . . . . . . . . . . . . . . 12
3.09 Paid Holidays . . . . . . . . . . . . . . . . . . 12
ARTICLE IV - VACATIONS . . . . . . . . . . . . . . . . . 14
4.02 Time of Vacation . . . . . . . . . . . . . . . . . 15
4.03 Eligibility for Vacation Pay and/or Seniority Bonus 16
4.04 Seniority Bonus . . . . . . . . . . . . . . . . . 16
ARTICLE V - WAGES . . . . . . . . . . . . . . . . . . . . 17
5.03 Union Bargaining Committee . . . . . . . . . . . . . 18
ARTICLE VI - I.A.M. NATIONAL PENSION FUND, NATIONAL PENSION
PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.01 Subcontracting . . . . . . . . . . . . . . . . . . 20
8.01 Layoff Notice . . . . . . . . . . . . . . . . . . 20
9.01 Grievance and Arbitration Procedure . . . . . . . 21
9.02 Conciliation and Arbitration . . . . . . . . . . . 21
9.03 Expedited Arbitration . . . . . . . . . . . . . . 21
10.01 Health and Welfare Plan . . . . . . . . . . . . . . 22
<PAGE>
11.01 Jury Duty . . . . . . . . . . . . . . . . . . . . . 23
12.01 Past Customs and Practices . . . . . . . . . . . . . 24
13.01 Picket Lines . . . . . . . . . . . . . . . . . . . . 24
14.01 Eyeglass Replacement . . . . . . . . . . . . . . . . 24
15.01 Non-Bargaining Unit Employees. . . . . . . . . . . . 24
16.01 Pay During Treatment of Work-connected Injuries. . . 24
17.01 Safety and Health Conditions . . . . . . . . . . . . 25
18.01 Military Clause . . . . . . . . . . . . . . . . . . 25
19.01 Saving Clause . . . . . . . . . . . . . . . . . . . 26
19.02 Project U.N.I.T.E. . . . . . . . . . . . . . . . . . 26
19.03 Substance Abuse Policy (See page 29) . . . . . . . . 26
21.01 Duration of Agreement . . . . . . . . . . . . . . . 27
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . 28
<PAGE>
ARTICLE I - UNION RECOGNITION AND SECURITY
- ------------------------------------------
1.01 All mechanics at the Piscataway location (hereinafter known as employees)
- ----
shall be members of the International Association of Machinists and Aerospace
Workers, after forty-five (45) days.
1.02 The Company reserves the right to hire from any available source and as a
- ----
condition of employment, all employees covered by this Agreement shall not later
than forty-five (45) days after the date of the execution of this Agreement, or
in the case of new employees, not later than forty-five (45) days after the date
of hiring, become members of the Union and remain members in good standing in
the Union during the term of this Agreement. All employees will be furnished to
the Employer, if so requested by the Office of the International Association of
Machinists and Aerospace Workers. The Company will, within three (3) working
days after receipt of notice from the Union, discharge any employee who is not
in good standing in the Union as required by the preceding paragraph such
discharge to conform with the L.M.R.A. of 1947.
1.03 NON-DISCRIMINATION Simmons Company provides equal employment opportunity
- ---- ------------------
to qualified persons without regard to race, color, religion, national origin,
age, sex, known handicap, or veteran status except where religion, sex, national
origin or age is a bona fide occupational qualification or where a bona fide
seniority or merit system affects compensation, terms, conditions, or privileges
of employment. Our policy relates to all phases of employment, including
recruitment, placement, promotion, training, demotion, transfer, layoff, recall
and termination, rates of pay, employee benefits and participation in all
Simmons sponsored employee activities. We are opposed to all forms of harassment
including sexual, racial, ethnic or religious. Unwelcome sexual advances,
requests for sexual favors, and other verbal or physical conduct of a sexual
nature or verbal or physical conduct directed at a person's race, color,
religion, sex, national origin, age, handicap or veterans status may constitute
harassment. At any time, if you believe that you have been harassed, you must
----
report the harassment to your immediate Supervisor or to the Operations Manager.
- ------
A confidential investigation will be conducted.
2
<PAGE>
1.04 CHECK OFF - Upon written individual, voluntary authorization by each
- ---- ---------
employee and subject to the requirements of any applicable local, state, or
federal law, membership dues and initiation fees of the Union as authorized by
the Phoenix Lodge No. 315 due and unpaid shall be deducted from the wages of
all employees covered by this Agreement and remitted by the Company each and
every month to the financial officers of the Union. Contributions or gifts to
District Lodge 15, Local 315, International Association of Machinists
and Aerospace Workers are not tax deductible as charitable contributions for
Federal Income Tax purposes. However, they may be tax deductible under other
provisions of the Internal Revenue Code.
ARTICLE II SENIORITY
- --------------------
2.01 The Company shall have the exclusive right to hire and shall be the sole
- ----
judge of the requirements and qualifications of each applicant. New employees
shall be considered probationary employees until they have completed the
probationary period of sixty (60) days. During the probationary period an
employee may be discharged at the discretion of the Company with or without
cause.
2.02 Seniority is based on the length of continuous service as of the date the
- ----
employee entered the I.A.M. union. Employees to be laid off consistent with
their service in their respective new classification structure, Maintenance
Mechanic.
2.03 TRANSFER OUT OF BARGAINING UNIT - In the event an employee in the
- ---- -------------------------------
Bargaining Unit covered by this Agreement is promoted or transferred to a
Supervisory position outside the scope of this agreement, he shall have his
seniority arrested as of the day transferred or promoted and in the event the
employee is returned to the unit at a later date, his seniority will again start
as of his arrested date and the time spent out of the unit shall not apply in
the event of layoffs.
2.04 CONTINUITY OF SERVICE
- ---- ---------------------
(a) Employees with less than one (1) year of service:
3
<PAGE>
It is agreed that the Employer will not break the continuity of
service of any employee with less than one (1) year of service, who is
laid off for reasons beyond the employee's control, if the employee is
rehired within six (6) calendar months.
(b) Employees with one (1) to nineteen (19) years of service:
It is agreed that the employer will not break the continuity of
service of any employee with one (1) to nineteen (19) years
service, who is laid off for reasons beyond the employee's control,
if the employee is rehired within twelve (12) calendar months.
(c) Employees with more than (19) years of service:
It is agreed that the employer will not break the continuity of
service of any employee with more than twenty (20) years service,
who is laid off for reasons beyond the employee's control, if the
employee is rehired within twenty-four (24) calendar months.
(d) Employees who quit or are discharged:
Employees who quit or are discharged will have their seniority broken
and if rehired will start as a new employee.
2.05A PROCEDURE TO FOLLOW IN EVENT OF SLACKNESS OF WORK - In the
- ----- -------------------------------------------------
event of a slackness of work, no employee shall be laid off due to such lack of
work, until the working hours in the employee's classification have been reduced
to eight (8) hours per day or forty (40) hours per week, subject only to the
provisions of seniority covered in Section 2.02. When again increasing the work
force, those laid off shall be privileged to return for a time not to exceed
their length of seniority up to a maximum of two (2) years in the reverse order
of their layoff before any new employee can be hired. In the event of a
controversy on this section, it will be handled in the regular "Grievance
Procedure."
2.05B 32 HOUR WORKWEEK LAYOFF - When the hours of work fall below 32 hours
- ----- -----------------------
per week for two (2) consecutive weeks for all employees covered by this
agreement and when the Chief Shop Steward requests a layoff, said layoff shall
be discussed with management to
4
<PAGE>
provide a more full workweek for the remaining employees. The Company will give
a two (2) calendar day notice to the Union prior to a four (4) day workweek.
2.06 SENIORITY OF SHOP STEWARDS - Shop Stewards shall retain top seniority
- ---- --------------------------
while acting in that capacity.
2.07 SHIFT PREFERENCE - Preference will be given to the senior employee for
- ---- ----------------
shift openings. If a senior employee exercises his seniority for a shift
opening, he shall remain on such shift for a minimum of six (6) calendar months
from the date of the shift change. The six (6) month minimum requirement can
only be waived by mutual agreement of the Company and the Union. The employee
will be given a 48-hour notice of shift change. The Company shall not be
responsible for the provisions of this section due to acts of God, of the public
enemy, or due to the conditions beyond the control of the Company.
Selection of the employees will continue to be maintained by giving preference
to the most qualified senior employee with the understanding that the youngest
most qualified employee by seniority in the classification must accept the shift
change.
It is understood if a senior employee must work on shift opening as a
result of the lack of qualifications of a younger employee by seniority,
the senior employee shall remain on such shift for a maximum of sixty (60)
calendar days with the understanding that the youngest employee by seniority
must accept the shift change.
2.08 EXCEPTIONS TO SENIORITY - Exceptions to the above seniority rules may be
- ---- -----------------------
made by mutual agreement between the Company and the Union Bargaining Committee,
in order to maintain efficient operating conditions under abnormal situations of
which the following are typical:
(a) Weather conditions make it difficult or impossible to work.
5
<PAGE>
(b) Where a holiday falls on a weekend, under the terms of this agreement
the weekend may be extended for a period not to exceed one day prior to or after
the holiday when temporary business conditions warrant. A typical example would
be Labor Day.
This clause is in no way intended to be a mechanism by which any rights with
respect to permanent could be abridged.
2.09 LABOR TURNOVER - The Personnel Office will furnish the Union a copy of
- ---- --------------
the Labor Turnover List each time an employee appears on said list specifying
the commencement and/or expiration date.
2.10 LEAVE OF ABSENCE FOR UNION BUSINESS - If an employee is elected or
- ---- -----------------------------------
appointed to a full-time position as a Union Representative or other official
Union Business, such employee shall be given a Leave of Absence without pay, in
writing, for the term of his office or any renewal thereof, if leave for such
absence is approved and granted by the Company, in writing. The Union shall give
the Company four (4) weeks prior notice in such situation. Seniority shall
continue and accumulate during this period of absence from work. An employee
while on a Leave of Absence for Union Business shall be included in any
personnel changes in line with his seniority.
2.11 LEAVE OF ABSENCE FOR PERSONAL REASONS - A Leave of Absence without
- ---- -------------------------------------
pay will be granted under the following conditions:
A. Upon written request.
B. For reasonable cause.
C. When the requirements of the plant permit.
D. An employee absent on leave shall be considered as having quit if he
engaged in other employment.
6
<PAGE>
E. A Leave of Absence shall be for a specified period of time.
F. Any employee who falsifies their reason for absence or abuses the
privilege of Leave of Absence will be subject to discipline including
possible discharge.
The Union will be notified in writing of any Leaves of Absences, the reasons
therefore and any extensions thereof. An employee who overstays his Leave of
Absence without first notifying the Company and securing permission for the
extension thereof will be subjected to disciplinary action.
2.12 CONSOLIDATION OF CLASSIFICATIONS - The parties have agreed to permit
- ---- --------------------------------
greater utilization of the workforce by consolidating the classifications
contained within the agreement and hereby listed below. Therefore, the agreement
will contain provisions for one classification, Maintenance Mechanic. Employees
in the Maintenance Mechanic unit will be required to perform the range of duties
embraced by the consolidated classifications and therefore, will be expected to
cross trade lines. Minor electrical work will continue to be performed by such
employees. CLASSIFICATIONS CONSOLIDATED: Tool and Die Makers, Sewing Machine
Mechanics, Machinists - Garnett, Machinists - Maintenance, Carpenters,
Millwrights, Pipe Fitters, Tool Crib Specialist. As was discussed during the
negotiations, the agreement is designed to insure and permit management to make
flexible job assignments.
Agreement has been reached whereby for layoff purposes, seniority will be based
upon continuous service as of the date the employee became a member of the
I.A.M. Union. Layoff will be in accordance with seniority in the respective
classification, Maintenance Mechanic.
It is clearly understood that all new employees subsequent to the effective date
of this agreement will be hired as a Maintenance Mechanic. Training needs are
retained as management rights and are in conjunction with the Memo of
Understanding contained within this offer.
7
<PAGE>
ARTICLE III WORKWEEK, OVERTIME AND HOLIDAYS
- -------------------------------------------
3.01 Workweek - Eight (8) consecutive hours in a regular work shift,
- ---- --------
exclusive of a lunch period, shall constitute a normal working day. Five (5)
days, Monday through Friday, shall constitute a normal week. The actual number
of shifts and the starting time and actual hours of work for each shift shall
be set forth in the schedule attached hereto and made a part hereof.
3.02 Work Schedule
- ---- -------------
(a) When three shifts are to be worked in any division or department,
the following schedule shall be observed.
1. On the first shift, all workers will report at 7:00 a.m. and
work until 3:00 p.m. with a half hour lunch period from 12:00
noon to 12:30 p.m.
2. The second shift shall be from 3:OO p.m. to 11:00 p.m. with
a half-hour lunch period from 7:30 p.m. to 8:00 p.m.
3. The third shift shall be from 11:00 p.m. until 7:00 a.m. with
a half-hour lunch period from 3:00 a.m. to 3:30 a.m.
(b) When two shifts are to be worked in any division or department,
the following schedule shall be observed.
1. On the first shift, all workers shall report at 7:00 a.m.
and work until 3:30 p.m. with a half hour lunch period from
12:00 noon to 12:30 p.m.
2. The second shift shall be from 3:30 p.m. to 12:00 midnight
with a half-hour lunch period from 7:30 p.m. to 8:00 p.m.
(c) When one shift is to be worked in any division or department, the
following schedule shall be observed:
Workers will report at 7:00 a.m. and work until 3:30 p.m. with
a half-hour lunch period from 12:00 noon to 12:30 p.m.
Where an employee(s) is required to perform work during the regular lunch
period, such employee shall receive a twenty (20) minute period with pay
immediately upon completion of the required work; provided, however, the
employee shall have said time recorded by a member of supervision on his time
card to verify the time spent on the
8
<PAGE>
lunch period. This clause shall not supersede the method of overtime payment as
hereinbefore set forth should an employee(s) be required to perform work through
his normal lunch period.
(d) In the event it becomes necessary to deviate from the above stated
starting or quitting times, the Employer will inform the Union of
such change in shifts as it becomes necessary for their mutual
welfare. It is understood that such change will only take place
when U.I.U. Local #420 members have their shift changed, even if
staggered start times by department.
(e) The Employer and the Union will also by mutual agreement decide
when it becomes necessary to change the shift of an employee or
group of employees in any emergency.
(f) Each employee shall be provided with two clean-up periods: five (5)
minutes immediately before lunch and ten (10) minutes at the end of
each shift. In the event of the assignment of overtime work, the
clean-up period shall be provided before the designated end of the
period of overtime instead of at the end of the regular shift.
(g) Rest Periods: It is agreed that two (2) rest periods of ten (10)
minutes will be given during each shift.
(h) The Company may permanently assign one mechanic to start one-half
hour earlier than the normal shift start time in order to start up
machinery for production purposes without penalty of premium pay.
This assignment will be based on seniority.
3.03 MANAGEMENT RIGHTS CLAUSE - The Union recognizes the right of the Company
- ---- ------------------------
to conduct its business, to operate its plants and to direct the working
forces in such a manner as
9
<PAGE>
it sees fit but not inconsistent with the terms of this agreement and it is
understood that the Company retains all management rights not specifically
covered by this agreement.
3.04 OVERTIME- All work performed before or after the regular starting or
- ---- --------
quitting time of the schedule shift shall be paid at time and one half. In the
event that an employee is asked to work through his normal lunch period, he will
receive time and one half for such time. Overtime shall be paid for at the rate
of time and one half for the first two (2) hours beyond the regular quitting
time, and the first four (4) hours on Saturday. Work that continues after two
(2) hours beyond the regular quitting time shall be paid for at the rate of
double time. Double time rates shall be paid for Sundays, Holidays, and after
four (4) hours of work on Saturdays.
Employees who are to work on a Saturday or Sunday to cover production are to be
so notified no later than 1:00 p.m. on Friday of that week. Employees who are to
work on a Saturday or Sunday where there is no production scheduled shall be
notified no later than 1:00 p.m. on Thursday that week. In the event an employee
is to work on a holiday they are to be notified no later than 1:00 p.m. on the
scheduled working day before such holiday to be worked.
Employees who are to work on Saturday, Sunday or Holidays because of production
work being done, will work four (4) hours or more according to the production
schedules; however, in the event that any of the Maintenance Mechanic employees
are required to report for such work overhauls, emergencies or general repairs
they shall be granted eight (8) hours of work.
If a Maintenance Mechanic is required to report to work on Saturday to repair
closing machines, pocket machines, or any other maintenance, overhaul or general
repair work, he shall be granted eight (8) hours of work despite the fact that
no production employee may be working.
Employees working on Sundays will be compensated for straight hours work
allowing a 20-minute period for lunch with pay. Employees who utilize more than
20 minutes for their lunch period will have the regular half-hours deducted from
their working time.
10
<PAGE>
Policy of Selecting Personnel for Overtime is as follows: Overtime will be
- --------------------------------------------------------
offered to the most senior employee. Overtime not filled by this procedure will
continue to be offered to the next senior qualified employee (with the skill and
ability on the particular equipment or group of equipment) with the
understanding that the youngest qualified employee (with the skill and ability
on the particular equipment or group of equipment) must accept the assignment.
Employees selected for overtime will be required to maintain production coverage
for specific equipment or group of equipment as well as being assigned other
duties necessary for operational needs. If, however, a qualified employee (with
the skill and ability on the particular equipment or group of equipment) is
performing the work at the regular shift quitting time, he shall continue to do
such work on overtime. Any employee may be excused from such overtime work
provided a valid reason is given and further no concerted action is taken by the
employees.
If more than one employee is assigned to a particular department to cover
production, seniority will prevail, provided the senior employee is qualified
and has worked in that department for more than three (3) hours that day.
Weekend overtime will go strictly by seniority for production purposes. If,
however, a mechanic is working on a piece of machinery to repair a major
breakdown or overhaul, that mechanic would remain for overtime if so required
for that particular piece of machinery.
3.05 SHIFT PREMIUMS - There shall be a twenty-five cents ($.25) per hour bonus
- ---- --------------
paid all employees on the second shift. There shall be a thirty cents ($.30) per
hour bonus paid all employees working on the third shift.
3.06 REPORTING PAY - Any employee who reports on his regular schedule, not
- ---- -------------
having been notified not to report before the beginning of the shift, shall be
guaranteed four (4) hours work or pay at his regular straight time rate. The
Company shall not be responsible for the provisions of this section due to Acts
of God, or the public enemy, or due to conditions beyond the control of the
Company.
11
<PAGE>
3.07 EMERGENCY WORK - Any employee covered by this agreement called into work
- ---- --------------
after having left the plant to perform Emergency Work, shall be required to
perform only the specific Emergency Work for which he was called back and shall
receive a minimum of four (4) hours pay at double time. The Union guarantees the
Company that employees will be available to cover each emergency.
3.08 HOLIDAYS - The following holidays shall be observed at the Piscataway
- ---- --------
location:
New Year's Day Labor Day
Birthday of Martin Luther King, Jr. Veterans Day
Washington's Birthday Thanksgiving Day
Good Friday Day after Thanksgiving
Memorial Day Christmas Day
Independence Day (July 4th) Day before or after Christmas
Should any holiday fall on Sunday, then the day to be observed by the State,
Nation or by Proclamation, shall be considered as a Holiday and shall be paid at
the rate of double time for all work performed. The Company agrees that whenever
a Holiday falls on a Saturday it shall, at the discretion of the Production
Manager, be celebrated on either the preceding Friday or the following Monday.
The day before or after Christmas will be celebrated at the discretion of the
Production Manager. Notice of the date selected will be posted two weeks in
advance.
3.09 PAID HOLIDAYS
- ---- -------------
1. In conformance with Federal Law enacted in 1968 and effective
1/1/71, certain Mondays shall be observed as legal holidays, i.e.,
Washington's Birthday (3rd Monday in February); Memorial Day (last
Monday in May); Labor Day (1st Monday in September); and the
Birthday of Martin Luther King, Jr. (3rd Monday in January).
2. The Company also recognizes the following paid holidays:
New Year's Day Thanksgiving
12
<PAGE>
Good Friday Day After Thanksgiving
Independence Day (July 4th) Christmas Day
Veterans Day The Day Before or After
Christmas
Except as otherwise provided, the Company will pay every employee his average
straight time earnings, for the holiday, computed on an eight (8) hour basis,
provided, however:
(a) That such employee shall have worked eight (8) hours or more during
the calendar week in which such holiday occurs and shall not have left
the employ of the Company.
(b) Any employee required to work on any of the above mentioned holidays,
will receive double time for work actually performed plus eight (8)
hours at their average hourly straight time earnings.
(c) That time allowed for holidays and not actually worked by the employee
shall be included in determining the number of hours worked during the
week with respect to overtime compensation.
(d) If any of the above mentioned holidays fall on a Sunday and is observed
the following Monday, the compensation will be paid for that day by
this Agreement.
(e) If a paid holiday falls within an employee's vacation period, the
employee shall have the option of taking an extra day's vacation with
pay or receive such holiday pay in addition to their regular vacation.
The optional feature will be decided prior to leaving for vacation.
(f) If, for reasons beyond the control of the employees, the entire plant
or any part thereof is shut down for a period of one (1) week during
which a paid holiday
13
<PAGE>
occurs. In that event, eligible employees will receive compensation for
the paid holidays involved. The Company shall not be responsible for
the provisions of this section because of conditions beyond control of
the Company.
(g) The employee works the day before and the day after the holiday.
Excused absences, however, do not preclude an employee from receiving
holiday pay.
3.10 In the event any holiday mentioned in Article III falls during a long
- ----
illness or accident of an employee, the employee shall be paid for the first
holiday that falls during such illness or accident providing such employee has
five (5) or more years of continuous service.
ARTICLE IV - VACATIONS
- ----------------------
4.01 In each calendar year, vacation with pay shall be granted to each
- ----
employee on the following basis:
(a) Employees with from one (1) to three (3) years of continuous service
shall receive an annual week of vacation with pay for forty (40)
hours if otherwise eligible.
(b) Employees with three (3) to twelve (12) years of continuous service
shall receive annually two (2) weeks of vacation with pay for eighty
(80) hours if other-wise eligible.
(c) Employees with twelve (12) to eighteen (18) years of continuous
service shall receive annually three (3) weeks of vacation with pay
for one-hundred-twenty (120) hours if otherwise eligible.
(d) Employees with eighteen (18) or more years of continuous service have
the option of taking a fourth week of vacation in lieu of the
seniority bonus if otherwise eligible.
14
<PAGE>
(e) Company will pay one additional week vacation pay at vacation rate for
employees with twenty-five (25) or more years seniority. The employee
has the option of scheduling a fifth week of vacation, provided that it
is not taken during the months June through October and it is scheduled
in line with Article 4.02 of this contract.
(f) Vacation Schedule - For the employees hired on or after December 10,
1983, vacations will be granted as follows:
Continuous Years Of Service Weeks Off
--------------------------- --------
Less than 1 year 0
1 up to 3 1
3 up to 12 2
12 up to 18 3
18 or more 4
Employees on the payroll prior to December 9, 1983, will receive their weeks of
vacation and, if eligible, the seniority option bonus as outlined in the
Agreement which expired December 9, 1983.
4.02 TIME OF VACATION - The Company shall establish the actual vacation dates.
- ---- ----------------
If the Company decides to stagger vacations, they shall be so arranged as not to
cause interference with production and the Company will, insofar as possible,
arrange the vacation of an employee at a time which suits the employee and those
having the greater seniority will be given preference in selection of the time
of their vacation insofar as possible, one employee per week. If vacations are
staggered, period of same will be taken between January 1st and December 31st.
To assure that there are no conflicts or duplicate scheduling, a vacation
schedule for mechanics must be submitted to management before January 31st of
each year.
15
<PAGE>
4.03 ELIGIBILITY FOR VACATION PAY AND/OR SENIORITY BONUS - All employees to be
- ---- ---------------------------------------------------
eligible for vacation benefits or seniority bonus must be on the payroll during
the vacation period of May through September inclusive or any part thereof.
(a) Continuous service as of September 30th of the current year shall be
the determining factor as to the amount of vacation or seniority bonus
payment to be granted employees in accordance with Article IV,
Sections 4.01 and 4.04.
(b) An employee otherwise eligible for vacation who is disabled through an
accident in the Simmons Plant will be paid full vacation benefits for
one (1) calendar year only.
(c) Employees with ten (lO) or more years of continuous service who lost
time during the year because of illness will be paid full vacation for
one (1) year only.
(d) Any employee who quits or is discharged will receive his pro-rata
share of Vacation Benefits as defined in Sections 4.01, 4.02 and 4.03.
(e) Full vacation benefits will be paid to those who are otherwise
eligible, in the following circumstances:
1. To the employee's estate in the event of death of the
employee;
2. To the employee in the year (January to December) of his or
her retirement.
(f) Shift premium will be included in vacation pay computation for
employees otherwise eligible.
4.04 SENIORITY BONUS
- ---- ---------------
(a) Effective in 1959 all eligible employees with eighteen (18) years or more
of continuous seniority will be granted a seniority bonus of forty (40)
hours pay either
16
<PAGE>
at Christmas time, at the time of their vacation or absence (minimum
eight (8) hours pay) as the employee chooses against their seniority bonus
pay.
(b) Employees with eighteen (18) or more years of continuous service who
lost time during the year of illness will be paid full seniority bonus
for one (1) year only.
ARTICLE V. - WAGES
- ------------------
5.01 The following Wage Schedule shall be the minimum rate of compensation for
- ----
the type of work performed. Any new employee shall receive the minimum of $9.00
per hour (except in the case of work study students) for the class of work being
performed during his/her probationary period. After such probationary period,
the employee will receive the minimum rate of the classification. Nothing herein
shall be construed as preventing the employer from paying higher than the
minimum at his discretion.
First Tier Employees:
- --------------------
Effective December 10, 1995, a general wage increase of sixty-one cents ($.61)
per hour shall be granted. Effective as of December 10, 1996, a general wage
increase of fifty cents ($.50) per hour shall be granted. Effective as of
December 10, 1997, a general wage increase of fifty cents ($.50) per hour shall
be granted. The following schedule, reflecting the increases, shall apply:
12/10/95 12/10/96 12/10/97
- -------- --------- --------
$15.25 $15.75 $16.25
Second Tier Employees:
- ---------------------
Effective December 10, 1995, a wage increase of one dollar and eleven cents
($1.11) per hour shall be granted. Effective June 10, 1996, a wage increase of
fifty cents ($.50) per hour shall be granted. Effective December 10, 1996, a
wage increase of fifty cents ($.50) per hour shall be granted. Effective June
10, 1997, a wage increase of fifty cents ($.50) per hour shall be granted.
Effective December 10, 1997, a wage increase of fifty cents ($.50) per hour
shall be granted.
17
<PAGE>
Effective June 10, 1998, a wage increase of fifty cents ($.50) per hour shall be
granted. The following schedule, reflecting the increases, shall apply:
12/10/95 6/10/96 12/10/96 6/10/97 12/10/97 6/10/98
- -------- ------- -------- ------- -------- -------
$12.61 $13.11 $13.61 $14.11 $14.61 $15.11
5.02 Whenever the Company calls an employee or if he is directed by his
- ----
Supervisor to the Personnel Office for a conference, such employee shall suffer
no loss of wages as a result of such conference, unless the appearance is
necessitated as a consequence of the Disciplinary Procedure. No payment is
required for such obviously personal matters such as Employee Discount or Return
Goods purchases.
5.03 UNION BARGAINING COMMITTEE - The negotiating committee shall be limited
- ---- --------------------------
to no more than two (2) members from the Piscataway I.A.M. Simmons bargaining
unit. Time during normal working hours spent in conference with the Company
pertaining to negotiations of a new contract shall be compensated by the Union
for the I.A.M Negotiating Committee.
ARTICLE VI - I.A.M. NATIONAL PENSION FUND, NATIONAL PENSION PLAN
- ----------------------------------------------------------------
6.01 (a) The employer shall contribute to the I.A.M. National Pension Fund,
- ----
National Pension Plan for all employees covered under this Agreement
as follows: fifty cents ($.50) per hour limited to a maximum of forty
(40) hours per week for each employee, seventy-five cents ($.75) per
hour effective January 1, 1996, limited to a maximum of forty (40)
hours per week for each employee, eighty cents ($.80) per hour
effective January 1, 1997, limited to a maximum of forty (40) hours
per week for each employee.
(b) The employer shall continue contributions based on a forty (40) hour
workweek while an employee is off work due to paid vacations or paid
holidays. The Company will make such monthly contribution for an
employee on an authorized
18
<PAGE>
sick leave for a maximum of twelve (12) calendar months from the
outset of such sick leave.
(c) Contributions for a new, probationary, full-time employee are payable
from the completion of the employee's probationary period, but no
later than forty-five (45) calendar days after date of hire.
(d) The I.A.M. Lodge and the Company adopt and agree to be bound by, and
hereby assent to, the Trust Agreement, dated May 1, 1960, as amended,
creating the I.A.M. National Pension Fund and the Plan rules adopted
by the trustees of the I.A.M. National Pension Fund in establishing
and administering the foregoing Plan pursuant to the said Trust
Agreement, as currently in effect and as the Trust and Plan may be
amended from time to time.
(e) The parties acknowledge that the Trustees of the I.A.M. National
Pension Fund may terminate the participation of the employees and the
Employer in the Plan if the successor collective bargaining agreement
fails to renew the provisions of this pension Article or reduces the
Contribution Rate. The parties may increase the Contribution Rate
and/or add job classifications or categories of hours for which
contributions are payable.
(f) This Article contains the entire agreement between the parties
regarding pensions and retirement under this Plan and any contrary
provision in this Agreement shall be void. No oral or written
modification of this Agreement shall be binding upon the Trustees of
the I.A.M. National Pension Fund. No grievance procedure, settlement
or arbitration decision with respect to the obligation to contribute
shall be binding upon the Trustees of the said Pension Fund.
(g) Upon making the contribution(s) to the I.A.M. National Pension Fund,
National
19
<PAGE>
Pension Plan provided for above, the Company is absolved of all
responsibility for providing for any pension benefits for any of its
employees by this contract and shall not, under any circumstances, be
held accountable for the distribution of the monies paid. It is
understood that the program will be administered by the Union.
Management's responsibility will be strictly limited to the payment of
the premium.
(h) The employer agrees it will not sell, transfer, or assign the
operation covered by this agreement unless an agreement has been
entered into with the buyer, transfer, or assignee, providing that,
upon consummation of such transaction Simmons Pension Plan be
continued in full force and effect and that all benefits, vested,
unvested, or accrued by bargaining unit members under that plan be
preserved.
7.01 SUBCONTRACTING - Should it become necessary to have work done by
- ---- --------------
another firm or when machinery or parts thereof are to be installed by another
firm, preference shall be given to firms who run AFL-CIO Union Shops provided
they have the facilities for doing work, and in no case shall work be given to a
firm where a strike or lockout exists. Notwithstanding the above, no work shall
be given out which can be performed with the equipment and manpower at hand.
8.01 LAYOFF NOTICE - The following layoff notice shall be given to
- ---- -------------
employees covered by this Agreement. After six (6) months of service, employees
permanently laid off will receive five (5) working days pay in lieu of five (5)
working days notice. This notice is to be posted on the bulletin board and copy
given to the Chief Shop Steward.
I.A.M. and Aerospace Workers laid off will receive, at time of separation, all
wages due and any vacation or other monies to which they are entitled. If an
employee receives such money prior to layoff, it is understood that upon recall
he will not be also eligible for time off for vacation already paid.
20
<PAGE>
9.01 GRIEVANCE AND ARBITRATION PROCEDURE - Any employee who feels
- ---- -----------------------------------
that the Company has violated the contract may submit a grievance in writing
and, along with the Union representative, will meet with his department
supervisor within three (3) working days of the occurrence of the event which
gave rise to the complaint.
If the grievance is not resolved within three (3) working days following the
date the grievance was submitted, the Chief Shop Steward or Shop Steward and the
Human Resources Manager or Production Manager will meet to discuss the merits of
the grievance. The Human Resources Manager or Production Manager will have five
(5) working days to answer the grievance.
In any event, if the grievance is not resolved or appealed to the Business Agent
and Sr. Vice President of Human Resources within thirty (30) calendar days from
the date of filing of the grievance, the grievance is deemed resolved as per
Company's last answer. At the last stage of this grievance procedure, the
parties may extend the stated time limits by written mutual agreement. If the
grievance is not settled in the foregoing grievance procedure, then either
party, upon written demand given to the other party within ten (10) working
days, may submit said grievance to arbitration.
9.02 CONCILIATION AND ARBITRATION - Failing satisfactory adjustment by the
- ---- ----------------------------
above means, the matter thereupon shall be presented to the Federal Mediation
and Conciliation Service of the U. S. Department of Labor. Following the above
procedure, the matter shall then by assigned to an Arbitrator to be selected by
the Director of Conciliation of the U.S. Department of Labor, whose findings
shall be final and binding upon both parties.
9.03 EXPEDITED ARBITRATION - Either the Union or the Company may invoke the
- --------------------------
Expedited Grievance - Arbitration Procedure provided in this section as
distinguished from the ordinary Grievance - Arbitration Procedure. This
procedure may also be invoked by either party in the event an employee is
discharged or suspended, or in the event there is a seniority dispute.
21
<PAGE>
Such dispute or grievance shall be asserted by notice in writing by registered
mail, return receipt requested, or Mail-Gram, report delivery, given to the
other party.
The arbitrator shall hold an arbitration hearing as expeditiously as possible,
but in no event later than twenty-four (24) hours after receipt of said notice.
The decision of the arbitrator shall issue forthwith and in no event later than
three (3) hours after the conclusion of the hearing unless the grieving party
agrees to waive this time limitation with respect to all or part of the relief
requested. The arbitrator's WRITTEN opinion will follow within thirty (30) days.
All costs for the hearing and service of the arbitrator designated herein, or
for any other person selected pursuant to the aforementioned procedure shall be
borne by the parties jointly. Each party will bear the expense of its
representatives and for the presentation of its own case.
10.01 HEALTH AND WELFARE PLAN - Company agrees to forward to the
- ----- -----------------------
Administration of the International Association of Machinists and Aerospace
Workers, District 15, Health and Welfare Trust Fund a fixed contribution level,
per month, as identified below, in consideration of the promise by the Union to
purchase the District 15 Health and Welfare insurance provided however the
Company has the right at any time to convert to another carrier as long as the
same schedule of benefits are maintained in either plan. It is understood that
the program will be administered by the Union. Management's responsibility will
be strictly limited to the payment to the premium.
The fixed monthly contribution levels for the duration of this contract to be
forwarded to the I.A.M. District 15, Health and Welfare Trust Fund are:
First Year's Contribution- Effective 12-10-95 is:
-------------------------------------------------
Company $420.00 Employee $45.00 Total $465.00
Second Year's Contribution - Effective 12-10-96 is:
---------------------------------------------------
22
<PAGE>
Company $461.00 Employee $50.00 Total $511.00
Third Year's Contribution - Effective 12-10-97 is:
--------------------------------------------------
Company $504.00 Employee $55.00 Total $559.00
Upon making the contribution(s) to the District No. 15 Welfare Fund provided for
above, the Company is absolved of all responsibility for providing for any
welfare benefits for any of its employees by this contract and shall not, under
any circumstances, be held accountable for the distribution of the monies paid.
The Company will make such monthly contribution for an employee on an authorized
sick leave for a maximum of twelve (12) calendar months from the outset of such
sick leave. A weekly disability program to be provided by the Company whereby
the maximum benefit is 2/3 of employee weekly wage not including overtime, per
week for a maximum of fifty-two weeks. The Company, however, reserves the
right to alter insurance carrier or become self-insured provided benefits are
maintained.
10.02 It is agreed that the Welfare Plan provided by the Union shall become
- -----
null and void if in conflict with or in violation of the New Jersey State
Disability Act, Labor-Management Relations Act of 1947 or any other State or
Government Legislation.
10.03 It is mutually agreed that the Welfare Plan can be changed or modified if
- -----
necessary, to conform with the State or National Legislation provided there is
no additional cost to the Company.
11.01 JURY DUTY - Any employee who is absent from the plant because of Jury
- ----- ---------
Duty shall be paid the difference between his regular straight rate of pay and
the payment received for such Jury Service upon presentation of proper evidence
and the amount of compensation received.
23
<PAGE>
11.02 It is the intent of this clause to restore any loss of earnings suffered
- -----
by serving on the jury, but it is not the intent that any employee shall have
any financial advantage by serving on the Jury, nor shall he receive any
overtime compensation as a result thereof.
12.01 PAST CUSTOMS AND PRACTICES - It is agreed between the parties that this
- ----- --------------------------
Contract together with the Wage Schedule attached hereto shall be the complete
Agreement superseding any and all previous written agreements, oral agreement,
customs and practices.
13.01 PICKET LINES - It shall not be considered a violation of this Agreement
- ----- ------------
if I.A.M. employee members fail to report to work for reason of a legitimate
authorized picket line established by the Union representing the production
employees at the Piscataway Works provided such Union has a collective
bargaining agreement with the Company or has been certified as bargaining agent.
14.01 EYEGLASS REPLACEMENT Where it has been established that an employee's
- ----- --------------------
eyeglasses were broken or damaged on Company property during the course of his
employment, the employee shall be reimbursed for the replacement at comparable
value. It is understood such replacement will be in the form of prescription
safety glasses.
15.01 NON - BARGAINING UNIT EMPLOYEES - Non-Bargaining Unit Employees,
- ----- -------------------------------
including Supervisory Employees, shall not perform work normally performed by
Employees in the Bargaining Unit. However, this clause is not to be construed
in such fashion that the Maintenance Supervisors cannot be used as instructors
nor shall it be used to prohibit a Maintenance Supervisor from testing a piece
of equipment in order to determine its fitness.
16.01 PAY DURING TREATMENT OF WORK - CONNECTED INJURIES If an employee is
- ----- -------------------------------------------------
injured in the plant while performing his work assignment and it is necessary
for him to receive treatment by either the Company Nurse or Company Doctor
during his regularly scheduled working hours, the Company shall pay for the time
spent in the treatment of such injury on the
24
<PAGE>
day the injury occurred, at his hourly rate of pay. If either the nurse or
----------------------
doctor certifies that such injured employee is unable to continue work because
- ------------------------------------------------------------------------------
of such injury, the Company will pay for the balance of his scheduled shift at
- ------------------------------------------------------------------------------
his hourly rate of pay. If the doctor requests subsequent visit(s) during his
- ----------------------
regularly scheduled shift for the treatment of this injury, the Company will pay
for the time spent in this treatment at the employee's hourly rate of pay. To
minimize employee inconvenience, such subsequent visits will be scheduled, if
possible, during the employee's regular shift. However, where a second shift
employee is injured on the job and subsequently requires additional treatment
for this injury, then such visits shall be scheduled by the Company's personnel
department at a time consistent with the treating doctor's office hours.
The employee will be clocked out in time to make the appointment as scheduled.
When the employee leaves the doctor or nurse, he will receive a release form
that will show the completion time of the appointment. Upon returning to his
department, the employee will present this form to his supervisor and will be
clocked back in for return to work.
It is agreed that for all such visits off the Company premises, upon request,
the Company will furnish transportation if the employee is unable to drive or
has no means of transportation. None of the sections of this paragraph are to be
so construed that benefits will insure in addition to or pyramid on disability
payments of workmen's compensation payment.
17.01 SAFETY AND HEALTH CONDITIONS - The Company shall make reasonable
- ----- ----------------------------
provisions for the protection, safety and health of its employees in the
Piscataway facility in accordance with the State and Federal laws pertaining
thereto.
18.01 MILITARY CLAUSE - The Company agrees to comply with all applicable laws
- ----- ---------------
relating to re-employment rights of employees called for military duty.
25
<PAGE>
19.01 SAVING CLAUSE - In the event that any State or Federal legislation,
- ----- -------------
government regulations or court decisions cause invalidation of any Article or
Section of this agreement, all other Article and Sections not so invalidated
shall remain in full force and effect.
19.02 PROJECT U.N.I.T.E. - In the event the Company determines to retool,
- ----- -----------------
redesign or re-engineer the Plant in order to implement Project U.N.I.T.E. or
similar program which requires alterations to the Contract, the Company shall
negotiate such changes with the Union. If after such negotiations, the Union and
the Company do not agree to the changes, the Company shall not implement such
program for the duration of this agreement.
19.03 SUBSTANCE ABUSE POLICY - The Union and the Company have agreed to the
- ----- ----------------------
attached substance abuse policy.
20.01 - If the Simmons Piscataway Employees Union, Local No. 420 of the United
- -----
Steelworkers of America, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division), is granted any improvements more liberal than those now enjoyed by
the International Association of Machinists and Aerospace Workers in the
following categories, the I.A.M. and Aerospace Workers will be improved to the
same level.
*Holidays Death in Family
Vacation Improvements Shift Premiums
Severance Pay Overtime Premiums
Sick Leave Work-Connected Injuries
Jury Duty Method of Payment
* Employee Birthday Pay - Employee shall have the option of taking their
birthday off, with pay or being paid for eight (8) hours in lieu of time off.
Pay in lieu of time off, if so desired, will be granted in the first paycheck in
January.
26
<PAGE>
Improvements, if any, to be effective for the I.A.M. and Aerospace Workers the
same date as for Local #420 of the United Steelworkers of America, A.F.L.,
C.I.O, C.L.C. (Upholstery Industries Division). It is understood that such new
improvements that do not equal the present I.A.M. and Aerospace Workers
benefits, will not cause a change in the present I.A.M. and Aerospace Workers
benefits.
21.01 - DURATION OF AGREEMENT - This Agreement signed this 7th day of March
- -----------------------------
1996, shall become effective on the tenth day of December, 1995, and shall
remain in full force and effect for a period of three (3) years. At the end of
said three (3) years and at the end of each yearly period thereafter, this
Agreement shall renew itself for periods of one (1) year unless either party
gives written notice of a desire to modify, amend or terminate this Agreement,
at least sixty (60) days prior to the yearly effective date of this Agreement,
in which such Agreement shall terminate.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
this 7th day of March, 1996.
27
<PAGE>
REPRESENTING AND SIGNING FOR SIGNING FOR THE EMPLOYER
THE INTERNATIONAL SIMMONS COMPANY
ASSOCIATION OF MACHINISTS PISCATAWAY WORKS
AND AEROSPACE WORKERS,
LOCAL #315 OF DISTRICT NO. 15
/s/ August Morreale /s/ Ken Barton
------------------------- ---------------------------
August Morreale Ken Barton
Business Representative Senior Vice President
Human Resources
/s/ John Daniel, Jr. /s/ Marjanna Garvin
------------------------- ---------------------------
John Daniel, Jr. Marjanna Garvin
Chief Shop Steward Human Resources Mannager
/s/ Michael D'Errico /s/ Robert Carstens
------------------------- ---------------------------
Michael D'Errico Robert Carstens
Shop Master Operations Manager
28
<PAGE>
TO: Simmons Company Employees
SUBJECT: Substance Abuse Policy
EFFECTIVE DATE: October 15, 1994
IT IS THE COMPANY'S POLICY TO IDENTIFY AND HELP THOSE EMPLOYEES WITH SUBSTANCE
ABUSE PROBLEMS AND TO ENCOURAGE THEM TO SEEK HELP ON THEIR OWN. APPLICANTS
IDENTIFIED AS BEING SUBSTANCE ABUSERS WILL BE DENIED EMPLOYMENT AND ENCOURAGED
TO SEEK HELP. EMPLOYEES WHO ARE IDENTIFIED AS BEING SUBSTANCE ABUSERS MAY BE
REFERRED FOR COUNSELING OR REHABILITATION AS APPROPRIATE. HOWEVER, THE
POSSESSION, USE, TRANSFER, MANUFACTURE OR SALE OF ALCOHOL, ILLEGAL DRUGS, OR
LEGAL DRUGS WITHOUT A VALID PRESCRIPTION, ON COMPANY PROPERTY OR ON COMPANY TIME
WILL RESULT IN DISCIPLINARY ACTION, UP TO AND INCLUDING TERMINATION.
TESTING OF APPLICANTS
---------------------
All applicants will be required to undergo a drug screening test after a
conditional offer of employment has been extended. Employment will be denied to
any applicant whose drug screen reveals the presence of illegal drugs or
prescription drugs without a valid prescription or alcohol in excess of the
sobriety level as established by state law.
TESTING OF EMPLOYEES
--------------------
Reporting to duty or working with drugs present in the body or while affected by
alcohol will be handled as a disciplinary matter. Testing may be required under
the following circumstances, and where allowed by applicable state or local
laws.
* When an employee is involved in an accident resulting in injuries
requiring medical treatment offsite.
* When the Company has reasonable cause and suspicion. Circumstances
that could be indicators of a substance abuse problem and considered
reasonable suspicion are:
A. Observed alcohol or drug abuse during work hours on company
premises.
B. Apparent physical state of impairment.
C. Incoherent mental state.
D. Marked changes in personal behavior that are otherwise
unexplainable.
E. Deteriorating work performance that is not attributable to other
factors.
F. Accidents or other actions that provide reasonable cause to
believe the employee may be under the influence.
29
Exhibit 10.25
U.I.U.
MASTER CONTRACT
October 15, 1994
to
October 15, 1997
<PAGE>
INDEX
Article Item Page Number
-----------
I RECOGNITION AND UNION SECURITY . . . . . . . . . . . . 03
II DISCIPLINARY PROCEDURE . . . . . . . . . . . . . . . . 05
III GRIEVANCE PROCEDURE AND ARBITRATION . . . . . . . . . 08
IV HOURS OF WORK AND PREMIUM PAY . . . . . . . . . . . . 12
V NO STRIKE - NO LOCKOUT . . . . . . . . . . . . . . . . 16
VI MANAGEMENT RIGHTS CLAUSE . . . . . . . . . . . . . . . 16
VII SENIORITY--LAYOFF AND RECALL . . . . . . . . . . . . . 16
VIII WAGES . . . . . . . . . . . . . . . . . . . . . . . . 20
IX STANDARD ALLOWED HOURS . . . . . . . . . . . . . . . . 22
X HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . 29
XI PAID VACATIONS . . . . . . . . . . . . . . . . . . . . 31
XII U.I.U PENSION TRUST . . . . . . . . . . . . . . . . . 33
XIII UIU HEALTH AND WELFARE FUND . . . . . . . . . . . . . 35
XIV JURY SERVICE . . . . . . . . . . . . . . . . . . . . . 40
XV BEREAVEMENT PAY . . . . . . . . . . . . . . . . . . . 41
XVI BULLETIN BOARDS . . . . . . . . . . . . . . . . . . . 41
XVII MILITARY CLAUSE . . . . . . . . . . . . . . . . . . . 42
XVIII PICKET LINE CLAUSE . . . . . . . . . . . . . . . . . . 42
XIX TRAINING PERIOD . . . . . . . . . . . . . . . . . . . 43
XX PAY DURING TREATMENT OF WORK-CONNECTED INJURIES . . . 43
XXI NON-DISCRIMINATION . . . . . . . . . . . . . . . . . . 45
XXII SAVING CLAUSE . . . . . . . . . . . . . . . . . . . . 45
XXIII EMPLOYEE BIRTHDAY PAY . . . . . . . . . . . . . . . . 46
XXIV DURATION AND TERMINATION . . . . . . . . . . . . . . . 46
XXV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 48
XXVI SEVERANCE AND PLANT CLOSINGS . . . . . . . . . . . . . 50
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 51
APPENDIX A DISCIPLINARY POLICY . . . . . . . . . . . . . . . . 51
APPENDIX B AAA ARBITRATORS . . . . . . . . . . . . . . . . . . 52
<PAGE>
MASTER MULTI-PLANT WORKING AGREEMENT
------------------------------------
THIS AGREEMENT, entered into this 16th of October, 1994 by and between
SIMMONS COMPANY, a Delaware corporation, for and on behalf of its plants at
Atlanta, Columbus, Dallas, Piscataway, Jacksonville, Kansas City, and Los
Angeles, hereinafter referred to as the COMPANY,
and
THE UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C. (UPHOLSTERY
INDUSTRIES DIVISION), through its Locals 63, 424, 422, 420, 425, 173, and 515 in
the Atlanta, Columbus, Dallas, Piscataway, Jacksonville, Kansas City and Los
Angeles plants of the COMPANY, hereinafter referred to as the UNION.
WITNESSETH
NOW, THEREFORE, in consideration of the promises and of mutual covenants
and AGREEMENTS of the parties hereinafter set forth, the parties do hereby agree
as follows:
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 The UNION and the COMPANY shall cooperate to promote the welfare of
the COMPANY and efficiency of its factory operations. It is also the intention
of the parties to provide an orderly procedure between the EMPLOYER and the
UNION and, therefore, all AGREEMENTs or understandings concerning hours, wages
and working conditions between the EMPLOYER and the employees covered by this
contract are to be made by the EMPLOYER with the UNION as the representative of
said employees. No individual employee or group of employees, nor member of the
COMPANY shall have the authority to abridge or modify this AGREEMENT in any
manner.
<PAGE>
1.02 Recognition. The COMPANY hereby recognizes the UNION as the sole and
-----------
exclusive collective bargaining agent for all the COMPANY'S employees employed
by it in connection with all its operations in the various plants covered
by this MASTER MULTI-PLANT WORKING AGREEMENT, excluding executives, sales
employees, office workers, supervisors, foremen, timekeepers and such other
employees as may be excluded in the individual PLANT SUPPLEMENTS hereinafter
described.
1.03 UNION Security.
--------------
(a) The COMPANY agrees that as a condition of employment all
employees in the bargaining unit shall become members of the
UNION after the thirtieth day of their employment or thirty (30)
days after the execution date of this AGREEMENT, whichever is the
later. All employees who become members of the UNION shall remain
members of the UNION in good standing by proper tender of dues
and initiation fees during the term of this AGREEMENT.
(b) The UNION agrees to accept into membership and make membership
available to all employees upon the same terms and conditions
generally applicable to other members without discrimination.
(c) Within five (5) days after receipt of written notice from the
UNION that any employee has failed, pursuant to the terms of this
Article, to tender payment of the regular dues and initiation fee
uniformly required by the various locals, party to this
AGREEMENT, as a condition of acquiring or retaining membership in
the UNION, the COMPANY shall discontinue its employment of such
employee. The COMPANY shall not be required by the UNION to
discontinue the employment of any employee for any other reason.
<PAGE>
(d) Upon demand by the UNION that an employee be discharged because
he is delinquent in the payment of his regular dues or initiation
fee, the COMPANY shall promptly notify the employee that his
discharge has been demanded and the employee shall have a
reasonable time as determined by the UNION in which to rectify
the matter before the discharge is placed in effect. If the
discharge of an employee is effected by the request of the UNION
pursuant to paragraphs a, b, c and d of this section, the UNION
agrees to indemnify the COMPANY from any final determination of
liability for this action if, prior to the discharge, the COMPANY
sends an Overnight letter to the Director of Upholstery
Industries Division notifying him of the requested discharge.
Failure of the International President to respond by Overnight
mail within five (5) days will be deemed concurrence with the
local UNION request.
(e) The COMPANY shall have the exclusive right to hire and shall be
the sole judge of the requirements and qualifications of each
applicant until the completion of the probationary period set
forth in the LOCAL PLANT SUPPLEMENTS.
(f) The provisions of this section shall be applicable only to the
extent permitted by applicable state and federal legislation.
(g) No UNION member in any of the following plants: Atlanta,
Jacksonville, Dallas, Los Angeles, Kansas City, Columbus,
Piscataway, shall be compelled to train employees of a non-UNION
shop.
1.04 Check-Off. Upon written individual voluntary authorization by each
---------
employee and subject to the requirements of any applicable local, state or
federal law, membership dues and initiation fees of the UNION as authorized and
approved by the United Steel Workers UNION Executive Board due and unpaid shall
be deducted from the wages of all employees covered by this
<PAGE>
AGREEMENT and remitted by the COMPANY each and every month to the International
Treasurer. This article or any section thereof shall not be operative where
prohibited by state law.
The UNION agrees that it will indemnify and save the COMPANY harmless from
any and all liability, claim, responsibility, damage, or suit which may arise
out of any action taken by the COMPANY in accordance with the terms of this
Article or in reliance upon the authorization mentioned herein.
1.05 The contract consists of the MASTER AGREEMENT, the PROCEDURES CONTRACT
and the individual LOCAL PLANT SUPPLEMENT.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
----------------------
2.01 The COMPANY shall not discharge, suspend or otherwise discipline any
employee except for just cause, except also as provided in Section 1.03 (e).
2.02 In the event that disciplinary action involving loss of wages
(suspension and/or discharge) is taken against any employee, the employee
involved must be given an interview concerning such disciplinary action, in
which he must be represented by a Shop Steward or an officer of the UNION.
The UNION representative will be informed prior to the disciplinary
action being taken and must be given an opportunity (not to exceed fifteen (15)
minutes) to discuss the case with the affected employee and to participate in
the interview with the COMPANY concerning the matter. The interview may be of
very short duration and shall not be construed as part of the GRIEVANCE
PROCEDURE, as described in Article III of this AGREEMENT, inasmuch as the
primary function of the interview is to make certain that a UNION representative
is aware of the discipline and that the employee knows precisely what he or she
is disciplined for.
<PAGE>
In cases of physical altercation or where the employee is not on
COMPANY premises at the time of the disciplinary action, the interview will be
dispensed with.
A discharged employee shall be entitled to a hearing before the
COMPANY PLANT LABOR RELATIONS COMMITTEE at 10 a.m. on the day following his
discharge, provided the employee is notified of the hearing and is physically
able to attend, at which time the merits of the case will be discussed between
the UNION and the COMPANY.
In the event an employee is unable to attend or the UNION is unable to
find such employee, the hearing may be held in abeyance for a period of one (1)
week. If the hearing is delayed because of unavailability of the employee, the
EMPLOYER is not liable for any wages during such period.
2.03 No employee acting in the capacity of a UNION OFFICER or UNION
REPRESENTATIVE shall be disciplined for carrying out in good faith his duties
under the provisions of this AGREEMENT or as permitted by applicable law.
2.04 Once an individual is reprimanded and the offense is not committed
again for a period of 12 months, the employee shall be considered to have
corrected himself. This shall not include such serious offenses as no-strike
clause violations, insubordination, stealing, cheating, physical assault,
damaging COMPANY property and poor quality.
<PAGE>
ARTICLE III
-----------
GRIEVANCE AND ARBITRATION PROCEDURE
-----------------------------------
3.01 - GRIEVANCE PROCEDURE
A. It is the intent of the parties to this Agreement that the
grievance procedure hereby established shall serve as a means for
the prompt disposition and amicable settlement of such grievances
as may arise between the Company and its employees or the Company
and the Union.
A grievance is defined as any dispute (excluding discharges for
those employees in probationary period) between the Company and
employee(s) or between the Company and the Union over the
application, interpretation, or alleged violation of an express
provision of this Agreement, where applicable.
B. Should any grievance arise between the Company and any of the
Company's employees involving a work assignment, the employee
involved shall continue to perform the assignment in question
while the grievance is being processed unless it will endanger
his life, limb, or safety, or that of other employees or where
the contract expressly disavows cessation of such assignment.
C. The aggrieved employee may discuss the matter with the employee's
immediate supervisor and union representative if requested. Any
resolution by the supervisor or steward shall not act as a
precedent in future cases.
3.02 - GRIEVANCES - STEP 1
If the grievance is not settled in verbal discussion described in
Section 1 (C)above, the grievance shall be reduced to writing on forms to be
made available for such purpose, with each
<PAGE>
form signed and dated by the aggrieved employee and/or his designated Union
Representative. The designated Union Representative shall present the grievance
form to the supervisor within five (5) working days from the date of the
occurrence or knowledge of occurrence. The grievance shall specify the incident
involved, the facts or alleged facts relied upon to support the contention of
the employee, the section of this Agreement relied upon, where applicable, the
interpretation requested by the grievant; and shall show on its face the date of
the incident. The supervisor has (2) work days to answer.
3.03 - GRIEVANCES - STEP 2
A grievance not settled at Step 1 shall be presented to the Operations
Manager and/or the Human Resource Manager within three (3) work days from the
Step 1 answer. The Operations Manager and/or Human Resource Manager within two
days shall meet and discuss the matter with the employee and a union
representative. The Operations Manager and/or Human Resource Manager shall then
have three (3) work days to answer.
3.04 - GRIEVANCES - STEP 3
If a settlement is not obtained in Step 2, the grievance shall be
referred to the Company's Vice President-Human Resources, or his designated
representative as Step 3 by the local union representative within five (5)
working days from the date of the reply under Step 2. The International
Representative of the Union shall meet with the Company's Vice President-Human
Resources or the representative he designates, within a reasonable time (not to
exceed thirty (30) calendar days). A written answer by the Company to the
grievance considered at such meeting shall be given to the International
Representative of the Union within five (5) working days after such meeting.
<PAGE>
If an employee is needed as witness in the process of Step 1 or 2 by
the Union, it is understood that any pay lost by the witness or others resulting
from his/her absence from work will be reimbursed by the Union.
3.05 - Failure on the part of either party to respond to any step within
the grievance procedure within the time limits established by this article will
resolve the grievance against the party failing to respond. Resolution by
default, however, shall not establish a precedent for similar grievances. Time
limits may be extended by mutual written agreement. Whenever time limits are set
out in this Article, they shall be work days exclusive of Saturdays, Sundays,
and holidays recognized by this Agreement.
3.06 - ARBITRATION OF DISPUTES.
If the grievance is subject to arbitration as provided herein and all
conditions in Section 1 above have been satisfied, including the applicable time
limits, then the Union on behalf of the aggrieved employee or aggrieved
employees may, within ten (10) calendar days of the Company's answer in Step 3,
file a written request to the Operations Manager or his designee that the
grievance be submitted to arbitration for determination pursuant to this
Article.
3.07 Within ten (10) calendar days after the Union files its written
request for arbitration pursuant to Section 6 above, the Company or the Union
may write either the Federal Mediation and Conciliation Service or the American
Arbitration Association to request that it submit a panel of seven (7)
arbitrators. The Union shall notify the Company of its first strike, and each
party shall then alternately strike one name until only one name remains who
shall be designated as the impartial arbitrator. Either party reserves the right
to reject the entire panel prior to any striking of arbitrators and to request
one additional panel of arbitrators per grievance.
<PAGE>
In the event the Union and the Company are unable to agree to a base
rate on a new classification as provided for in Section 8.05, the dispute may be
appealed to arbitration for determination by a qualified Time Study Arbitrator.
Appeals under the Standard Allowed Hour Formula as described in
Article IX, if warranted, shall be carried to arbitration under the above
described procedure; however, in this instance, the Impartial Chairman of the
Arbitration Board must be a qualified Time Study Engineer.
3.08 - In interpreting and applying the provisions of this Agreement and in
making findings of fact, the Arbitrator's interpretation and application must be
in accord with the spirit and letter of this Agreement and any amendments
thereto. The function of the Arbitrator shall be judicial rather than
legislative in nature. No Arbitrator shall have the jurisdiction or authority to
add to, take from, nullify, or modify any of the terms of this Agreement or any
amendments or Letters of Understanding applicable thereto. In no event shall any
of the Company's rights ever be deemed or construed to have been modified,
diminished, or impaired by any past practice or course of conduct except where
contained in an express provision of this Agreement.
The Arbitrator shall be bound by the facts and evidence submitted to
him/her in the hearing and may not go beyond the terms of this Agreement in
rendering his/her decision. No such decision may include or deal with any issue
not directly involved in the grievance submitted to him/her or with any matter
which is not expressly made subject to arbitration by the terms of this
Agreement. No decision of the Arbitrator shall require the payment of an hourly
rate different from the applicable one negotiated by the parties and expressly
set forth in this Agreement. The decision of the Arbitrator shall be in writing
and such decision shall be final and binding upon the parties when rendered upon
a matter within the authority of the Arbitrator and within the scope of the
matters subject to arbitration as provided in this Agreement and in accordance
with the procedures specified in this Agreement.
<PAGE>
3.09 - EXPEDITED ARBITRATION
The Union or the Company may invoke the Expedited Grievance Procedure,
as distinguished from the ordinary Grievance Procedure, in the event an employee
is discharged, suspended, disqualified from a job, disciplined for failure to
meet production standards, loss or reduction of earnings or in the event there
is a seniority dispute. Such request shall be asserted in writing, by next day
mail, given to the other party. The party requesting the Expedited Grievance
Procedure shall immediately contact the American Arbitration Association
headquarters (New York City) to request the first available Arbitrator from a
National pre-agreed panel of fifteen (15) arbitrators (see Appendix B, page 52)
who can hear the case within seven (7) calendar days.
The Arbitrator shall hold an arbitration hearing as expeditiously as
possible, but in no event later than seven (7) calendar days after receipt of
said notice. The decision of the Arbitrator shall issue forthwith and in no
event later than three (3) days after the conclusion of the hearing unless the
grieving party agrees to waive this time limitation with respect to all or part
of the relief requested. The Arbitrator's WRITTEN opinion will follow within
thirty (30) days and such decision shall be final and binding on both parties.
All costs for the hearing and service of the Arbitrator designated
herein, or for any other person selected pursuant to the aforementioned
procedure shall be borne by the parties jointly. Each party will bear the
expense of its representatives and for the presentation of its own case.
ARTICLE IV
----------
HOURS OF WORK AND PREMIUM PAY
-----------------------------
4.01 Work Week. For the purpose of computing overtime pay, eight (8) hours
---------
shall constitute a day's work; forty (40) hours, from Monday to Friday
inclusive, shall constitute a week's work.
<PAGE>
4.02 (a) All authorized time worked before regular starting time and/or
after regular quitting time including authorized time worked
during the regular lunch period shall be paid at time and one-
half, the average straight time hourly earnings as computed in
Section 8.07 reflecting the earnings for the week in which the
overtime is worked.
(b) Anyone reporting to work after their regular starting time will
receive overtime pay only upon completion of eight (8) hours
work.
4.03 All work on Saturday as such will be paid at time and one-half. Also,
double time will be paid for all work performed on Sunday except in the case of
any shift beginning in the preceding day and continuing into Sunday. Double time
shall be paid to employees who are scheduled to work and perform work on a
holiday.
4.04 Employees must be available for all work as scheduled, regular or
overtime. An employee who did not receive notice of overtime on his or her
previous shift worked shall not be compelled to work overtime on that particular
day (except for those employees on vacation or approved leave of absence).
Employees who have a valid reason may be excused by management from working
regular or overtime work at any particular time.
(a) Overtime. Except for plant security, continuous shift operations,
--------
emergency, or maintenance, the COMPANY will not require
production employees to work in excess of 10 hours per day on
Monday, Tuesday, Wednesday, and Thursday, 8 hours on Friday,
and/or in excess of 8 hours on Saturday, provided, however, that
no employee will be compelled to work more than two consecutive
Saturdays, except for the five (5) months listed in the local.
Work in excess of 8 hours on Friday will be addressed in each
LOCAL PLANT SUPPLEMENT.
<PAGE>
In those five (5) months listed in the local, employees shall be
available for Saturday work when production schedules so require.
A tentative schedule for these five (5) months will be given by
December 15th. In the event any of these five months need to be
changed, a sixty (60) day notice will be given.
(b) During the months described above the local plant UNION committee
and the Operations Managers have the authority to agree to
further enhance the varying starting times for selected
operations in order to satisfy the scheduling needs for quick
turn deliveries as well as to further ensure prompt delivery to
customers. Three (3) days notice is also required for such
change. (Except Los Angeles).
(c) Production on Sundays and holidays and in excess of the hours
described in (a) above may be performed by volunteers but will
not be mandatory.
(d) If a holiday falls on Friday, then Saturday work shall be
performed by volunteers.
4.05 There shall be no pyramiding of any premium or overtime pay under this
AGREEMENT for the same hours worked. Where one or more premiums or overtime rate
is payable, the single higher rate shall be paid.
4.06 Lunch Period. Each LOCAL PLANT SUPPLEMENT shall provide for at least
------------
thirty (30) minutes per day for a lunch period without pay, except when three
(3) shifts operate in which event LOCAL PLANT SUPPLEMENTS shall govern.
4.07 Rest Period. Each LOCAL PLANT SUPPLEMENT will spell out the time and
-----------
amount of any existing rest periods.
<PAGE>
4.08 (a) Shift Schedule. The shift schedule language described in the
--------------
various LOCAL PLANT SUPPLEMENTS will be modified to permit local
plant management to vary the starting time one hour either before
or after the described normal starting time for those operations
needed to balance the flow of work without penalty of overtime
premium. The COMPANY is required to give three (3) calendar days
notice of such change in writing to the UNION as well as posting
such on the Bulletin Board and giving notice to the individual
involved. Failure to give three (3) days notice for shift varying
times will not release the COMPANY from payment of overtime
premium pay.
4.08 (b) When it is necessary to temporarily assign an employee, or group
of employees from a permanent shift assignment to take care of
customer demands, the UNION may mutually agree with the COMPANY
to the adjustment of shift hours and reasonable notice
("Reasonable" means by the end of the prior working day) will be
given to the employee(s) involved without penalty of overtime
premium. Article 4.08 does not apply to Los Angeles.
4.09 Shift Premiums. Employees assigned to work on the second or third
--------------
shift shall be paid a shift premium of twenty (20) cents per hour.
4.10 Reporting Pay. When an employee reports for work at the regular
-------------
starting time of his shift without previous notice not to report and his regular
work is not available for him, he will receive a minimum of four (4) hours work
or pay, provided, however, that at the COMPANY'S option, he/she may be assigned
to another job for any portion of said four (4) hours, in which event he will be
paid at Average Rate as computed in Section 8.07 for whatever time is spent at
that job. The COMPANY shall have no liability regarding the above paragraph in
the event of a breakdown of power outside of plant or if inside of plant and not
maintained by the COMPANY, a general plant
<PAGE>
fire, act of God, act of public enemy or because of conditions beyond the
control of the COMPANY. (Except Los Angeles).
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
----------------------
5.01 Neither the UNION nor any of the employees in the bargaining unit
covered by this AGREEMENT will collectively, concertedly or individually
encourage, engage in or participate in, directly or indirectly, any strike,
deliberate slowdown, stoppage or other interference with production of work
during the term of this AGREEMENT; and the COMPANY during the term of this
AGREEMENT will not lock out any of the employees covered by this AGREEMENT.
ARTICLE VI
----------
MANAGEMENT RIGHTS CLAUSE
------------------------
6.01 The UNION recognizes the right of the COMPANY to conduct its business,
to operate its plants and to direct the working forces in such manner as it sees
fit but not inconsistent with the terms of this AGREEMENT and it is understood
that the COMPANY retains all MANAGEMENT rights not specifically covered by this
AGREEMENT.
ARTICLE VII
-----------
SENIORITY -- LAYOFF AND RECALL
------------------------------
7.01 The COMPANY recognizes the principle of seniority among its employees
and agrees that all layoffs occasioned by lack of work and recalls from layoff
shall be by seniority as herein provided.
7.02 (a) New employees shall be considered probationary employees until
they have completed the probationary period of 60 days. During
the probationary period an employee may be discharged at the
discretion of the COMPANY with or without cause.
<PAGE>
Any employee who completes his/her probationary period shall
commence his/her seniority as of the date of employment and
his/her seniority shall remain in full force and effect and shall
accumulate thereafter until terminated, all as herein provided.
No employee shall be required to serve more than one (1)
probationary period, provided such employee is rehired within one
year. The COMPANY, however, retains the right to terminate such
employee in the event he or she has not demonstrated the ability
to successfully perform the job within 30 days of rehire. This
provision will not apply to recalls as defined in the MASTER
Contract.
7.03 Seniority shall continue and accumulate while the employee is
continuously employed by the COMPANY and during the following periods of absence
from work:
(a) Up to twelve (12) months in case of disability or illness.
(b) During the first twelve (12) months of layoff.
(c) During military service.
(d) When an employee is elected or appointed to a UNION office, such
employee shall be given a leave of absence in writing for the
term of his office or any renewal thereof. The UNION shall give
the COMPANY two (2) weeks prior notice in such situation.
(e) The manner of return to employment shall be set forth in each
LOCAL PLANT SUPPLEMENT.
(f) To be eligible for a leave of absence, an employee must have
completed the probationary period provided in LOCAL PLANT
SUPPLEMENTS and the leave must be in writing.
7.04 Termination of Seniority. Seniority shall terminate for the following
------------------------
reasons:
(a) When the employee resigns.
<PAGE>
(b) When the employee is discharged for just cause.
(c) When the employee is laid off longer than twelve (12) months,
except for right of recall as per Section 7.10.
(d) When the employee's absence due to disability or illness exceeds
five (5) years.
(e) When an employee is recalled to work and does not return to work
as provided in Section 7.11.
(f) If an employee falsifies any information given in connection with
a leave of absence.
(g) The employee obtains employment while on an approved leave of
absence.
7.05 When increases or decreases in the working force become necessary they
shall be made on the basis of seniority as set forth in the LOCAL PLANT
SUPPLEMENTS.
7.06 When there is not sufficient work for all employees, probationary
employees with less than sixty (60) days seniority, shall first be laid off. If
further reduction of the work force is necessary, employees will be laid off in
accordance with Section 7.05.
7.07 Layoff Notices. Definitions, determinations and notices of layoffs
--------------
may be set forth in the LOCAL PLANT SUPPLEMENTS.
7.08 Surplus Labor List. Any employee laid off for lack of work shall have
------------------
his/her name placed on a surplus labor list in accordance with the LOCAL PLANT
SUPPLEMENT. If an employee's seniority has been broken his name shall be removed
from such list.
7.09 Personnel Turnover. The local plants that presently provide the UNION
------------------
with labor turnover sheets will continue to do so to the extent and in the
manner they presently do.
<PAGE>
7.10 Recall. Employees shall be recalled from the surplus labor list and
------
at the time of their recall be offered work in accordance with the procedure set
forth in the LOCAL PLANT SUPPLEMENTS.
If an employee is laid off longer than the twelve (12) months, he/she
shall have recall rights for an additional six (6) month period without loss of
seniority. This additional six (6) month grace period for recall purposes only
may not be extended for any other purpose and shall not be credited toward
accumulation of seniority.
7.11 Notice of Recall. An employee on layoff who is recalled for work will
----------------
be notified by overnight mail. Failure to report to the Employment Office within
forty-eight (48) hours after receipt of notice to report will terminate
seniority.
Overnight letters to the employees being recalled will read:
"Job available. UNION Contract requires you report
within 48 hours."
The burden of proving delivery of notice by overnight mail to his last
known address shall solely be that of the COMPANY.
7.12 Change of Address. It will be the duty of employees to keep the
-----------------
COMPANY advised of any change of residence. Any employee who fails to do so or
who fails to respond to the notice in Section 7.11 shall have no recall rights
to the then available job, but his seniority will not be forfeited until the
UNION has been notified of his failure to respond in which event the UNION will
have five (5) days in which to locate said employee. Failure on the part of the
UNION to locate him/her within the above five (5) days will mean forfeiture of
all seniority rights by the employee involved.
<PAGE>
7.13 In the event of a war emergency, the parties agree to discuss revision
of the seniority provisions of this AGREEMENT for the purpose of providing for
such revision as may be necessary because of the employment conditions then
existing.
7.14 Seniority Bonus. All employees with eighteen (18) years or more of
---------------
continuous seniority will be granted a seniority bonus of one (1) week's pay
either at Christmas time or at the time of their vacation as the employee
chooses.
ARTICLE VIII
------------
WAGES
-----
8.01 A general wage increase of thirty cents (30 cents) per hour for all
hourly employees and twenty-five cents (25) per hour for all incentive
employees will be granted effective October 16, 1994. All basic rates, all
hourly rates and all labor grade rates will be increased to reflect the
increase.
8.02 A general wage increase of thirty cents (30 cents) per hour for all
hourly employees and twenty-five cents (25) per hour for all incentive employees
will be granted effective October 16, 1995. All basic rates, all hourly rates
and all labor grade rates will be increased to reflect the increase.
8.03 A general wage increase of thirty cents (30 cents) per hour for all
hourly employees and twenty-five cents (25) per hour for all incentive employees
will be granted effective October 16, 1996. All basic rates, all hourly rates
and all labor grade rates will be increased to reflect the increase.
8.04 Reactivation of Old Classifications. Whenever an obsolete
-----------------------------------
classification is reactivated, it is understood that all intervening wage
adjustments shall be automatically added to the original rate thereof.
<PAGE>
8.05 Establishment of New Classifications. In the event it becomes
------------------------------------
necessary to establish a new classification, the COMPANY and the UNION shall
meet for the purpose of reaching AGREEMENT as to the rate for such
classification.
The COMPANY and the UNION, in an attempt to reach an AGREEMENT, shall
take into consideration similar classifications in the plant previously or
presently in existence.
If the parties fail to reach an AGREEMENT within three (3) working
days, the resolution of the rate will be moved to expedited arbitration (in
accordance with the procedure outlined in ARTICLE III Section 9 [Expedited
Arbitration]). The COMPANY will assign a temporary employee at his average rate
to the new classification who shall perform the operation until such time as an
AGREEMENT is reached or is resolved by arbitration. When the rate of the
disputed classification is agreed upon or resolved as provided above, the job
will be filled in accordance with the terms as set forth in the LOCAL PLANT
SUPPLEMENTS.
8.06 Rate for Borrowed Man. When an employee is borrowed for the
---------------------
convenience of the COMPANY and given a type of work to perform other than the
type of work at which he/she is (normally) employed, then his/her rate shall be
his/her average hourly earnings rate, provided such average rate is greater than
his/her earnings on incentive or the day work rate for the work being performed.
(a) No job may be filled by borrowed personnel for more than 60 days
during any 12 month period except by mutual AGREEMENT between the
COMPANY and the UNION, except in situations in which the training
period exceeds 60 days.
8.07 Average Rate Computation. Individual average hourly earnings rates
------------------------
for employees working in incentive classifications will be computed quarterly by
dividing the total number of hours
<PAGE>
that the incentive worker has worked, including average rate payment, if any,
into the total straight time earnings of that individual. The hours shall
include the total hours of any incentive worker except those hours when he
is in a holiday or vacation status, or time working on any classification other
than his/her own. A copy of such average hourly earnings shall be made available
to the UNION. Each year the COMPANY will advise the UNION, in writing, the
specific dates which determine the period of earnings on which averages are
based.
8.08 In the event an employee has not established his average hourly rate
due to the fact that he/she has not worked during the immediately preceding
calendar quarter, then his/her average rate shall be equal to his/her average
hourly rate for the last quarter he/she worked.
ARTICLE IX
----------
STANDARD ALLOWED HOUR (S.A.H.} SETTING FORMULA
----------------------------------------------
9.01 It is agreed that the COMPANY at any time may install an incentive
compensation plan in any operation, job, or variation of any operation or job
where in its judgement such a plan is practicable. Such incentive compensation
plans when established may be made applicable to individuals or groups of
individuals and will provide for skilled employees an incentive earnings
opportunity for increased productivity. Effective October 15, 1982, the Standard
Allowed Hour system will replace the price per piece (piecework) system. It is
recognized by the parties, however, that certain bonus plans such as packing,
pre-loading, off-bearing and allocating (shipping), and ultrasonic, etc., may
nevertheless continue, inasmuch as special circumstances make it difficult to
effect a conversion to SAH at this time. The Standard Allowed Hour System of
payment will be in effect at all the plants covered by this MASTER AGREEMENT.
<PAGE>
9.02 If a new job, new operation or variation of an existing operation is
set up, the Foreman shall notify the Shop Steward and the operator's experience
time shall begin on the date of this notification.
Whenever time studies are necessary the floor observations of the
COMPANY'S Time Study Engineer will be of at least 30 minutes duration in order
to assure a representative sample of the job. The operator who is to be time
studied or analyzed will be paid his or her average hourly rate until a new
standard is submitted.
The COMPANY shall select the operator for time study analysis. Until a
new standard or incentive value is submitted, the employee who works on a unit
for which there is no standard or standard allowed hour will be paid his/her
average hourly rate for such unit.
9.03 In all cases, the S.A.H. will be determined by dividing the Total
-----
Standard Minutes by a 60-Minute Hour.
- ---------------- --------------
S.A.H. per piece = T.S.M.
------
60
The Basic Rate of the Classification will be as stated in each of the
--------------------------------
several Local Plant Supplements.
The Basic Production Expectancy will be determined by dividing a 60-
--------------------------- ---
Minute Hour by the Time per Piece at 100% rating increased by a 10% Rest,
- ----------- --------------
Fatigue, and Delay Allowance (Effective 10/16/94, the RFD factor on new or
revised standards shall be 12.5%).
<PAGE>
Basic Production Expectancy =60-Minute Hour
--------------
100% Time/Piece Allowance Plus 10% R.F.D.Allowance
(12.5% on new or revised standards after 10/16/94)
Basic Production Expectancy x S.A.H. = Hours Earned.
Hours Earned x Base Rate = Rate per Hour.
Example of Incentive Earnings
Opportunity Offered by Above Formula
------------------------------------
1362 S.A.H. = T.S.M. of 8.1738
----------------
60-Minute Hour
7.3405 Pieces per Hour
Basic Production Expectancy =60-Minute Hour
--------------
(Cycle base minutes) 7.4307 (100% Time/Piece) plus
.7431 (10% R.F.D. Allowance)
------
T.S.M. 8.1731 (Total Standard Minutes)
A. 7.3405 pcs./hr. 100% at 25% Incentive Pace equals
9.1756 pcs./hr.
B. 9.1756 pcs. @ S.A.H .1362 = 1.25 hours earned.
C. Base Rate $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hr.
E. Earnings/Hour 7.72
----
Base rate 6.18 = 125% Incentive
Earnings Opportunity at +25% Incentive Pace.
<PAGE>
9.04(a) It is agreed that whenever an S.A.H. standard is computed it
shall be submitted in writing to the operator and become
effective immediately. This computation may consist of an actual
clocking of the work or an analysis of previous standards or
records of comparable or similar work. The COMPANY will furnish a
complete written prescribed job methods description to the UNION
whenever new standards or revised standards are submitted. Once
such job methods change is submitted in writing, the COMPANY has
a ninety (90) day period in which to adjust the time in the event
such adjustment is necessary. If such time value is neither
adjusted by the COMPANY nor grieved by the UNION, neither party
can expect revision of such change after the expiration of ninety
(90) days. No standards changes can be effected without a written
job methods change.
(b) The written confirmation referred to above will indicate whether
the standards were developed from a clocking analysis, local
plant standard data, or a combination of time study and data.
PROCEDURAL INTERPRETATION OF SECTION
------------------------------------
9.05 Current standards are guaranteed unless MANAGEMENT makes a change in
method, means, process, equipment, production conditions or product design.
Where such change results in an addition to the standard task time an adjustment
will be made to proportionately reflect the change.
In those instances where the change results in greater output, the
time will be proportionately adjusted to reflect the diminution in task time.
Thus, standards will be revised to reflect the changes of the job, operation or
variation of an operation in the degree the change in the task affects the
standard upward or downward.
<PAGE>
Where the change represents less than five percent (5%) of the cycle
base minutes, MANAGEMENT will use standard data from its bank of appropriate
basic time study standards in determining the new task time reflecting the
change. The COMPANY may restudy the operation in those instances where the
elements of work affected by the revised method exceed five percent (5%) of
the originally submitted cycle base minutes of the entire task. In those
instances where there was no original time study taken, where standards
were set by negotiations, or where element breakdown was not measured,
or where the additions and deletions are not sufficiently distinct to
permit addition or subtraction from work content, MANAGEMENT will develop
time from a restudy of the entire operation. Every time a change of
sufficient impact to justify a modification of standard is contemplated
all other changes from the time the standards were last established,
will of course be included in the new measurement of the task. It is
contemplated that there will be occasions where preceding and succeeding
elements will be effected by change. Similarly, it is contemplated that
preceding and succeeding operations for classifications may be affected by a
change. In those instances, it will be necessary to measure and modify the
impact of such change. Once the appropriate addition or deletion is developed,
such time will be translated into an S.A.H. on the basis of current labor grades
or basic rates.
In order to preserve the integrity of earnings as well as integrity of
job methods and product quality, it is agreed that neither the supervisor nor
the employee can change the prescribed method of performing the incentive task.
All changes and resulting standards, in order to become effective and binding,
must be initiated in writing by the Time Study Department. For identification
purposes, the COMPANY on October 15, 1973, installed an administrative procedure
on all new time studies which enables a departmental Shop Steward or other
designated UNION official to sign a copy of such new standard data or chart
issued as a consequence of such new time study.
9.06 Grievances Regarding Incentive Standards
----------------------------------------
<PAGE>
(a) Before submitting any grievance on an SAH standard, the operator
will work at the submitted standard for a period of at least
thirty (30) calendar days.
(b) If, after thirty (30) calendar days from the date on which the
standard is submitted, the operator(s) is not satisfied with the
standard, such operator(s) shall have the right of protesting
said standard by submitting a written complaint in accordance
with the Grievance and Arbitration Procedure of this AGREEMENT,
provided this right is exercised within a period of ninety (90)
calendar days from the date the standard was originally
submitted. Failure to exercise this right of protest within the
above described ninety (90) calendar days shall constitute an
automatic acceptance of the submitted standard. Whenever a
standard has been automatically accepted by failure of the UNION
to initiate action under the Grievance and Arbitration Procedure
within ninety (90) days, no new grievance can be submitted in
connection with this particular standard. A resolution of
grievances over incentive standards shall be retroactive to the
date the protested standard was originally submitted.
(c) If the COMPANY Time Study Department finds no error in the
submitted standard and the matter is still in dispute, then it
may be processed in accordance with the Grievance and Arbitration
Procedure to determine whether or not the standard as established
is contrary to the provisions of this agreement.
(d) It is agreed by the parties hereto that in the case of disputes
concerning the accuracy of the COMPANY'S clocking analysis the
Impartial Chairman described in Section 3.07 Paragraph 3 must be
a qualified Time Study Engineer. The findings of the Impartial
Chairman shall be final and binding on both parties and shall be
retroactive to the date the SAH was originally submitted.
<PAGE>
9.07 Availability of Time Study Data. The COMPANY agrees that it will
-------------------------------
conform to the law with respect to making available such Time Study data as may
be needed by authorized UNION Officials from time to time in the course of
processing grievances under this AGREEMENT with regard to incentive standards.
It is agreed that such data will not be misused and that it will be kept
strictly confidential so as to insure that COMPANY means, methods and production
processes will never be revealed to parties not bound by this AGREEMENT. The
Union Time Study Engineer and the Company Time Study Engineer will meet for the
purpose of resolving the question of unsupported time study back-up data.
9.08 UNION Time Study Engineer. Whenever a Local Union, party to this
-------------------------
AGREEMENT, desires to have the INTERNATIONAL UNION designated time study
engineer visit one of the plants in order to verify COMPANY standards or job
content as the consequence of a grievance by that Local Union the procedures
will be as follows:
1. The UNION COUNSEL shall write the COMPANY Senior Vice President -
Human Resources suggesting a list of dates a minimum of two (2)
weeks prior to the proposed visit.
2. The COMPANY designee will respond by either selecting from the
UNION list or by offering alternative dates.
3. Once the above two (2) designees complete arrangements they will
notify their respective local plant MANAGEMENT and UNION
representatives the agreed upon dates for the visit.
9.09 Standard Data. Consistent with the mutual desire of the parties to
-------------
minimize or eliminate the grievances and problems now inherent in work
measurement via stop watch and also
<PAGE>
the attendant difficulties occasioned by disagreement over pace determination,
the COMPANY will, whenever feasible, set incentive job standards by use of
predetermined, pre-leveled time values, i.e., use of a data bank.
To ensure greater objectivity, the COMPANY will detail and define more
completely the methods involved in each operation.
ARTICLE X
---------
10.01 The following paid holidays shall be celebrated:
New Year's Day Independence Day
Birthday of Martin Labor Day
Luther King, Jr. Thanksgiving Day
Memorial Day Christmas Day
Where any local plant currently celebrates more than the above listed
seven (7) paid holidays, such additional paid holidays shall be provided for in
the LOCAL PLANT SUPPLEMENT.
10.02 Eligibility. Eligibility for holiday pay will be provided for in
-----------
LOCAL PLANT SUPPLEMENTS. The COMPANY will pay holiday benefits on a local plant
basis consistent with past contract and policy. Appropriate language will be
written into the LOCAL PLANT SUPPLEMENT.
10.03 Holiday pay shall be included in the pay check for the pay period in
which the holiday falls.
10.04 When any of the above holidays falls within an eligible employee's
approved vacation period and he is absent from work during his regularly
scheduled work week because of such
<PAGE>
vacation, he/she shall be paid for such holiday in addition to his/her vacation
pay and shall have such day off.
10.05 If any two (2) or more of the paid holidays shall occur on the same
day, the employee will be paid for each of said holidays but shall have only one
(1) day off.
10.06 When any of the paid holidays falls on Sunday and the day following
is observed as the holiday, the latter day shall be the paid holiday.
10.07 The COMPANY agrees that whenever a holiday falls on a Saturday it
shall, at the discretion of the Operations Manager, be celebrated on either the
preceding Friday or the following Monday. Notice of the date selected will be
posted two (2) weeks in advance. In the above situation, no work will be
scheduled on such Saturday to avoid holiday premium pay.
10.08 Holiday pay will be at eight (8) times the employee's average hourly
earnings rate as computed in Section 8.07 for incentive workers; day workers
will be paid at eight (8) times the employee's regular day work hourly rate.
Shift premium shall be included in holiday pay computation for eligible
employees.
10.09 For the purpose of computing overtime and premium pay, holidays
herein designated shall be regarded as days worked in the week in which they
occur whether or not work was actually performed during such hours.
10.10 In conformance with Federal Law enacted in 1968 and effective 1/1/71,
certain Mondays shall be observed as legal holidays, i.e., Washington's Birthday
(3rd Monday in February); Memorial Day (last Monday in May); Labor Day (1st
Monday in September); and Veteran's Day (4th Monday in October).
<PAGE>
ARTICLE XI
----------
PAID VACATIONS
--------------
11.01 The COMPANY Will Grant Vacations With Pay As Follows:
-----------------------------------------------------
(a) Employees with from one (1) to three (3) years of continuous
service shall receive an annual week of vacation with pay for
forty (40) hours if otherwise eligible.
(b) Employees with three (3) to twelve (12) years of continuous
service shall receive two (2) weeks of vacation with pay for
eighty (80) hours if otherwise eligible.
(c) Employees with twelve (12) to eighteen (18) years of continuous
service shall receive three (3) weeks of vacation with pay for
one-hundred twenty (120) hours if otherwise eligible.
(d) Employees with eighteen (18) or more years of continuous service
shall have the option of taking a fourth week of vacation in lieu
of the seniority bonus (Section 7.14) if otherwise eligible.
Selection of the fourth week will be at a time convenient to the
COMPANY.
(e) Full vacation benefits will be paid to those who are otherwise
eligible in the following circumstance:
(1) To the employee's estate in the event of the death of the
employee;
(2) To the employee in the year of his or her retirement.
(f) Employees on the payroll to October 15, 1982, will receive their
week of vacation and, if eligible, the seniority option bonus as
outlined in the MASTER AGREEMENT expired October 15, 1982.
(g) COMPANY will pay one additional week vacation pay at vacation
rate for employees with twenty-five or more years seniority with
no additional time off.
11.02 Wherever LOCAL PLANT SUPPLEMENT language conflicts with present
MASTER CONTRACT language, the MASTER CONTRACT shall prevail, so that the COMPANY
can freely choose which particular weeks, if any, it will shut down for vacation
purposes.
<PAGE>
11.03 (a) The COMPANY shall notify the UNION, no later than January 1st
of each vacation year, whether each individual plant will shut
down or whether there shall be a staggered vacation on an
individual employee basis. Prior to January 1st of each
vacation year, vacations for eligible employees will be
scheduled by classification and seniority in accordance with
period January 1 to December 31. If the COMPANY decides on
plant shutdown, those employees who had their vacation time
earlier and are not eligible for any more vacation time during
the year, nor required to work during the shutdown, will be
furloughed during plant shutdown.
(b) The COMPANY may elect to ship finished products, modify,
maintain, or install equipment and manufacture process or
finished product in order to balance work flow, satisfy
customer needs, or balance production schedules and stock
during a shutdown for vacation purposes.
11.04 Eligibility for vacation will be determined by measuring the year of
earned vacation benefit pay from the anniversary date of hire, rather than by
calendar or fiscal year.
11.05 If vacations are staggered, then vacations for eligible employees
will be scheduled by classification and seniority in accordance with anticipated
production requirements during the period from January 1 to December 31, except
that 3rd and 4th weeks of vacation for eligible employees may not normally be
scheduled during the months of May, June, July, August and September. Employees
shall indicate in writing on a form furnished by the COMPANY their preferences
for vacation dates during the month of December of each year. At that time also
employees eligible for a 3rd week's vacation who wish to receive money in lieu
of vacation and employees eligible for the seniority bonus who wish to take
vacation time off in lieu of the bonus shall so indicate on the form. Vacation
time will not be altered except when operational needs are affected by illness.
Exceptional
<PAGE>
cases of third or fourth week vacations during the period of May, June, July,
August and September may occasionally be arranged when the Business Agent or
Local President can mutually agree to such with the Operations Manager or the
Labor Relations Specialist.
11.06 Employees may not accumulate vacation benefits but must take them
when eligible. Hardship cases may be considered and money may be taken in lieu
of vacation provided the COMPANY will advise the UNION of the reason for such
prior to payment of the vacation money to the employees involved.
11.07 Shift premium will be included in vacation pay computation for
employees otherwise eligible.
ARTICLE XII
-----------
U.I.U. PENSION TRUST
--------------------
12.01 U.I.U. Pension Trust provides employees represented by the UNION with
certain pension benefits as are from time to time determined by the Trustees.
The parties to this AGREEMENT desire that the pension benefits now granted and
which may hereafter be granted by the Trustees, be provided to the employees
covered by this AGREEMENT.
The EMPLOYER agrees, therefore, beginning with the month of November,
1988 and for each month thereafter for the duration of this AGREEMENT, to
contribute, by no later than the tenth day of each month, to the U.I.U. Pension
Trust a sum of money in an amount equal to six percent (6%) of the total gross
earnings accrued during the immediately preceding calendar month by all the
employees who were covered by this AGREEMENT during the said immediately
preceding calendar month, including the total gross earnings of any such
employee whose employment was terminated during the said immediately preceding
calendar month. The EMPLOYER shall transmit to said Trust with each
contribution, a "Contribution Report", on the form furnished by Trust, in
<PAGE>
which the EMPLOYER shall report the names, hire and termination dates as
applicable, and total gross earnings of all such employees during such calendar
month. The EMPLOYER further agrees to supply to the Trust such further
information as may from time to time be requested by it in connection with the
benefits provided by said Trust to said employees. The parties agree, however,
that the coverage of a newly employed employee shall not begin until the first
day of the first calendar month following the expiration of twelve (12) months
from the commencement of this employment, meaning that in calculating the
contribution due hereunder for the first twelve (12) months of coverage for the
said newly hired employee, his/her total gross earnings for the entire preceding
twelve months shall be considered. Thereafter, the employer will make
contributions each calendar month. This exception for newly employed employees
shall not apply in the case of employees who have been previously covered under
the U.I.U. Pension Trust in which event the EMPLOYER shall report such employees
and make contributions as required herein beginning with the first calendar
month following the date of the commencement of such employment.
For the purposes of this clause only, a part-time employee is defined
as one who is employed to regularly work less than the number of hours
established as the regular work week, which definition does not include regular
full time employees who are employed to work a full work week but who might be
working shorter hours due to lack of work, sickness, etc. Part-time employees
shall not receive coverage hereunder nor shall their earnings be considered in
calculating the contributions due hereunder. For the purposes of accurate record
keeping, however, part-time employees shall be listed on the contribution report
and their total gross earnings shown. Nothing in this clause shall be construed
as an affirmation or negation of the EMPLOYER'S right to employ part-time
employees or as an indication of what other clauses of this AGREEMENT might or
might not apply to certain employees.
In the event there is a default in the payment of contributions as
required herein, the payment thereof may be enforced by either process of law or
arbitration and if either suit or
<PAGE>
arbitration is initiated, the debt owing to the Fund shall be increased to
include the cost of suit and/or arbitration and an attorney's commission of ten
percent (10%) of the payments then in default.
In consideration of the EMPLOYER'S aforesaid contributions to the
Trust as herein above provided and for so long as the EMPLOYER'S participation
in the Trust is accepted by the Trustees, the Trustees will, beginning with the
date of receipt by the Trust of the EMPLOYER'S first said contribution and
continuing for such part of the duration of this AGREEMENT as the EMPLOYER fully
complies with the terms of this clause in all respects, extend and make
available to employees covered by this AGREEMENT the pension benefits for which
such employees are eligible under the Declaration of Trust, as amended from time
to time, which is by this reference incorporated herein and made a part hereof.
If during the life of this AGREEMENT the EMPLOYER'S participation in the Trust
is rejected or terminated by the Trustees, this clause shall be null and void
and this AGREEMENT shall be reopened and negotiations between the parties
entered into, but only as to the subject of the establishment of other benefits
in place of the U.I.U Pension Trust, but at a cost of the EMPLOYER not to exceed
the cost of the Contribution hereunder.
ARTICLE XIII
------------
U.I.U. HEALTH AND WELFARE FUND
------------------------------
(Not applicable to Los Angeles)
-------------------------------
13.01 - BENEFIT PLAN(S)
The parties to this agreement desire that the benefits now granted by
the Board of Trustees of the UIU HEALTH AND WELFARE FUND, hereinafter "FUND", in
their plan of benefits designated as Plan E, Plus Dental Plan 4, be provided to
the employees employed in the Union's Bargaining Unit.
13.02 - CONTRIBUTION RATES
<PAGE>
(a) Disability due to sickness or accident, up to a maximum of six
(6) months per disability.
(b) Vacation
(c) Attendance at Union or Fund Convention, seminar or grievance
hearing.
The employer is not required to make a contribution on an employee
whose employment is terminated during the wage month.
13.04 - EMPLOYEE CONTRIBUTIONS:
Each such employee must in writing authorize the Employer to deduct
the employee's contributions from the employee's wages and to transmit same to
the Fund. When supplied with such a written authorization the Employer agrees to
make the required deductions and to promptly transmit same to the Fund. Employee
contributions are due at the same time as the Employer contributions.
Employees who refuse or neglect to provide the Employer with the
necessary written authorization to deduct the required employee contributions
will receive no fund coverage. In those cases in which an employee has supplied
the Employer with the required written authorization but because of lack of
wages the Employer is unable to deduct the employee contribution due for a
particular benefit month, it is the obligation of the employee to pay, in a
timely fashion, to the Employer for transmittal to the Fund, the required
employee contribution. The coverage of such an employee failing to make the
required payment on time is automatically terminated. Employee pre-tax co-pay
will be deducted on a weekly basis.
13.05 - SICKNESS AND HEALTH AND LIFE INSURANCE
For those eligible employees who do not elect medical and dental
coverage during the defined time period, the Company will make a monthly
contribution to the Fund of $44.00 for
<PAGE>
Sickness and Accident Coverage and Life Insurance Coverage as provided by the
U.I.U. HEALTH AND WELFARE FUND TRUST.
13.06 - PAYMENT OF CONTRIBUTIONS
Contributions are due from the employer on the tenth (10th) day of the
benefit month, commencing with the month of November, 1994, and each and every
month thereafter so long as this agreement is in force.
13.07 - COVERAGE
(a) Hospital and Medical Benefits. Coverage for newly hired
-----------------------------
employees and any named dependents will begin on the first day of
the month following completion of thirty (30) days of employment.
Previously covered employees shall be covered the first day of
the calendar month following their return to work.
(b) Disability Benefits. Newly hired employees shall be eligible for
-------------------
the sixty percent (60%) Indemnity Payment if disabled after
completing six (6) months of employment.
(c) These provisions for newly hired employees shall not apply in the
case of those employees who have been "Previously Covered" under
the Fund. Such employees and their dependents shall be eligible
for all benefits from the date of hire.
13.08 - ELECTION OF CATEGORY OF COVERAGE AND RIGHT TO CHANGE
Employees shall elect a category of coverage no later than the first
day of the calendar month following the completion of thirty (30) days
employment. This election may be changed only as provided for in the Plan. Newly
born children must be enrolled within 31 days of birth.
13.09 - REQUIREMENTS
<PAGE>
The employer shall transmit to the FUND with each contribution a
contribution report on the form furnished by the FUND on which the employer
shall report the names, status, hire and termination dates as applicable, as
well as the total gross earnings of each eligible employee during the wage
month.
The employer further agrees to supply to the FUND such further
information as may from time to time be requested by it in connection with the
benefits provided by said FUND to said employees, and to permit audits of its
books and records by the FUND for the sole purpose of determining compliance
with the terms and conditions of this agreement.
13.10 The COMPANY agrees solely to make the contributions required by
the terms of this Agreement. The UNION and the UIU HEALTH AND WELFARE FUND agree
to hold harmless and indemnify the COMPANY from any and all claims, grievances,
lawsuits, actions at law or inequity relating to the Plan except a claim that
the COMPANY has not paid the contribution required by this Agreement.
The COMPANY does not agree to be bound by, and expressly disavows any
obligations imposed upon the COMPANY by, the provisions of any Trust Agreement
or other document pertaining to the UIU HEALTH AND WELFARE FUND to which the
COMPANY is not a signatory party.
13.11 - REINSTATEMENT OF COVERAGE
The FUND may, in its sole discretion, elect to reinstate coverage
either retroactively or prospectively or both once the amounts owed to the FUND
by the employer are paid in full. If coverage is reinstated prospectively, there
shall, nevertheless, be no coverage for illnesses first manifested during the 10
day period following the date of reinstatement.
<PAGE>
13.12 - PART-TIME EMPLOYEES
For the purpose of FUND coverage, a part-time employee is one who is
hired to regularly work less than the number of hours established as the regular
work week in this AGREEMENT, which definition does not include regular full-time
employees who are hired to work a full work week but who might be working short
hours because of lack of work, sickness, etc. Part-time employees shall not
receive FUND coverage nor shall the EMPLOYER pay a contribution for such
employees. Nothing in this clause shall be construed as an affirmation or
negation of the EMPLOYER'S fight to hire part-time employees.
13.13 The COMPANY shall have the right to audit the UIU HEALTH AND
WELFARE FUND periodically.
13.14 In consideration of the EMPLOYER'S aforesaid payment to said
FUND as hereinabove provided, the UNION warrants that the Board of Trustees of
the UIU HEALTH AND WELFARE FUND will, beginning on the date of receipt by the
FUND of the EMPLOYER'S first said payment, and during such part of the life of
this AGREEMENT as the EMPLOYER fully complies with the terms of such AGREEMENT
in all respects, extend and make available to EMPLOYER'S said employee the
benefits for which employees are eligible under the above designated benefit
plan. No benefits will be paid or services furnished to any employee or
employees for whom the EMPLOYER has not paid the required contribution to the
FUND except as, and only to the extent, otherwise required by any applicable
State Disability Benefit Insurance Law.
ARTICLE XIV
-----------
JURY SERVICE
------------
14.01 Any employee duly called to perform his civic duty to serve on a jury
panel shall be compensated by the COMPANY for the difference between the daily
jury pay and average hourly
<PAGE>
earnings as computed in Section 8.07 if an incentive worker or the hourly day
work rate for the classification if a day worker of the employee based on an
eight (8) hour work day. Any employee who is excused from serving shall not be
required to report to his job to complete a partial shift. In the event any
employee has been excused for a full day, he shall report to his job and
continue working until told to report again for jury duty.
ARTICLE XV
----------
BEREAVEMENT PAY
---------------
15.01 Definition
----------
Bereavement pay will be granted up to a maximum of three days for time
lost due to death in the immediate family. Immediate family is defined as
mother, mother-in-law, father, father-in-law, brother, half brother, sister,
half sister, grandchildren, spouse or child. No pay shall be granted unless an
employee fails upon request to furnish the COMPANY with reasonable proof of
death and relationship.
15.02 Payment
-------
The pay for such loss of time from work will be for eight hours,
straight time at the employee's previous quarter average hourly rate if an
incentive employee and at the classification rate of pay if a day worker.
ARTICLE XVI
-----------
BULLETIN BOARDS
---------------
16.01 The UNION may put up bulletin boards at locations specified by the
MANAGEMENT for the following non-controversial UNION announcements:
(a) Notice of UNION recreational or social affairs;
<PAGE>
(b) Notice of UNION nominations or elections and results of such
elections and nominations;
(c) Notice of UNION Appointment;
(d) Notice of UNION meetings;
(e) Notice of dates when dues payments are to be made;
(f) Notices pertaining to the U.I.U. Health and Welfare and U.I.U.
Pension Programs.
16.02 The UNION agrees that all notices so posted as above stated shall be
signed by the Secretary or other authorized officer of the UNION and he alone
shall have the power to post such notices on behalf of the UNION and further
agrees that notices are to remain on the bulletin board for a period of not more
than two (2) weeks.
Before any notices are posted in accordance with the foregoing, a copy
of such notice shall be delivered to the COMPANY Operations Manager, or to the
Labor Relations Specialist where there are such officials. Any of the
aforementioned representatives of the COMPANY may remove from the bulletin board
any notice which does not conform to the requirements of this Article.
ARTICLE XVII
------------
MILITARY CLAUSE
---------------
17.01 The COMPANY agrees to comply with all applicable laws relating to re-
employment rights of employees called for military duty.
<PAGE>
ARTICLE XVIII
-------------
PICKET LINE CLAUSE
------------------
18.01 Mr. Ernest Shock, Director of the Upholstery Industries Division
of The United Steel Workers UNION, and Mr. Robert K. Barton, Senior Vice
President-Human Resources for SIMMONS COMPANY, shall meet to develop appropriate
language.
ARTICLE XIX
-----------
TRAINING PERIOD
---------------
19.01 Employees who are recalled, transferred, bid, bump or roll to another
incentive job shall immediately receive the training rate described in the LOCAL
PLANT SUPPLEMENTS where such training rate is provided or his/her incentive
earnings for such job, whichever is higher. Any employee who is recalled,
transferred, bids, bumps or rolls to a day work job shall immediately receive
the top rate for the classification of said job as described in the respective
LOCAL PLANT SUPPLEMENTS.
19.02 In all cases involving transfer, bid, bump, roll or promotion, the
employee or employees concerned shall receive a trial period of at least thirty
(30) working days, provided the employee shows satisfactory progressive
improvements. Such trial period may be extended by mutual AGREEMENT BETWEEN THE
COMPANY and the UNION. If the employee fails to show satisfactory improvement
and is about to be disqualified, the UNION will be so advised immediately. If
the employee and the UNION request an extension of time the COMPANY will
consider such request.
19.03 Minimum hiring rates shall be set forth in Local Plant Supplements.
<PAGE>
ARTICLE XX
----------
PAY DURING TREATMENT OF WORK-CONNECTED INJURIES
-----------------------------------------------
20.01 (a) If an employee is injured in the Plant while performing his
work assignment and it is necessary for him to receive
treatment by either the COMPANY Nurse or COMPANY Doctor during
his regularly scheduled working hours, the COMPANY shall pay
for the time spent in the treatment of such injury on the day
the injury occurred at his average rate if an incentive worker
or his hourly rate if an hourly worker. If either the Nurse or
Doctor certifies that such injured employee is unable to
continue work because of such injury, the COMPANY will pay for
the balance of his scheduled shift at his average rate for
incentive worker and hourly rate for hourly worker. If the
Doctor requests subsequent visit(s) during his regularly
scheduled shift for the treatment of this injury, the COMPANY
will pay for the time spent in this treatment at the employee's
average rate for incentive worker and hourly rate for hourly
worker. To minimize employee inconvenience, such subsequent
visits will be scheduled, if possible, during the employee's
regular shift. However, where a second or third shift employee
is injured on the job and subsequently requires additional
treatment for this injury, then such visits shall be scheduled
by the COMPANY's Personnel Department at a time consistent with
the treating Doctor's office hours.
(b) The employee will be clocked out in time to make the
appointment as scheduled. When the employee leaves the doctor
or nurse, he/she will receive a release form that will show the
completion time of the appointment. Upon returning to his/her
department, the employee will present this form to his/her
supervisor and will be clocked back in for return to work.
<PAGE>
(c) It is agreed that for all such visits off the COMPANY premises,
upon request, the COMPANY will furnish transportation if the
employee is unable to drive or has no means of transportation.
(d) None of the sections of this paragraph are to be so construed
that benefits will inure in addition to or pyramid on
disability payments or Workers' Compensation payments.
ARTICLE XXI
-----------
NON-DISCRIMINATION
------------------
21.01 SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, national origin, age, sex, known
handicap, or veteran status except where religion, sex, national origin or age
is a bona fide occupational qualification or where a bona fide seniority or
merit system affects compensation, terms, conditions or privileges of
employment. Our policy relates to all phases of employment, including
recruitment, placement, promotion, training, demotion, transfer, layoff, recall
and termination, rates of pay, employee benefits and participation in all
SIMMONS sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial, ethnic
or religious harassment. Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature or verbal or physical
conduct directed at a person's race, color, religion, sex, national origin, age,
handicap or veterans status may constitute harassment. At any time, if you
believe that you have been harassed, you must report the harassment to your
-----------
immediate Supervisor or to the Operations Manager. A confidential investigation
will be conducted.
<PAGE>
ARTICLE XXII
----
SAVING CLAUSE
-------------
22.01 If any provision of this MASTER Multi-Plant Working AGREEMENT is
invalid or illegal, in any state, then such provision shall be considered to be
deleted in its entirety or to be inoperative in said state in which it is
illegal or invalid and the remaining provisions of this AGREEMENT will continue
in full force and effect.
22.02 The parties recognize the need to maintain compliance with all
federal statutes and regulations and nothing in this agreement shall be
construed to prevent the company from taking actions necessary to comply with
federal law. Further, to the extent any provision of this agreement conflicts
with a federal statute or regulation, the federal law shall govern.
ARTICLE XXIII
-------------
EMPLOYEE BIRTHDAY PAY
---------------------
23.01 Each employee who meets the LOCAL PLANT SUPPLEMENT requirement for
holiday eligibility will receive an additional eight (8) hours pay (computed as
per Section 10.08) during the week in which his birthday occurs, even though he
may be on vacation or absent due to illness or accident. Should the birthday
fall on a Saturday, Sunday, or holiday, the employee will nevertheless receive
the above mentioned eight (8) hours pay. In the event an employee desires to
take a day off from work on his birthday in lieu of eight (8) hours pay, he may
do so only if he gives five (5) working days prior notice to his supervisor. The
above will be administered so as to permit an employee to select a day off in
the event his birthday falls on a Saturday, Sunday, or holiday. Employees on
layoff status will not be eligible for birthday pay if such birthday falls later
than fifteen (15) calendar days following the layoff. Where individual plants
have given up this day as noted in 10.01 above, such change will be reflected in
the LOCAL PLANT SUPPLEMENT.
<PAGE>
Employees who are eligible for birthday pay and elect to receive pay in lieu
of a day off by January 1st will receive a $100 Birthday check, exclusive of
payroll deductions. If not elected by January 15th, the appropriate clauses of
the contract will apply.
ARTICLE XXIV
------------
DURATION AND TERMINATION OF CONTRACT
------------------------------------
24.01 This AGREEMENT shall be in full force and effect from October 16,
1994 until October 15, 1997.
24.02 The parties agree that there shall be no reopening of this AGREEMENT
and that this AGREEMENT constitutes the entire AGREEMENT between the parties on
the subjects of multi-plant bargaining and at no time during the life of this
AGREEMENT shall either party have any obligation to negotiate or bargain with
the other party with respect to any points not covered by this AGREEMENT and as
to matters covered by this AGREEMENT only in the manner and to the extent herein
provided.
No other agreements, understandings or practices, contemporaneous or
preexisting, except to the extent that they are expressly included in this
Agreement, shall be binding on either party. Similarly, no subsequent
agreements, understandings or practices shall be valid unless reduced to writing
and signed by the authorized representatives of both parties. This language only
applies to M.M.P.W.A. and Multi-Plant Bargaining Procedures.
24.03 This AGREEMENT shall become effective when countersigned by a duly
authorized officer of the INTERNATIONAL UNION if countersigned by him within ten
(10) days of the time it is signed by the UNION Multi-Plant AGREEMENT
Negotiating Committee. When so
<PAGE>
countersigned the within AGREEMENT shall be deemed to have become effective as
of the date set forth in the first paragraph of this Article.
24.04 This AGREEMENT, when signed by the officers of the COMPANY and the
UNION, shall become effective as described above for a period of three (3) years
and shall continue to remain in full force and effect from year to year
thereafter, unless written notice is given by either party hereto to the other
on or before sixty (60) days prior to the annual expiration date, requesting
that the AGREEMENT be modified or terminated. In the event of such notification,
the parties hereto shall immediately confer and negotiate with reference to a
new or modified AGREEMENT. Negotiations for a new contract shall commence not
later than thirty (30) days from the date of the written notice herein
mentioned.
In the event that neither party notifies the other of its desire to modify
this AGREEMENT, this AGREEMENT subject to such notification shall continue to
remain in effect during the period of negotiations until a new AGREEMENT has
been reached or until either party shall give the other party ten (10) days
notice of cancellation. No other notice of modification or of termination of
contract shall be required of either party other than the notice herein
specified. In any event, nothing herein contained shall preclude either party
from modifying or changing or amending its proposals for a new AGREEMENT.
24.05 LOCAL PLANT SUPPLEMENTS shall be reopened for negotiations
automatically if proper notice from either the INTERNATIONAL UNION or the
COMPANY Senior Vice President - Human Resources is given to the other party in
conformity with Article XXV of this AGREEMENT.
<PAGE>
ARTICLE XXV
-----------
MISCELLANEOUS
-------------
25.01 Cameras will be used only for appropriate security measures. Mr.
----
Barton will discuss with all appropriate Plant Managers.
ARTICLE XXVI
------------
SEVERANCE AND PLANT CLOSINGS
----------------------------
26.01 In the event the COMPANY decides to close any of the above facilities
presently organized by the United Steelworkers, sixty (60) day notice of such
event will be given to the Director of the Upholstery Division. Those employees
affected by the plant closing shall continue to be covered under their existing
U.I.U. HEALTH AND WELFARE FUND benefits as outlined in Article XIII of the
Collective Bargaining AGREEMENT, for an additional four (4) months, and the
COMPANY shall be responsible for the payment of the contributions for the four
(4) month period of coverage. All of the above shall also be applied to Article
IX of the Los Angeles Plant Supplement. COMPANY will extend the eligibility of
Health and Welfare Benefits by one month.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of America,
A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
Through its Agents SIMMONS COMPANY
By /s/ By /s/
------------------------------ -----------------------------------
Local 63 Local 173
By /s/ By /s/
------------------------------ -----------------------------------
Local 420 Local 422
By /s/ By /s/
------------------------------ -----------------------------------
Local 424 Local 425
By /s/
------------------------------
Local 515
BY: /s/ Robert K. Barton
--------------------------------------------
Robert K. Barton, Senior Vice President
Human Resources, Simmons Company
Countersigned at Philadelphia, Pennsylvania
This Day of ,19
----- -------------------------- --
The United Steel Workers of America, A.F.L., C.I O., C.L C
(Upholstery Industries Division)
BY: /s/ Ernest F. Shock
----------------------------------------------
Director of Upholstery industries Division
Ernest F. Shock
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of America,
A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
Through its Agents SIMMONS COMPANY
By /s/ By /s/
------------------------------ -----------------------------------
Local 63 Local 173
By /s/ By /s/
------------------------------ -----------------------------------
Local 420 Local 422
By /s/ By /s/
------------------------------ -----------------------------------
Local 424 Local 425
By /s/
------------------------------
Local 515
BY: /s/ Robert K. Barton
--------------------------------------------
Robert K. Barton, Senior Vice President
Human Resources, Simmons Company
Countersigned at Philadelphia, Pennsylvania
This Day of ,19
----- -------------------------- --
The United Steel Workers of America, A.F.L., C.I O., C.L C
(Upholstery Industries Division)
BY: /s/ Ernest F. Shock
----------------------------------------------
Director of Upholstery industries Division
Ernest F. Shock
<PAGE>
APPENDIX A
----------
DISCIPLINARY POLICY
SIMMONS corporate view is that the disciplinary procedure is not designed
to punish employees, particularly for less serious offenses, but, rather, to
educate, correct and train people as effective team members who can be counted
on to give reliable productive performance.
Finally, time itself is the best measure of correction in any individual,
regardless of job or authority. In the situation of the lesser offenses as
contrasted with the more serious offenses described in Section 2.05 of the
MASTER AGREEMENT, each manager is cautioned with the need to believe that the
employee has corrected his problem in the event there is no repetition of such
within one year of the last infraction. In that event, the process is to begin
anew.
<PAGE>
MULTI-PLANT BARGAINING PROCEDURES CONTRACT
INDEX Page Number
----- -----------
OBJECT ARTICLE I 2
------
BARGAINING REPRESENTATIVES ARTICLE II 3
--------------------------
Union Multi-Plant Agreement
Negotiating Committee 3
Local Plant Supplement Negotiating
Committee 3
The Union Negotiating Committee
Chairmen 4
Company Representatives & Company
Negotiating Committees 4
Legal Counsel 5
Stenographer 5
Site of Negotiations 5
Hours of Negotiation 6
Observers 6
BARGAINING EXPENSES ARTICLE III 6
-------------------
Union Expenses 6
Company Expenses 6
Negotiating Chamber Expenses 6
Expense of Counsel 7
Stenographer 7
TERM OF NEGOTIATIONS ARTICLE IV 7
--------------------
Presentation of Proposals in Writing 7
The First Meeting of Negotiating
Committees 7
Order of Negotiations 8
CONCESSIONS ARTICLE V 8
-----------
EXCHANGE OF BEST OFFERS ARTICLE VI 10
----------------------
BALLOTING PROCEDURES ARTICLE VII 10
--------------------
MULTI-PLANT NEGOTIATIONS IN FUTURE
----------------------------------
YEARS BEYOND 1961 ARTICLE VIII 13
-----------------
RATIFICATION OF THIS MULTI-PLANT
- --------------------------------
BARGAINING PROCEDURES CONTRACT ARTICLE IX 13
------------------------------
EXHIBIT "A" - BALLOTING PROCEDURES 16
<PAGE>
MULTI-PLANT BARGAINING PROCEDURES CONTRACT
------------------------------------------
This AGREEMENT made this 16th day of October, 1991, by and between
SIMMONS COMPANY, a Delaware Corporation, for and on behalf of its plants at
Atlanta, Columbus, Dallas, Piscataway, Jacksonville, Kansas City, and Los
Angeles, hereinafter referred to as the COMPANY,
and
The United Steel Workers of America, A.F.L., C.I.O., C.L.C. (Upholstery
Industries Division) and its agents, U.I.U. Locals 63, 424,422,420, 425, 173,
and 500, in the Atlanta, Columbus, Dallas, Piscataway, Jacksonville, Kansas
City, and Los Angeles Plants of the COMPANY, hereinafter referred to as the
UNION.
ARTICLE I
OBJECT
------
1.01 It shall be the object of negotiations conducted under the terms of
this contract to bargain at one time and place Working AGREEMENTs covering
all conditions of employment for employees of the COMPANY represented by the
UNION. All conditions of employment shall be covered in the following manner:
(a) A Master Multi-Plant Working AGREEMENT containing provisions
universally and equally applicable to all plants party to this
contract; and
(b) Local Plants Supplements consisting of provisions applicable
separately to each Local Plant individually and provisions
which are local variations of corresponding provisions of the
Master Multi-Plant Working AGREEMENT.
<PAGE>
(c) In the event there is any conflict between a provision of the
Master Multi-Plant Working AGREEMENT and any provision of a
Local Plant Supplement, the Master Multi-Plant Working
AGREEMENT shall govern, unless the provision of the Local
Plant Supplement is expressly stated to be in derogation of
the Master Multi-Plant Working AGREEMENT provision and unless
the parties hereto have agreed to such provision in writing.
1.02 All negotiations concerning proposals regarding the Master Multi-
Plant Working AGREEMENT and all Local Plant Supplements shall be in
accordance with the procedures set forth in this Contract.
ARTICLE II
BARGAINING REPRESENTATIVES
UNION Multi-Plant AGREEMENT Negotiating Committee
--------------------------------------------------
2.01 The UNION Multi-Plant AGREEMENT Negotiating Committee shall consist
of one representative of each Local Union party to this Contract, and one
representative appointed directly by the Upholsterers' International Union.
The UNION agrees to notify the COMPANY of the names of its representatives
reasonably in advance so that proper leaves of absence may be arranged if
necessary.
Local Plant Supplement Negotiating Committee
--------------------------------------------
2.02 There shall be a Local Plant Supplemental Negotiating Committee for
each Local Union. This Committee shall consist of the members of the Master
Multi-Plant AGREEMENT Negotiating Committee plus an additional number of
representatives, not less than one (1) nor more than four (4), appointed by
the Local Union. Each Local Union member of the Master Multi-Plant AGREEMENT
<PAGE>
Negotiating Committee shall be the chairman of his respective Local Plant
Supplemental Negotiating Committee. Each Local Union agrees to notify the
COMPANY of the names of its representatives of the Local Plant Supplemental
Negotiating Committee reasonably in advance so that proper leaves of absence
may be arranged as necessary.
The Union Negotiating Committee Chairmen
----------------------------------------
2.03 Prior to negotiations, the UNIONs' Negotiating Committees shall
elect their respective Chairmen and notify the COMPANY of their respective
choices. The Chairman of the UNION Master Multi-Plant AGREEMENT Negotiating
Committees shall serve as spokesman for that Committee. The Chairman of the
Local Plant Supplement Negotiating Committee shall serve as spokesman for his
respective Local Plant Supplement Negotiating Committee. Only statements
of the Chairman of each respective Union Negotiating Committee authorized by
Committee caucus shall be accepted by the COMPANY as stating the official
position of the Committee. All other statements by members of the Union
Negotiating Committees shall be accepted by the COMPANY as being only
informal and unofficial.
COMPANY Representatives and Company Negotiating Committees
----------------------------------------------------------
2.04 (a) The COMPANY shall be represented by any number of persons of
its choice provided this number does not exceed the number
herein allotted to the Union
<PAGE>
Negotiating Committees.
(b) The COMPANY Senior Vice President of Human Resources shall
serve as Chairman of the COMPANY Negotiating Committee.
Only statements of the Chairman of the COMPANY Negotiating
Committee authorized by Committee caucus shall be accepted by
the Union Negotiating Committee as stating the official
position of the COMPANY. All other statements by members of
the COMPANY Negotiating Committee shall be accepted by the
UNION as being only informal and unofficial.
Legal Counsel
-------------
2.05 Either the UNION or the COMPANY shall have the right to have
present during negotiations outside legal counsel to any extent it deems
advisable. Whenever the UNION or the COMPANY exercises its right under the
terms of this provision to have outside legal counsel present, it shall
notify the other party.
Stenographer
------------
2.06 The parties to this AGREEMENT may mutually agree to any extent they
deem advisable to have a stenographer or stenographers present during
negotiations.
Site of Negotiations
--------------------
2.07 Except when mutually agreed otherwise, all negotiations shall take
place in an appropriate space in one of the principal
<PAGE>
hotels in the city of Charlotte, North Carolina.
Hours of Negotiations
---------------------
2.08. Except when mutually agreed otherwise, the Negotiating Committees
of the UNION and the COMPANY shall meet between the hours of 10:00 a.m. and
12:00 Noon and between 2:00 p.m. and 5:00 p.m.
Observers
----------
2.09 Silent observers shall be permitted to attend all negotiating
sessions, but shall have neither voice nor vote. A local UNION shall not have
more than four observers.
ARTICLE III
BARGAINING EXPENSES
-------------------
UNION Expenses
---------------
3.01 The UNION will pay all travel, hotel, living and any compensation
or other expenses incidental to activities of all UNION representatives.
COMPANY Expenses
-----------------
3.02 The COMPANY will pay all travel, hotel, living and any compensation
or other expenses incidental to activities of its representatives.
Negotiating Chamber Expenses
----------------------------
3.03 The cost of renting a negotiations chamber shall be shared one-half
by the UNION and one-half by the COMPANY.
<PAGE>
Expense of Counsel
------------------
3.04 The UNION shall bear fully the whole expense of its use of its
outside legal counsel. The COMPANY shall bear fully the whole expense of its
use of its outside counsel.
Stenographer
------------
3.05 The UNION and the COMPANY shall share equally the expense of the
stenographers used by the negotiating conferences.
ARTICLE IV
TERM OF NEGOTIATIONS
--------------------
Presentation of Proposals in Writing
-------------------------------------
4.01 All proposals regarding either the Master Multi-Plant Working
AGREEMENT or Local Plant Supplements shall be consolidated and presented in
writing by the respective Negotiating Committee Chairman to the other party
within thirty days from the first notice by either party of desire to
negotiate regarding the Master Multi-Plant Working AGREEMENT or Local Plant
Supplements. Such notice may be given only at the times and in the manner
prescribed by such AGREEMENTs.
The First Meeting of Negotiating Committees
-------------------------------------------
4.02 The first meeting of negotiating committees for negotiations under
the terms of this contract shall begin two weeks following the receipt of
proposals presented as herein provided above.
<PAGE>
Order of Negotiations
---------------------
4.03 (a) The Proposals for the Master Multi-Plant Working AGREEMENT
shall be discussed first and continue until the parties have
finalized their bargaining positions and exchanged their "best
offers" in writing as hereinafter provided. Thereupon,
separate discussions of the proposals for each respective
Local Plant Supplement shall commence with the appropriate
Local Plant Supplemental Negotiating Committee in the
following order: Atlanta, Columbus, Dallas,
Piscataway, Jacksonville, Kansas City, Los Angeles.
(b) The discussions and negotiations with the appropriate Local
Plant Supplement Negotiations Committee in each instance shall
continue until the parties have finalized their bargaining
positions and exchanged their "best offers" in writing before
proceeding to discussion of the next Local Plan Supplement in
the foregoing list with the appropriate Local Plant Supplement
Negotiating Committee.
ARTICLE V
CONCESSIONS
-----------
5.01 The parties to this contract recognize that local
<PAGE>
business and competitive conditions, local plant and production requirements,
local productivity levels and local area bedding industry rates cause
variations in SIMMONS labor grade rates, composite rates and/or base rates
from plant to plant and therefore the UNION agrees that at no time during the
life of this agreement or during the life of any Master Multi-Plant Working
AGREEMENT referred to herein will the UNION make contract demands intended to
equalize these rates or narrow these variations at any two or more plants.
The parties to this contract realize that the COMPANY plans to institute
a program designated to standardize its means, methods, processes and
equipment to the greatest extent practicable and whenever any means, methods,
processes and equipment are so standardized as to make an entire operation
identical in any two or more plants, these task times as measured and
determined by the COMPANY time study engineers will be the same.
5.02 The COMPANY agrees in advance that it will make no demands having
the effect of eliminating the job security of senior employees.
5.03 The UNION agrees in advance that it will negotiate in good faith on
all proposals presented by the COMPANY whether new or for modifications of
existing agreements and practices.
<PAGE>
ARTICLE VI
EXCHANGE OF BEST OFFERS
-----------------------
6.01 When either party shall have finalized its bargaining position, it
shall so notify the other party.
6.02 At the next meeting, the COMPANY Chairman shall present in writing
to the UNION Chairman the COMPANY's best offer with respect to UNION
proposals regarding the Master Multi-Plant Working AGREEMENT, and the Local
Plant Supplements.
6.03 At that same meeting, the UNION Chairman shall present in writing
to the COMPANY Chairman the UNION's best offer with respect to COMPANY
proposals regarding the Master Multi-Plant Working AGREEMENT and the Local
Plant Supplements.
ARTICLE VII
BALLOTING PROCEDURES
--------------------
7.01 The UNION recognizes the propriety of the COMPANY's interest in the
uniformity and fairness of the balloting procedures and parliamentary
practices to be employed in connection with the democratic ascertainment of
the will of its employee members of this UNION. Therefore, while Exhibit A is
not to be considered a part of this contract, it is attached hereto for
informational purposes so that the COMPANY can be fully informed and
reassured concerning the balloting procedures and parliamentary practices to
be followed in balloting on the COMPANY's best offer.
<PAGE>
7.02 It is agreed and understood that when reporting the COMPANY's best
offers to the employee members through the Local Unions under the balloting
procedures described in Exhibit A, the UNION will use the best offers exactly
as delivered to it by the COMPANY Negotiating Committee and it is further
understood and agreed that the voting on the COMPANY's best offers shall be
on a ballot form prepared by the Union Negotiating Committees and containing
the COMPANY's summary of its best offers as prepared by the COMPANY
Negotiating Committee.
7.03 (a) When as a result of the balloting described in Exhibit A, an
AGREEMENT and Supplements with the COMPANY have been
authorized, the COMPANY will be so notified and arrangements
made for a meeting to consummate the AGREEMENT and Supplements
which will be signed by the respective committees subject to
approval and counter-signature of the Director of Upholstery
Industries Division as required by The United Steel Workers
(Upholstery Industries Division) General Laws.
(b) The Master Multi-Plant Working AGREEMENT will be signed for
the UNION by the UNION Multi-Plant AGREEMENT Negotiating
Committee and each Local Plant Supplement signed by the
respective Local Plant Supplement Negotiating Committee
subject to
<PAGE>
approval and counter-signature of the Director of Upholstery
Industries Division as required by The United Steel Workers
(Upholstery Industries Division) General Laws.
7.04 (a) When as a result of the balloting described in Exhibit A, an
AGREEMENT and Supplements with the COMPANY are not authorized,
the UNION will give appropriate instructions to the Union
Negotiating Committees which will resume negotiations with the
COMPANY.
(b) At the conclusion of this second series of negotiations
according to the procedures outlined above, the UNION will
meet, prepare and submit a report, etc., as described in
Exhibit A.
(c) The procedures described in Exhibit A will be repeated each
time the balloting does not authorize an AGREEMENT and
Supplements and negotiations shall continue until an agreement
and supplements are authorized or negotiations become
deadlocked.
7.05 When an AGREEMENT and Supplements are authorized, the procedure
described above in Section 4 of this Article shall be followed.
<PAGE>
7.06 When negotiations become deadlocked, the UNION will meet to discuss
the situations and determine action to be taken.
7.07 The UNION will then prepare and submit a report and its
recommendations to the employee members through the Locals as described in
Exhibit A.
7.08 When this balloting results in authorization of an AGREEMENT and
all Local Plant Supplements, the procedures above shall be followed.
7.09 When this balloting results in a decision to strike the UNION shall
pursuant to UNION Law, request the Director of Upholstery Industries Division
for permission to strike.
ARTICLE VIII
MULTI-PLANT NEGOTIATIONS IN FUTURE YEARS
BEYOND 1961
-----------
8.01 The parties to this Multi-Plant Bargaining Procedures Contract
agree that all its provisions and amendments mutually agreed upon shall be
the basis in any future year for any negotiations conducted on a multi-plant
basis.
ARTICLE IX
RATIFICATION OF THIS MULTI-PLANT BARGAINING PROCEDURES CONTRACT
---------------------------------------------------------------
9.01 The provisions of this Multi-Plant Bargaining Procedures
<PAGE>
Contract shall be binding on The United Steel Workers (Upholstery Industries
Division) and all of its local unions above listed when this contract has
been executed by the duly authorized officers of The United Steel Workers
(Upholstery Industries Division). The execution of this contract by said The
United Steel Workers (Upholstery Industries Division) officers constitutes
an affirmation by said officers that they have duly authorized to do so under
the constitutional provisions of The United Steel Workers (Upholstery
Industries Division) General Laws.
9.02 The execution of this contract by the representatives of the
COMPANY constitutes an affirmation by such representatives that they have
been authorized to do so by the Corporation.
9.03 This Multi-Plant Bargaining Procedures Contract may be terminated
by the COMPANY or The United Steel Workers of America, A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division), on sixty (60) days notice in writing.
However, such notice may not be given by either party prior to October 15,
1994. On the expiration of such notice, all collective bargaining
negotiations for AGREEMENTs and Schedules shall be conducted on a single
plant basis when and as their current AGREEMENT expires.
<PAGE>
IN WITNESS WHEREOF, the Parties have hereunto set their hands and seals.
FOR SIMMONS COMPANY FOR THE UNION
/s/ Robert K. Barton /s/ Ernest F. Shorn
--------------------------- -------------------------------
/s/ /s/
--------------------------- -------------------------------
/s/ John W. Salter /s/ Raymond E. Valdez
--------------------------- -------------------------------
/s/
--------------------------- -------------------------------
/s/ M.E. Kelly
--------------------------- -------------------------------
/s/ C. Alston
--------------------------- -------------------------------
/s/
--------------------------- -------------------------------
--------------------------- -------------------------------
--------------------------- -------------------------------
--------------------------- -------------------------------
<PAGE>
EXHIBIT A
BALLOTING PROCEDURES
--------------------
1. Within a week of the submission in writing of the COMPANY's best offers
to the respective UNION Chairmen, the UNION shall prepare a complete
report of the negotiations including all UNION proposals, all COMPANY
proposals with the COMPANY's best offers, including the conclusions
reached on all proposals, and transmit this report with whatever
recommendations deemed warranted, to the employee members through the
Local Unions for a referendum vote of all the employee members covered
by the Multi-Plant Bargaining Procedures Contract. A copy of this report
will be furnished to the COMPANY.
2. (a) Simultaneous meetings (on same day and hours) of all Locals will be
prearranged and held.
(b) At each Local Meeting, the Local representative on the UNION
National Negotiating Committee will submit the UNION report on
Master Multi-Plant AGREEMENT negotiations and the Chairman of
the Local Plant Supplement Negotiating Committee will submit the
report on Local Plant Supplements negotiations and each may also
verbally elaborate if deemed necessary. After a thorough discussion
by the employee members present, the chairman of the meeting shall
submit the negotiating reports
<PAGE>
to a single vote.
(c) The employee members present shall vote "yes" or "no".
(d) Balloting shall be by supervised secret ballot conducted in
accordance with The United Steel Workers (Upholstery Industries
Division) referendum and election laws. The United Steel Workers
(Upholstery Industries Division) shall furnish Supervisors to
supervise the secret balloting. The expenses of the balloting shall
be borne by the UNION. The United Steel Workers (Upholstery
Industries Division) supervisors shall be paid by The United Steel
Workers (Upholstery Industries Division).
(e) Balloting shall be by all employee members subject to the AGREEMENT
and Supplements and present at the meeting who shall be given ample
time to cast their ballots. All ballots shall be deposited by the
balloting employee member in a locked ballot box.
(f) The ballot boxes will be unlocked and opened and the ballots
counted by the UNION Election Tellers only in the presence of The
United Steel Workers
<PAGE>
(Upholstery Industries Division) Supervisor. The ballot boxes shall
not be unlocked until after the simultaneous closing of the polls
at every balloting location. A report of the count shall be made to
the UNION by The United Steel Workers (Upholstery Industries
Division) Supervisor within twenty-four (24) hours after polls are
closed.
(g) The United Steel Workers (Upholstery Industries Division)
Supervisor's reports of the balloting to The United Steel Workers
(Upholstery Industries Division) shall include (1) the number of
employee members present and voting; (2) the number of "yes" votes;
and (3) the number of "no" votes.
3. (a) The United Steel Workers (Upholstery Industries Division) will then
tabulate the ballots - all "yes" votes cast in all Locals into one
group and all "no" votes cast in all Locals in another group. The
majority shall determine the result which shall be binding on all
employee members at all plants irrespective of the number of "yes"
or "no" votes at any one plant.
(b) The ballots of Locals failing to meet and vote on the date and
during hours prearranged and set for
<PAGE>
the simultaneous meetings will not be included in this tabulation.
(c) A report of the results of the tabulations of the ballots will then
be transmitted to the UNION, the UNION Bargaining Committees and
the Local Unions and to the COMPANY. This report will be itemized
by Local - listing the number of employee members present and
voting, the number of "yes" and "no" votes cast in each Local
Union.
<PAGE>
SIMMONS BARGAINING GROUPS
Plant UIU IAM UFWA ILWU TEAMSTERS RENEWAL
------- ------ ----- ---- ---- --------- -------
Atlanta Local Oct-97
63
Columbus Local Lodge Oct-97
424 55
Dallas Local Oct-97
422
Piscataway Local Lodge Oct-97
420 315
Jacksonville
Local Oct-97
425
Kansas City Local Lodge Oct-97
173 72
Los Local Local Oct-97
Angeles 515 986
San Local
Leandro 262
Honolulu Local
142
<PAGE>
ATLANTA PLANT
SUPPLEMENT
LOCAL #63
<PAGE>
INDEX
ARTICLE ITEM . . . . . . . . . . . . . . . PAGE
I RECOGNITION AND UNION SECURITY
1.01 Recognition . . . . . . . . . . . . . . . 2
1.02 Check Off . . . . . . . . . . . . . . . . 2
II HOURS OF WORK
2.01 Shifts . . . . . . . . . . . . . . . . . 2
2.02 Notice of Shift Changes . . . . . . . . . 3
III INVENTORY WORK . . . . . . . . . . . . . . . . 4
IV PAID HOLIDAYS . . . . . . . . . . . . . . . . 4
V SENIORITY
5.01 Layoffs . . . . . . . . . . . . . . . . . 5
5.02 Termination of Seniority . . . . . . . . 8
5.03 Return from Surplus Labor . . . . . . . . 8
5.04 Right of Recall . . . . . . . . . . . . . 8
5.05 Furlough . . . . . . . . . . . . . . . . 9
5.06 Bidding . . . . . . . . . . . . . . . . . 9
5.07 Failure to Succeed on Bid Job . . . . . . 10
5.09 New Classification Structure . . . . . . 11
5.10 Approved Leave . . . . . . . . . . . . . 13
5.11 Leave of Absence for Union Activity . . . 14
5.12 Procedure for Rehiring from LOA for Union
Business . . . . . . . . . . . . . . . . . 14
5.13 Bumping Production Employees/Mechanical
Employees . . . . . . . . . . . . . . . . 14
5.14 Hiring Rate & Progression . . . . . . . . 15
VI PAID VACATIONS . . . . . . . . . . . . . . . . 15
VII LEGAL COUNSEL . . . . . . . . . . . . . . . . 15
VIII GROUP OPERATIONS . . . . . . . . . . . . . . . 16
IX MECHANIC/MACHINIST APPRENTICE TRAINING
SCHEDULE/PAY RATE . . . . . . . . . . . . . . 16
X WORK WAIT
10.01 Work Wait . . . . . . . . . . . . . . . 17
10.02 Electric Power Failure . . . . . . . . . 17
10.03 Rate for Borrowed Man . . . . . . . . . 17
10.04 Temporary Jobs . . . . . . . . . . . . . 17
XI LEAVE OF ABSENCE . . . . . . . . . . . . . . . 18
XII EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . 18
XII DURATION AND TERMINATION OF SUPPLEMENT . . . . 19
WAGES--ATLANTA PLANT CLASSIFICATION STRUCTURE . 21
SIGNATURES . . . . . . . . . . . . . . . . . 20
<PAGE>
ATLANTA PLANT SUPPLEMENT
This AGREEMENT, made this 16th day of October, 1994, by and between SIMMONS
COMPANY, Atlanta, Georgia, hereinafter referred to as the EMPLOYER, and the
United Steelworkers of America, A.F.L.,C.I.O.,C.L.C. (Upholstery Industries
Division) hereinafter referred to as the UNION, acting through its agent, Local
Union #63, for and on behalf of itself and the employees of said Company, at its
plant located at Atlanta, Georgia, supplementing the MASTER MULTI PLANT WORKING
AGREEMENT between the same parties and others.
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Recognition. The persons covered by this contract include all employees
of the COMPANY described in Appendix I and II, employed in its Atlanta, Georgia
plant, excluding office workers, supervisors, foremen, inspectors, watchmen,
plant guards, departmental coordinators, carload checkers, or persons in any way
identified with MANAGEMENT.
1.02 Check Off. The deduction of initiation fees and regular UNION dues, as
certified by the UNION in writing to the EMPLOYER, shall be made from the fourth
(4th) pay period of each month and remitted to the Treasurer of the United Steel
Workers of America by the tenth (10th) day of the following month, or sooner if
possible.
1.03 Department Committee meetings or conferences with the MANAGEMENT, if
held during regular working hours, shall result in no loss of pay to the
employees.
ARTICLE II
----------
HOURS OF WORK
2.01 Shifts
A. The normal first shift shall be from 7:00 a.m. to 3:30 p.m. with a
thirty (30) minute lunch period without pay.
B. The normal second shift shall be from 3:30 p.m to 12:00
Midnight with a thirty (30) minute lunch period without pay.
2
<PAGE>
C. Whenever three shifts are to be worked, the normal third shift
will begin work at 12:00 Midnight and continue to work until
7:00 a.m., with a thirty (30) minute lunch period without pay.
D. First Shift: Lunch period Thirty (30) minutes to be staggered as
per agreement between 11:30 a.m. and 12:30 p.m.
Rest period: Ten (10) minutes each; 1st rest period 9:30 a.m. to
9:40 a.m.; 2nd rest period 2:00 p.m. to 2:10 p.m.
Second Shift: Lunch period 7:30 p.m. to 8:00 p.m.; 1st rest
period from 5:30 p.m. to 5:40 p.m.; 2nd rest period from 9:20
p.m. to 9:30 p.m.
Third Shift: Lunch period 3:00 a.m. to 3:30 a.m.; 1st rest period
from 1:30 a.m. to 1:40 a.m.; 2nd rest period from 5:20 a.m. to
5:30 a.m.
E. Employees will be required to work two consecutive Saturdays
all year long. If an employee agrees to work the third Saturday,
said employee must then work two more consecutive Saturdays,
for a total of five before having the option of being off on
Saturday.
F. Overtime on Friday up to ten (10) hours will be scheduled as
mandatory overtime provided that these employees are exempt
from Saturday work.
2.02 Notice of Shift Changes. Employees shall receive seven (7) days notice
of any change in shift assignment, and when it is necessary to temporarily
assign an employee, or group of employees, from a permanent shift assignment to
take care of operational bottlenecks, the UNION will mutually agree with the
COMPANY to the adjustment of shift hours, and reasonable notice ("reasonable"
means by end of the prior working day) will be given to the employee(s)
involved.
2.03 Whenever more than one shift is necessary, employees with seniority
shall be allowed to choose the shift on which they will work. However, the
necessity for exceptions shall be discussed between the department delegate and
the department foreman.
3
<PAGE>
2.04 No premium wage or extra compensation shall be paid for work on
customary holidays except that time and one half wage compensation shall be paid
for work performed on any of the following holidays only:
New Year's Day Wednesday before Thanksgiving
M.L. King, Jr. Birthday Thanksgiving Day
Good Friday Day after Thanksgiving
Memorial Day Christmas Eve
Fourth of July Christmas Day
Labor Day
ARTICLE III
INVENTORY WORK
3.01 In selecting the employees needed for inventory purposes, preference
will be given to day workers. Division superintendents may assign unqualified
day workers to material handling, cleaning, etc.
3.02 Day workers will be paid the rate of their classification for all
inventory work.
3.03 Whenever pieceworkers are to be used for taking inventory, they shall
be used in departments in which they are familiar with the items to be
inventoried. Pieceworkers who are selected will receive their average hourly
rate, unless otherwise mutually agreed.
ARTICLE IV
PAID HOLIDAYS
4.01 In addition to the seven (7) paid holidays listed in Section 10.01 of
the MASTER MULTI-PLANT WORKING AGREEMENT, the following four (4) additional paid
holidays shall be celebrated in accordance with Article X of the
MASTER MULTI-PLANT WORKING AGREEMENT:
1. Good Friday
2. Wednesday before Thanksgiving
3. Day after Thanksgiving Day
4. Last work day before Christmas Day
4.02 An employee must have sixty (60) days or more of service to be eligible
for holidays.
4.03 "When an eligible employee goes on sick leave, he/she shall receive pay
for one such holiday."
4
<PAGE>
4.04 Except as otherwise provided, the COMPANY will pay every eligible
employee who is not required to perform work in the service of the COMPANY on
such holidays on the following basis: If an incentive worker, payment will be
paid at eight (8) times the employee's quarterly average hourly rate excluding
overtime premiums. Hourly workers will be paid eight (8) times their hourly
rate, with the following conditions:
A. That such employee shall have worked on the schedule work day
preceding a holiday and on the schedule work day following a holiday,
except in the case of sickness to the individual and evidence of such
sickness supported by a doctor's certificate and unless excused by
MANAGEMENT.
B. Any employee required to work on the above mentioned holidays will
receive time and one half pay for work actually performed plus eight
(8) hours at his average hourly straight time earnings.
C. The time allowed for holidays and not actually worked by the employee
shall be included in determining the number of hours worked during the
week with respect to overtime compensation.
4.05 If any of the above mentioned holidays fall on Sunday, and it is
observed the following Monday, compensation will be paid for that day by this
agreement.
4.06 If for any reason beyond the control of the employees of the SIMMONS
COMPANY, Atlanta Works, the entire plant is shut down for a period of one week,
during which a holiday occurs. In that event, eligible employees will receive
compensation for the paid holiday involved.
ARTICLE V
SENIORITY
5.01 Layoffs
A. The COMPANY recognizes the principle of seniority (last hired
will be the first laid off) among its employees and agrees that
all layoffs occasioned by lack of work and subsequent recalls from
layoff shall be by seniority as provided below.
B. When increases or decreases in the work force become necessary,
they shall be made on the basis of seniority within work
groupings.
5
<PAGE>
C. Laid off employees who have seniority rights will be recalled in
accordance with their seniority as described in Section 5.03.
D. In the event a layoff is necessary, the reduction will be by
classification and seniority, giving the affected employee the right
to bump or roll the youngest employee in such employee's work
grouping provided as follows:
(1) Employees having previously bid on the classification which
is to be reduced and such employee has six (6) months or
less training, he/she will be the first to be laid off.
Employees who have earned piecework for two (2)
consecutive weeks will be protected by plant seniority.
(2) If trained in one or more classifications within the work
grouping, the affected employee must roll or bump into a
trained classification. If trained in one or more
classifications within the work grouping, the affected
employee may select the trained classification he/she so
desires according to seniority.
(3) If the affected employee is not trained in more than one
classification within his/her work grouping, then the
affected employee may roll or bump the youngest employee
within the grouping without regard to previous
qualifications.
(4) If such employee is unable to roll or bump within his/her
work grouping as provided in #2 and #3 above, and the
affected employee is qualified to perform jobs in other
classifications in a different work grouping without
training, such employee may roll or bump the youngest
employee in such classification as provided by Seniority
Rule in A and B above.
(5) If such employee is not permitted to remain in his/her work
grouping and does not qualify to roll or bump into any
other work grouping, such employee will be permitted to
roll or bump any employee in Group VI without previous
qualifications as provided by Seniority Rules in A and B.
This does not apply to repair work, unless he/she is
qualified to do the particular repair work.
6
<PAGE>
E. The COMPANY has the right to train employees in any particular
grouping provided such employees are the youngest untrained in
seniority and provided further such employees are physically able to
perform such jobs. The term "not physically able" as used herein shall
mean that the subject employee has a permanent physical disability or
condition that prevents him/her from performing his/her job in a
satisfactory manner and that this fact has been verified in writing by a
physician.
F. The COMPANY will train such senior employees that request
additional training in new jobs. Payment for training purposes will be
at the existing base rate or labor grade rate of the new or old job,
whichever is highest. When the employee earns piecework, he/she
shall receive such.
G. Refreshing of skills shall be paid as follows:
Employees who have been off the job less than thirty (30) days will
receive no training; off the job from thirty (30) to sixty (60) days will
receive eight (8) hours training; sixty (60) days to six (6) months will
receive sixteen (16) hours training; off the job in excess of six (6)
months will receive twenty four (24) hours training.
H. Skills audit will be conducted with employees and each employee can
declare the jobs he/she feels he/she should remain qualified in.
I. Any employee who is trained on a new job may not declare
himself/herself ineligible for such skill until he/she has made such
available to the COMPANY for a minimum of eighteen (18) months.
J. Any employee assigned to his/her secondary skill must be assigned to
such for a minimum of two (2) consecutive hours. The COMPANY
agrees that no more than one move will be made per day.
K. During layoff, any employee shall have the right to declare
himself/herself eligible for any and all skills he/she has previously
qualified for, provided such skills will be available to the COMPANY
for a continuous eighteen (18) month period thereafter.
L. The borrowed man clause will be available whenever an employee is
taken off his/her regular classification for the convenience of the
COMPANY.
7
<PAGE>
In the event there is any conflict between a provision of the above
Article V and the remainder of this L.P.S., the above shall govern.
5.02 Termination of Seniority. When the employee refuses to accept available
work as outlined above, such refusal will terminate the right of recall and
result in the loss of all seniority rights.
5.03 Return from Surplus Labor. If due to Seniority Rules in Section 5.01, A
and B above, an affected employee must go on Surplus Labor, the same rules
would apply returning to open jobs.
D 2 1st Priority
D 3 2nd Priority
D 4 3rd Priority
5.04 Right of Recall
A. The COMPANY will return the most senior employee on layoff
to such employee's former work grouping when an opening in
any one of the classifications contained therein occurs, provided
such employee can successfully perform the work available.
When opening occurs in the employee's former classification,
he/she must return to that classification.
B. In the event there is an opening in another skill grouping for
which there are no employees available in such skill grouping on
surplus labor, and provided a senior employee from another skill
group on surplus labor can successfully perform the available
work, such employee will be given an opportunity to return to
the active payroll prior to the hiring of a new employee. When
an opening occurs in the employee's former classification, he/she
must return to that classification.
C. If there are no openings for incentive classifications, but there
is a need in Grouping VI, the most senior employee on surplus
labor will be given an opportunity to qualify for such work before
the COMPANY hires new employees. Those who have been
transferred into Group VI and are learning, will receive either
their day work rate or base rate of the new job, whichever is
higher.
D. In the event a job is posted for bid and there are no bidders, the
most senior employee on layoff who is qualified to perform the
posted job duties will be given an opportunity to take the open
8
<PAGE>
job. It is clearly the responsibility of the employee to make
known to management his desire to identify the job he wishes to
return to in writing.
E. An employee who is not recalled under Sections A, B, C or D
may be recalled in line with his seniority and qualification,
but only if there are no qualified employees on surplus labor
waiting to be recalled to said job.
5.05 Furlough. In order to provide a more reasonable work schedule for
senior employees when hours are shortened due to business conditions, the
Operations Manager (or appointed designee) will have the responsibility of
placing on furlough those employees who are not needed to meed the daily
production requirements. The furloughed employee(s) will be placed on surplus
labor so as to make them eligible for unemployment benefits during the furlough
period, if otherwise eligible. The furlough will be conducted by classification,
then shift and by seniority, starting with the most senior employee, without the
bump/roll process. The furlough will not be of a length that would allow for
cessation of health benefits (except as in section B below), meaning that an
employee must work at least one day in a given calendar month. The employee will
make up their portion of premium contributions upon their return from furlough.
A. If an employee is to be furloughed a continuous month, then the
Company will make the employee's benefit contribution for that month.
B. A furlough is not to exceed a time frame which would encompass more
than one calendar month. Stated another way, a furlough cannot exceed
a combination of two partial months (at least one day worked) plus one
calendar month. Should business conditions warrant a longer time frame
then layoff language will be referenced.
5.06 Bidding. Any employee with greater than 60 days seniority is eligible
to bid, except as noted in 5.05(A).
When it is necessary to fill a new job, such positions shall be posted by
MANAGEMENT on bulletin boards for twenty four (24) hours. All bids will be held
in strictest confidence. At the end of this period, all bids will be reviewed
with the Local President (or designee) and MANAGEMENT shall fill this job with
the qualified bidder having the greatest seniority. In the event an employee
with from 60 days to 6 months seniority is the successful bidder, MANAGEMENT has
the right to award or decline the bid. The determination of qualifications shall
be exclusively a right of MANAGEMENT.
9
<PAGE>
A. To be eligible for bidding purposes, an employee must have not
successfully exercised the right to bid for at least twelve (12) months.
B. Employees on the active payroll who are successful bidders on an open
job will receive the base rate of the job they have bid on during their
learning period.
C. It is agreed that the successful bidder will be transferred to a new
job as soon as possible; but in no case will he/she remain longer than
three (3) weeks on his/her former job, during which time MANAGEMENT will
have the opportunity to provide a suitable replacement.
D. Should MANAGEMENT choose to withdraw a posted job that was
successfully bid on, that job cannot be posted for 60 calendar days. If
posted prior to 60 days, the job will be awarded per the original bids.
5.07. Failure to Succeed on Bid Job
A. In the event a successful bidder is unable to satisfactorily learn the new
job in accordance with the learning curve, such employee may return to
his/her former job, if available. If not available, such employee may
perform jobs in other classifications in a different work grouping without
training, roll or bump the youngest employee in other job classifications,
provided he/she is qualified without extra training. In addition, such
employee may bump the least senior employee in Group V if his/her
seniority permits and such employee is physically qualified to do the work.
B. Employees may be disqualified for bona fide physical reasons, in which
event they may roll or bump into Group V provided they are physically
qualified to perform the selected job in Group V, or go on surplus labor.
The term "bona fide physical reasons" as used herein shall mean that the
subject employee has a permanent physical disability or condition that
prevents such employee from performing the job in a satisfactory manner and
such disability is verified in writing by a licensed physician.
C. In the event an employee twice fails to qualify in one (1) year on a job
that was successfully bid for, such employee shall be disqualified from
further bidding for two (2) full years.
5.08 Disqualification Following a Bump, Roll, or Transfer. An employee
placed on a job as the result of a bump, roll, or transfer who fails to qualify
in
10
<PAGE>
accordance with the learning curve, will be permitted to roll or bump
the youngest employee in Group V or be placed on surplus labor.
A. Employees who have been disqualified three(3) times, will be
terminated.
5.09 Combined Classifications
A. In an effort to provide a more equal level of hours, the COMPANY may
combine two (2) or three (3) different job classifications.
11
<PAGE>
5.09 Skill Group Classifications
NEW CLASSIFICATION STRUCTURE
----------------------------
FOR ATLANTA PLANT
-----------------
Skill Group Classification Designation Weeks of Training
- ----------- -------------------------- -----------------
I CUTTING
A. Matts, B/S 4
B. Slitter 4
C. Overcast Borders 4
II SEWING
A. Matts, B/S 8
B. Overcast & Label 8
C. Quilt Machines 8
D. Border Room 10
E. Sew Pillowtops/Matt Borders 8
III MATTRESS
A. Close Mattress 20
B. Hog Ring 4
IV BOX SPRING
A. Assemble & Finish Wood Frames 4
B. Top Off Construction 4
C. PreLoad 4
D. Upholster B/S 6
V INDIRECT LABOR
A. Inspection 2
B. Material Handlers 1
C. Shipping 1
D. Receiving 1
E. Sweepers 1
F. Repairs 8
G. Packing Matts & B/S 1
12
<PAGE>
Skill Group Classifications (continued)
Skill Group Classification Designation Weeks of Training
- ----------- -------------------------- -----------------
VI MECHANICS
Qualifications & Training: Must successfully pass Department of
Labor Standards for Apprentice or complete appropriate
vocational school courses.
It is agreed that those currently in such classifications for one
(1) year or more will not be required to meet DOL admission
standards.
VII Ultrasonic Construction
A. Ultrasonic Coil Operator 8
B. Assemble Construction Operator 6
C. Finish & Inspect Construction 4
5.10 Approved Leave. Approved leave requires at least three working days
notice. In the event of extreme emergency, an employee may call in and request
the leave. Documentation must be presented the following day to the Operations
Manager and Union President for approval. In the event of conflict over time
needed, advance notice required, documentation to support the leave request, or
other matters related to the application of the approved leave, the matter will
be resolved by mutual consent of the Local 63 President (or designee) and the
Operations Manager (or designee). Employees will not be reimbursed, either in
time or money, for approved leave time not used in a calendar year. Approved
leave will be granted by the following schedule:
Employees eligible for one week vacation will be eligible for one unpaid
day per year.
Employees eligible for two weeks vacation will be eligible for one paid day
per year.
Employees eligible for three weeks vacation will be eligible for one paid
day and one unpaid day per year.
Employees eligible for four weeks vacation will be eligible for two paid
days per year.
Employees will not be reimbursed, either in time or money, for approved
leave time not used in a calendar year. Approved paid leave will be reimbursed
via the
13
<PAGE>
number of days of leave taken times the employee's average for incentive
workers. For employees in a split classification, the higher rate will be
applied. Day workers will be paid at their hourly rate.
5.11 Leave of Absence for Union Activity. The COMPANY will not deny a
request for a leave of absence to any employee accepting a position with the
UNION. A leave of absence for other purposes, if granted by MANAGEMENT, may be
granted for a thirty (30) day period, subject to MANAGEMENT review at the end of
the thirty (30) day period.
5.12 Procedure for Rehiring from Leave of Absence for Union Business. At the
expiration of a leave of absence for UNION business, such employee on request,
shall be reinstated to the position he/she held prior to his/her leave of
absence, provided request is made within sixty (60) days after such employee is
available to return to work. If such position has been eliminated, then he/she
shall be given other employment for which he/she is suited in accordance with
his/her seniority rights.
5.13 Bumping (Rolling) Production Employees and Mechanical Employees
A. No production employee, pieceworker, or dayworker will be
permitted to bump any employee in Skill Group VI, Mechanic,
Machinist, Electrician.
No employee listed in Skill Group VI (above) will be permitted to
bump a production employee, pieceworker, or dayworker.
The above does not limit employees from bidding on open jobs in Class
VI, provided such employees have the basic qualifications when the bid
is placed.
Should a person bid and subsequently be disqualified, such individual
would return to the job he/she held prior to the bid, or bid on
another open job, or bump to an open job. The above bid or bump would
be permissible only if such were available at the time of
disqualification.
B. Mechanic, Machinist Apprentice Program: No production employee,
pieceworker, or dayworker will be permitted to bump (roll) any
employee on the mechanic/machinist training program after the
trainee starts on the training job.
No employee on the mechanic machinist training program will be
permitted to bump (roll) a production employee, pieceworker, or
dayworker except in the event of disqualification. If disqualified,
14
<PAGE>
such trainee would return to the job he/she held prior to bidding on
the training program or could bid on another open job or roll to an
open job.
C. Mechanics will not be compelled to work outside their
classification.
D. Memorandum of Agreement on Maintenance Leadman will remain
as is with the exception that all increases granted under this
contract will be added to the current rate.
5.14 Hiring Rate & Progression
A. New incentive employees will be hired at $7.00/hr. effective
0/16/94. New hourly workers will be hired at $6.50/hr. effective
October 16, 1994. Senior Union Representative and Plant General
Manager will set up a program in payment for an employee
somewhere between the hiring rate and the base depending on level
of productivity (30% or 45%, 60%, 70%, 90% and 100% of base.)
B. Progression:
Incentive employees will receive either the hiring rate or their
incentive earnings, whichever are higher, once they demonstrate that
they can meet quality standards set by the COMPANY.
Hourly workers shall receive an increase of fifteen cents (15 cents)
per hour after completing thirty (30) days with the COMPANY and shall
receive labor grade rate for their respective assignment after
completing sixty (60) days with the COMPANY.
ARTICLE VI
----------
PAID VACATIONS
6.01 Pay for each week of vacation will be figured at forty (40) times an
employee's average hourly earning rate for the previous quarter, if an incentive
worker, and the employee's regular hourly rate, if paid on an hourly rate,
excluding overtime premiums.
ARTICLE VII
LEGAL COUNSEL
-------------
7.01 Whenever the UNION or the COMPANY desires to have outside legal counsel
present at any meeting between the Union Bargaining Committee and MANAGEMENT, it
shall notify the other party.
15
<PAGE>
ARTICLE VIII
------------
GROUP OPERATIONS
8.01 In group or team operations, employees will not split their earnings,
unless it is mutually agreed between them that they do so.
ARTICLE IX
----------
MECHANIC & MACHINIST APPRENTICE TRAINING SCHEDULE AND PAY RATE PROGRESSION SCALE
EFFECTIVE October 16, 1994
Hired at 10.00
After 30 days increased .20 10.20 If satisfactory
After 90 days increased .10 10.30 If satisfactory
After 6 months increased .10 10.40 If satisfactory
After 12 months increased .10 10.50 If satisfactory
After 18 months increased .10 10.60 If satisfactory
After 2 years bottom of bracket .20 10.80 If satisfactory
After 30 months top of bracket .20 11.00 If satisfactory
After demonstrating the ability to fill in for experienced mechanics in all
phases of the operation, pay would increase to $13.00/hr.
For the above training schedule, the determination of qualifications shall
be exclusively a right of MANAGEMENT. However, if the bidder is qualified at the
time he/she gets the job, he/she will not come under the training schedule and
will receive the top rate of the classification.
16
<PAGE>
ARTICLE X
---------
WORK WAIT
10.01 Work Wait. It is agreed that any piecework employee who is required to
wait more than ten (10) continuous minutes and does not leave the immediate work
area shall receive compensation at eighty-five percent (85%) of average hourly
rate.
It is agreed that the COMPANY shall have no liability regarding the Work
Wait and Reporting In Pay provisions of the AGREEMENT in the event of a
breakdown of electric power outside the plant, or if inside the plant and not
maintained by the COMPANY, or in the event of a general plant fire, flood, Act
of God, act of Public Enemy, or because of conditions beyond the control of the
COMPANY.
10.02 Electric Power Failure. It is agreed that, in the event of an electric
power failure, employees will stand by their work stations until instructed by
the COMPANY to either go home or to resume work. If the COMPANY, within one (1)
hour after the moment of power failure, instructs the employees to either go
home or to resume work, the employees will not be paid for the time lost within
this one (1) hour. If the COMPANY does not instruct any employee within one (1)
hour after the beginning of such power failure to either go home or to resume
work, he/she will be paid for this loss of time in accordance with Section 10.01
above; if an incentive worker, and at the regular day work rate of his/her
classification; if a day worker, for all time lost from the end of the
first minute of power failure to the time he/she is either instructed to go home
or to resume work.
10.03 Rate for Borrowed Man. If an employee is given another job outside of
his/her trained skilled work group, the employee will receive compensation based
on his/her previous quarterly average hourly rate or his/her piecework earnings
on the new job, whichever is higher, except as provided in Section 5.01,
Paragraph G.
10.04 Temporary Jobs. Temporary jobs will only be posted in the event of
illness to the full-time employee and if said employee is on an authorized sick
leave.
10.05 Temporaries. The Company may use a maximum of ten(10) temporaries or
part-time employees at one time for no more than 60 days at a time. These
temporaries or part-time employees would not be eligible for any benefits and
would not be eligible for any overtime work if the full-time employees are not
working overtime. Hiring rate for part-time employees or temporaries would be
the normal hiring rate. If after 60 days the position is still needed, the job
will be posted for bidding.
17
<PAGE>
ARTICLE XI
----------------
LEAVE OF ABSENCE
11.01 It is mutually agreed that any employee asking for a leave of absence
will be granted such leave at the exclusive discretion of MANAGEMENT in
accordance with Section 7.03(f) of the MASTER MULTI-PLANT WORKING AGREEMENT.
Leaves of absence will be granted provided an employee can be spared without
loss of production or other serious inconvenience to the COMPANY. Leave of
absence will be for a period of thirty (30) days and will be reviewed by
MANAGEMENT at the expiration of each thirty (30) day period. When a request for
a leave of absence has been denied by the COMPANY, the UNION can discuss the
subject with the Plant Manager if they feel that the denial is unreasonable. The
COMPANY agrees to give due consideration to UNION request.
11.02 On the return of an employee from a leave of absence, he/she shall be
returned to work consistent with Section 5.03.
ARTICLE XII
-----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, national origin, age, sex, known
handicap, or veteran status except where religion, sex, national origin or age
is a bona fide occupational qualification. Our policy relates to all phases of
employment, including recruitment, placement, promotion, training, demotion,
transfer, layoff, recall and termination, rates of pay, employee benefits and
participation in all SIMMONS sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial, ethnic
or religious harassment. Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature or verbal or physical
conduct directed at a person's race, color, religion, sex, national origin, age,
handicap or veterans status may constitute harassment. Claims of harassment
which come to our attention may result in discipline up to and including
discharge. At any time, if you believe that you have been harassed, you must
report the harassment to your immediate Supervisor or your Human Resources
Manager. A confidential investigation will be conducted.
18
<PAGE>
ARTICLE XIII
------------
DURATION AND TERMINATION OF SUPPLEMENT
13.01 This supplemental agreement shall be in full force and effect for
three (3) years, from October 16, 1994 until October 15, 1997.
13.02 The parties agree that this AGREEMENT together with the MASTER
MULTIAPLANT WORKING AGREEMENT, constitutes the entire AGREEMENT between the
parties, and at no time during the life of this AGREEMENT shall either party
have any obligation to negotiate or bargain with the other party, with respect
to any points not covered by this AGREEMENT, and as to the matters covered by
this AGREEMENT, only in the manner and to the extent herein provided.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
THE UNITED STEEL WORKERS OF AMERICA,
A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division) SIMMONS COMPANY
Through its Agent, Local Union #63
By /s/ /s/ R. Barton 12/9/94
-------------------------- ------------------------
__________________________ ________________________
Countersigned at Philadelphia, Pennsylvania
This 9th Day of December, 1994
--- --------
The United Steel Workers of America, A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
by /s/ Ernest F. Shorn
-----------------------------
Director of Upholstery
Industries Division
20
<PAGE>
SIMMONS COMPANY ATLANTA PLANT
CLASSIFICATION STRUCTURE
EFFECTIVE OCTOBER 16, 1994
APPENDIX I & II COMBINED BY SKILL GROUP
Skill Base/Hourly/Rate
Group Classification Designation 10/16/94 10/16/95 10/16/96
- ----- -------------------------- ----------------------------------------
I Cutting
A. Matts, B/S DW 9.07 9.37 9.67
B. Slitter DW 9.07 9.37 9.67
C. Overcast Borders DW 9.65 9.95 10.25
II Sewing
A. Matts, B/S
Box Springs Inc. 7.99 8.24 8.49
B. Overcast & Label
Label Inc. 8.09 8.34 8.59
Overcast Inc. 8.13 8.38 8.63
C. Quilt Machines Inc. 8.11 8.36 8.61
D. Border Room
Run borders Inc. 8.42 8.67 8.92
Cut, Punch, Grommet,
Attach Handles,
Bechik Machine Inc. 8.48 8.73 8.98
Border Hemmer
(2-4 Machine) DW 8.66 8.96 9.26
E. Sew Pillowtops/
Matt. Borders Inc. 8.13 8.38 8.63
Sew Flaps
III. Mattress
A. Close Mattress Inc. 8.63 8.88 9.13
B. Hog Ring Inc. 8.67 8.92 9.17
IV Box Spring
A. Assemble & Finish
Wood Frames
Assemble Inc. 8.58 8.83 9.08
A.B.C. Router Inc. 8.52 8.77 9.02
B. Top Off Construction Inc. 8.29 8.54 8.79
C. Pre Load Inc. 8.28 8.53 8.78
D. Upholster Box Spring Inc. 8.92 9.17 9.42
21
<PAGE>
V Indirect Labor
A. Inspection DW 8.38 8.68 8.98
B. Materials Handlers DW 8.18 8.48 8.78
Material Handler
Leadman DW 8.23 8.53 8.83
Special Leadman DW 8.43 8.73 9.03
C. Shipping
Forklift Operator &
Order Puller DW 8.75 9.05 9.35
D. Receiving
Forklift Operator DW 8.60 8.90 9.20
E. Sweepers DW 8.15 8.45 8.75
F. Repair
Quilt Covers DW 8.38 8.68 8.98
Borders DW 8.38 8.68 8.98
Box Spring DW 8.43 8.73 9.03
Mattress DW 11.20 11.50 11.80
G. Packing Mattress
& Box Springs
ARPAC Machine
Operator DW 9.60 9.90 10.20
Offbearer/forklift
Operator DW 9.20 9.50 9.80
Offbearer/Leadperson DW 9.00 9.30 9.60
VI Mechanics
A. Mechanics, Machinists &
Electricians DW 13.00 13.30 13.60
Leadman Maintenance
Machinery DW 13.20 13.50 13.80
VII Ultrasonic Construction
A. Ultrasonic Coil
Operator Inc. 8.14 8.39 8.64
B. Assemble Constr. Inc. 8.29 8.54 8.79
C. Finish & Inspect
Constr. Inc. 8.29 8.54 8.79
22
<PAGE>
COLUMBUS PLANT
SUPPLEMENT
LOCAL #424
<PAGE>
INDEX
ARTICLE TITLE PAGE
I RECOGNITION AND UNION SECURITY
Employees Covered . . . . . . . . . . . . . . . . . 3
Check-Off . . . . . . . . . . . . . . . . . . . . . 3
Union Representative Seniority . . . . . . . . . . 3
Procedure for Returning from Leave of Absence/Union 4
II SENIORITY
Seniority and Layoff . . . . . . . . . . . . . . . 4
Columbus Work Groupings . . . . . . . . . . . . . . 7
Right of Recall . . . . . . . . . . . . . . . . . . 8
Procedure in Replacing Employees/Former Classifi-- . 9
Probationary Period . . . . . . . . . . . . . . . . 9
Change in Union Representatives . . . . . . . . . . 10
Layoff Notice . . . . . . . . . . . . . . . . . . . 10
Furlough . . . . . . . . . . . . . . . . . . . . . 11
Equalization of Work Wherever Practicable . . . . . 11
Job Bidding Procedures . . . . . . . . . . . . . . 11
III WORKING HOURS AND OVERTIME
Shift Schedule . . . . . . . . . . . . . . . . . . 13
IV WAGES
Hiring Rate . . . . . . . . . . . . . . . . . . . . 14
Work Wait Compensation . . . . . . . . . . . . . . 15
Make Work . . . . . . . . . . . . . . . . . . . . . 16
Qualified Incentive Workers . . . . . . . . . . . . 16
V PAID HOLIDAYS . . . . . . . . . . . . . . . . . . . 17
VI PAID VACATIONS . . . . . . . . . . . . . . . . . . 18
VII INVENTORY WORK . . . . . . . . . . . . . . . . . . 18
VIII LEAVE OF ABSENCE . . . . . . . . . . . . . . . . . 19
Determination of Layoffs . . . . . . . . . . . . . 19
IX EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . . 19
X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 20
XI DURATION AND TERMINATION OF SUPPLEMENT . . . . . . 20
<PAGE>
SIGNATURES . . . . . . . . . . . . . . . . . . . . 22
APPENDIX "A" . . . . . . . . . . . . . . . . . . 23-24
APPENDIX "B" . . . . . . . . . . . . . . . . . . 25-26
COLUMBUS PLANT SUPPLEMENT ADDENDUM . . . . . . . 27-30
<PAGE>
COLUMBUS SUPPLEMENT
-------------------
AGREEMENT
This AGREEMENT, made this 16th day of October, 1994, by and between SIMMONS
COMPANY, Columbus, Ohio, hereinafter referred to as the EMPLOYER, and THE UNITED
STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division), hereinafter referred to as the UNION, acting through its agent, Local
Union No. 424, for and on behalf of itself and the employees of said COMPANY at
its plant located at Columbus, Ohio, supplementing the MASTER MULTI-PLANT
WORKING AGREEMENT of even date between the same parties and others.
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Employees Covered. The persons covered by this contract include all
------------------
production employees of the COMPANY employed in its Columbus, Ohio plant,
excluding watchmen, office janitors, maintenance department employees, truck
drivers, foremen, supervisors, private chauffeurs, main office, clerical, and
engine room and power plant employees.
1.02 Check-Off. The deduction of initiation fees and regular UNION dues,
---------
as certified by the UNION in writing to the EMPLOYER, shall be made from the
second pay period of each month and remitted to the Financial Secretary-
Treasurer of the local UNION within five (5) days.
1.03 UNION Representative Seniority. All officers shall have top seniority
------------------------------
in their classification in the Department and Plant on all layoffs and recalls.
The priority sequence will be as follows: President, Vice President, Financial
Secretary, Recording Secretary, Sergeant-at-Arms, three (3) Trustee Auditors.
Department Stewards will be entitled to top seniority in their classification in
the departments second only to the above officers.
<PAGE>
1.04 Procedure for Returning from Leave of Absence for UNION Activity. An
------------------------------------------------------------------
employee, at the expiration of his leave of absence for UNION activity, shall be
returned to his former classification on the basis of seniority within work
groupings as described in Article II below.
ARTICLE II
----------
SENIORITY
2.01 Seniority and Layoff
--------------------
A. The COMPANY recognizes the principle of seniority (last hired
will be the first laid off) among its employees and agrees that
all layoffs occasioned by lack of work and subsequent recalls
from layoff shall be by seniority as provided below. In order to
make layoff procedures less cumbersome, the following procedure
will apply. Bumping rights or options will be given first to the
most senior person to be laid off.
B. When increases or decreases in the work force become necessary,
they shall be made on the basis of seniority within work
groupings.
C. Laid off employees who have seniority rights will be recalled in
accordance with their seniority as described in Section 2.02.
D. In the event a layoff is necessary, the reduction will be by
classification and seniority giving the most senior affected
employee the right to bump or roll the youngest employee in such
employee's work grouping provided as follows:
1. If trained in one or more classifications within the work
grouping, the affected employee must roll or bump into a
trained classification. If trained in one or more
classifications within the work grouping the affected
employee may select the trained classification he/she so
desires according to seniority.
2. If the affected employee is not trained in more than one
classification within his/her work grouping, then the
affected employee may roll or bump the
<PAGE>
youngest employee within that grouping without regard to
previous qualifications.
3. If such employee is unable to roll or bump within his/her
work grouping as provided in #1 and #2 above, and the
affected employee is qualified to perform jobs in other
classifications in a different work grouping without
------- training, such employee may roll or bump the
youngest -------- employee in such classification as
provided by Seniority Rule in A and B above.
4. If such employee is not permitted to remain in his/her
work grouping and does not qualify to roll or bump into
any other work grouping, such employee will be permitted
to roll or bump the youngest worker in Group V or the
plant. If, however, he/she elects to bump a quilting
operator and requires training to do so, such person must
give up rights to his/her former classification at that
time.
5. If a doctor certifies that an employee has a physical
disability that prevents such employee from working on his
current job without aggravating such condition, or
endangering the health or safety of others, such employee
will have the right of bumping the least senior employee
on a job that the ailing employee can perform without
further training, regardless of job groupings.
E. The COMPANY has the right to train employees in any particular
grouping provided such employees are the youngest untrained in
seniority, and provided further such employees are physically able to
perform such jobs.
F. The COMPANY will also train such senior employees as request
additional training in new jobs.
G. Payment for training purposes will be at eighty-five percent (85%) of
average rate. When the employee earns piecework, he/she shall receive
such.
<PAGE>
H. Refreshing of skills shall be as follows:
Employees who have been off the job:
0 - 15 days No training allowance
16 - 29 days 4 hours at average
30 - 59 days 8 hours at average
60 days - 6 mos. 24 hours at average
6 mos. - 1 year 32 hours at average
1 - 3 years 40 hours at average
3 years or more Retrain completely
I. (deleted)
J. Before Section 2.01 is placed in effect, each employee in each work
grouping will be interviewed to determine his various skills. At that
time the employee has the option of deleting any skills he/she is no
longer interested in performing. We agree that both a COMPANY and a
UNION representative will be present at the time of the interview.
(Interview to be on COMPANY time.)
K. Any employee who is trained on a new job may not declare himself
ineligible for such skill until he/she has made himself/herself
available to work in that new job for a period of twelve (12) months
after being qualified.
L. Any employee assigned to his/her secondary skill must be assigned to
such for a minimum of four (4) consecutive hours. Any assignment less
than four (4) hours will be paid at average rate.
M. All recalls from layoff will be made following the rules in 2.01 in
reverse order from layoff.
D-1 1st Priority
D-2 2nd Priority
<PAGE>
D-3 3rd Priority
D-4 4th Priority
N. The borrowed man clause will be available whenever an employee is
taken off his/her regular classification for the convenience of the
COMPANY.
In the event there is any conflict between a provision of the above
Article II and the remainder of this L.P.S., the above shall govern.
O. All classifications listed in Appendix A and B attached hereto will be
grouped as indicated below:
COLUMBUS WORK GROUPINGS
-----------------------
I. Cutting
-------
A. Mattress, Box Spring
B. Slitter/Anderson Cutter
II. Sewing
------
A. Mattress, Box Spring
B. Overcast & Label
C. Blindstitch/Hemming
D. Border
III. Mattress
--------
A. Close/Tape
B. Hog Ring
C. HMB
E. Beautyrest Coil
IV. Boxspring
---------
A. Assemble & finish box spring frames
B. Top-off construction
C. Pre-load
COL/2-7
<PAGE>
D. Upholster B/S
V. Indirect Labor
--------------
A. Inspection
B. Material Handlers
C. Shipping
D. Receiving
E. Janitor
F. Repair
G. Packaging
H. Quilter (direct)
I. Forklift
2.02 Right of Recall
---------------
A. The COMPANY will return the most senior employee on layoff to such
employee's former work grouping when an opening in any one of the
classification contained therein occurs, provided such employee can
successfully perform the work available. When an opening occurs in the
employee's former classification, he/she may return to that
classification.
B. In the event there is an opening in another skill grouping for which
there are no employees available in such skill grouping on surplus
labor and provided a senior employee from another skill group on
surplus labor can successfully perform the available work, such
employee will be given an opportunity to return to the active payroll
prior to the hiring of a new employee. When an opening occurs in the
employee's former classification, he/she may return to that
classification.
C. If there are no openings for incentive classifications, but there is a
need in Group VIII, the most senior employee on surplus labor will be
given an opportunity to qualify for such work before the COMPANY hires
new employees. Those who have
<PAGE>
been transferred into Group V and are learning will receive either
their day work rate or base rate of the new job, whichever is higher.
D. Procedure in Replacing Employees on Former Classification
---------------------------------------------------------
1. The Personnel office will check "return to former classification"
file involving employees presently working in the plant.
2. Failing to find applicants from step "A", the personnel office
will check the surplus labor list and select employees on the
basis of seniority by work grouping.
3. Any employee returning to his/her former classification must
remain on that job for a period of one (1) year before having
bidding rights.
4. Any employee who has a "return to former classification" form
made out and refuses to accept the former classification when an
opening occurs loses any right to claim that job as his "former
classification" for the purpose of future recall.
5. An open or vacant job shall be deemed to exist when a requisition
for help is unfilled by the employment office through "return to
former classification" or by preference of the employee on the
surplus labor list and shall be filled as hereinafter set forth.
The COMPANY will furnish to the UNION, monthly, a current list of all
people laid off.
2.03 Probationary Period. New employees shall be considered probationary
--------------------
employees during the first sixty (60) calendar days of service with the EMPLOYER
and may be discharged for any reason during this period, with or without cause.
If retained in employment after the expiration of the sixty (60) day
probationary period, the seniority rating of new employees shall commence with
<PAGE>
the first day of their employment with the EMPLOYER. Probationary period shall
be 60 days for all eligibility requirements.
2.04 In the event that employee covered by this AGREEMENT is promoted to a
supervisory position or to any other position outside of the bargaining unit,
and is thereafter transferred back into a classification within the bargaining
unit, he/she shall be credited with the amount of seniority which he/she had
acquired before promotion, plus thirty (30) calendar days, but shall not be
credited with seniority for the time spent outside the bargaining unit in excess
of the aforementioned thirty (30) days. He/she shall not be eligible to replace
any employee other than the one with the least seniority in his/her work
grouping to which he/she is returning if his/her seniority so permits. The
employee must decide within six (6) months whether he/she will stay on the job
or transfer back to the bargaining unit.
2.05 Upon the execution of this AGREEMENT, a basic seniority list shall
be prepared containing the names of all employees who are covered by this
AGREEMENT and the date of the commencement of their respective employment.
Copies of this seniority list shall be posted on the bulletin boards, and
a copy shall be delivered to the UNION. The seniority list shall be revised
from time to time as necessary, and a list of the current additions and
deletions and hires shall be furnished to the UNION for the previous month.
2.06 Change in UNION Representatives. It is agreed that the UNION will
-------------------------------
keep the COMPANY notified at all times of the persons who are officers and shop
stewards of the UNION.
2.07 Layoff Notice. The COMPANY will give four (4) working hours notice
-------------
of a temporary layoff. On a permanent layoff, the COMPANY will give a notice of
two (2) working days. A "temporary" layoff is when an employee is laid off for
a period of more than eight (8) working hours, but not exceeding seven (7)
calendar days. A "permanent" layoff is when an employee is laid off for more
than seven (7) calendar days.
<PAGE>
2.07a Furlough - When a temporary reduction in a classification becomes
--------
necessary the Company will seek volunteers for furlough, starting with the most
senior employee in the classification. If no volunteers are available, regular
layoff procedures will apply. A furlough may last up to three weeks and be a
minimum of one week. Employees on furlough will be eligible for unemployment
benefits. Employees must continue to pay their portion of the health benefit
contribution while on furlough.
2.08 Equalization of Work Wherever Practicable. Hours of work (including
-----------------------------------------
overtime hours) will be distributed as equally as practicable among qualified
employees in each classification. If complaints are made, adjustments in equal
distribution of hours of work will be made, as far as practicable, within
periods of three (3) months.
2.09 Job Bidding Procedures. Any employee with at least six (6) months
-----------------------
seniority shall be entitled to bid on any new or vacated job. Notice of such new
or vacated jobs shall be posted on the bulletin board by the COMPANY for a
minimum of twenty-four (24) hours excluding Saturday and Sunday. The COMPANY
will award the job to the senior bidder. The successful bidder shall have a 48
hour waiting period (excluding Sundays and Holidays) from accepting the bid
until transfer to the new job. The successful bidder can refuse to accept the
job awarded in this 48 hour period. Union/Company will use a document that
reflects the bidding, job award, job refusal, job transfer requirements and
employee signature for the action taken.
Any person accepting the posted job must remain on that job for twelve (12)
months. Rule of seniority shall apply. Any person accepting the posted job will
be given a trial period of at least thirty (30) days provided he/she shows
progressive improvement, and failing to do so, he/she shall be disqualified in
which event he/she may bump the employee with least seniority in Work Group V.
If disqualified a second time, he/she shall be laid-off and have his/her name
placed on the surplus labor list for a maximum of one (1) year. Any person who
is a successful bidder for an open job and refuses to accept the job is
ineligible to bid for a period of one (1) year. It is understood that
employee(s) who are on vacation at the time a job is posted for bid may have
his/her name entered for bid by the
<PAGE>
shop steward. If the employee is the successful bidder and is subsequently laid
off his bidding rights will be restored.
Because of the delays inherent in successive job openings, the COMPANY may
elect to fill, without posting, job vacancies resulting from the assignment of
an applicant to the job originally posted, with this exception: When an employee
successfully bids to a lower-rated job, the opening created by his/her bidding
off will be posted. (This will not apply to lateral bids or bids to higher-rated
jobs.) However, the COMPANY will post a vacated job resulting from the
assignment of an employee to an open job which did not originally require
posting.
2.10 Successful job bidders will be transferred to their new job
classification within fifteen (15) calendar days, provided it does not cause any
undue hardship in maintaining existing production schedules, and provided that
they do not involve jobs that take extended training periods such as pocket
machine operators, and closers.
Should the COMPANY have a need for components or finished pieces that it is
unable to fill because the replacement for the successful bidder has not been
able to produce the required number of pieces, it is understood that the COMPANY
can borrow the successful bidder for a period not to exceed sixty (60) days
during which time the successful bidder will continue to work on incentive.
The COMPANY and UNION committee shall mutually agree on an extended period
to allow the COMPANY sufficient time to train a replacement.
2.11 In the event a job is posted for bid and there are no bidders, the
most senior employee on lay-off who is qualified to perform the posted job
duties will be given an opportunity to take the open job. It is clearly the
responsibility of the employee to make known to MANAGEMENT his/her desire to
identify the job he/she wishes to return to in writing.
<PAGE>
ARTICLE III
-----------
WORKING HOURS AND OVERTIME
3.01 Shift Schedule. The following is the usual shift schedule which
---------------
may be changed by MANAGEMENT upon reasonable notice to the UNION:
A. When one shift is to be worked in any department, the schedule
will be from 7:00 a.m. until 3:30 p.m. with a one-half hour lunch
period between 11:00 a.m to 12:30 p.m.
B. When two shifts are to be worked in any department, the schedule
will be as follows:
1. The first shift will work from 7:00 a.m. until 3:30 p.m.
with a one- half hour lunch period between 11:00 a.m. and
12:30 p.m.
2. The second shift will work from 3:30 p.m. to 12:00 midnight
with a one-half hour lunch period from 7:30 p.m. to
8:00 p.m.
C. When three shifts are to work in any department, the schedule
will be as follows:
1. The first shift will work from 7:00 a.m. until 3:00 p.m.
with a one- half hour lunch period between 11:00 a.m. and
12:30 p.m.
2. The second shift will work from 3:00 p.m. to 11:00 p.m. with
a one-half hour lunch period from 7:00 p.m. to 7:30 p.m.
3. The third shift will work from 11:00 p.m. to 7:00 a.m. with
a one- half hour lunch period from 3:00 a.m. to 3:30 a.m.
3.02 Whenever three shifts are necessary, each shift shall be paid for
eight (8) hours work with the one-half hour lunch period included. Pieceworkers
shall be paid at their average hourly earnings rate for the one-half hour lunch
period. Hourly workers shall be paid their hourly rate for the one-half hour
lunch period.
<PAGE>
3.03 Employees who work the night shift on Friday will not be made to work
before 11:00 a.m. Saturday.
3.04 Rest Periods. There shall be two (2) ten (10) minute rest periods
------------
daily, one in the forenoon and one in the afternoon.
3.05 An incentive employee shall have the right to refuse all work after
four (4) hours if assigned to another classification with a rate lower than
his/her average.
ARTICLE IV
----------
WAGES
4.01 Hiring Rate.
-----------
A. The hiring rate for all new employees shall be $7.00 per hour. An
increase of fifteen cents (15 cents) per hour shall be granted
to day workers at the end of the first thirty (30) calendar days
and ten cents (10 cents) per hour every thirty (30) calendar
days thereafter until the classification rate is reached.
B. An increase of ten cents (10 cents) per hour shall be granted to
pieceworkers after thirty (30) calendar days. In the case of
closers, an additional ten cents (10 cents) per hour shall be
granted after the second thirty (30) calendar days.
C. Training Rate. The training rate shall be $7.75 per hour.
-------------
4.02 The EMPLOYER and the UNION have agreed upon the hourly rates of
classifications for hourly workers as set forth in Appendix "A" and the basic
rates of classifications for pieceworkers as set forth in Appendix "B".
<PAGE>
4.03 Shop committee meetings or conferences with any member of said
committee, if called or approved by MANAGEMENT during working hours, shall be
compensated for at the employee's basic rate.
4.04 Work Wait Compensation.
----------------------
A. If, due to absenteeism, mechanical failure, lack of materials,
components or supplies, an incentive worker is required to wait
for any continuous period of more than ten (10) minutes time, and
he/she is unassigned to any work, he/she shall be compensated at
eighty-five percent (85%) of his/her average hourly earnings for
all time lost.
B. If he/she is assigned to other work, he/she shall be compensated
at his/her average hourly earnings rate, except when on secondary
skill training for a job chosen by employee. In such event the
employee shall receive eighty-five percent (85%) of his/her
average hourly rate.
C. It is agreed that the COMPANY shall have no liability regarding
the above provisions in the event of a breakdown of power outside
the plant or if inside the plant and not maintained by the
COMPANY, General Plant Fire, Act of God, Act of Public Enemy, or
because of conditions beyond the control of the COMPANY.
D. It is agreed that in the event of one of the occurrences listed
in the preceding paragraph, employees will stand by until
instructed by the COMPANY to go home or to return to work. If the
COMPANY, within 30 minutes after the moment of the occurrence,
instructs employee to go home or to return to work, the employee
will not be paid for time lost within this 30 minute period. If
the COMPANY does not instruct any employee within 30 minutes
after the beginning of one of the above occurrences to go home or
to return to work, he/she will be paid his average hourly
earnings as computed in Section 8.05 of the MASTER MULTI-PLANT
WORKING
<PAGE>
AGREEMENT if an incentive worker, and at the hourly daywork rate
of his classification if a dayworker for all time lost from the
end of the first minute of one of the above-listed occurrences to
the time he/she is either instructed to go home or to return to
work.
E. An hourly employee assigned to fill-in on an incentive operation
will be paid eighty-five percent (85%) of his/her average daily
earnings for work wait, provided that he/she has earned such
amount that day on the operation to which he/she is assigned.
Should he/she fail to earn such amount, he/she will receive
his/her hourly rate for work wait.
4.05 Make Work. All employees in incentive classifications who are
----------
temporarily out of work in their classification, will be paid at the rate of
$7.80 per hour when MANAGEMENT assigns them to a classification other than their
own. This rate does not apply to new employees or employees with an average rate
of less than the rate listed in this section.
4.06 If an employee is injured in the plant while performing work on
his/her assigned classification and it is necessary for him/her to receive
treatment by either the COMPANY Doctor or Nurse during working hours, the
COMPANY shall pay for the time spent in the treatment of such injury. If either
the Doctor or the Nurse certifies that such injured employee is unable to
continue work because of the injury, the COMPANY will pay for the balance of the
scheduled shift. Said pay shall be at hourly rate for hourly workers and at
average hourly earnings for pieceworkers. None of the sections of this paragraph
are to be so construed that benefits will inure in addition or pyramid on
disability payments of Workers Compensation payments.
4.07 Qualified Incentive Workers. To be qualified, an employee must
----------------------------
attain one hundred percent (100%) of the basic rate for a period of five (5)
continuous days. A Utility classification employee or any other employee must
also meet this standard to be an adequate replacement for an absent member of a
team.
<PAGE>
4.08 No incentive worker will be required to work at piecework with an
employee who has been off that job for more than thirty (30) days until the
employee has had reasonable time to learn the job. Time not to exceed two (2)
working days.
ARTICLE V
---------
PAID HOLIDAYS
5.01 In addition to the seven (7) paid holidays listed in Section
10.01 of the MASTER MULTI-PLANT WORKING AGREEMENT, the following additional paid
holidays shall be celebrated in accordance with Article X of the Master Multi-
Plant Working AGREEMENT:
Good Friday
Friday after Thanksgiving Day
Day before New Year's Day
Day before Christmas
5.02 In order to receive holiday pay, an employee must have 60 days or
more of service and work the last scheduled workday before and the first
scheduled workday after the holiday.
5.03 When an eligible employee is on an approved leave of absence for
either pregnancy, illness, accident, or personal reasons, and a paid holiday or
holidays occur during this period, he/she shall receive pay for the first paid
holiday occurring after the commencement of such leave of absence. If an
employee's approved leave of absence begins on the day following a holiday, the
employee will be paid for such holiday.
<PAGE>
ARTICLE VI
----------
PAID VACATIONS
6.01 The COMPANY will grant paid vacation to employees as set forth in
the MASTER MULTI-PLANT WORKING AGREEMENT.
6.02 Pay for each week of vacation will be figured at forty (40) times
an employee's average hourly earning rate of the previous quarter if an
incentive worker and the employee's regular hourly rate if paid on an hourly
rate, excluding overtime premiums.
6.03 One (1) week of vacation can be taken at 8 hour intervals (by
days) with one week or more notice and seniority permitting. Time of payment for
this week to be determined.
ARTICLE VII
-----------
INVENTORY WORK
7.01 When employees are selected for inventory work, the selection
shall be made by applying the following factors:
1. Length of service
2. Qualifications (ability to read, write, compute, weigh, and
identify the components and products)
3. Non-volunteers on basis of youngest in seniority, if qualified.
Length of continuous service shall govern where, as between two or more
employees, in the judgement of the COMPANY, the factors in Item 2 are relatively
equal.
<PAGE>
ARTICLE VIII
------------
LEAVE OF ABSENCE
8.01 On the return to work of an employee from a leave of absence for
pregnancy, illness, accident, or other legitimate reason, such employee shall
return to his/her original shift and classification and department and work
station (work station does not apply if sick leave was over 12 months)
consistent with Article II, Seniority, above. Any employee returning from a
leave of absence of more than 30 days must give two (2) working days advance
notice of his/her return.
8.02 Determination of Layoffs. If the hours of work in any
--------------------------
classification fall below sixty (60) hours for a period of any two (2)
consecutive weeks, the COMPANY will lay off a sufficient number of employees to
permit a nearer normal work week.
ARTICLE IX
----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, national origin or ancestry, age, sex
(including pregnancy and any illness arising out of and occurring during the
course of pregnancy, childbirth or related to medical condition), handicap, or
veteran status except where religion, sex, national origin or age is a bona fide
occupational qualification. Our policy relates to all phases of employment,
including recruitment, placement, promotion, training, demotion, transfer,
layoff, recall and termination, rates of pay, employee benefits and
participation in all SIMMONS sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial, ethnic
or religious harassment. Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature or verbal or physical
conduct directed at a person's race, color, religion, sex, national origin, age,
handicap or veterans status may constitute harassment. Claims of
<PAGE>
harassment which come to our attention may result in discipline up to and
including discharge. At any time, if you believe that you have been harassed,
you must report the harassment to your immediate Supervisor or your Human
Resources Manager. A confidential investigation will be conducted.
ARTICLE X
---------
MISCELLANEOUS
10.01 The Company agrees to cooperate with the Union representative on
information regarding Worker's Compensation and Unemployment Compensation.
10.02 The Company will contribute $2.00 towards the purchase of safety
shoes.
10.03 The Company will furnish the same type of hand cleaner as the IAM
for the following departments: 160 - 225 - 490.
10.04 The Company and Union agree to update Skills Audits on a timely
basis.
10.05 The Company and Union will discuss incentive systems for some
hourly positions.
10.06 Bereavement pay will be granted up to a maximum of 3 days for the
loss of a maternal or paternal grandparent, with proper documentation.
ARTICLE XI
----------
DURATION AND TERMINATION OF SUPPLEMENT
11.01 THIS SUPPLEMENTAL AGREEMENT shall be in full force and effect for
three (3) years, from October 16, 1994 until October 15, 1997.
<PAGE>
11.02 The parties agree that this AGREEMENT, together with the MASTER
MULTI-PLANT WORKING AGREEMENT and the Procedures Contract, constitutes the
entire agreement between the parties, and at no time during the life of this
AGREEMENT shall either party have any obligation to negotiate or bargain with
the other party, with respect to any points not covered by this AGREEMENT, and
as to matters covered by this AGREEMENT, only in the manner and to the extend
herein provided.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of
America, SIMMONS COMPANY
A.F.L, C.I.O., C.L.C.
(Upholstery Industries Division)
Through its Agent, Local Union
#424
By /s/ /s/ R. Barton 12/8/94
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
Countersigned at Philadelphia, Pennsylvania.
This 8th day of December, 1974.
--- --------
The United Steel Workers of America, A.F.L., C.I.O, C.L.O.
(Upholstery Industries Division)
By /s/ Ernest F. Shorn
---------------------------------------------------
Director of Upholstery Industries Division
<PAGE>
COLUMBUS
APPENDIX "A"
RATES FOR HOURLY WORKERS
Effective
---------
Job Description Code 10/16/94 10/16/95 10/16/96
- --------------- ---- -------- -------- --------
Fork Lift Truck Operator D-1 $9.17 9.47 9.77
Truck Checker D-2 9.12 9.42 9.72
Unloader & Order Fillers D-3 9.07 9.37 9.67
- - Receiving
Utility Receiving D-4 9.20 9.50 9.80
Material Handlers - Heavy D-5 8.95 9.25 9.55
(frames, springs, etc.)
Material Handlers - Light D-6 8.88 9.18 9.48
(covers, borders, etc.)
Janitors D-7 8.88 9.18 9.48
Truck Checkers
& Loaders Shipping D-8 9.12 9.42 9.72
Storekeeper - Cover Cage D-9 9.20 9.50 9.80
Key Handlers (in the D-10 9.05 9.35 9.65
following departments)
1 in Box Spring Department
1 in Beautyrest(R) Department
2 in Open Coil Department
1 in Wood Shop Department
Fold & inspect covers, etc. D-11 8.88 9.18 9.48
Sort & stack D-12 9.10 9.40 9.70
Inspector, 1st Class
finish product D-13 9.13 9.43 9.73
Repair Mattress (Closer) D-15 9.18 9.48 9.78
<PAGE>
Columbus APPENDIX "A"
---------------------
Hourly Rate
Effective
Job Description Code 10/16/94 10/16/95 10/16/96
- --------------- ----- -------- -------- --------
Repair Mattress
& Box Spring D-21 $8.93 9.23 9.53
Utility - Cut & Sew D-22 9.19 9.49 9.79
Cutter - Matt & Box D-24 8.88 9.18 9.48
Hem/Double Overcast Borders D-37 8.88 9.18 9.48
Slitting/Anderson Cutter D-43 9.05 9.35 9.65
Inventory - Heavy (frames,
springs, etc.) D-45 9.03 9.33 9.63
Inventory - Light (covers,
borders, thread, etc.) D-46 8.73 9.03 9.33
Lead Inspector
& Coordinator D-47 8.95 9.25 9.55
Loader/Helper D-49 9.05 9.35 9.65
Construction Opener D-50 9.05 9.35 9.65
Packer D-51 9.15 9.45 9.75
Packer/Helper D-52 8.95 9.25 9.55
Inspector/Packer D-53 9.34 9.64 9.94
<PAGE>
COLUMBUS
--------
APPENDIX "B"
------------
Rate Effective
--------------
Job
Class Job Description Code 10/16/94 10/16/95 10/16/96
- ----- --------------------------- ---- -------- -------- --------
DEPARTMENT 160 - BOX SPRING
009 Fill, upholster
& trim box spring X-2 $8.51 8.76 9.01
Pre-loader X-4 8.15 8.40 8.65
DEPARTMENT 130 - MATTRESS
Close mattresses,
all types M-1 8.57 8.82 9.07
089 Close mattress on
closing machine
098 Close Beautyrest(R) on
closing machine
062 Pocket Machine Operator
(Beautyrest(R)) M-5 7.97 8.22 8.47
063 Assemble Beautyrest(R)
construction M-6 7.58 7.83 8.08
Hog ring panel
to construction M-7 7.79 8.04 8.29
087 Hog ring open coil
096 Hog ring Beautyrest(R)
Pack matts, all types M-13 8.37 8.62 8.87
093 Pack mattress
100 Pack Beautyrest(R)
DEPARTMENT 04 - WOOD ROOM
Assemble box spring frames W-1 8.82 9.07 9.32
016 Radius box spring corners
019 Assemble & nail
box spring frames
(pneumatic nailer)
020 Rout box spring frame
015 Nailing Machine W-3 8.81 9.06 9.31
<PAGE>
COLUMBUS
---------
APPENDIX "B"
------------
Piecework Basic Timing Rates
Rate Effective
-----------------------------
Job
Class Code 10/16/94 10/16/95 10/16/96
- ----- ---- -------- -------- --------
DEPARTMENT 105 - BORDER
001 Mattress Border Machine
Operator B-1 $8.68 8.93 9.18
002 Operate Bechik 4-hold
punch with hand switch
or foot pedal B-2 8.03 8.28 8.53
003 Attach handles to border
(other than Bechik)
DEPARTMENT 115 - CUT & SEW
Sew & tape mattress & box
spring cover, attach
dot fasteners S-2 7.91 8.16 8.41
050 Sew panels to border matt
054 Sew box spring panels to border
058 Sew welt to panel or borders
Sew labels, hem panels,
& overcast S-3 8.54 8.79 9.04
048 Sew labels to matt & box
spring panels
049 Overcast
055 Hemming
057 Overcast & sew Osnaburg
(Galkin Machine) S-4 8.13 8.38 8.63
DEPARTMENT 120 - QUILT
Quilt Machine Operator D-48 8.28 8.53 8.78
DEPARTMENT 150 - BOX SPRING
008 Top Off X-1 8.74 8.99 9.24
<PAGE>
COLUMBUS PLANT SUPPLEMENT
-------------------------
ADDENDUM
--------
The AGREEMENT detailed below between SIMMONS COMPANY, Columbus, Ohio, and
the United Steel Workers of America, AFL, CIO, CLC (Upholstery Industries
Division) Local Union No. 424 will take effect on October 16, 1994 and continue
until the termination date of the MASTER MULTI-PLANT WORKING AGREEMENT on
October 15, 1997.
In all cases where the language below conflicts or is otherwise in
disagreement with the "Columbus Supplement", the language below shall prevail.
1. Overtime: The normal overtime schedule for production employees will
--------
be limited to ten (10) hours per day Monday through Friday and no more
than eight (8) hours on Saturday. In the event of a serious customer
service requirement, overtime hours may be expanded to a maximum of
twelve (12) hours per day Monday through Friday and eight (8) hours on
Saturday. If twelve (12) hours are necessary, the COMPANY will first
seek volunteers. If there are not enough volunteers then the overtime
will be scheduled according to seniority. Production on Sundays and
holidays may be performed by volunteers but will not be mandatory. No
employee can be scheduled for more than 58 hours in a one week period.
Work over 58 hours will be done on a volunteer basis only.
On those occasions where the COMPANY'S orders are heavy they must have
the right to schedule overtime to satisfy the customers' requirements.
If the overtime requirement continues the COMPANY will hire new people
and train them or even bring in finished stock from other factories
rather than work continued overtime. Over the long run heavy overtime
tends to be counter productive and is not in the best interest of
SIMMONS COMPANY or its employees.
The COMPANY'S intent here is to have the flexibility needed to work
overtime on a limited basis to satisfy the customers.
<PAGE>
In all cases the COMPANY will make every effort to use the variable
starting times by department so as to reduce the amount of overtime
required on a daily basis. (All other overtime restrictions in the
current contract referring to working more than two consecutive
Saturdays in "peak season" months will be eliminated.)
2. Borrowed Man: When an employee is borrowed for the convenience of the
-------------
COMPANY and given a type of work to perform on which he/she has not
been qualified (previously earned incentive rate), then his/her rate
shall be his/her average hourly earnings rate, provided such average
rate is greater than his/her earnings on incentive or the daywork rate
for the work being performed. In those cases where an employee is
borrowed into a job on which he/she has previously qualified, his
earnings shall be at incentive rate for that job. The Refreshing of
Skills chart will apply to those individuals. An employee who has been
trained on a job may not delete himself/herself from that job unless
it is mutually agreed by both the COMPANY and the UNION.
3. Quilt Machine Operators: In order to maintain a consistent productive
-----------------------
capacity in the quilting operation, employees wishing to exercise
their option to bump the least senior employee in Work Grouping V will
be prohibited from bumping less senior employees in the Quilt Machine
Operation classification unless all other options have been exhausted.
In cases of disqualification from a former classification, Quilt
Machine Operators will be omitted from Work Group V when determining
the least senior position in this non-skill position, provided that
this does not force that employee into a layoff status.
4. Working Hours - If three shifts become necessary, each shift may be
--------------
scheduled so that the employees each work a full eight-hour shift with
an additional unpaid 1/2 hour for lunch. In this case, the shift hours
will overlap each other.
<PAGE>
When it is necessary to temporarily assign an employee, or group of
employees, from a permanent shift assignment to take care of the
operational bottlenecks, the Company has the right to adjust the
starting time plus or minus one hour from normal as long as reasonable
notice (reasonable notice means by the prior work day) is given to the
employees involved.
5. Temporary employees may be used for indirect positions temporarily
-------------------
vacant due to sick leave, vacation, or unfilled after posted for bid.
Temporary employees may also be used for short term projects if no
other permanent employee is available. No temporary employees may be
used if there are employees on layoff and are available to work in the
short term position. Temporary employees may fill a position for up to
60 days. After thirty days, if the position still appears to be
necessary, the job will be posted and filled according to the
provisions of the contract. Probationary period will be waived for
temporary employees hired for permanent positions if they have worked
60 consecutive days as a temporary for the Company. The Company will
employ no more than four (4) temps at a time. If more are required
they can be added by mutual agreement of the Union and Company. When a
need arises for temporary employees the Union will be notified.
(Temporary employees will not be eligible for benefits.)
6. Overtime Scheduling. Employees must be available to work overtime on
-------------------
the day they return from any absence if overtime was scheduled in
their classification and the employee failed to speak to their
immediate or assigned supervisor when reporting their absence.
(Overtime shall not exceed 10 hours.)
<PAGE>
FOR U.I.U. LOCAL #424 FOR SIMMONS COMPANY
COLUMBUS
/s/
- --------------------------- ----------------------------------
- --------------------------- ----------------------------------
- --------------------------- ----------------------------------
- --------------------------- ----------------------------------
<PAGE>
May 5, 1994
Addendum to UIU Local 424 Columbus Supplement
Simmons Company
and
UIU Local 424
Effective April 25, 1994
The classification of Inspector, 1st Class Finished Product at the packing
machines will include the following functions: Inspect final product for defects
before packaging, apply appropriate tags or documentation to products, do minor
repairs, trimming, cleaning, etc. to ensure final product meets Simmons quality
standards, monitor packing machine, load wrapping material, and ensure machine
operates correctly. The duties of this position include but are not limited to
all of the above functions.
This job function will apply to Final Inspector at Packaging and will pay $9.04
per hours.
/s/
- ------------------------------- --------------------------------------
For the Union For the Company
- ------------------------------- --------------------------------------
Date Date
<PAGE>
May 5, 1994
Memorandum of Understanding
Update of Memorandum of August 8, 1992
Simmons Company
and
UIU Local 424
Any employee who is borrowed for more than 30 days during one quarter and has
not had the opportunity to establish an average in their prime classification
shall have an average established for them based on 125% of the base rate of
their prime classification.
An employee who is borrowed for more than thirty days during one quarter and has
not had the opportunity to establish an average in their prime classification,
but they have worked on piecework for 30 days or more, shall have their average
based on this piecework. The employee will be paid this average or the 125% of
the base rate of their prime classification, whichever is higher.
/s/
- ------------------------------- --------------------------------------
For the Union For the Company
- ------------------------------- --------------------------------------
Date Date
<PAGE>
MEMORANDUM OF UNDERSTANDING
SIMMONS COMPANY
AND
UIU LOCAL 424
May 20, 1993
An employee who qualifies on a piecework job (see CLS sec. 4.07) during the
period between the cutoff date for the computation of averages and the date the
new average is issued, (a period of approximately 4 weeks), will have an average
calculation based on the qualifying piecework during the period between the cut-
off date and the issue date for the new averages each quarter.
An employee who qualifies on a piecework job after the issue date for quarterly
averages will have their average issued during the following quarter.
This memorandum will be effective January 1, 1993.
For the Union: For the Company:
/s/
- --------------------------------- ------------------------------------
Bur Childress Jeff LaCoe
<PAGE>
DALLAS PLANT
SUPPLEMENT
LOCAL 422
<PAGE>
DALLAS INDEX
ARTICLE ITEM PAGE
I RECOGNITION AND UNION SECURITY
1.01 Employees Covered . . . . . . . . . . . . . . . . . 2
1.02 Check Off . . . . . . . . . . . . . . . . . . . . . 2
1.04 Union Representatives' Seniority . . . . . . . . . 2
1.05 Definition of Union Representative . . . . . . . . 3
1.07 Negotiation Committee . . . . . . . . . . . . . . . 3
II LAYOFF, HIRING AND EMPLOYMENT PROCEDURES
2.01 Principle . . . . . . . . . . . . . . . . . . . . . 3
2.02 Layoff Procedure . . . . . . . . . . . . . . . . . 3
2.06 Employees Who Bump into Classification . . . . . . . 5
2.07 Layoffs Resulting in Combination Jobs . . . . . . . 5
2.08 Determination of Layoffs . . . . . . . . . . . . . 6
2.09 Furlough . . . . . . . . . . . . . . . . . . . . . 6
2.10 Surplus Labor . . . . . . . . . . . . . . . . . . . 7
2.11 Probationary Period . . . . . . . . . . . . . . . . 7
2.12 Rehired or Transferred Employees . . . . . . . . . 7
2.13 Consolidation of Classification . . . . . . . . . . 8
2.14 Status of Employees on Split Combination Jobs . . . 8
2.15 Procedure on Filling Open Jobs . . . . . . . . . . 8
2.16 Procedure in Applying for New Jobs . . . . . . . 9
III WORKING HOURS
3.01 Shifts . . . . . . . . . . . . . . . . . . . . . . 11
3.04 Rest Period . . . . . . . . . . . . . . . . . . . . 12
IV WAGES
4.03 Borrowed Supervision . . . . . . . . . . . . . . . 12
4.06 Work Wait . . . . . . . . . . . . . . . . . . . . . 13
4.07 Borrowed Employee . . . . . . . . . . . . . . . . . 13
4.08 Time Elements on Borrowed Employees . . . . . . . . 14
V PAID HOLIDAYS . . . . . . . . . . . . . . . . . . . . . 14
VI VACATIONS . . . . . . . . . . . . . . . . . . . . . . . 15
VII INVENTORY WORK . . . . . . . . . . . . . . . . . . . . . 16
VIII GRIEVANCE PROCEDURE . . . . . . . . . . . . . . . . . . 17
IX STATUS OF MECHANICS . . . . . . . . . . . . . . . . . . 17
X LEAVE OF ABSENCE . . . . . . . . . . . . . . . . . . . . 18
XI EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . . . . . 18
XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 19
XIII DURATION AND TERMINATION OF SUPPLEMENT . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 21
APPENDIX A Base Rate for Incentive Workers . . . . . . . 22
APPENDIX B Base Rate for Hourly Workers . . . . . . . . 23
<PAGE>
DALLAS SUPPLEMENT
------------------
AGREEMENT
THIS AGREEMENT made this 16th day of October, 1994, by and between SIMMONS
COMPANY, Dallas, Texas, hereinafter referred to as the EMPLOYER, and THE UNITED
STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C (Upholstery Industries
Division), hereinafter referred to as the UNION, acting through its agent,
Local Union #422, for and on behalf of itself and the employees of said
EMPLOYER at its plant located in Dallas, Texas, supplementing the MASTER
MULTI-PLANT WORKING AGREEMENT of even date between the parties and others.
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Employees Covered. The term "employees" shall not include supervisors,
-----------------
foremen, factory clerks, office employees, timekeepers, watchmen, nor other
persons in any way identified with MANAGEMENT.
1.02 Check Off. The deduction of initiation fees and regular UNION dues as
---------
certified by the UNION in writing to the EMPLOYER, shall be made from the first
pay check of each month and remitted to the Financial Secretary of the local
UNION within one week.
1.03 As a condition of employment with the SIMMONS COMPANY, no employee can
make an assignment of wages or salaries, whether earned or unearned, and the
EMPLOYER shall never be liable to the assignee because of any assignment made by
an employee.
1.04 UNION Representatives' Seniority. All representatives of the UNION
--------------------------
shall head the seniority list during their term of office in their respective
divisions and shall be returned to their regular standing on the seniority list
on their termination of office. No representative shall be laid off or
transferred out of the division in which they are a representative while work is
available until their
2
<PAGE>
current term of contract expires, if such layoff or transfer is objected to by a
majority of those employees represented.
1.05 Definition of UNION Representative. UNION representatives are:
------------- --------------
President
Vice President
Financial Secretary and Treasurer
Recording Secretary
Second Shift Steward
It is understood and agreed that the above officers will also serve as
department stewards for all employees covered under this Agreement.
1.06 An employee, at the expiration of their leave of absence for UNION
activity, shall be returned to their former classification, in line with their
seniority. If said classification is not in existence at that time, they shall
replace the employee with the least seniority in the plant.
1.07 Negotiation Committee. The Negotiation Committee of the UNION shall
---------------------
be limited to no more than five (5) members.
ARTICLE II
----------
LAYOFF, HIRING AND EMPLOYMENT PROCEDURES
2.01 Principle. The EMPLOYER recognizes the principle of seniority among
---------
its employees and agrees with the UNION that all layoffs caused by lack of work
shall be by seniority. The last employee hired shall be the first laid off and
all rehiring and layoffs shall be governed accordingly, unless otherwise
provided in Section 2.07.
2.02 Layoff Procedure. When a layoff occurs on a classification, the
----------------
least senior employee in the point of service on the classification shall be
laid off unless otherwise provided. Then the employee has a choice of applying
their seniority against the least senior employee in the point of
3
<PAGE>
service in the Department in which they are employed, or may apply their
seniority against the least senior employee in the point of service in the plant
or probationary employees, or take an open job unless otherwise provided. In any
event, senior employees always have the option of accepting layoff rather than
bumping as per above. This option shall be expressed in writing at the time of
layoff and at that time, the employee may elect not to be called for specific
types of work or a specific shift and shall be by-passed when employees are
needed for those named occupations or shift.
An employee who has exercised any of the above options may change
their choice of jobs for return opening provided notice of such change is given
to the EMPLOYER in writing no later than sixty (60) days measured from the
effective date of layoff. If they did not exercise an option at the time of
layoff, the employee must accept the first open job recalled to in line with
seniority.
The EMPLOYER will not contest the employee's right to draw
unemployment if the employee has exercised the option of layoff. Further,
employees who take a voluntary layoff will be protected under Sections 2.03 and
2.04.
An employee who is laid off through lack of work and is transferred to
another job and is subsequently disqualified because they are unable to
satisfactorily perform the work will be granted the privilege of bumping a newly
hired employee unless otherwise provided. If the employee is then disqualified,
they shall be laid off and placed on the surplus labor list.
2.03 Employees who are laid off from their regular classification will
be given preference to their regular type of work by filling in an application
for return to former job. When there are openings in such jobs, the applications
will be honored in line with seniority before bids are accepted by the EMPLOYER.
2.04 Employees laid off who desire to be returned to their regular jobs
must request these returns to their particular type of work at the time of
layoff and applications covering same must be
4
<PAGE>
forwarded to the Personnel Office where they will remain on file and shall be
valid for a period of one (1) year from the date of layoff.
Following a layoff, the EMPLOYER agrees not to return any employee to
former classification, post bid, or borrow any employee on said classification,
unless classification has worked a minimum of forty (40) hours per week for the
preceding three (3) week period, unless the employees on the job do not produce
sufficient units so that preceding and following operations have sufficient
work, or unable to provide products for promised customer delivery, or unless
because of absenteeism.
2.05 An employee who has been laid off on their classification and has
taken a bump can also bid on a posted job and still hold their return to former
classification unless otherwise provided. Employees have the preference to
return or remain on the jobs they bumped into, when offered their return to
former classification.
2.06 Employees Who Bump into a Classification When a Layoff Occurs. An
-------------------------------------------------------------
employee who bumps into a classification immediately prior to a layoff on that
classification will not have seniority privileges if they have not made
incentive and are not performing satisfactory work for the payroll week
immediately prior to the date on which the layoff notice is given.
2.07 Layoffs Resulting in Combination Jobs
-------------------------------------
(A) If, as a result of a layoff in accordance with Section 2.08 below, one
or more classifications require part-time work, then these
classifications will be combined, taking into consideration the number
of hours needed to create an appropriate full-time job.
(B) Employees who retain part-time work in any of the combined
classifications will be grouped together and the least senior employee
or employees of this group will be laid off and the senior employees
will be assigned to the combined classifications. In order
5
<PAGE>
to be eligible, the senior employee must have part-time work in one of
the combined classifications.
(C) Where possible, day work and incentive jobs will be kept separate in
combination jobs.
2.08 Determination of Layoffs. When the hours of work fall below thirty-
------------------------
two (32) hours per week for a two (2) week period, the EMPLOYER will lay off a
sufficient number of employees in order to provide thirty-two (32) hours or more
per week for the remaining group, provided the request has been made and
approved by the UNION BARGAINING COMMITTEE. Vacation weeks and inventory week
shall not be computed in the two (2) week period.
It is mutually agreed in furloughs that no less than four (4) working
hours notice or pay will be given. On permanent layoffs ample notice is to be
given, but in no event will the notice of permanent layoffs be less than one (1)
week or one week's pay.
2.09 Furlough. In order to provide a more reasonable work schedule for
--------
senior employees when hours are shortened due to lack of orders, the plant or
operations manager will have the responsibility of placing on furlough those
employees who are not needed to fill the daily production schedule. Furlough
will be offered first on a voluntary basis according to seniority within the
affected classification. If there are not enough volunteers, then the Company
will furlough the least senior employee(s) in the affected classification. The
furloughed employees will be placed on surplus labor so as to make them eligible
for unemployment benefits during such furlough period, if otherwise eligible.
Employee health and dental insurance will be maintained in accordance with
Article XIII of the Master Agreement for the entire length of furlough. It is
understood that a furlough may be for any length of time provided such does not
exceed (sixty) 60 days at any given time. For recordkeeping purposes, the
president for Local #422 or his appointee will be notified of such furlough by
letter signed by the involved plant or operations manager.
In the event variation in customer demands requires employees to
return from furlough earlier than announced, such return shall be by seniority
unless the senior employees are unavailable.
6
<PAGE>
However, the senior employee will not be forced to return if there will still be
less senior employees on furlough within the classification. If the furlough
turns to a permanent layoff, the most senior employee may choose to remain out
of work on layoff status, with recall rights as granted in Section 2.02.
With regard to recall from furlough, the EMPLOYER liability shall be
limited to notification to the UNION that such employee either could not be
reached by telephone or was unavailable because of other commitments. Because
State Unemployment rules pay reduced benefits for partial unemployment, the
plant or operations manager will project furlough time in multiples of five (5)
working days. Any furlough can be triggered at any day of the week.
------------
Should a planned furlough affect a single employee a third time, the
Company and Union will meet to discuss the necessity prior to invoking furlough
on the affected employee.
2.10 Surplus Labor. In the event an employee can not exercise their
-------------
seniority in the above manner due to the fact that they did not have sufficient
amount of service, then, and in that event, they may take a layoff and have
their name placed on the surplus labor list, and shall be subject to be rehired
in accordance with the provisions set forth in this AGREEMENT.
2.11 Probationary Period. New employees shall be considered probationary
-------------------
employees during the first sixty (60) calendar days of service with the EMPLOYER
and may be discharged for any reason during this period, with or without cause.
If retained in employment after the sixty (60) day probationary period, the
seniority rating of new employees shall commence with the first day of their
last employment with the EMPLOYER. New employees will be introduced to the
President of the UNION and to the Department Shop Steward.
2.12 Rehired or Transferred Employees. Employees who are rehired or
--------------------------------
transferred must qualify as incentive workers within thirty (30) working days.
If they fail to show progressive improvement during this period, they will be
disqualified, in which event, they may bump the least
7
<PAGE>
senior employee in the plant unless otherwise provided. If disqualified a second
time, the employee will be laid off and placed on the surplus labor list.
2.13 Consolidation of Classification. In the event the EMPLOYER finds it
----------------------------------
necessary to consolidate two or more classifications of work, the matter will be
discussed between the UNION and MANAGEMENT before putting it into effect. Such
consolidation of classification is not to affect the prevailing incentive rates
and base rates. Should the UNION fail to mutually agree to the proposed
consolidation of classification, such would be subject to the Expedited
Grievance Procedure. "When two or more day work classifications are combined,
the highest rate will apply to the combined classification. Should the
classifications be segregated again, their original rates will be restored."
2.14 Status of Employees on Split Combination Jobs
---------------------------------------------
(A) If an employee bids on a combination job (two or more
classifications) and one of the classifications becomes a full-time job, they
will automatically be transferred to that full-time job.
(B) If an employee bids on a combination job (two or more classifica-
tions) and one or more of the classifications become full-time jobs, then they
will have the opportunity of picking one of the full-time jobs and will be
transferred to that job.
(C) The UNION and the EMPLOYER will decide if and when one of the jobs on a
split classification set-up requires a full-time employee.
2.15 Procedure on Filling Open Jobs
------------------------------
(A) Requisition showing the number of employees required in department
and classification is filed with the Personnel Office.
(B) Personnel Office will check the Return to Former Classification
forms of employees presently on payroll.
(C) Failing to find applicants from Step B, the Personnel Office will
then post all full-time positions available on the bulletin board located
at the main employee plant entrance,
8
<PAGE>
the method of compensation which will then be open for bids by
eligible employees in line with seniority. The successful bidder will
be notified within twenty-four (24) hours of the posting of the open
job available.
(D) Failing to find applicants by the above outline procedure, the
EMPLOYER will then contact employees from the surplus labor list in
line with their seniority and qualifications unless otherwise
provided.
(E) Successful job bidders will be transferred to their new job
classifications within fifteen (15) calendar days, provided it does
not cause any undue hardship in maintaining existing production
schedules and provided that they do not involve jobs that take
extended training periods such as the following:
Example: Pocket Machine Operators, Quilt Operators, Closers,
Upholsterers, Beautyrest(R) Assembly (HMB) Operators.
Should the EMPLOYER have a need for components or finished pieces that it is
unable to fill because the replacement for the successful bidder has not been
able to produce the required number of pieces, it is understood that the
EMPLOYER can borrow the successful bidder for a period not to exceed forty-five
(45) working days during which time the successful bidder will continue to work
at incentive.
The EMPLOYER and UNION Committee may mutually agree on an extended
period to allow the EMPLOYER sufficient time to train a replacement if
necessary.
2.16 Procedure in Applying for New Jobs. The EMPLOYER agrees to post on the
----------------------------------
bulletin boards a list of all open jobs. These notices are to appear on the
board for a period of twenty-four (24) hours. All applications for jobs so
posted will be considered on a basis of seniority and ability and aptitude. If
after the expiration of twenty-four (24) hours no employee has applied for the
open jobs, the EMPLOYER shall hire from the surplus labor list unless otherwise
provided.
9
<PAGE>
Any employee presently working, accepting a job through the above outlined
procedure must remain on that particular job for a period of one (1) year before
applying for another type of work unless otherwise provided. Employees who have
a physical disability and bid on a job where they are subsequently disqualified
because of this disability, may be allowed one bump at the EMPLOYER'S
discretion. At the approval of MANAGEMENT and UNION, they may also have their
bidding rights restored. Seniority, steadiness, skill and circumstances covering
the physical disability will be taken into consideration before joint approval
is granted.
When an employee bids on a job and has been on the job less than one (1)
year and due to the curtailment of production is laid off or bumped, they shall
have the privilege of bidding for another type of work.
Any employee who is assigned to a job under the above procedure does not
have seniority rights for purposes of layoffs until the completion of thirty
(30) working days even though they may be qualified as an incentive worker and
day worker before that expiration date.
An employee who bids on a classification that has been posted (and is the
successful bidder) can only refuse that job until such time as they are notified
that they are the successful bidder. If that employee refuses the job, they will
be frozen on their job for a period of one (1) year.
If a night shift is in operation on a classification and a day job opens up
on said classification, the night employee with the most seniority may move up
to the day job if they so desire and the night job vacated will be posted for
bid.
In the event a vacant job has not been requested through the above procedure
by any qualified employee, employees with less than one (1) year will be given
the job at the discretion of MANAGEMENT in line with seniority and
qualifications.
10
<PAGE>
2.17 Hours of work shall be so shared by the employees that each member of
a classification will receive, as nearly as possible each day, the same number
of hours as do the other members of this classification on the same shift.
ARTICLE III
-----------
WORKING HOURS
3.01 Shifts. The first shift shall be from 7:00 am to 3:30 p.m.,
------
with one-half hour lunch period without pay. The second shift shall be from 3:30
p.m. to 12:00 midnight with one-half hour lunch period without pay. When it
becomes necessary to run a third shift, the first shift shall be from 7:00 a.m.
to 3:00 p.m. with one-half hour lunch period, the second shift shall be from
3:00 p.m. to 11:00 p.m. with one-half hour lunch period, and the third shift
shall be from 11:00 p.m. to 7:00 a.m. with one-half hour lunch period. Employees
who have a valid reason for absence will be excused as per Section 4.04 in the
MASTER MULTI-PLANT WORKING AGREEMENT.
3.02 In the event it becomes necessary to deviate from the above stated
starting and quitting time, the EMPLOYER and the UNION shall by mutual AGREEMENT
decide such changes in shift as might become necessary for the mutual welfare.
3.02(a) To permit the ability to work ten (10) hours on Friday in lieu of
Saturday work, the following language will apply to Fridays only: Notification
of overtime will be given on previous shift per ARTICLE 4.04 of the MASTER
MULTI-PLANT WORKING AGREEMENT. Employees will be notified by 2:30 p.m. each
Friday if overtime is to be worked, or if work will be performed on Saturday.
Any employee who worked the scheduled overtime Friday will not be compelled to
work on Saturday. Saturday work for those employees will be on a voluntary
basis.
3.03 Whenever three (3) shifts are necessary, each shift shall be paid for
eight (8) hours work, the one-half hour lunch period included. Incentive workers
shall be paid at their average hourly rate for the one-half hour lunch period.
Hourly workers shall be paid their hourly rate for the one-half hour lunch
period.
11
<PAGE>
3.04 Rest Period. All employees will be allowed two (2) ten (10) minute
-----------
daily rest periods to be established at a uniform time throughout the plant.
3.05 At all times when there is work to be performed outside the plant due
to the reopening of a service center, the UNION will be informed.
ARTICLE IV
----------
WAGES
4.01 The EMPLOYER and the UNION have agreed upon the basic rates of
classification for incentive workers as set forth in Schedule "A", and the
hourly rates of classification for hourly workers as set forth in Schedule "B",
which are hereunto annexed and made part hereof.
4.02 The hiring rate for all new employees shall be $6.30 per hour. After a
thirty (30) day trial period, new employees shall receive a five cents (5 cents)
per hour increase, and each successive week thereafter, they shall receive a
minimum increase of five cents (5 cents) per hour until the training rate is
reached if an incentive worker, or the regular hourly rate of the classification
if an hourly worker. The training rate shall be $7.70 per hour for all
employees.
The Hiring Rate will be: $6.30 per hour
The Training Rate will be: $7.70 per hour
4.03 Borrowed Supervision. Any employee who is borrowed as a supervisor is
--------------------
to receive their quarterly average rate plus $1.50 per day as a minimum.
4.04 All employees in incentive classifications, who are temporarily out of
work in their classifications may be offered other work at the job rate of
Material Handler at the sole discretion of the MANAGEMENT. Employees have the
choice of accepting or refusing the temporary work. This rate does not apply to
new employees, employees with an average rate of less than $9.00 as of 10/16/94,
or employees unskilled in the requested classification. The rate will apply on
incentive jobs outside of classification, setting up and dressing showfloor, and
repair work. This set-up does not
12
<PAGE>
release MANAGEMENT from AGREEMENT obligations as set forth in the CONTRACT. This
rate to be marked "Special" and deleted from average hourly earnings.
4.05 The Local President/Chief Steward will be given three (3) copies of the
quarterly average rate sheets and the first quarter composite classification
average hourly earnings.
4.06 Work Wait. In the event that incentive workers are required to wait for
---------
a period of more than ten (10) minutes non-cumulative time, they will be
compensated for the lost time due to waiting at eighty-five percent (85%) of
their average rate for the preceding quarter of the year. Should such an
incentive worker be assigned to another job while in such work wait status, they
will receive one hundred percent (100%) of their individual average hourly rate.
In all such instances, incentive workers must notify their foremen immediately
and if they are not available, notify another person previously designated by
the foreman.
Power Failure, Etc. The EMPLOYER shall have no liability whatsoever for
-------------------
these provisions in case of a breakdown of power or light supply, fire, flood,
Acts of God, or any other reasons beyond their control.
4.07 Borrowed Employee When an employee is borrowed for the convenience of
-----------------
the EMPLOYER and given a type of work to perform on which they have not been
qualified (previously earned incentive rate), then their rate shall be their
average hourly earnings rate, provided such rate is greater than earnings on
incentive or the daywork rate for the work being performed. In those cases when
an employee is borrowed into a job on which they have previously qualified,
earnings shall be at average rate for that job, provided they meet the following
guidelines:
110% or above Average Rate
100% or 109% 85% of Average
99% or below Base Rate
The refreshing of skills chart will apply to those employees who have not
performed at incentive rate on the job to which they are being borrowed for the
following time periods.
0 days - 29 days No training allowed
13
<PAGE>
29 days - 59 days 6 hours
60 days - 6 months 12 hours
6 months - 1 year 24 hours
An employee who has trained on a job may not delete themselves from that job
unless it is mutually agreed upon by both the EMPLOYER and the UNION. Non-
incentive (dayworker) workers borrowed back to their previous incentive jobs
will be paid at 85% of the composite average of the classification to which they
are borrowed when they qualify for the refreshing of skills chart. Down-time for
non-incentive workers will be paid at 85% of the composite average of the
classification for single jobs, and 85% of their borrowed partners average for
team jobs.
4.08 Time Element on Borrowed Employees. If person is borrowed on a job for
----------------------------------
more than thirty (30) days and if after that period objects to being on the job
which they are borrowed on, a meeting will be called with MANAGEMENT by the
UNION Committee. MANAGEMENT has agreed to either compensate the employee for
staying on the borrowed job, or release them to return to the original
classification. A borrowed person will be compensated at their average rate for
the travel time lost, if any, moving from one job to another.
If any employee objects to being borrowed, the EMPLOYER agrees that they
will not be borrowed for more than thirty (30) days per calendar quarter.
ARTICLE V
---------
PAID HOLIDAYS
5.01 In addition to the seven (7) paid holidays listed in Section 10.01 of
the MASTER MULTI-PLANT WORKING AGREEMENT, the following four (4) additional paid
holidays shall be celebrated in accordance with Article X of the MASTER MULTI-
PLANT WORKING AGREEMENT:
Washington's Birthday
Good Friday
14
<PAGE>
Day after Thanksgiving
Last Workday before Christmas
5.02 Holiday pay will be paid to employees provided they meet all of the
following conditions:
(a) The employee has six (6) calendar months or more of continuous
service with the EMPLOYER as of the date of the holiday.
(b) Such employee shall have worked eight (8) hours or more during the
calendar week in which the holiday occurs and shall not have left the
employment of the EMPLOYER or have been discharged prior to such
holiday or on leave of absence.
5.03 When a holiday falls on Saturday or during a plant shutdown, eligible
employees shall receive holiday pay.
5.04 Eligible employees who are absent from work due to illness or accident
will receive compensation for one paid holiday; said holiday being the first
holiday coming after the commencement date of illness or accident. In all cases,
a doctor's certificate must be presented in order to qualify for the paid
holiday.
5.05 When an eligible employee goes on sick leave during the week prior to
or during the week in which the holiday falls, the employee shall receive pay
for such holiday.
5.06 When an eligible employee is on an approved leave of absence and
returns to work following the holiday but during the week in which the holiday
falls, they shall be eligible for holiday pay.
ARTICLE VI
-----------
VACATIONS
6.01 Pay for each week of vacation shall be computed by multiplying the
average straight time hourly earnings of the first three (3) calendar months of
the year by forty (40) hours.
15
<PAGE>
6.02 An employee returning from an approved leave of absence (medical,
maternity, layoff, personal) of ninety (90) days or more, must work a period of
sixty (60) days or more in order to receive any vacation benefits (time, money)
that they are eligible for.
6.02 (a) An employee may receive pay for the 1st and/or 2nd weeks
vacation prior to taking actual vacation time off.
(b) Scheduling 3rd and/or 4th week vacations will be per Article
11.05 M.M.P.W.A. There is no obligation on the employees part to
take 4th week of vacation at Christmas, nor the right on the
EMPLOYER's part to insist upon such. The EMPLOYER's only
recourse is per Article 11.03 (a) M.M.P.W.A, thereby scheduling
all vacation time for periods of plant shutdown.
(c) Changes in vacation schedules must be made no less than five (5)
-------------
working days prior to the scheduled time off.
(d) Except per (c) above, vacation time must be used when scheduled,
or the time off will be forfeited. Exception will be for
illness, emergency, etc. authorized at managements discretion.
(e) Employees bidding into a new classification will lose seniority
for that year as far as vacation is concerned. That is, the
employee may not be able to take vacation as scheduled if
another employee has the same schedule regardless of seniority.
ARTICLE VII
-----------
INVENTORY WORK
7.01 In selecting employees for inventory purposes, the EMPLOYER will give
preference to the senior hourly workers. If additional employees are needed, the
senior incentive workers may bid for the openings.
16
<PAGE>
7.02 Exceptions to the above will be made if necessary to select employees
with ability to read, write, compute, weigh, and identify the components and
products.
7.03 Inventory rates for incentive employees will be Material Handler's
rate. Day workers receive their regular classification rates when working on
inventory.
ARTICLE VIII
------------
GRIEVANCE PROCEDURE
8.01 The EXECUTIVE COMMITTEE will be paid by the EMPLOYER for time lost from
work up to thirty-two (32) hours per week as a maximum total for the entire time
lost.
ARTICLE IX
----------
STATUS OF MECHANICS
9.01 Employees in the Mechanic Classification can not be bumped by
production or unskilled dayworkers.
9.02 Production employees will be eligible to bid when there is an opening
in the mechanical force. Employees will be required to take the IAM test or a
mutually agreed upon test with a one week advance notice provided to bidders. If
the test is given on site, a designated union representative may be present
during the EMPLOYER administered test. The successful bidder will be the most
senior employee with a passing score on the test. Employees who do not pass the
test will be counseled on the areas of improvement. The employee may choose to
work on those areas and will be allowed to bid on the next available opening.
Successful bidders who complete the Apprentice Training Program will receive the
top rate of the classification.
MECHANIC'S APPRENTICE TRAINING SCHEDULE
AND PAY RATE PROGRESSION SCALE
Hired at: $8.00
After 90 days increased by a minimum of .20
After 6 months increased by a minimum of .35
17
<PAGE>
After 12 months increased by a minimum of .50
After 18 months increased by a minimum of .50
After 24 months increased by a minimum of .50
After 30 months increased by .50
For the above training schedule, the determination of qualifications shall
be reviewed at the aforementioned intervals by a joint UNION/MANAGEMENT
committee and shall be administered exclusively as a right of MANAGEMENT.
However, if the bidder is qualified at the time they get the job, the employee
will not come under the training schedule and will receive the top rate of the
classification.
ARTICLE X
---------
LEAVE OF ABSENCE
10.01 An employee while on an approved leave of absence shall be included in
any personnel change in line with their seniority and shall have the same right
of job selection as if they were working. While on such leave of absence, they
shall be replaced by a temporary employee.
10.02 On the return to work of any employee on leave of absence, such
employee will return to the classification they left. If the classification has
been discontinued, they will bump the least senior employee in the Department or
Plant from point of seniority provided always that the returning employee has
seniority over the least senior employee unless otherwise provided.
ARTICLE XI
----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, mental retardation, handicap, AIDS or
AIDS related complex, national origin, age or veteran status, except where
religion, sex, national origin or age is a bona fide occupational qualification.
Our policy relates to all phases of employment, including recruitment,
18
<PAGE>
placement, promotion, training, demotion, transfer, layoff, recall and
termination, rates of pay, employee benefits and participation in all SIMMONS
sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial, ethnic
or religious harassment. Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature or verbal or physical
conduct directed at a person's race, color, religion, sex, national origin, age,
handicap or veterans status may constitute harassment. Claims of harassment
which come to our attention may result in discipline up to and including
discharge. At any time, if you believe that you have been harassed, you must
report the harassment to your immediate Supervisor or your Human Resources
Manager. A confidential investigation will be conducted.
ARTICLE XII
-----------
TEMPORARY EMPLOYEES
A rate will be set for temporary employees and no benefits,
pension, holidays or vacation will be paid. At the time the EMPLOYER determines
that the position is full-time or at the end of one year (whichever comes
first), the job will be filled in accordance with the contract.
The EMPLOYER will not have temporary employees supplement the work force if
regular employees are not working all scheduled hours per week unless the
regular employees have refused to work on the job being performed by temporary
employees.
ARTICLE XIII
-------------
DURATION AND TERMINATION OF SUPPLEMENT
13.01 This supplemental AGREEMENT shall be in full force and effective for
three (3) years, from October 16, 1994 until October 15, 1997.
13.02 The parties agree that this AGREEMENT, together with the MASTER MULTI-
PLANT WORKING AGREEMENT and the Procedures CONTRACT, constitutes the entire
AGREEMENT between the parties, and at no time during the life of this AGREEMENT
shall either
19
<PAGE>
party have any obligation to negotiate or bargain with the other party, with
respect to any points not covered by this AGREEMENT, and as to the matters
covered by this AGREEMENT, only in the manner and to the extent herein provided.
Additionally, we agree to discontinue all past practice or agreements not
specifically covered within this AGREEMENT. Any other past agreements that may
arise during the term of this AGREEMENT that are not known by either the
EMPLOYER or the UNION, will be brought up and discussed for settlement between
local management and U.I.U Local 422. If a settlement cannot be reached, the
matter will then be referred to the Vice President of Human Resources for an
investigation and research for settlement.
If both parties sign into agreement any memorandum of understanding which
has been discussed and confirmed by the EMPLOYER and the UNION as mutually
beneficial to both parties, the memorandum will be honored for the duration of
this supplement at which time said memorandum can be reviewed for inclusion in
the next local supplement.
20
<PAGE>
IN WITNESS WHEREOF: The parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of America, SIMMONS COMPANY
A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
Through its Agent, Local Union #422
By /s/ J. R. Wiles /s/ R. Barton 12/9/94
---------------------------- ---------------------------------
____________________________ _________________________________
____________________________ _________________________________
____________________________ _________________________________
____________________________ _________________________________
Countersigned at Philadelphia, Pennsylvania.
This 8th day of Dec , 1994
--- ------ ----
The United Steel Workers of America, A.F.L, C.I.O., C.L.C.
(Upholstery Industries Division)
By /s/ Ernest F. Shorn
--------------------------------------------
Director of Upholstery Industries Division
21
<PAGE>
APPENDIX "A"
SIMMONS COMPANY - DALLAS PLANT
INCENTIVE BASIC TIMING RATE
---------------------------
Effective
CLASSIFICATIONS 10/16/94 10/16/95 10/16/96
- --------------- -------- -------- --------
CUT AND SEW
- -----------
B/S (Hem, Label, Tape) 8.15 8.40 8.65
QUILT
- -----
Sew Matt (Overcast) 8.27 8.52 8.77
Sew Labels 8.35 8.60 8.85
Run Quilt Machines 8.16 8.41 8.66
BORDER
- ------
Run Matt & B/S Borders 8.54 8.79 9.04
Attach Cord Handles & Vents 8.90 9.15 9.40
- - Convexco
Join, Tack Borders on Bechick 8.48 8.73 8.98
5051 Machine
MATTRESS
- --------
Close Mattress (All Types) 9.55 9.80 10.05
Hog Ring (All Types) 8.74 8.99 9.24
BEAUTYREST(R) HMB
- ---------------
Run Beautyrest(R) Pocket Machine 8.44 8.69 8.94
Assemble B/R Construction 8.43 8.68 8.93
BOX SPRING CONSTRUCTION
- -----------------------
Top off Assembler 8.40 8.65 8.90
WOOD SHOP
- ---------
Assemble Box Spring Frame 8.38 8.63 8.88
Box Spring Radius & 8.81 9.06 9.31
Ease Corners
BOX SPRING
- ----------
Pre-Upholster and Upholster 8.88 9.13 9.38
Box Spring
22
<PAGE>
APPENDIX "B"
SIMMONS COMPANY - DALLAS PLANT
RATES FOR HOURLY WORKERS
------------------------
Effective
CLASSIFICATION 10/16/94 10/16/95 10/15/96
- -------------- -------- -------- --------
General Warehouse
(Shipping & Receiving) 9.00 9.30 9.60
Sweeper 9.00 9.30 9.60
Inspector 9.00 9.30 9.60
Cutter 9.00 9.30 9.60
Mechanic 12.15 12.45 12.75
Material Handler 9.00 9.30 9.60
Repair (Matt/Box Spring) 9.03 9.33 9.63
Packing Machine Attendant 9.25 9.55 9.85
<PAGE>
DECEMBER 8, 1994
KANSAS CITY
SUBJECT: DALLAS SUPPLEMENTAL UIU CONTRACT
Assuming Don Daniel initialed temporary language clause, ARTICLE XII will be
left in contract as written.
Company agrees to increase base rate for mechanic by .50 cents per hour above
the .30 cents per hour negotiated. Only employees who have completed 30 months
under apprenticeship program will receive the .50 cent increase.
/s/ J. R. Wiles
--------------------------------------
______________________________________
/s/ R. Barton 12/9/94
--------------------------------------
<PAGE>
COMPANY PROPOSAL TO LOCAL UNION CONTRACT
Meeting # 4
1. Article I Recognition and Union Security
A) Add Article XII as stated below:
Article XII Temporary Employees
A rate will be set for temporary employees and no benefits, pension,
holidays or vacation will be paid. At the time the Company determines
that the position is full-time or at the end of one year (whichever
comes first), the job will be filled in accordance with the contract.
The Company will not have temporary employees supplement the work
force if regular employees are not working all scheduled hours per
week unless the regular employees have refused to work on the job
being performed by temporary employees.
2. Article II Seniority
A) Wording to simplify and consolidate the language of the
layoff procedure in one location of the contract will be
provided. See Attachment A for proposed wording.
* B) Move Section 2.13 Time Element on Borrowed Employees to
Section 4.03 and change the heading to Borrowed Person as
shown in Attachment B.
C) Language regarding seniority by shift will be provided.
3. Article III Working Hours
A) Delete Sections 3.03 and 3.05.
B) Add wording for the scheduling of monthly Union Meetings
after working hours on the second Monday of each month.
C) Replace 302(a) with Attachment C.
4. Article IV Wages
A) Delete Section 4.07.
* Items agreed to between the Company and the Union
<PAGE>
COMPANY PROPOSAL TO LOCAL UNION CONTRACT
Meeting #4
1. Article I Recognition and Union Security
A) Add Article XII as stated below:
Article XII Temporary Employees
A rate will be set for temporary employees and no benefits, pension,
holidays or vacation will be paid. At the time the Company determines
that the position is full-time or at the end of one year (whichever
comes first), the job will be filled in accordance with the contract.
The Company will not have temporary employees supplement the work
force if regular employees are not working all scheduled hours per
week unless the regular employees have refused to work on the job
being performed by temporary employees.
2. Article II Seniority
A) Wording to simplify and consolidate the language of the
layoff procedure in one location of the contract will be
provided. See Attachment A for proposed wording.
* B) Move Section 2.13 Time Element on Borrowed Employees to
Section 4.03 and change the heading to Borrowed Person as
shown in Attachment B.
C) Language regarding seniority by shift will be provided.
3. Article III Working Hours
A) Delete Sections 3.03 and 3.05.
B) Add wording for the scheduling of monthly Union Meetings
after working hours on the second Monday of each month
C) Replace 302(a) with Attachment C.
4. Article IV Wages
A) Delete Section 4.07.
* Items agreed to between the Company and the Union
<PAGE>
DATE: August 17, 1995
TO: Ken Barton
FROM: Robin Jennings
SUBJECT: Grievance D-1-95
________________________________________________________________________________
Please find enclosed grievance D-1-95, a letter to John Thomas, Dallas Union
Business Agent, and a Memorandum of Agreement resolving the grievance. In the
Memorandum of Agreement, the interpretation of section 4.04 of the master
contract (copy enclosed) was clarified to the Company's interpretation. However,
we do not want to present any problems at the next negotiation session and would
like your approval of the Memorandum of Agreement.
Facts around the grievance include the grievant being notified Tuesday, July 19
of overtime being scheduled. The grievant called in sick Wednesday, July 20 but
came to the parking lot to pick up a fellow employee. The grievant's supervisor
told the grievant while in his car in the parking lot that overtime was
scheduled for the next day (Thursday, July 21). However, the grievant failed to
work the needed overtime. The grievant was suspended Friday, July 22 for one
day. The local union filed the attached grievance on July 26.
If you have any questions, please feel free to contact John or myself. Thank you
for assistance.
c: John Cannon
<PAGE>
MEMORANDUM OF AGREEMENT
MASTER MULTI-PLANT WORKING AGREEMENT
ARTICLE IV: HOURS OF WORK AND PREMIUM PAY
SECTION 4.04
Effective August 17, 1995 through October 17, 1997, employees who receive notice
of overtime on their previous shift worked shall be required to work overtime on
the particular day they return to work.
As an example, Monday, Bob Jones is scheduled to work overtime Tuesday. Bob
Jones is absent Tuesday and Wednesday but returns to work Thursday. Since Bob
was scheduled for overtime on his previous shift worked (Monday), Bob would be
required to work overtime (if needed) Thursday, the day he returns to work.
This Memorandum of Agreement is effective August 18, 1995 through October 17,
1997 (the end of the contract period) despite any changes in representation by
either the Company or the Union. At that time, it will be open to discussion at
any contract negotiations.
________________________________ _______________________________
Jack Wiles, Local 422 President John Cannon, Operations Manager
________________________________ ________________________________
John Thomas, Staff Representative Robin Jennings, Human Resources Mgr.
<PAGE>
4.02 (a) All authorized time worked before regular starting time and/or
after regular quitting time including authorized time worked
during the regular lunch period shall be paid at time and
one-half, the average straight time hourly earnings as computed
in Section 8.07 reflecting the earnings for the week in which the
overtime is worked.
(b) Anyone reporting to work after their regular starting time will
receive overtime pay only upon completion of eight (8) hours work.
4.03 All work on Saturday as such will be paid at time and one-half. Also,
double time will be paid for all work performed on Sunday except in the case of
any shift beginning in the preceding day and continuing into Sunday. Double
time shall be paid to employees who are scheduled to work and perform work on a
holiday.
4.04 Employees must be available for all work as scheduled, regular or
overtime. An employee who did not receive notice of overtime on his or her
previous shift worked shall not be compelled to work overtime on that particular
day (except for those employees on vacation or approved leave of absence).
Employees who have a valid reason may be excused by management from working
regular or overtime work at any particular time.
(a) Overtime. Except for plant security, continuous shift operations,
--------
emergency, or maintenance, the COMPANY will not require production
employees to work in excess of 10 hours per day on Monday,
Tuesday, Wednesday and Thursday, 8 hours on Friday, and/or in excess
of 8 hours on Saturday, provided, however, that no employee will be
compelled to work more than two consecutive Saturdays, except for the
five (5) months listed in the local. Work in excess of 8 hours on
Friday will be addressed in each LOCAL PLANT SUPPLEMENT.
<PAGE>
AGREEMENT and remitted by the COMPANY each and every month to the International
Treasurer This article or any section thereof shall not be operative where
prohibited by state law.
The UNION agrees that it will indemnify and save the COMPANY harmless from
any and all liability, claim, responsibility, damage, or suit which may arise
out of any action taken by the COMPANY in accordance with the terms of this
Article or in reliance upon the authorization mentioned herein.
1.05 The contract consists of the MASTER AGREEMENT, the PROCEDURES CONTRACT
and the individual LOCAL PLANT SUPPLEMENT.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
----------------------
2.01 The COMPANY shall not discharge, suspend or otherwise discipline any
employee except for just cause, except also as provided in Section 1.03 (e).
2.02 In the event that disciplinary action involving loss of wages
(suspension and/or discharge) is taken against any employee, the employee
involved must be given an interview concerning such disciplinary action, in
which he must be represented by a Shop Steward or an officer of the UNION.
The UNION representative will be informed prior to the disciplinary action
being taken and must be given an opportunity (not to exceed fifteen (15)
minutes) to discuss the case with the affected employee and to participate in
the interview with the COMPANY concerning the matter. The interview may be of
very short duration and shall not be construed as part of the GRIEVANCE PROCE-
DURE, as described in Article III of this AGREEMENT, inasmuch as the primary
function of the interview is to make certain that a UNION representative is
aware of the discipline and that the employee knows precisely what he or she is
disciplined for
<PAGE>
PISCATAWAY PLANT
SUPPLEMENT
LOCAL #420
<PAGE>
INDEX
ARTICLE ITEM PAGE
I RECOGNITION AND UNION SECURITY . . . . . . . . . . . . . . . . . . 1
1.01 Employees Covered . . . . . . . . . . . . . . . . . . . . . 1
1.02 Check-Off . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.04 Info Furnished to Union by Personnel . . . . . . . . . . . . 1
1.05 Union Representatives' Seniority . . . . . . . . . . . . . . 2
1.06 Leaves of Absence for Union Business . . . . . . . . . . . . 2
1.07 Change in Membership . . . . . . . . . . . . . . . . . . . . 2
1.12 Payment for Union Officials/Conf. with Mgmt . . . . . . . . . 3
II SENIORITY, HIRING AND LAYOFF . . . . . . . . . . . . . . . . . . . 3
2.01a Furlough . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.02 Return to Former Classification . . . . . . . . . . . . . . . 4
2.04 Probationary Period . . . . . . . . . . . . . . . . . . . . . 5
2.05 Changes in Return to Former Classification . . . . . . . . . 5
2.06 Interviews at the Personnel Office . . . . . . . . . . . . . 5
2.07 Presence of Union Delegate During Layoff . . . . . . . . . . 5
2.08 Requests Not to be Returned to Work . . . . . . . . . . . . . 6
2.09 Determination of Layoffs . . . . . . . . . . . . . . . . . . 6
2.10 Layoff Notices . . . . . . . . . . . . . . . . . . . . . . . 7
2.11 Reasons for Absence to be Reported . . . . . . . . . . . . . 7
2.12 Procedures on Filling Open and New Jobs . . . . . . . . . . . 7
2.13 Procedures on Filling Temporary Jobs . . . . . . . . . . . . 10
2.14 One Year Freeze Period after Return . . . . . . . . . . . . . 11
2.15 Refusal to Accept Return to Former . . . . . . . . . . . . . 11
2.16 Refusal to Accept Job After Bid Successfully . . . . . . . . 11
2.17 Seniority of Employees Who Bid or Transfer . . . . . . . . . 11
2.18 Employees Who Bump Into a Classification . . . . . . . . . . 12
2.19 Increases and Decreases in Production . . . . . . . . . . . . 12
2.20 New and Transferred Employees . . . . . . . . . . . . . . . . 12
2.21 Training Program on New Jobs . . . . . . . . . . . . . . . . 13
III 3.01 SHIFT SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . 13
3.02 Changes in Shift Schedule . . . . . . . . . . . . . . . . . . 13
3.03 Lunch Periods . . . . . . . . . . . . . . . . . . . . . . . . 14
3.04 Payment for Work During Lunch . . . . . . . . . . . . . . . . 14
3.05 Rest Periods . . . . . . . . . . . . . . . . . . . . . . . . 14
3.06 Requests to Report to Work w/o Prior Scheduling . . . . . . . 14
3.07 Shift Preferences . . . . . . . . . . . . . . . . . . . . . . 15
3.08 Employees Borrowed as Working Supervisors . . . . . . . . . . 15
3.09 Employees Sent Home . . . . . . . . . . . . . . . . . . . . . 15
3.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.11 Overtime . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.12 Closers and Hog Ring . . . . . . . . . . . . . . . . . . . . 17
3.13 Rehiring on Unfamiliar Work . . . . . . . . . . . . . . . . . 18
<PAGE>
IV CALL-IN PAY/WORK WAIT
4.01 Work Wait Compensation . . . . . . . . . . . . . . . . . . . 18
4.02 Conditions Beyond Control of Company . . . . . . . . . . . . 20
4.03 Reporting Pay Computation . . . . . . . . . . . . . . . . . . 21
4.04 Grievances - Wages . . . . . . . . . . . . . . . . . . . . . 21
V HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.02 Paid Holidays . . . . . . . . . . . . . . . . . . . . . . . . 22
5.03 Eligibility for Holiday Pay . . . . . . . . . . . . . . . . . 22
5.04 Holiday Pay & Sick Leave . . . . . . . . . . . . . . . . . . 23
VI VACATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.02 Length of Vacation . . . . . . . . . . . . . . . . . . . . . 23
6.03 Vacation Pay . . . . . . . . . . . . . . . . . . . . . . . . 24
6.04 Rate for Vacation Pay . . . . . . . . . . . . . . . . . . . . 24
VII DISCIPLINE AND DISCHARGE CLAUSES . . . . . . . . . . . . . . . . . 24
7.02 Discharge - Three Warning Notices . . . . . . . . . . . . . . 25
7.03 Discharge Hearings . . . . . . . . . . . . . . . . . . . . . 25
VIII LEAVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.01 Sick Leave . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.02 Injury During the Course of Employment . . . . . . . . . . . 25
8.03 Leave of Absence . . . . . . . . . . . . . . . . . . . . . . 25
8.04 Broken Glasses . . . . . . . . . . . . . . . . . . . . . . . 26
IX FOUL WEATHER CLOTHING . . . . . . . . . . . . . . . . . . . . . . 26
X NEW PIECE OF EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . 26
10.02 Supervisors Working . . . . . . . . . . . . . . . . . . . . 26
10.03 Leave to Join Police/Fire Department . . . . . . . . . . . . 26
10.04 Premium Payment-Successful Bidder Not Assigned . . . . . . . 27
XI PAY SHORTAGES . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.02 Rotation of Employees' Overtime . . . . . . . . . . . . . . 27
XII BORROWED EMPLOYEE . . . . . . . . . . . . . . . . . . . . . . . . 28
XIII DURATION AND TERMINATION OF SUPPLEMENT . . . . . . . . . . . . . . 28
XIV EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . . . . . . . . . . 29
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
APPENDIX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
APPENDIX II . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
<PAGE>
PISCATAWAY PLANT SUPPLEMENT
---------------------------
AGREEMENT
---------
THIS AGREEMENT made this 16th day of October, 1994, by and between the SIMMONS
COMPANY, Piscataway Plant, hereinafter referred to as the COMPANY, and THE
UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division), hereinafter referred to as the UNION, acting through its agent, Local
Union #420, for and on behalf of itself and the employees of said COMPANY at its
plant located at Piscataway, NJ, supplementing the MASTER MULTI-PLANT WORKING
AGREEMENT of even date between the same parties and others.
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Employees Covered. The persons covered by this contract include all the
-------------------
employees described in Appendix I and II which is made a part hereof who are
production employees of the COMPANY employed in its Piscataway, NJ Plant
excluding watchmen, office janitors, maintenance department employees, truck
drivers, tool makers, machinists, supervisors, porters, matrons, main office,
clerical, and maintenance helpers.
1.02 Check-Off. The deduction of initiation fees and regular UNION dues as
---------
certified by the UNION in writing to the EMPLOYER, shall be made from the second
pay period of each month and remitted promptly to the Financial Secretary of the
Local Union.
1.03 This section has been superceeded 10/16/94 - refer to Article III of the
MMPWA.
1.04 Information Furnished to the UNION Office by Personnel
------------------------------------------------------
(a) All jobs posted for bid purposes on the Bulletin Board and the results
of bidding thereon.
(b) A copy of the Personnel Action Form each time such list issues.
(c) The results in writing of each layoff interview.
<PAGE>
(d) Copies of all completed "Return to Former Classification Form."
(e) The UNION shall receive copies of all bulletins posted on the COMPANY
bulletin boards for the general information of the employees.
(f) The COMPANY will give the UNION a copy of the various average rates
when such lists are presented to the various employees.
(g) The COMPANY will, semi-annually, on demand, publish a Plant Seniority
List which will include classifications and provide a copy of such
list to the Local Union.
1.05 UNION Representatives' Seniority. For the purpose of layoff only, Officers
--------------------------------
of the UNION and UNION Stewards, where they have departmental jurisdiction shall
head the seniority list during their respective term of office.
1.06 Leaves of Absence for UNION Business. An employee, while on a leave of
------------------------------------
absence for UNION business, shall be included in any personnel changes, in line
with their seniority, and shall have the same right of job selection as if they
were working. While on such leave of absence they shall be replaced by a
temporary employee.
1.07 Change in Membership - Officers and Shop Steward of UNION. It is agreed
---------------------------------------------------------
that the COMPANY will be notified immediately of any change in membership of the
officers and Shop Stewards of the UNION. In the event it becomes necessary to
lay off employees, the COMPANY will give the layoff list to the particular Shop
Steward involved before posting same on bulletin board.
1.08 This section has been superceeded 10/16/94 - refer to Article III of the
MMPWA.
1.09 This section has been superceeded 10/16/94 - refer to Article III of the
MMPWA.
1.10 This section has been superceeded 10/16/94 - refer to Article III of the
MMPWA.
1.11 This section has been superceeded 10/16/94 - refer to Article III of the
MMPWA.
2
<PAGE>
1.12 Payment for Union Officials Time Spent in Conference with Management.
--------------------------------------------------------------------
Union Officials shall be paid at their previous quarter average hourly rate as
computed in Section 8.07 of the MASTER MULTI- PLANT WORKING AGREEMENT. Time
spent in conference with the COMPANY pertaining to negotiations of a new
contract or subsequent hearings before any Federal or Governmental Agencies
pertaining to such contract, shall be compensated for by the UNION.
ARTICLE II
-----------
SENIORITY, HIRING, AND LAYOFF
2.01 The EMPLOYER recognizes the principle of seniority among its employees and
agrees with the UNION that all layoffs occasioned by lack of work shall be by
shift by seniority, with the oldest employee in point of service to be the last
to go. The last employee laid off on each shift shall be the first recalled and
all recalling shall continue on that basis, except as otherwise provided.
An employee as hereinbefore defined shall commence his/her seniority as of the
date of employment and his/her seniority shall remain in full force and effect
unless otherwise terminated as hereinbefore provided for.
When a layoff occurs in a classification, the youngest employees in point of
service in the classification ON EACH SHIFT shall be laid off, then they have a
choice of applying their seniority against the youngest employees in point of
service as follows:
1. In their classification on either shift.
2. In their department on the same shift.
3. In the plant on the same shift.
It is understood, however, that quilt operators will not be subject to bump.
2.01A Furlough. In order to provide a more reasonable work schedule for senior
--------
employees when hours are shortened due to lack of orders, the plant or
operations manager will have the responsibility of placing on furlough those
junior employees who are not needed to fill the daily production
3
<PAGE>
schedule. The furloughed employees will be placed on surplus labor so as to
make them eligible for unemployment benefits during such furlough period, if
otherwise eligible. It is understood that a furlough may be for any length of
time provided such does not exceed four (4) continuous weeks at any given time,
unless the furlough occurs on the first work day of a given month, in which case
the furlough cannot exceed three (3) consecutive weeks. For recordkeeping
purposes, the president for Local #420 or his appointee will be notified of such
furlough by letter signed by the involved plant or operations manager.
In the event variation in customer demands requires employees to return from
furlough earlier than announced, such return shall be by seniority unless the
senior employees are unavailable. In such event, the COMPANY liability shall be
limited to notification to the UNION that such employee either could not be
reached by telephone or was unavailable because of other commitments. Because
State Unemployment rules pay reduced benefits for partial unemployment, the
plant or operations manager will project furlough time in multiples of five (5)
working days. Any furlough can be triggered at any day of the week. For
------------
example, if a holiday falls on Tuesday, the COMPANY will declare the furlough
to begin Wednesday and continue through for a continuous minimum of five (5)
working days.
2.02 Return to Former Classification. Employees who are laid off and maintain
-------------------------------
employment in work other than their regular classification will be given
preference to their regular type of work by filling in the application "Return
to Former Classification." These applications will be honored in line with
seniority before "Bids" are accepted by the COMPANY.
Employees laid off, who desire to be returned to their regular classification,
must request their return to that particular type of work at the time of the
layoff and applications covering same must be forwarded to the Personnel Office.
2.03 This section null and void effective October 16, 1991.
4
<PAGE>
2.04 Probationary Period. New employees shall be considered probationary
-------------------
employees during the first sixty (60) calendar days of service with the COMPANY
and may be discharged for any reason during this period with or without cause.
If retained in employment after the expiration of the sixty (60) day
probationary period, the seniority rating of new employees shall commence with
the first day of their last employment with the COMPANY.
2.05 Changes in Return to Former Classification. Employees desiring a change in
------------------------------------------
their Return to Former Classification may do so, provided they previously have
held that classification and provided that no requisitions have been sent to the
Personnel Department indicating vacancies currently exist in that
classification.
2.06 Interviews at Personnel for Employees Involved in a Layoff
----------------------------------------------------------
(a) Employees who are interviewed at the Personnel Office in the course
of a regularly scheduled layoff shall be paid in the following
manner:
1. Those who come from home, whether they be pieceworkers or
dayworkers shall be granted the half hour pay at their average
hourly rate.
2. Employees who leave their jobs to go to the Personnel Office
shall be paid full average rate from five (5) minutes before the
time indicated on the posted interview schedule until five (5)
minutes following the end of the interview.
2.07 Presence of UNION Delegate During Layoff Interviews. The President (or
-----------------------------------------------------
their designee) of Local 420 will be the single designated member of the UNION
in all layoff counselling regardless of size. The representative of the
Personnel Office who will do the interviewing shall determine where they want to
conduct the layoff interviews. In view of the fact that the UNION is furnished
complete copies of all layoff and bump lists as soon as they are compiled, no
grievance over layoffs or bumps will be entertained if the grievance is not
submitted at least eight (8) working hours before the interviewing will
commence.
5
<PAGE>
The COMPANY will agree to the UNION request for presence of a translator during
the interview of an employee considering job change, provided such translator
has the necessary language skill and the cost to the COMPANY as well as absence
of employees from work is de minimis. COMPANY suggests ten (10) minutes as
adequate.
2.08 Requests Not to be Returned to Certain Types of Work. An employee being
------------------------------------------------------
laid off who is eligible to bump or take an open job may have the option of
taking the available job or taking a layoff. This option shall be expressed in
writing at the time of layoff and at that time the employee may elect not to be
called for specific types of work or a specific shift and they shall be by-
passed when employees are needed for those named occupations or shift. If an
employee elects to take a layoff, the COMPANY will not protest their claim for
unemployment benefits. Once an employee who exercised any of the above options
is on layoff, he/she may not change this option during the period of layoff and
shall be recalled only to the jobs indicated in the option. If he/she did not
exercise an option at the time of layoff, the employee must accept the first
open job he/she is recalled to in line with seniority. Any employee on layoff
who refuses a job he/she previously indicated acceptance of recall to, will be
terminated as not available for employment.
A form will be developed to indicate the employee will accept any job for which
he/she is recalled in line with seniority, except as otherwise indicated in
writing. The UNION will receive a copy of exceptions. Recognizing language
problems and the possibility of misunderstanding a layoff recall status, it is
agreed that any employee who desires to change his recall option may do so
providing such change of option is expressed in writing with acknowledgement by
the UNION President and the Labor Relations MANAGER no later than thirty (30)
working days following the notice of layoff.
2.09 Determination of Layoffs. When the hours of work fall below thirty-two
------------------------
(32) hours per week for two (2) consecutive weeks subsequent to a furlough and
when the UNION Executive Board requests a layoff the layoff shall take place in
accordance with Article II.
6
<PAGE>
2.10 Layoff Notices. The COMPANY will give four (4) working hours notice of a
--------------
temporary layoff. On a permanent layoff the COMPANY will give a notice of five
(5) working days. A temporary layoff is when an employee is laid off for a
period of more than six (6) working hours, but not exceeding five (5) working
days. A permanent layoff is when an employee is laid off for more than five (5)
working days.
2.11 Reasons for Absence to be Reported to Personnel by Employees. It is the
--------------------------------------------------------------
responsibility of each employee to immediately report the reason for their
absence to the Personnel Office. Any employee who does not report for work and
does not report the reason for their absence to the Personnel Office for three
(3) consecutive working days will be terminated. After the second day of no
report, the Company will notify the Union of the pending termination.
Extenuating circumstances will be reviewed by the Company on an individual
basis.
2.12 Procedure on Filling Open and New Jobs.
---------------------------------------
(a) Requisition Sent to Personnel Office: Requisition showing number of
-------------------------------------
employees required, department and classification is filed with the
Personnel Office.
(b) Returns to Former Classification Honored from Active Payroll:
----------------------------------------------------------------------
Personnel Office honors "Return to Former Classification" claims
involving employees presently on the payroll.
(c) Returns to Former Classification Honored from Surplus Labor List:
----------------------------------------------------------------------
Failing to find applications from Step (b), the Personnel Office will
go to the surplus labor list and select employees by Return to Former
Classifications and seniority to fill the open job.
(d) Job Postings: Failing to find applicants for Step (c), the COMPANY
-------------
will then post the job available and the method of compensation on the
Bulletin Board located in non-smoking and smoking cafeteria bulletin
boards, but bids must be hand delivered to human resources office.
Selection will then be open for bid by eligible employees in line with
seniority. The above notice is to appear on the Bulletin Board for a
period of thirty-three (33) hours. All applications unless otherwise
provided will be considered on basis of seniority. If, after
expiration of thirty-three (33) hours, no
7
<PAGE>
employee has applied for the open job, the COMPANY shall hire from the
Surplus Labor List. COMPANY agrees to make every effort to notify the
UNION of successful bidders as promptly as possible after bids have
been received for the job posted. Any employee assigned to a job
under the above procedure does not have seniority rights for the
purpose of layoff unless such employee has demonstrated his ability to
work piecework for five (5) consecutive days before that expiration
date.
(e) Employees Laid Off Prior to Thirty 30-Day Working Period on New
---------------------------------------------------------------
Classification:
---------------
It is understood that in the event that there shall be no "Return to
Former Classification" submitted by eligible employees, preference
shall be given to employees who have written a Return to Former
Classification who were not eligible because they were laid off or
bumped prior to having served the thirty (30) day working period
required on that classification. Failing to find applicants by the
above outlined procedure, the COMPANY will then contact employees from
the Surplus Labor List in line with their seniority, regardless of
classification except as provided in Section 4.01 (g).
(f) Employees with Less than twelve (12) Months Seniority:
------------------------------------------------------
Employees with less than twelve (12) months seniority:
(1) are not eligible to bid for open jobs, and
(2) may only remain on the surplus labor list for a period not to
exceed length of service. If the Company should call back the
laid off employee within one year after the original hire date,
the employee will maintain their original hire date.
(g) New Employees on Payroll: Employees not eligible to bid will be given
-------------------------
preference on open jobs as against newly hired employees, provided
they have had six (6) months service with the COMPANY; provided
further that they indicate in writing an interest in changing their
job to the Employment Office and they now work. An open job shall be
deemed to exist when a requisition for help is unfilled by the
Employment Office through Return to Former Classification or bid or by
preference of the employees on the Surplus Labor List when
interviewed.
8
<PAGE>
(h) Job Freeze: Any employee accepting a job through the above-outlined
-----------
procedure must remain on that particular job for a period of one (1)
year before they may apply for another type of work.
(i) New Employees Notified of Layoff: Employees currently on the payroll
---------------------------------
who are otherwise frozen to their classification shall be eligible to
bid provided they have been officially notified of a layoff or are on
the subject to bump list. Employees on a sick leave are eligible to
bid. There is no obligation to give such employee any notice other
than that posted above.
(j) Choice of Jobs in Conjunction with Bidding Procedure:
-----------------------------------------------------
Eligible employees when bidding for posted jobs will be allowed up to
three (3) choices of jobs in any one day. When two (2) or more jobs
appear on the board open for bidding, eligible employees will be
allowed to make three (3) choices, Choice 1, 2, and 3. The bid forms
will be clearly marked in print: Choice 1, Choice 2 and Choice 3.
(k) Withdrawal of Bids: Any employee having bid and desiring to withdraw
-------------------
his/her bid may do so by dropping a written notice at the human
resources office before 10 a.m. of the morning following the original
posting of the job. This written notice shall consist of the special
form indicating the change by the employee. No bid shall be accepted
after 10:00 a.m. of the morning following the original posting of the
job.
(l) Combination of Classifications: Upon mutual AGREEMENT between the
-------------------------------
COMPANY and the UNION, there shall be a combination of classifications
as warranted by production schedules. When daywork classifications
are involved in this combination, the employee will receive the pay of
the highest classification. In the event that an employee bumps into
a dual or combined classification he may request as his "Return to
Former Classification" the classification of the employee he replaced.
Failing to reach an AGREEMENT on the combining of jobs the layoff will
be held in abeyance.
(m) Disqualification of Employees: Any employee disqualified three (3)
------------------------------
times as incapable of performing a job shall be terminated from
employment. Physical disqualifications
9
<PAGE>
are counted for this purpose unless: if the third disqualification is
the employee's first physical disqualification, then that employee
---------
will be placed on surplus labor.
(n) Job Cancellations by Divisional Superintendent: In the event posted
-----------------------------------------------
jobs have been bid for and are cancelled by the plant or operations
manager, preference shall be given to the successful bidders at the
next job opening provided the next job opening occurs within a period
of one hundred eighty (180) days from the original posting.
The successful bidder shall be entitled to sign a "Return to Former
Classification" which shall be effective for a one hundred eighty
(180) day period. Their thirty (30) day qualifying period shall begin
with the first day they are assigned to the job bid for. Should the
employee successfully bid on another job within the one hundred eighty
(180) day period, they shall relinquish all rights to the first job
bid for.
(o) Cancellation of Bid by Successful Bidder: In the event a successful
-----------------------------------------
bidder cancels their bid prior to having worked on the job, preference
shall be given to the remaining unsuccessful bidders.
2.13 Temporary Employees:
--------------------
(a) Temporary employees will receive no benefits, pension, holidays, or
vacation payment.
(b) At the time the Company determines that the position is permanent or
the end of sixty (60) days (whichever comes first), the job will be
filled in accordance with Section 2.12.
(c) The Company will not have temporary employees working if regular
employees are not working all scheduled hours per week unless the
regular employees have refused to work on the job being performed by
temporary employees.
(d) If a temporary employee is transferred to a permanent employee, their
seniority date will be considered their original hire date, as long as
there was no break in service between the transfer.
10
<PAGE>
2.14 One (1) Year Freeze After Return to Former Classification. Any employee
---------------------------------------------------------
returning to their former classification must remain on that particular job for
a period of one (1) year before another bid will be recognized by the COMPANY.
Exception to the preceding sentence: Employees who have two or more years of
continuous service return to a former classification without a freeze and be
free to bid.
2.15 Refusal to Accept Return to Former Classification When Opening Occurs.
---------------------------------------------------------------------
Any employee who has a "Return to Former Classification" form made out and
refuses to accept the Former Classification when the opening occurs will be
ineligible to bid for a period of one (1) year.
2.16 Refusal to Accept Job After Having Bid Successfully. Any employee who is
---------------------------------------------------
the successful bidder for an open job and refuses to accept the job will be
ineligible to bid for a period of one (1) year.
2.17 Seniority of Employees Who Bid or Transfer Prior to Layoff. Employees who
----------------------------------------------------------
bid or have been transferred immediately prior to a layoff must meet the
following requirements in order to enjoy regular seniority privileges:
(a) PIECEWORKERS: An employee must have demonstrated their ability to work
piecework for five (5) consecutive days within thirty (30) days. Any
partial day or days when an employee is told to go home because of no
work shall be considered as working days. This time must be worked
prior to the date the layoff occurs. Holidays coming within this
period of time will be considered as days worked. The effective date
in determining when the thirty (30) day trial period starts will be
the day the employee files their bid in the Employment Office or in
the case of transferred employees, the date on which the employee
has been notified they are going to be transferred.
(b) In addition, a pieceworker must be earning piecework and performing
satisfactory work for the payroll week previous to the date on which
the layoff notice is given, regardless of the number of days on the
classification.
11
<PAGE>
(c) Dayworkers must have been in an assigned classification for five (5)
working days prior to the day on which the layoff occurs. Holidays
coming within this period of time will be considered as days worked.
(d) ALL EMPLOYEES: Employees who bid or were transferred and cannot meet
the requirements in items a, b, and c, will be the first employees
taken off classification when a layoff occurs and they will have the
right to replace the youngest employee in the plant, in accordance
with the Principal Labor AGREEMENT unless the bidding employees fail
to qualify for said classification.
2.18 Employees Who Bump Into a Classification When a Layoff Occurs. Any
-------------------------------------------------------------
employee who bumps into a classification immediately prior to a layoff on that
classification will not have the seniority privileges of such classification if
he has not made piecework and is not performing satisfactory work for the
payroll week immediately prior to the date on which the layoff notice is given.
In the event such employee is laid off they shall be eligible to bump the
youngest employee in the plant. Employees who exercise this right to bump will
have at least five (5) working days layoff so that sufficient layoff notice can
be given to the employee who is to be bumped. Should the above employee be
subsequently disqualified on the job held by the youngest employee in the plant
they will go to the Surplus Labor List.
2.19 Increases and Decreases in Production - Notification to Shop Stewards.
---------------------------------------------------------------------
The President of the Local or their appointee will be notified of any increase
or decrease in production. New employees will be introduced to the departmental
Shop Steward.
2.20 New and Transferred Employees. All new and transferred employees must
-----------------------------
earn the training rate on their jobs within thirty (30) days from the time of
their employment and perform satisfactory work by meeting inspection standards
in order to maintain employment. Those who do not show progressive improvement
during the thirty (30) day period will be laid off.
12
<PAGE>
2.21 Training Program on New Jobs. The training program as described in Appendix
----------------------------
II may be extended by mutual AGREEMENT between the UNION and the COMPANY.
ARTICLE III
-----------
SHIFT SCHEDULE
3.01 Three (3) shifts - When three (3) shifts are to be worked in any
Department, the following schedule shall be observed:
(a) On the first shift, all workers will report at 7:00 a.m. and work
until 3:00 p.m. with a half-hour lunch period.
(b) The second shift shall be from 3:00 p.m. to 11:00 p.m. with a half-
hour lunch period.
(c) The third shift shall be from 11:00 p.m. until 7:00 a.m. with a half-
hour lunch period.
Two (2) shifts - When two (2) shifts are to be worked in any Department, the
following schedule shall be observed.
(a) On the first shift, all workers will report at 7:`00 a.m. and work
until 3:30 p.m. with a half-hour lunch period.
(b) The second shift shall be from 3:30 p.m. to 12:00 midnight with a
half-hour lunch period.
One (1) shift - When one (1) shift is to be worked in any Department,
the following schedule shall be observed.
(a) Workers will report at 7:00 a.m. and work until 3:30 pm. with a half-
hour lunch period.
3.02 Changes in Shift Schedule. In the event it becomes necessary to deviate
-------------------------
from the above stated starting or quitting times, the COMPANY and the UNION
shall by mutual AGREEMENT decide such change in shifts as might become necessary
for their mutual welfare. The COMPANY and the UNION will also by mutual
AGREEMENT decide when it becomes necessary to change the shift of an employee or
group of employees in any emergency.
13
<PAGE>
It is the AGREEMENT of the parties that no change in shifts can be established
until seven (7) days after said change has been mutually agreed upon by both
parties.
3.03 Lunch Periods
-------------
One Shift: On a one-shift schedule there shall be a lunch period from 12:00
- ----------
noon to 12:30 without pay.
Two shifts: On a two-shift schedule, the lunch period for the first shift
- -----------
shall be from 12:00 noon to 12:30 p.m. The lunch period for the
second shift shall be from 7:30 p.m. to 8:00 p.m. Both lunch
periods on a two-shift schedule are without pay.
Three shifts: On a three-shift schedule, the lunch period for the first shift
- -------------
shall be from 12:00 noon to 12:30 p.m.; second shift from 7:30
p.m. to 8:00 p.m.; third shift from 3:00 a.m. to 3:30 a.m.
Whenever three (3) shifts in department by classification are necessary, each
shift shall be paid for eight (8) hours work with one half-hour lunch period
included. Pieceworkers shall be paid at their weekly average hourly rate for
one-half hour lunch period. Hourly workers shall be paid their hourly rate for
the one-half hour lunch period.
3.04 Payment for Work During Lunch Period. In the event that an employee is
------------------------------------
asked to work through their normal lunch period, they will receive time and one-
half payment for such time.
3.05 Rest Periods. It is agreed that two (2) rest periods of ten (10) minutes
------------
will be given during any shift. The schedule for rest periods is as follows:
1st shift: 9:30 a.m. to 9:40 a.m. - 2:00 p.m. to 2:10 p.m.
2nd shift: 5:30 p.m. to 5:40 p.m. - 10:00 p.m to 10:10 p.m.
3rd shift: 1:00 a.m. to 1:10 a.m.-5:00 a.m to 5:10 a.m
3.06 Requests to Report to Work without Prior Scheduling. In the event that an
---------------------------------------------------
employee is requested to report to work on a day when they are not regularly
scheduled to work they shall receive
14
<PAGE>
compensation from the regular reporting time of their assigned shift, even
though they may be required to report at a later time.
However, in the event that an employee is requested to report at a time earlier
than the regular starting time of his assigned shift, they shall be compensated
from his actual starting time, in accordance with the MASTER MULTI-PLANT WORKING
AGREEMENT.
3.07 Shift Preferences. Shift preference will be given to employees presently
-----------------
working on a classification before requisitions for additional employees are
sent to Personnel Department.
3.08 Employees borrowed as working supervisors:
------------------------------------------
A. Any employee who is borrowed as a supervisor is to receive his/her
average rate plus $1.75 per day in addition to $1.00 per hour, for
every hour such employee is engaged in such capacity.
C. Pay for working supervisors will be included in vacation and holiday
pay.
D. No employee will be borrowed as a working supervisor for longer than
thirty 30 days.
3.09 Employees Sent Home Early or Absent Due to Lack of Orders. In the event
----------------------------------------------------------
an employee has been sent home before the normal end of their shift, or told not
to report for work because of lack of orders, and other employees, nevertheless,
perform operations normally assigned to their classification, the COMPANY will
compensate the employee who worked short hours the amount of earnings lost
because of substitute performing work in his absence.
EXAMPLE #1: If substitute closed three (3) mattresses, employee who lost work
will receive the three (3) piecework tickets.
EXAMPLE #2: If a substitute dayworker worked one (1) hour, employee who lost
work will receive one (1) hour's pay.
3.10 Inventory
---------
15
<PAGE>
(a) In selecting the employees needed for inventory purposes, preference
will be given to the dayworkers. Company may assign unqualified
dayworkers to material handling, cleaning, etc. Selection of
pieceworkers for inventory purposes will be on a volunteer basis by
department, provided however that in the event there are insufficient
volunteers the COMPANY will assign the least senior pieceworkers on a
departmental basis. Pieceworkers while working on inventory will be
paid the material handler's rate.
(b) Dayworkers will be paid the rate of their classification or the
inventory rate as indicated on Appendix I, whichever is the higher.
(c) Pieceworkers will receive the material handler rate indicated on
Appendix I. This rate shall be marked "special" so it will not
affect the computation of the average rate.
3.11 Overtime.
---------
(a) Time and one-half shall be paid for the first four (4) hours
overtime on any of the weekdays of the regular work week, Monday
to Friday inclusive. Any overtime beyond four (4) hours in the
regular work day shall be paid for at the rate of double time.
All work performed on Saturday shall be compensated for at time
and one-half such rate of pay for the first eight (8) hours.
Double time shall be paid for all work performed on Saturday, in
excess of eight (8) hours. All work performed on Sunday shall be
compensated at double time. Pieceworkers shall be paid for these
irregular hours at the average hourly earnings for the week
during which the overtime occurs.
(b) Friday Overtime - Employees can be scheduled for no more than two
hours overtime on Fridays provided:
(1) notification is received on the previous shift.
(2) the employee is not compelled to work on Saturday.
(3) Peak Activity Overtime - At times of peak production
requirements, Saturday overtime may be necessary. Twice per
calendar year the Company can require working no more than
six (6) consecutive Saturdays. The Company will
16
<PAGE>
notify the Union at the earliest possible moment of the need
for working more than two (2) consecutive Saturdays.
3.12 Closers and Hog Ring - Interdepartmental Movement.
--------------------------------------------------
(a) This clause is applicable only to those employees classified as hog
ringers or closers as of October 16, 1991. Any employee who enters
into these classifications after October 16, 1991 will not be
governed by this clause, but will in fact perform their
classification's function as directed by supervision/management. In
order to give COMPANY flexibility and permit greater efficiency, it
is agreed that in the event the closers in the Deepsleep Department
are unable to produce the units needed, and provided the closers on
the Beautyrest(R) floor have met production requirements, in that
event the Beautyrest(R) closers will close all open coil type matts
at piecework and vice-versa. It is understood that the flexibility
permitted by this paragraph shall not prejudice the individual
seniority rights of the closer involved. It is further agreed that
the aforementioned flexibility and efficiency shall apply in a
similar fashion with the hog ring operation. The COMPANY agrees to
change the Base Rate of the "Beautyrest(R)" Closing Classification
(#098) to equal that of the "Deep Sleep" Closing Classification
(#089) The "Beautyrest(R)" Closing incentive rates will be revised
to reflect this change with the understanding that this is done for
the express purpose of enabling MANAGEMENT to move employees from
one department to another in order to provide the necessary
flexibility to satisfy customer needs. It is understood that when
such movement is necessary the COMPANY will move the youngest
employees required.
(b) In the event the Company establishes a pre-load line in the Mattress
Finishing Department, all closers and all hog ringers will be
required to work on both Beautyrest and Open Coil, regardless of
their date of entry into these classifications.
17
<PAGE>
3.13 Rehiring on Unfamiliar Work. When an employee is laid off and rehired on
---------------------------
a type of work other than that which he/she normally performed, and in the event
that a piecework price has not been established, the employee will receive
his/her average hourly rate for the preceding quarter for the type of work until
such time as the piecework is submitted.
ARTICLE IV
----------
CALL-IN PAY - WORK WAIT
4.01 Work Wait Compensation
----------------------
(a) It is agreed that if, due to absenteeism, mechanical failure, or lack
of materials, components, or supplies, a pieceworker is required to
wait for any continuous period of more than ten (10) minutes time,
he/she shall be compensated in accordance with the following
paragraphs for the time lost, except in circumstances covered by
paragraph (b) of this section. If, due to absenteeism, mechanical
failure, or lack of materials, components, or supplies, a pieceworker
is required to wait for any period of less than ten (10) minutes,
he/she shall not be compensated for the time lost as hereinafter
otherwise provided.
(b) In all instances, a pieceworker must notify his/her own supervisor,
or if his/her is not available, another supervisor, of the fact that
he/she cannot work because of absenteeism, mechanical failure, or is
waiting for materials, components, or supplies. A pieceworker's work
wait status shall commence when he/she notifies a supervisor who
shall forthwith record the time. The employee shall be advised of
the times recorded by the supervisor. If in exceptional cases a
pieceworker requires a period longer than two (2) minutes to locate a
supervisor, time spent looking for a supervisor up to a maximum of
five (5) minutes shall be added to their compensable work wait time.
(c) The supervisor shall give the employee a duplicate slip within
twenty-four (24) hours.
(d) Any pieceworker who reports to a supervisor that he/she is in a work
wait status within five (5) minutes of the starting of his/her shift
rest period (e.g. 9:25 a.m. or 5:25 p.m.) will be compensated in
accordance with sub-paragraph (e) of this Section
18
<PAGE>
only for the duration of time in a work wait status occurring after
the end of that rest period.
Any pieceworker who reports to his/her supervisor that he/she is in a
work wait status within ten (10) minutes of the starting time of
his/her shift lunch period (e.g. 11:50 or 7:20 p.m.) will be
compensated in accordance with the following paragraphs only for the
duration of time in a work wait status occurring after the end of
that lunch period. Any pieceworker who reports to a supervisor that
he/she is in a work wait status within fifteen (15) minutes of the
end of his/her regular shift or overtime quitting hour shall not be
compensated for work wait occurring within this last fifteen (15)
minute period. A pieceworker who at the beginning of his/her shift
discovers that he/she is in a work wait status must notify a
supervisor immediately.
(e) It is agreed that if a pieceworker is required to wait for any period
and IS ASSIGNED to another job for the work wait period, he/she shall
be compensated for the duration of the time lost on his/her regular
job due to waiting at one hundred percent (100%) at his/she average
hourly rate for the preceding quarter. It is agreed that if a
pieceworker is required to wait for any period of more than ten (10)
minutes continuous time and IS NOT ASSIGNED to another job, he/she
shall be compensated for the duration of time lost due to waiting at
eighty-five percent (85%) of his/her average hourly earnings rate.
The decision to assign or not to assign a pieceworker in a work wait
status to another job for any work wait period shall be made entirely
at the COMPANY's discretion and option.
(f) Wherever two or more employees are regularly compensated as a group
for work performed, and one or more individuals of that group do not
report for work and the COMPANY assigns an "experienced employee" as
a substitute, all members of the group will be compensated on the
established piecework basis. An "experienced employee" shall be one
who has worked in that classification within four (4) months prior to
the date of substitution and has a minimum of thirty (30) days
satisfactory experience in that classification as hereinbefore set
forth in Article II Section 2.20. In the event the COMPANY is unable
to assign an "experienced employee" as a
19
<PAGE>
substitute for an absent member of the regular group, the regular
members of the group shall be compensated at their average hourly
earnings rate for the preceding quarter, or their actual piecework
earnings, whichever is higher.
(g) When an employee regularly operates more than one machine and one or
more of his machines is not operative due to absenteeism, mechanical
failure, or lack of materials, components, or supplies and a
piecework price has been established for the production of the number
of machines remaining in an operative condition, the employee shall
be compensated for the value of the production of the operative
machine at this same established piecework price with no additional
compensation on account of the inoperative machines. When an
employee regularly operates more than one machine and one or more of
his machines is not operative due to absenteeism, mechanical failure,
or lack of materials, components, or supplies and no piecework price
has been established for the production of operative machines, the
operator will receive the sum total of the piecework value of the
production, of the operating machines at the regularly established
multi-machine piecework price, plus that proportion of the total work
wait compensation per machine computed in accordance with the
provision of this work wait section as that number of machines in an
inoperative condition bears to the total number of machines regularly
operated by the employee.
4.02 Conditions Beyond Control of COMPANY. It is agreed that the COMPANY shall
------------------------------------
have no liability regarding the above provisions in the event of a breakdown of
power outside the Plant or if inside of Plant and not maintained by the COMPANY,
General Plant Fire, Act of God, Act of Public Enemy, or because of conditions
beyond the control of the COMPANY. It is agreed that in the event of power
failure employees will stand by until instructed by the COMPANY to go home or to
return to work. If the COMPANY, within one (1) hour after the moment of power
failure, instructs employee to go home or to return to work the employee will
not be paid for time lost within this one (1) hour. If the COMPANY does not
instruct any employee within one (1) hour after the beginning of the power
failure to go home or to return to work, the employee will be paid his/her
average
20
<PAGE>
hourly earnings as computed in Section 8.08 of the MASTER MULTI-PLANT WORKING
AGREEMENT if a pieceworker, and at the hourly daywork rate of his/her
classification if a dayworker for all time lost from the end of the first minute
of power failure to the time he/she is either instructed to go home or to return
to work.
4.03 Reporting Pay - Computation. Implementing Section 4.10 of the MASTER
---------------------------
MULTI-PLANT WORKING AGREEMENT, Reporting Pay shall be paid at the employee's
average hourly earnings for the previous quarter, if a pieceworker. If an
hourly paid employee, he/she shall receive the rate of his/her classification.
4.04 Grievances - Wages. Upon settlement of a grievance involving wages, the
------------------
COMPANY agrees to make every effort to notify the UNION in the form of a written
statement setting forth the grievance number and the disposition thereof. The
grievants will be paid as promptly as possible.
ARTICLE V
---------
HOLIDAYS
5.01 Holidays. It is agreed that the following holidays shall be granted at the
--------
plant of the EMPLOYER, located in Piscataway, New Jersey: New Year's Day
Washington's Birthday
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day (as proclaimed by the Governor of
the State of New Jersey)
Armistice Day
Christmas Day
M.L. King's Birthday
21
<PAGE>
Presidential Election Day (1st Tuesday after 1st Monday in
November every fourth year)
The day before or after Christmas
5.02 Paid Holidays. In addition to the seven (7) paid holidays listed in
-------------
Section 10.01 of the MASTER MULTI-PLANT WORKING AGREEMENT the following four (4)
additional paid holidays shall be paid in accordance with Article X of the
MASTER MULTI-PLANT WORKING AGREEMENT.
Washington's Birthday
Good Friday
Armistice Day
Day before of Day after Christmas
5.03 Eligibility for Holiday Pay
---------------------------
(a) Except as otherwise provided the COMPANY will pay every employee who
is in their employ thirty (30) days immediately prior to such holiday
and who is not required to perform work in the service of the COMPANY
on such holiday at eight (8) times the employee's average hourly
earnings for the previous quarter as computed in Section 8.08 for
pieceworkers. Dayworkers will be paid eight (8) times the employees'
regular hourly daywork rate.
(b) Any employee who receive twenty-four (24) hours notice to work on any
of the holidays mentioned in the Article and fails to perform such
work will receive no compensation for that day.
(c) That such employee shall have worked eight (8) hours or more during
the calendar week in which such holiday occurs and shall not have
left the employment of COMPANY or have been discharged prior to such
holiday, or on leave of absence.
(d) Any employee required to work on any of the above mentioned holidays
will receive double time for work actually performed plus eight (8)
hours at his average hourly straight time earnings.
22
<PAGE>
If for reasons beyond the control of the employees of the SIMMONS PISCATAWAY
WORKS, the entire plant or any part thereof is shut down for a period of one
(1) week during which a paid holiday occurs, in that event eligible employees
will receive compensation for paid holidays involved.
5.04 Holiday Pay - Employees Absent Due to Illness or Accident. Pay for illness
---------------------------------------------------------
- - Eligible employees who are absent from work due to illness or accident will
receive compensation for one (1) paid holiday; said holiday being the first
holiday coming after the commencement date of the illness or accident.
ARTICLE VI
-----------
VACATIONS
6.01 The COMPANY shall establish the actual vacation dates and determine whether
or not the vacations shall be either staggered or by Plant shutdown.
If the COMPANY decides to stagger vacations they shall be so arranged as not to
cause interference with production or create additional expense and the COMPANY
will, insofar as possible, arrange the vacation of eligible employees at a time
which suits the employee and those having the greater seniority by
classification will be given preference in selection of the time of their
vacation insofar as possible. If vacations are staggered, period of same will
be between January first and December thirty-first. If COMPANY decides to use a
staggered vacation system, in that event the anniversary date of hiring shall be
the determining factor for eligible purposes.
Any employees eligible for a third week of vacation shall receive same at a time
selected by MANAGEMENT.
6.02 Length of Vacation and Pay Therefor. Section 11.01 of the MASTER MULTI-
-----------------------------------
PLANT WORKING AGREEMENT will govern, except that quits and discharges will
receive pro rata share based on the actual number of complete months worked
during the calendar year during which such
23
<PAGE>
employee quit or was discharged. Reinstated discharges will receive full
vacation benefits they are otherwise eligible for.
6.03 Vacation Pay
-------------
A. Vacations
---------
Employees covered by this AGREEMENT who have been employed during the
vacation season shall receive vacation pay as specified in 11.01 of
the MASTER AGREEMENT.
B. Determining Factor in Amount of Vacation Pay
--------------------------------------------
Otherwise eligible employees who are in approved leaves of absence or
layoff, will nevertheless receive their full vacation benefits
provided they actually worked sixty (60) days during the previous
calendar year. If the employee did not work sixty (60) days in the
previous year, full vacation benefits will be restored after working
sixty (60) days in the year vacation benefits are sought.
6.04 Rate to be Used for Computing Vacation Pay. The rate to be used to compute
------------------------------------------
vacation pay shall be the employee's quarterly rate which is in effect at the
time of his vacation as computed in Section 8.07 MASTER MULTI-PLANT WORKING
AGREEMENT.
ARTICLE VII
-----------
DISCIPLINE AND DISCHARGE CLAUSES
7.01 The COMPANY agrees to retain all warning notices or memos or disciplinary
action for a reasonable length of time for UNION inspection. Evidence of poor
workmanship must be retained for UNION inspection whenever feasible, but in no
event to exceed forty-eight (48) hours after a copy of the warning notice of bad
works is given to the UNION. Reprimands must be issued and the UNION copied no
later than one (1) week after the infraction.
24
<PAGE>
7.02 Automatic Discharge - Three (3) Warning Notices. The parties agree that
-------------------------------------------------
the present system of automatic discharge after receipt of three (3) written
reprimands in continuous twelve (12) months shall not be changed by anything in
the AGREEMENT.
7.03 Discharge Hearings. Discharge hearings will be held promptly or, at the
------------------
latest, by 10:00 a.m. of the next working day provided the employee is notified
of the hearing and is physically able to attend.
ARTICLE VIII
------------
8.01 Sick Leave. An employee, upon presentation of doctor's certificate may be
----------
granted sick leave upon good cause shown, and upon receiving such leave shall be
replaced by temporary employee. The temporary employee during the aforesaid
sick leave shall assume the seniority of the sick employee and can only be
bumped as outlined in Section 2.13 (d).
8.02 Injury in Course of Employment. Any employee injured in the course of
--------------------------------
employment shall be compensated at his/her average hourly rate for any time
spent in treatment of the resulting injury at the First Aid Room. Should the
injured employee work in a team operation, his remaining partner or partners
will also be compensated at average rate or as provided hereinbefore in Article
IV, Section 4.01(f), and for any resulting lost time.
In the event the COMPANY requires an injured employee to be treated during hours
--------
outside those which work is scheduled, such employee will be paid at a rate of
$7.00 per hour or fraction thereof, with the understanding that $7.00 will be
the minimum in the event that actual treatment is less than one (1) hour.
8.03 Employees on Leaves of Absence - Seniority Rights. An employee while on an
-------------------------------------------------
approved leave of absence shall be included in any personal changes, in line
with their seniority, and shall have the same rights of job selection, as if
they were working. While on such leave of absence, they shall be replaced by a
temporary employee. A leave of absence may be granted for personal reasons for
a period not to exceed thirty (30) days upon application of the employee to and
approval by the
25
<PAGE>
COMPANY in writing. Such leave of absence shall not be renewed and seniority
will accumulate during the leave.
8.04 Where it has been established that an employee's glasses were broken on
COMPANY property during the course of employment, the employee shall be
reimbursed for the replacement. Misrepresentation as to breakage in the course
of employment shall subject offenders to immediate discharge.
ARTICLE IX
----------
9.01 Foul Weather Clothing. The COMPANY will provide foul weather clothing for
---------------------
employees required to fight fires, flood and for use in inclement weather. Foul
weather clothing shall be under the supervision of the foreman in charge of the
department and shall be turned in at the end of each shift.
ARTICLE X
---------
10.01 New Piece of Equipment - Displacement of Personnel. In the event that a
---------------------------------------------------
new piece of equipment is introduced which results in displacement of personnel
covered by this contract, those people that have been displaced by the new piece
of equipment shall be given preference of the classification affected before the
job is posted.
10.02 Supervisor's Working. Since the primary function of a supervisor is that
--------------------
of managing a department he/she shall not perform operations that are not
covered in paragraph 1.01 of Article I. However, this clause is not to be
construed in such fashion that the supervisors cannot be used as instructors nor
shall it be used to prohibit a supervisor from testing a piece of equipment in
order to determine its fitness.
10.03 Leaves of Absence up to three (3) months will be granted to employees who
join the Local City Police or Fire Department to protect them during their
probationary period. It is understood that
26
<PAGE>
such employees are protected only against severance of seniority with no claim
on any particular job classification.
10.04 Premium Payment- Successful Bidders Not Assigned to New Jobs. It is
------------------------------------------------------------
understood that when an individual shall have successfully bid for a job, and
shall not be assigned to the new classification within a period three (3) weeks,
the failure to make such an assignment by the end of the third week shall result
in a special bonus payment of an additional fifteen (15) cents per hour
beginning with the fourth week provided he/she still maintains his previous
piecework pace (if a pieceworker) or his/her normal satisfactory job performance
(if a dayworker), and continues until he is transferred.
In addition, it is understood that when an individual shall have successfully
bid for a job, the individual shall be assigned to the new classification within
a period of forty-five (45) days, the failure to make such an assignment by the
end of forty-five (45) days shall result in the employee being paid the rate of
the new job or his/her average rate, whichever is higher.
ARTICLE XI
----------
11.01 Pay Shortages. Employees who establish a shortage in pay shall receive a
-------------
special check provided the amount is in excess of ten dollars ($10.00) within
twenty-four (24) hours after such shortage has been established. A statement of
the reason for payment will accompany the check.
When an employee requests a listing of the codes and the values thereof for
his/her operation from his/her supervisor, the COMPANY will see that the
employee is provided such listing.
11.02 Rotation of Employees - Overtime and Department Shutdown. Whenever
--------------------------------------------------------
practicable, qualified employees in a classification shall be rotated for the
purpose of:
(a) Overtime
(b) Department Shutdown
except during inventory. It is intended by the parties that the rotation
schedules for (a) and (b) shall be separate and distinct.
27
<PAGE>
ARTICLE XII
-----------
12.01 Borrowed Employee
-----------------
(a) When an employee is borrowed to an incentive job at the Company's
convenience and the employee has demonstrated in the past earnings at
incentive to the job being borrowed to, the employee will be paid at
incentive. However, the basis upon which incentive earnings will be
based will be the higher of the base rates between the incentive job
being borrowed to or the incentive or day work job the employee is
borrowed from.
(b) Refreshing of Skills: Employees borrowed to a job at incentive which
they have not been on for less than forty-five (45) days will receive
no training time; from forty-five (45) days to less than ninety (90)
days will receive four (4) hours training at average; from ninety
(90) days to less than six (6) months, will receive eight (8) hours
training at average: from six (6) months to less than one (1) year,
will receive sixteen (16) hours training at average; if over one (1)
year, will receive twenty-four (24) hours training at average.
(c) An employee borrowed to an incentive job at the Company's convenience
must be assigned for a minimum of two (2) consecutive hours for
incentive pay to be applied.
ARTICLE XIII
------------
DURATION AND TERMINATION OF SUPPLEMENT
13.01 This Supplemental AGREEMENT shall be in full force and effect for three
(3) years, from October 16, 1994 until October 16, 1997.
13.02 The parties agree that this AGREEMENT, together with the MASTER MULTI-
PLANT WORKING AGREEMENT, Procedures Contract, Appendix I,and II constitute the
entire AGREEMENT between the parties and at no time during the life of this
AGREEMENT shall either party have any obligations to negotiate or bargain with
the other party, with respect to any points not covered by this AGREEMENT, and
as to matters covered by this AGREEMENT, only in the manner and to the extent
herein provided.
28
<PAGE>
ARTICLE XIV
-----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, creed, national origin, age, sex,
atypical hereditary cellular or blood trait, nationality, marital status,
physical handicap, AIDS or AIDS related complex or veteran status except where
religion, sex, national origin or age is a bona fide occupational qualification
or unless the nature and extent of the handicap reasonably precludes the
performance of the particular employment. Our policy relates to all phases of
training, demotion, transfer, layoff, recall and termination, rates of pay,
employee benefits and participation in all SIMMONS sponsored employee
activities. We are opposed to all forms of harassment including sexual, racial,
ethnic or religious harassment. Unwelcome sexual advances, requests for sexual
favors, and other verbal of physical conduct of a sexual nature or verbal or
physical conduct directed at a person's race, color, religion, sex, national
origin, age, handicap or veterans status may constitute harassment. Claims of
harassment which come to our attention may result in discipline up to and
including discharge. At any time, if you believe that you have been harassed,
you must report the harassment to your immediate Supervisor or your Human
Resources Manager. A confidential investigation will be conducted.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of America, SIMMONS COMPANY
A.F.L., C.I.O, C.L.C.
(Upholstery Industries Division)
Through its Agent, Local Union #420
By /s/ /s/
--------------------------------- --------------------------
/s/
--------------------------------- --------------------------
--------------------------------- --------------------------
--------------------------------- --------------------------
--------------------------------- --------------------------
Countersigned At Philadelphia, Pa. Countersigned for SIMMONS COMPANY
this_____ day of ____________, 19__.
The United Steel Workers of America, AFL, C.I.O., C.L.C.
(Upholstery Industries Division)
By /s/ /s/ R. Kenneth Barton
--------------------------------- --------------------------
Director of Upholstery Industries R. Kenneth Barton
Division
30
<PAGE>
PISCATAWAY PLANT SUPPLEMENT
APPENDIX I
Hiring Rate Effective
10/16/91
--------
$6.50
Additional 20 cents per week beginning the second week of employment and
each week thereafter to be added to the hiring rate until end rate listed
below is reached as indicated.
ITEM JOB TITLE 10/16/94 10/16/95 10/16/96
End Rate End Rate End Rate
8 Control Room- Matts & B/S 8.98 9.28 9.58
11 Cutting Type #2 8.90 9.20 9.50
22 Inspector (1st Class) 9.09 9.39 9.69
51 Special 8.62 8.92 9.22
62 Storeroom (1st Class) 9.15 9.45 9.75
81 General Labor 9.03 9.33 9.63
83 Inventory Rate * 8.81 9.11 9.41
89 Repair 8.98 9.28 9.58
95 Material Handlers 8.81 9.11 9.41
101 Truck Loaders 11.95 12.25 12.55
Conveyor 11.95 12.25 12.55
799 Plastic Wrap Operator 10.20 10.50 10.80
*** Sr. 2nd Class Cutter 10.14 10.44 10.74
*** Sr. Control Room 13.01 13.31 13.61
*** Material Control Analyst 10.25 10.55 10.85
* To be marked "Special" and not included in average rate
*** The noted (***) classifications will be eliminated via attrition (bid
off, retirement, quit, etc.) and the individuals currently holding the
above classifications will not be replaced in those specific
classifications. This will serve to eliminate memorandums of agreement
which created the above "red circle" rates.
31
<PAGE>
APPENDIX II
PISCATAWAY PLANT SUPPLEMENT
Hiring Rate: EFFECTIVE
10/16/91
--------
$6.50
Progression Rate: An additional ten cents (10 cents) per week the second
week of employment and five cents (5 cents) per week thereafter to be
added to the hiring rate listed below until end training rate is reached
as indicated.
END
TRAINING BASIC
RATES RATES
EFFECTIVE EFFECTIVE
JOB CLASS 10/16/94 10/16/94
-------- --------
01 Border Machine 7.81 8.82
02 Bechik 7.81 8.89
12 Finish Box Spring 7.81 8.99
09 Hog Ring Open Coil 7.76 8.27
24 Hog Ring Beautyrest 7.76 8.27
25 Hog Ring (any type) 7.76 8.27
08 Close Mattress (any type) 7.91 10.45
15 Box Spring Frame and Route 7.81 8.65
07 Run Quilt Machine 8.20 8.80
03 Sew Labels 7.76 8.32
06 Overcast 7.76 8.32
04 Sew Boxspring Panels to Border 7.76 8.32
17 Ultrasonic Operator 7.81 8.88
16 B/R Assembly Machine 7.76 9.28
26 Box Spring Top-off 7.81 8.70
Above End Training Rates and Base Rates will be increased by .25
cents per hour 10/16/95 and .25 cents per hour 10/16/96.
33
<PAGE>
JACKSONVILLE PLANT
SUPPLEMENT
LOCAL #425
<PAGE>
JACKSONVILLE - INDEX
ARTICLE ITEM PAGE
I. RECOGNITION AND UNION SECURITY . . . . . . . . . . . . . 1
1.01 Recognition . . . . . . . . . . . . . . . . . . . 1
1.02 Check-Off. . . . . . . . . . . . . . . . . . . . 1
1.03 Union Representative Seniority . . . . . . . . . 1
1.04 Leave of Absence for Union Activity . . . . . . . 2
1.05 Union Business . . . . . . . . . . . . . . . . . 2
II. SENIORITY FURLOUGH AND LAYOFF . . . . . . . . . . . . . 2
2.01 Furlough . . . . . . . . . . . . . . . . . . . . 2
2.02 Seniority . . . . . . . . . . . . . . . . . . . . 3
2.03 Return from Surplus Labor . . . . . . . . . . . . 6
2.04 Right of Recall . . . . . . . . . . . . . . . . . 6
2.05 Definition and Notice of Layoff. . . . . . . . . 7
2.06 Job Bidding . . . . . . . . . . . . . . . . . . . 7
2.07 Failure to Succeed on Bid Job . . . . . . . . . . 8
2.08 Disqualification Following a Bump, Roll, or Transfer9
2.09 Loss of Seniority Rights . . . . . . . . . . . . 9
2.10 Hiring Rate . . . . . . . . . . . . . . . . . . . 9
2.11 Promotion Out of Bargaining Unit . . . . . . . 10
2.12 Seniority List . . . . . . . . . . . . . . . . 11
2.13 Change in Union Representatives . . . . . . . . 11
III. WAGES . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.01 Labor Grade Rates . . . . . . . . . . . . . . . . 12
3.02 Incentive Compensation Plans . . . . . . . . . . 13
3.03 Work Wait . . . . . . . . . . . . . . . . . . . . 14
3.04 Inventory Work . . . . . . . . . . . . . . . . . 14
3.05 Electric Power Failure . . . . . . . . . . . . . 15
3.06 Work Hardening Procedures . . . . . . . . . . . . 15
3.07 UNION Meetings and Scheduled Overtime . . . . . . 16
3.08 Overtime Agreement . . . . . . . . . . . . . . . 16
3.09 Borrowed Man . . . . . . . . . . . . . . . . . . 17
IV. WORKING HOURS . . . . . . . . . . . . . . . . . . . . . . 17
4.01 Hours . . . . . . . . . . . . . . . . . . . . . . 17
4.02 Shift Differential . . . . . . . . . . . . . . . 17
4.03 Rest Period . . . . . . . . . . . . . . . . . . . 18
4.04 Two Shifts . . . . . . . . . . . . . . . . . . . 18
4.05 Three Shifts . . . . . . . . . . . . . . . . . . 18
<PAGE>
V. PAID HOLIDAYS . . . . . . . . . . . . . . . . . . . . 18
VI. VACATIONS . . . . . . . . . . . . . . . . . . . . . . 19
VII. ABSENTEES - NO REPORT . . . . . . . . . . . . . . . . 20
7.01 Failure to Report Absence . . . . . . . . . . 20
VIII. MECHANIC APPRENTICE TRAINING . . . . . . . . . . . . 21
8.01 Mechanic Apprentice Training . . . . . . . . . 21
8.02 Probationary Period . . . . . . . . . . . . . 21
IX. EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . . . . 22
X. DURATION AND TERMINATION . . . . . . . . . . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
JACKSONVILLE U.I.U. SUPPLEMENT
------------------------------
AGREEMENT
THIS AGREEMENT, made this 16th day of October, 1994, by and between SIMMONS
COMPANY, Jacksonville, Florida, hereinafter referred to as the EMPLOYER, and THE
UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C. (Upholstery Industries
Division), hereinafter referred to as the UNION, acting, through its agent, the
Bedding Workers' Local Union No. 425, for and on behalf of itself and the
employees of said COMPANY at its plant located at Jacksonville, Florida,
supplementing the MASTER MULTI-PLANT WORKING AGREEMENT of even date between the
same parties and others.
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Recognition. The persons covered by this contract include all employees
-------------
of the COMPANY described in Article III, Section 3.01, employed in its
Jacksonville, Florida plant, excluding office workers, supervisors, inspectors,
foremen, watchmen, plant guards, departmental coordinators, or persons in any
way identified with MANAGEMENT.
1.02 Check-Off. The COMPANY shall deduct from their wages and turn over
-----------
monthly to the proper officers of the UNION the initiation fees and the UNION
dues of all such members of the UNION who individually and voluntarily certify
in writing that they authorize such deductions.
1.03 UNION Representative Seniority. The President of the Local Union shall
--------------------------------
have top seniority in his classification and in the Plant on all layoffs. All
UNION Stewards shall have top seniority in their respective classification and
department on all layoffs. The seniority of the President of the Local UNION
shall supersede that of any department steward in the event of conflict.
<PAGE>
1.04 Leave of Absence for UNION Activity. An employee who returns to work
---------------------------------------
after an authorized leave of absence for UNION activity shall be returned to his
former labor grade assignment in line with his seniority. If said assignment is
not in existence at that time, he shall go where his seniority will take him.
1.05 UNION representatives will be clocked down by the Supervisor for any
Union Business during employee work hours. When a Union Official conducts
approved Union Business throughout the day, whether paid by the Union or the
Company, time worked in excess of eight (8) hours will be paid at the overtime
rate. If MANAGEMENT approves a meeting during scheduled working hours, the
committee shall receive labor grade rate for the time spent in such meeting.
1.06 Specification information will be made available to employees or
UNION officials as required.
ARTICLE II
----------
SENIORITY FURLOUGH AND LAYOFF
2.01 A. In order to provide for a more reasonable work schedule for senior
employees when hours are shortened due to lack of orders, the plant operations
manager will have the responsibility of placing on furlough those employees who
are not needed to fill the daily production schedule. Furlough will be offered
first on a voluntary basis according to seniority within the affected
classification. If there are not enough volunteers, then the Company will
furlough the most junior employee(s) in the affected classification. The
furloughed employees will be placed on surplus labor so as to make them eligible
for unemployment benefits during such furlough period, if otherwise eligible.
Employee health and dental insurance will be maintained in accordance with
Article XIII of the Master Agreement for the entire length of furlough. It is
understood that a furlough may be for any length of time provided such does not
exceed sixty (60) days at any given time. For recordkeeping purposes, the
President for Local #425 or his appointee will be notified of such furlough by
letter signed by the involved plant or operations manager.
<PAGE>
In the event variation in customer demands requires employees to return from
furlough earlier than announced, such return shall be offered first to the most
senior employee in the classification being recalled; however, the senior
employee will not be forced to return if there will still be junior employees on
furlough within the classification. If the furlough turns to a permanent layoff,
the most senior employee may choose to remain out of work on layoff status, with
recall rights as granted in LPS Section 2.04.
With regard to recall from furlough, the COMPANY liability shall be limited
to notification to the UNION that such employee could not be reached by
telephone or was unavailable because of other commitments. Because State
Unemployment rules pay reduced benefits for partial unemployment, the plant or
operations manager will project furlough time in multiples of five (5) working
days. Any furlough can be triggered at any day of the week. For example, if a
------------
holiday falls on Tuesday, the COMPANY will declare furlough to begin Wednesday
and continue through for a continuous minimum of five (5) working days.
Should a planned furlough affect a single employee a third time, the Company and
Union will meet to discuss the necessity prior to invoking furlough on the
affected employee.
2.02 A. The COMPANY recognizes the principle of seniority (last hired
will be the first laid off) among its employees and agrees that
all layoffs occasioned by lack of work and subsequent recalls
from layoff shall be by seniority as provided below.
B. When increases or decreases in the work force become necessary,
they shall be made on the basis of seniority within work
groupings.
C. Laid off employees who have seniority rights will be recalled in
accordance with their seniority as described in Section 2.03.
D. In the event a layoff is necessary, the reduction will be by
classification and seniority giving the affected employee the
right to bump or roll the youngest employee in such employee's
work grouping provided as follows:
1. Employees having previously bid on the classification which
is to be reduced and such employee has six (6) months or
less training, he/she will be the first to be laid off.
Employees who have earned piecework for two (2) consecutive
weeks will be protected by plant seniority.
<PAGE>
2. Inasmuch as both the COMPANY and UNION firmly believe in
the value of employee seniority, Article II, Section 2.02 D
will be implemented as stated for all employees with less
than ten (10) years of seniority. For those affected
employees with ten (10) years or more seniority, the
employees will be allowed to bump the youngest employee
(providing youngest employee has less than ten (10) years
seniority) within any of the classifications within the
various skill groupings regardless of qualifications, with
the exception of Groups VIII and IX. The employee must be
fully qualified as stipulated in Article II, Section 2.02 D
#5 in the L.P.S. in order to be allowed to bump into Group
VIII and IX. The senior employee will have to qualify on the
new job within the determined training period per Section
3.01, or will be placed in either skill Group VII, by way of
bumping the youngest employee within Group VII, or on
surplus labor.
3. If trained in one or more classifications within the work
grouping, the affected employee must roll or bump into a
trained classification. If trained in one or more
classifications within the work grouping, the affected
employee may select the trained classification he/she so
desires according to seniority.
4. If the affected employee is not trained in more than one
classification within his/her work grouping, then the
affected employee may roll or bump the youngest employee
within that grouping without regard to previous
qualifications.
5. If such employee is unable to roll or bump within his/her
work grouping as provided in #3 and #4 above, and the
affected employee is qualified to perform jobs in other
classifications in a different work grouping without
training, such employee may roll or bump the youngest
employee in such classification as provided by Seniority
Rule in A and B above.
6. If such employee is not permitted to remain in his/her work
grouping and does not qualify to roll or bump into any other
work grouping, such employee will be permitted to roll or
bump any employee in Group VII without previous
<PAGE>
qualifications. Provided employee has seniority, as provided
by Seniority Rules in A and B. This applies except for
Repair Work, unless he/she is qualified to do the particular
repair work.
E. The COMPANY has the right to train employees in any particular grouping
provided such employees are the youngest untrained in seniority, and provided
further such employees are physically able to perform such jobs. The term
"not physically able" as used herein shall mean that the subject employee has
a permanent physical disability or condition that prevents him/her from
performing his/her job in a satisfactory manner, and that this fact has been
verified in writing by a physician.
F. The COMPANY will train such senior employees as they request additional
training in new jobs. Payment for training purposes will be at the existing
base rate or labor grade rate of the new or old job, whichever is highest.
When the employee earns piecework, he/she shall receive such.
G. Refreshing of skills shall be paid as follows:
Employees who have been off the job less than thirty (30) days will receive
no training; off the job from thirty (30) to sixty (60) days, will receive
four (4) hours training; sixty (60) days to six (6) months will receive eight
(8) hours training; off the job in excess of six (6) months will receive
twenty-four (24) hours training.
H. Any employee who is trained on a new job may not declare himself or herself
ineligible for such skill until he/she has made such available to the COMPANY
for a minimum of eighteen (18) months.
I. Any employee assigned to his/her secondary skill must be assigned to such for
a minimum of one (1) hour.
J. During layoff, any employee shall have the right to declare himself or
herself eligible for any and all skills he/she has previously qualified for
provided such skills will be available to the COMPANY for a continuous
eighteen (18) month period thereafter.
<PAGE>
K. The borrowed man clause will be available whenever an employee is
taken off his regular classification for the convenience of
COMPANY.
In the event there is any conflict between a provision of the above Article
II and the remainder of this L.P.S., the above shall govern.
2.03 Return from Surplus Labor. If due to Seniority Rules in A and B above,
---------------------------
an affected employee must go on Surplus Labor. The same rules would apply
returning to open jobs.
D-2 1st Priority
D-3 2rd Priority
D-4 3rd Priority
D-5 4th Priority
2.04 Right of Recall
---------------
A. The COMPANY will return the most senior employee on layoff to
such employee's former work grouping when an opening in any one
of the classifications contained therein occurs, provided such
employee can successfully perform the work available. When an
opening occurs in the employee's former classification, he/she
must return to that classification.
B. In the event there is an opening in another skill grouping for
which there are no employees available in such skill grouping on
surplus labor, and provided a senior employee from another skill
group on surplus labor can successfully perform the available
work, such employee will be given an opportunity to return to the
active payroll prior to the hiring of a new employee. When an
opening occurs in the employee's former classification, he/she
must return to that classification.
C. If there are no openings for incentive classifications, but there
is a need in Group VII, the most senior employee on surplus labor
will be given an opportunity to qualify for such work before the
COMPANY hires new employees. Those who have been transferred into
Group VII and are learning will receive either their day work
rate or base rate of the new job, whichever is higher.
<PAGE>
D. An employee with less than three (3) years of seniority does not
have automatic reclaim rights of former classification while on any form of
layoff status. The job that may fall within this category will first be posted
for bid and, in the event there are no bidders, then employee within this
category will return to their former classification.
2.05 Definition and Notice of Layoff. A temporary layoff is when an employee
---------------------------------
is laid off for a period of more than eight (8) hours, but not exceeding five
(5) working days. A permanent layoff is when an employee is laid off for more
than five (5) working days. On a permanent layoff, the COMPANY shall give a
notice of five (5) working days.
During the five (5) day working notice period, the employee who has been
notified that he/she is to be laid off will share the available work in his/her
classification with those who will be retained.
When the hours of work reach a minimum of thirty-two (32) hours per week, a
discussion will be held between the MANAGEMENT and the UNION for the purpose of
determining a layoff.
2.06 Job Bidding. When it is necessary to fill a new job or vacancy, such
-------------
positions shall be posted by MANAGEMENT on bulletin boards for twenty-four
hours.
At the end of the period, the COMPANY will review the applications from the
employees who have submitted their names for consideration and fill the job
opening by transferring the applicants, if any, it deems suitable for the job.
The COMPANY will award the job to the applicant with the most seniority in the
Plant, provided such applicant has more than twelve (12) months seniority.
It is agreed that the successful bidder will remain at his/her new job for a
period of one (1) year before he/she may have the privilege of again bidding on
another new job. It is agreed that the successful bidder will be transferred to
a new job as soon as possible, but in no case will he/she
<PAGE>
remain longer than one (1) month, during which time MANAGEMENT will have the
opportunity to provide a suitable replacement.
A. To be eligible for bidding purposes, an employee must have been
in the employment of SIMMONS for one (1) year or more, have been
certified as qualified on his/her previous job, and have not
successfully exercised the right to bid for at least twelve (12)
months.
B. Employees on the active payroll who are successful bidders on an
open job will receive the base rate of the job they have bid on
during their learning period.
C. In the event a job is posted for bid and there are no bidders,
the most senior employee on lay off who is qualified to perform
the posted job duties will be given an opportunity to take the
open job. It is clearly the responsibility of the employee to
make known to MANAGEMENT his desire to identify the job he
wishes to return to in writing.
2.07 Failure to Succeed on Bid Job
-----------------------------
A. In the event a successful bidder is unable to satisfactorily
learn the new job in accordance with the learning curve, such
employee may return to his/her former job, if available, or if
not available, such employee may bump the least senior employee
in Group VII if his/her seniority permits and such employee is
physically qualified to do the work.
B. Employees may be disqualified for bona fide physical reasons in
which event they will go to surplus labor. The term "bona fide
physical reasons" as used herein shall mean that the subject
employee has a permanent disability or condition that prevents
such employee from performing the job in a satisfactory manner
and such disability is verified in writing by a licensed
physician.
C. In the event an employee twice fails to qualify on a job that was
successfully bid for, such employee shall be disqualified from
further bidding.
<PAGE>
2.08 Disqualification Following a Bump, Roll, or Transfer. An employee placed
-----------------------------------------------------
on a job as the result of a bump, roll, or transfer who fails to qualify in
accordance with the learning curve will be placed on surplus labor.
2.09 Loss of Seniority Rights. An employee's continuous service record shall be
--------------------------
considered to be broken and he/she shall lose all his/her seniority for any of
the following reasons:
A. When the employee resigns.
B. When the employee is discharged.
C. For absence from the EMPLOYER's payroll longer than twelve (12)
continuous months due to layoff. If an employee is !aid off with
less than six (6) months of service, his recall rights and
seniority will remain in effect only as long as his length of
service with the Company.
D. When an employee is recalled to work after a layoff and does not
return to work promptly thereafter without good cause.
E. When an employee falsifies any information given in connection
with his/her application for employment or in connection with a
leave of absence.
F. In order to determine whether an employee returning from a sick
leave, job-connected or not, is physically able to satisfactorily
perform the work without risking further injury to
himself/herself or others, the COMPANY may require such returning
employee to submit medical proof of his/her recovery, including a
physical examination by a COMPANY doctor if desired by the
EMPLOYER.
G. When the employee refuses to accept available work as outlined
above, 2.01, 2.02, 2.03, 2.04, such refusal will terminate the
right of recall and result in the loss of all seniority rights.
2.10 Hiring Rate
-----------
A. New employees will be hired at $5.25 effective October 16, 1988.
B. Progression:
<PAGE>
Incentive employees will receive either the hiring rate or their
incentive earnings, whichever are higher, once they demonstrate
that they can meet quality standards set by the COMPANY.
Hourly workers shall receive an increase of fifteen cents
(15 cents) per hour after completing thirty (30) days with the
COMPANY and shall receive an additional fifteen cents
(15 cents) per hour after completing the 2nd thirty (30) days
with the COMPANY and shall receive labor grade rate for their
respective assignment after completing ninety (90) days with
the COMPANY.
A rate of $7.50 was set for part-time and temporary employees,
and no benefits, holidays or vacations will be paid. At the time
the COMPANY determines that a temporary position is full time, or
at the end of one year (whichever comes first), the temporary job
will be filled in accordance with the contract.
The COMPANY will not have part-time or temporary employees
working if regular employees are not working all scheduled hours
per week unless the regular employees have refused to work on the
job being performed by the part-time or temporary employees.
The COMPANY has agreed that no more than ten (10) incentive
employees will be classified as part-time or temporary. No limit
will be set for the number of non-incentives classified.
2.11 Promotion Out of Bargaining Unit
--------------------------------
In the event that any employee covered by this AGREEMENT is promoted to a
supervisory position or to any other position outside the bargaining unit, and
is thereafter transferred back into a classification within the bargaining unit,
he shall be credited with the amount of seniority which he
<PAGE>
has acquired. He shall not be eligible to replace any employee other than the
employee with the least amount of seniority in the classification in which he
has experience.
2.12 Seniority List. Upon the first anniversary of execution of this
------------------
AGREEMENT, a basic seniority list shall be prepared containing the names of all
employees who are covered by this AGREEMENT and who have been in the employ of
the COMPANY at least one (1) year and the date of the commencement of their
respective employment. Copies of this seniority list shall be posted on the
bulletin boards, and a copy shall be delivered to the UNION. The seniority list
shall be revised from time to time as necessary, and a list of the deletions
shall be furnished to the UNION.
2.13 Change in UNION Representatives. It is agreed that the UNION will keep
----------------------------------
the COMPANY notified at all times of the persons who are officers and Shop
Stewards of the UNION.
<PAGE>
ARTICLE III
-----------
WAGES
Skill Group Classifications and Labor Grade Rate
-------------------------------------------------
Jacksonville Plant
------------------
3.01 The COMPANY and the UNION have agreed upon the following Labor Grade
Rates and the job evaluation assignment to Labor Grade for all employees:
Skill D.W. Labor Grade Effective Weeks of
------------------------- ---------
Group Classification Inc. Grade 10/l6/94 10/16/95 10/15/96 Training
- -------------------- ---- ----- -------- -------- -------- ---------
I Cutting
-------
A. Matts/B.S. Cutter D.W. 6 8.33 8.63 8.93 4
B. Slitter D.W. 6 8.27 8.57 8.87 4
II. Sewing
------
A. Border Machine Op. Inc. 8 8.39 8.64 8.89 10
B. Quilt Machines Inc. 5 8.16 8.41 8.66 8
C. Matts/B.S.
1.Class I Inc. 3 8.02 8.27 8.52 8
Sew & Tape, Hem,
Label & Splice
2. Class II Inc. 3 8.02 8.27 8.52 8
Overcast, Label, Flange,
Quilts
D. Miscellaneous Border
Operations Inc. 2 7.95 8.20 8.45 4
E Double Hemmer Inc. 3 8.22 8.47 8.72 4
III. Mattress
--------
A. Close Mattress Inc. 9 8.80 9.05 9.30 20
B. Hog Ring Inc. 4 8.09 8.34 8.59 6
C. Repair Mattress D.W. 8.66 8.96 9.26 8
IV. Wire Forming
------------
A. Coilers (includes
Ultrasonic) Inc. 8 8.39 8.64 8.89 8
B. HMB Assembly Inc. 4 8.09 8.34 8.59 4
V. Boxspring
---------
A. Staple Coils Inc. 4 8.09 8.34 8.59 4
B. Top Off Const. Inc. 4 8.09 8.34 8.59 4
C. Upholster B.S. Inc. 4 8.09 8.34 8.59 6
D. Frame Const. Inc. 4 8.09 8.34 8.59 4
E. Route Corners Inc. 3 7.97 8.22 8.47 4
VI. Not Applicable to Jacksonville
------------------------------
VII.Indirect Labor
--------------
A. Warehouse D.W. 3 8.50 8.80 9.10 3
B. Inspection & Repair D.W. 3 8.35 8.65 8.95 4
C. Material Handler D.W. 2 8.13 8.43 8.73 2
D. Sweepers D.W. 1 8.03 8.33 8.63 1
E. Packing Machine D.W. 9.45 9.75 10.01 6
VIII Lift Truck Operator
-------------------
D.W 3 9.00 9.30 9.60 4
IX. Maintenance
-----------
A. Machinist
1. One Skill D.W. 10 11.30 11.60 11.90
2. Two Skills D.W. 10 12.80 13.10 13.40
3. Three Skills D.W. 10 14.30 14.60 14.90
B. Mechanic D.W. 10 10.60 10.90 11.20
C. Apprentice See Schedule at Section 8.01
<PAGE>
Qualifications & Training:
A. Machinist - can manufacture and modify parts for machinery on lathe or
milling machine, can perform welding, and can perform electrical work on
110, 220, 440.
B. Mechanic - Can adjust and replace parts on machinery, can perform basic
building maintenance.
C. Apprentice - one who is in the process of learning to adjust and replace
parts on machinery, can perform basic building maintenance. Must complete
the Industrial Mechanics course offered at FCCJ, or an equivalent course
as mutually agreed to by the Company and the Union.
During the implementation of the above classifications for maintenance, a
skills audit will be performed to assess the current level of existing employees
in group IX, and employees will be classified accordingly. No employee will have
any pay taken away from them immediately: however, there will be no pay increase
without attaining the appropriate skill level. Proper certification must be
presented for skill classification. The Company agrees to use a tuition
reimbursement program to assist in training of those employees in Skill Group
IX. The Company will reimburse employee cost with a passing (C) grade. Uniforms
will be furnished to all employees designated in the mechanics classification at
an equally shared cost between the Company and each Employee.
3.02 Incentive Compensation Plans. It is agreed that the COMPANY at any
----------------------------
time may install an incentive compensation plan in any operation where in its
judgment such a plan is practicable. Such incentive compensation plans when
established may be made applicable to individuals or groups of individuals
depending upon the nature of the work, and will provide an earnings opportunity
to experienced average employees twenty-five percent (25%) higher than the labor
grade rate. It is further agreed that the COMPANY may at any time discontinue
and terminate
<PAGE>
all or part of any incentive compensation plan where in its judgment the
incentives have proven unsound.
If a new job is added or there is a change in method (change in method,
means, or processes) so that the operator is required to work on a job for which
there is no standard, he/she shall be paid his/her average hourly rate until a
new standard is submitted for the time he/she spends on such unrated job.
3.03 Work Wait. If, due to absenteeism, mechanical failure, lack of
----------
materials, components, or supplies, an incentive worker is required to wait for
any continuous period of more than ten (10) minutes, after he/she has notified
his/her foreman, he/she shall be compensated at his/her labor grade rate for all
lost time.
An incentive worker's work wait status shall commence only after he/she
notifies his/her own foreman, who shall forthwith record the time. If the
employee's own foreman is not available, he/she shall notify any other foreman.
The COMPANY shall have no liability regarding this paragraph in the event of
a breakdown of power outside the plant, or if inside the plant and not
maintained by the COMPANY, general plant fire, act of God, act of public enemy,
or because of conditions beyond the control of the COMPANY.
If an employee is given another job outside of his/her trained skilled work
group, the employee will receive compensation based on his/her previous
quarterly average hourly rate or his/her incentive earnings on the new job,
whichever is higher, except as provided in Section 2.02, Paragraph G.
3.04 Inventory Work. In selecting the employees needed for inventory
--------------
purposes, preference will be given to day workers. Departmental Supervisors may
assign unqualified day workers to material handling, cleaning, etc.
<PAGE>
Day workers will be paid the rate of their classification for all inventory
work. Whenever pieceworkers are to be used taking inventory, they shall be used
in departments in which they are familiar with the items to be inventoried.
Pieceworkers who are selected will receive their average hourly rate.
3.05 Electric Power Failure. It is agreed that in the event of an electric
----------------------
power failure, employees will stand by their work stations until instructed by
the COMPANY to either go home or to resume work. If the COMPANY within one (1)
hour after the moment of power failure instructs the employees to either go home
or to resume work, the employees will not be paid for the time lost within this
one (1) hour.
If the COMPANY does not instruct any employee within one (1) hour after the
beginning of such power failure to either go home or to resume work, he/she will
be paid for this loss of time in accordance with Section 4.10 of MASTER
AGREEMENT if an incentive worker, and at the regular day work rate of his/her
classification if a day worker for all time lost from the end of the first
minute of power failure to the time he is instructed to either go home or to
resume work.
3.06 Work Hardening Procedures. Any employee who has suffered a work related
-------------------------
injury and has been released by their attending physician to return to work on a
limited status will be placed on a job which they can physically perform without
aggravating the injury. During this time they will be paid the rate of the job
which they perform.
It is expected that the employee will be used in this "work hardening" job
until such time as they are once again able to physically perform their regular
job. Provided that the injury is of a temporary nature and the employee returns
to his/her regular job after a "reasonable and customary recuperation period"
the COMPANY will reimburse the employee for the difference in pay between their
regular rate of pay and the "work hardening" job rate of pay.
Each situation will be reviewed and evaluated by management on an individual
basis.
<PAGE>
3.07 UNION Meetings and Scheduled Overtime. In the event a union meeting
---------------------------------------
conflicts with a COMPANY schedule or work and such meetings cannot be
rescheduled to a more convenient time, it is understood that the employees
desiring to attend the union meeting may do so providing they return from the
meeting directly to the plant and work the hours lost because of the
interruption.
EXAMPLE: The COMPANY schedules a regular work day of eight (8) hours plus
two (2) hours of overtime, or a schedule from 7:00 am. to 5:30 p.m. The UNION
calls a meeting at 3:30 p.m. that runs until 5:30 p.m., the employee who
attended the two (2) hour union meeting must return to the plant and work the
two (2) hours to assure the integrity of the COMPANY schedule. Failure to report
after the meeting and work the two (2) hours will subject the offending employee
to disciplinary action.
3.08 Overtime Agreement.
------------------
A. Within Classification
---------------------
Overtime for work regularly performed within any particular
classification will be assigned as equally as practicable among
qualified employees. Where questions arise, the most senior employee
in this classification shall receive the first right of refusal. If
there is an insufficient number of volunteers available, the COMPANY
may assign the required overtime to the least senior employee until
the required manpower needs are satisfied.
B. Project Labor
-------------
1. Employees who are qualified to do work which is not directly
related to the manufacture or shipping of the product (ie: Project Labor), may
request to be placed on a waiting list for such labor. Said list will be posted
on a quarterly basis and the work will be distributed in as equal a basis as
practicable.
Employees who have performed such work during the week in which the
work falls, including Saturday, will be given preference over those who
have more seniority but who did not perform such work during the week.
If an employee is unavailable to work when required, he/she will
lose their turn.
<PAGE>
2. The rate of pay for work performed outside the regular
classification will be $8.50/hr.
3.09 Borrowed Man When an employee is borrowed to a job that he/she has
------------
previously been qualified on, the following schedule of payment will be in
effect:
1. Production at or above 115% - employee receives average pay.
2. Production between 100% - 114% employee receives 85% of average pay.
3. Production below 100% - employee receives 75% of average pay or base
rate, whichever is higher.
It is understood that downtime customarily paid at base rate, such as
machine down or out of work, will be paid at 75% of average pay or the base
rate, whichever is higher. If refreshing of skills is necessary, such time
will be paid at average pay.
This clause will supersede and prevail over all language in the Master
Agreement pertaining to borrowed man.
ARTICLE IV
----------
WORKING HOURS
4.01 Hours. The normal starting time for 1st shift will be 7:00 am. As customer
-----
requirements demand, the start time can be varied, without penalty of overtime
premium, from between 6:00 am and 8:00 am, with a thirty (30) minute lunch
period without pay. All changes in shift start time will be made with reasonable
notice. ("Reasonable" means by the end of the prior working day). Additional
variance may be made through mutual consent between the Company and the Union
without penalty of overtime premium.
4.02 Shift Differential. All work performed on the second shift shall be paid a
------------------
premium of twenty (20) cents per hour.
<PAGE>
4.03 Rest Period. It is agreed that two (2) rest periods of ten (10) minutes
-----------
will be given during each eight (8) hour shift. One rest period is to be taken
before the normal lunch hour, and the other rest period is to be taken after the
lunch hour.
4.04 Two Shifts. Normal starting time for second shift will be 3:30 pm. As
----------
customer requirements demand, the start time can be varied, without penalty of
overtime premium, from between 2:30 pm and 4:30 pm, with a thirty minute lunch
period without pay.
4.05 Three Shifts. Whenever three shifts are to be worked in any department,
------------
the first shift will begin work at 7:00 a.m. and continue to work until 3:30
p.m. with a thirty (30) minute lunch period without pay; the second shift will
begin work at 3:30 p.m. and continue to work until 12:00 midnight, with a thirty
(30) minute lunch period without pay; the third shift will begin work at 12:00
midnight and continue to work until 7:00 a.m. with a thirty (30) minute lunch
period without pay.
ARTICLE V
---------
PAID HOLIDAYS
5.01 In addition to the seven (7) paid holidays listed in Section 10.01 of
the MASTER AGREEMENT, the following four (4) additional paid holidays will be
granted:
1. Either the day before or the day after Christmas as indicated by the
COMPANY
2. George Washington's Birthday
3. Good Friday
4. Day after Thanksgiving
(The Jacksonville Local elected to take the day after Thanksgiving in
lieu of Employee Birthday pay as listed in the MASTER AGREEMENT,
Article XXIII.)
<PAGE>
5.02 In order to be eligible for the holiday payment, an employee must have
completed his probationary period on the day of the holiday and have worked the
last scheduled work day before and the first scheduled work day after the
holiday, for a minimum of four (4) hours. Payment will be made at eight (8)
times the employee's previous quarterly average hourly rate excluding overtime
premiums if an incentive worker. Hourly workers will be paid eight (8) times
their labor grade rate. New employees (after qualified) will be paid the average
of the last two (2) full weeks if the average is over the base.
5.03 When one of the above holidays falls within an eligible employee's
approved vacation period, and he is absent from work during his regularly
scheduled work week because of such vacation, he shall be paid for such holiday.
5.04 When an eligible employee is on approved leave of absence which does
not exceed thirty (30) days and a holiday occurs during this period, he shall
receive pay for such holiday. (Employee would be eligible for one two-day
holiday, if applicable.)
5.05 In applying this procedure, when any of the above enumerated holidays
falls on Sunday and the day following is observed as the holiday by the State or
Federal Government, it shall be paid as such holiday.
5.06 It is understood that the COMPANY shall notify the UNION thirty (30)
calendar days in advance whether the tenth (10th) paid holiday is the day before
or the day after Christmas Day each year.
ARTICLE VI
----------
VACATIONS
6.01 Pay for each week of vacation will be figured at forty (40) times an
employee's average hourly earning rate for the previous quarter if an incentive
worker, and the employee's regular labor grade rate if paid on an hourly rate,
excluding overtime premiums.
<PAGE>
6.02 Full vacation benefits will be paid to all employees who work at
sometime during the calendar year with the exception of employees who are on a
layoff status or who quit or are discharged. Those employees will be paid on a
prorate basis of 1/12th for each month worked (five (5) working days will be
considered a month worked, 1/12 credit).
A. Any employee returning from an approved leave of absence must work
sixty (60) days to be eligible to take vacation time.
B. If employee returns in December he/she will receive full vacation
benefits for that calendar year provided sixty (60) days are worked
upon return.
C. Employees who have returned from Leave of Absence may sell one week of
vacation with no time restrictions. Requests to sell additional weeks
will be reviewed and granted by Management on an individual basis.
ARTICLE VII
-----------
ABSENTEES - NO REPORT
7.01 Failure to Report Absence. Any employee who does not report for work on
-------------------------
any work day shall report the reason thereof to the Personnel Manager, or his
foreman, within three (3) hours after the beginning of his work shift. This
report is to be made by telephone or written note. The following schedule of
reprimands will prevail for any employee who does not report as per above:
First offense Written reprimand
Second offense One day layoff
Third offense Two days layoff
Fourth offense Discharged permanently
<PAGE>
ARTICLE VIII
------------
MECHANIC APPRENTICE TRAINING
8.01 Mechanic Apprentice Training Schedule and Pay Rate Progression Scale.
--------------------------------------------------------------------
It is understood that the trainee will be paid from the following schedule and
the trainee will also be eligible for any raises given other employees by the
UNION Contract:
Effective: 10/16/94 10/16/95 10/16/96
--------- -------- -------- --------
Hiring Rate 9.00 9.30 9.60
-----------
After 30 day 9.25 9.55 9.90
After 90 days 9.50 9.80 10.20
After 6 months 9.75 10.05 10.50
After 12 months 10.00 10.30 10.80
After 18 months 10.60 10.90 11.20
It is understood that the trainee will be subject to disqualification as a
trainee at any time during the eighteen (18) month training period if the
COMPANY determines insufficient progress is being made. Also, if it is the
decision of the COMPANY that the trainee was not fully trained at the end of the
eighteen (18) month period, the last pay adjustment, raising the employee to the
labor grade rate for mechanic, would be withheld until such time the COMPANY
feels he is fully qualified.
It is understood that if the trainee is off the active payroll for any
length of time, the period of training will be decided by the actual time worked
on the job, not by calendar months.
8.02 Probationary Period. New employees shall be considered probationary
-------------------
employees during the first sixty (60) calendar days of service with the EMPLOYER
and may be discharged for any reason during this period. If retained in
employment after the expiration of the sixty (60) day probationary period, the
seniority rating of new employees shall commence with the first day of their
last employment with the EMPLOYER.
<PAGE>
AGREEMENT between COMPANY and UNION. Before posting any additional split
-----------------------------------
job, the Operations Manager will discuss the need with the President of Local
#425 to make certain that the additional split jobs will not exceed the number
of regular jobs in the given classification.
ARTICLE IX
----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified persons
without regard to race, color, religion, national origin, age, sex, marital
status, sickle cell trait, handicap including AIDS, or veteran status except
where religion, sex, national origin or age is a bona fide occupational
qualification. Our policy relates to all phases of employment, including
recruitment, placement, promotion, training, demotion, transfer, layoff, recall
and termination, rates of pay, employee benefits and participation in all
SIMMONS sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial, ethnic
or religious harassment. Unwelcome sexual advances, requests for sexual favors,
and other verbal or physical conduct of a sexual nature or verbal or physical
conduct directed at a person's race, color, religion, sex, national origin, age,
handicap or veterans status may constitute harassment. Claims of harassment
which come to our attention may result in discipline up to and including
discharge. At any time, if you believe that you have been harassed, you must
report the harassment to your immediate Supervisor or your Human Resources
Manager. A confidential investigation will be conducted.
ARTICLE X
---------
DURATION AND TERMINATION
10.01 This Supplement AGREEMENT shall be in full force and effect for three
(3) years, from October 16, 1994, until October 15, 1997.
<PAGE>
10.02 The parties agree that this AGREEMENT, together with the MASTER
AGREEMENT of even date, constitutes the entire AGREEMENT between the parties,
and at no time during the life of this AGREEMENT shall either party have any
obligation to negotiate or bargain with the other party, with respect to any
points not covered by this AGREEMENT, and as to matters covered by this
AGREEMENT, only in the manner and to the extent herein provided.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
The United Steel Workers of America, SIMMONS COMPANY
A.F.L., C.I.O., C.L.C.
JACKSONVILLE, FLORIDA
(Upholstery Industries Division)
Through its Agent, Local Union #425
By /s/ Foster Turner, Jr. /s/ Gary C. Davis
--------------------------------- -------------------------
/s/ Foster Turner, Jr. /s/ R. Barton 12/8/94
--------------------------------- -------------------------
--------------------------------- -------------------------
--------------------------------- -------------------------
--------------------------------- -------------------------
Countersigned at Philadelphia, Pennsylvania.
This 8th day of Dec., 1994
--- --- --
The United Steel Workers of America, A.F.L., C.I.O, C.L.C
(Upholstery Industries Division)
By /s/ Ernest F. Shorn
---------------------------------------------
Director of Upholstery Industries Division
<PAGE>
LETTER OF AGREEMENT
BETWEEN
UIU LOCAL 425 AND SIMMONS COMPANY
On this date it was agreed to amend LPS Section 3.06, Work Hardening Procedures
to read as follows:
Any employee who has suffered a work related injury and has been released by
their attending physician to return to work on a limited status will be placed
on a job which they can physically perform without aggravating the injury.
During this time they will be paid the rate of the job which they perform.
It is expected that the employee will be used in this "work hardening" job until
such time as they are once again able to physically perform their regular job.
Provided that the injury is of a temporary nature and the employee returns to
his/her regular job after a period of thirty days, the Company will reimburse
the employee for the difference in pay between their average rate of pay and the
work hardening job rate of pay.
The initial thirty day period may be extended by an additional thirty days in
extenuating circumstances. This additional time will be evaluated by management.
Make-up pay is intended to be used in instances where limited duty status is
short term. Should the period of limited duty run past 30 days (or 60 days with
management agreement) with no return to full duty, there will be no make-up pay
given. There will be no early payment of make-up pay even in hardship cases or
under extenuating circumstances.
Signed this 25th day of January, 1996
/s/ Foster Turner, Jr. /s/ John W. Cannon
- ------------------------------- -------------------------------
Foster Turner, Jr. John W. Cannon
President Operations Manager
USWA/UIU Local 425 Simmons Jacksonville
<PAGE>
KANSAS CITY PLANT
SUPPLEMENT
LOCAL #173
<PAGE>
KANSAS CITY INDEX
ARTICLE ITEM
PAGE
I RECOGNITION AND UNION SECURITY . . . . . . . . . . . . . . 3
1.01 Employees Covered . . . . . . . . . . . . . . . . . . 3
1.02 Check Off . . . . . . . . . . . . . . . . . . . . . . 3
1.03 Plant Committee . . . . . . . . . . . . . . . . . . . 3
II SENIORITY
2.01 Description . . . . . . . . . . . . . . . . . . . . . 4
2.02 Right of Recall . . . . . . . . . . . . . . . . . . . 7
2.03 Probationary and Training Period . . . . . . . . . . 8
2.05 Discontinuance of Departments . . . . . . . . . . . . 9
2.06 Restoration of Discontinued Departments . . . . . . . 9
2.11 (A) Determination of Layoffs . . . . . . . . . . . .10
2.11 (B) Furlough . . . . . . . . . . . . . . . . . . . .10
2.12 Layoff Notice . . . . . . . . . . . . . . . . . . . .10
2.14 Job Bidding . . . . . . . . . . . . . . . . . . . . .11
2.15 Active Seniority List . . . . . . . . . . . . . . . .12
III WORKING HOURS
3.01 Shift Schedule . . . . . . . . . . . . . . . . . . . 12
3.03 Rest Period . . . . . . . . . . . . . . . . . . . . 13
3.04 Overtime Notice . . . . . . . . . . . . . . . . . . 13
3.05 Overtime . . . . . . . . . . . . . . . . . . . . . . 13
IV WAGES
4.02 Training and Hiring Rates . . . . . . . . . . . . . 14
4.05 Work Wait . . . . . . . . . . . . . . . . . . . . . 15
4.06 Rate for Reporting Pay . . . . . . . . . . . . . . . 16
4.07 Computing Average Hourly Rate . . . . . . . . . . . 16
4.09 Team Operations . . . . . . . . . . . . . . . . . . 16
4.10 Shift Premium . . . . . . . . . . . . . . . . . . . 17
V PAID HOLIDAYS
5.08 Birthday - Floating Holiday . . . . . . . . . . . . 18
5.09 Personal Days . . . . . . . . . . . . . . . . . . . 19
VI PAID VACATION . . . . . . . . . . . . . . . . . . . . . . 20
VII LEAVE OF ABSENCE . . . . . . . . . . . . . . . . . . . . . 21
VIII GRIEVANCE PROCEDURES
8.01 Grievance Procedure . . . . . . . . . . . . . . . . 21
<PAGE>
IX EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . . . . . 22
X 10.01 DURATION AND TERMINATION OF SUPPLEMENT . . . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 23
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . . . 24
SCHEDULE B . . . . . . . . . . . . . . . . . . . . . . . 25
ADDENDUM . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
KANSAS CITY SUPPLEMENT
----------------------
AGREEMENT
THIS AGREEMENT made this 16th day of October, 1994, by and between
SIMMONS COMPANY, Kansas City, Missouri, hereinafter referred to as the
EMPLOYER, and THE UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C.
(Upholster Industries Division), hereinafter referred to as the
UNION, acting through its agent, Local Union #173 for and on behalf of
itself and the employees of said COMPANY at its plant located in Kansas
City, Missouri, supplementing the MASTER MULTI-PLANT WORKING
AGREEMENT of even date between the same parties and others.
ARTICLE l
---------
RECOGNITION AND UNION SECURITY
1.01 Employees Covered. The term "Employees" shall not include
------------------
executives, office employees, timekeepers, supervisors, machinists,
watchmen, or any persons whose duties are plant or office MANAGEMENT.
1.02 Check Off. The deduction of initiation fees and regular UNION
---------
dues as certified by the UNION in writing to the EMPLOYER, shall be
made from the second pay check of each month and remitted to the
Financial Secretary of the local UNION within five (5) days.
1.03 Plant Committee. A Plant Committee not to exceed five (5) in
---------------
number is to be comprised of the duly authorized and elected
representatives of the factory employees, members of the Upholsterers'
International UNION, Local #173.
<PAGE>
ARTICLE II
----------
SENIORITY
2.01 Description
-----------
A. The COMPANY recognizes the principle of seniority (last hired
will be the first laid-off) among its employees and agrees that all layoffs
occasioned by lack of work and subsequent recalls from layoff shall be by
seniority as provided below.
B. When increases or decreases in the work force become necessary,
they shall be made on the basis of seniority within work groupings.
C. Laid-off employees who have seniority rights will be recalled in
accordance with their seniority, as described in Section 2.02.
D. In the event a layoff is necessary, the reduction will be by
classification and seniority, giving the affected employee the right to bump or
roll the youngest employee in such employee's work grouping provided as
follows:
1. If trained in one or more classifications within the work
grouping, the affected employee must roll or bump into a
trained classification If trained in more than one
classification within the work grouping, the affected employee
may select the trained classification he/she so desires
according to seniority.
2. If such employee does not exercise his/her right to roll or
bump within his/her work grouping as provided in #1 and #2
above, and the affected employee is qualified to perform jobs
in other classifications in a different work grouping without
training, such employee may roll or bump the youngest employee
in such classification as provided by seniority rule in A and
B above.
<PAGE>
3. If such employee is not permitted to remain in his or her work
grouping and does not qualify to roll or bump into any other work
grouping, such employee will be permitted to roll or bump the
youngest employee in Group VII without previous qualifications
as provided by seniority in A and B above, this applies except
for repair work and biller/loader unless he/she is qualified
to do the particular work.
E. The COMPANY has the right to train employees in any particular
grouping provided such employees are physically able to perform
such jobs.
F. The COMPANY will also train such senior employees as they request
additional training in new jobs. We agree that if volunteers are
available the COMPANY will train a minimum of one additional skill
per work grouping in each six (6) month period.
G. The COMPANY will train both senior employees (where volunteers are
available) and junior employees in a work grouping on a one-to-one
ratio. Trainees in a work grouping will be maintained in a
one-to-eight ratio, except for new hires required for production
volume increases.
H. Payment for training purposes will be at the base rate of the new or
old job, whichever is higher. When the employee earns incentive
he/she shall receive such. Any earnings made during this training
period will not be used in the computation of the employee's
quarterly average.
I. Refreshing of skills:
---------------------
Employees who have been off the job:
0 - 90 days No training allowance
91 - 6 months
or more 4 hours at average
<PAGE>
J. All recalls from layoff will be made following the rules
in 2.01 in reverse order from layoff:
D-1 1st priority
D-2 2nd priority
D-3 3rd priority
K. Temporary Workers:
------------------
Temporary help may be used for positions temporarily
vacant due to sick leave, vacation, or unfilled after
posted for bids. Temporary, help may also be used for
short term projects if no other permanent labor is
available. No temporary labor may be used if there are
employees on layoff and they are available to work in the
short term position. Temporary labor may fill a position
for up to 60 working days. Temporary employees are
ineligible for fringe benefits, pension, holidays
or paid vacations.
KANSAS CITY WORK GROUPINGS
- --------------------------
I. Cutting
-------
A. Mattress, Box Spring
B. Slitter
II. Sewing
------
A. Mattress, Box Spring, SLP
B. Overcast and Label
C. Hemming
D. Quilt Machines
E. Border Room
III. Mattress
--------
A. Close Mattress
B. Hog Ring
C. Tuft
D. Pack Matts & Box Springs
<PAGE>
IV. Deleted
V. Box Spring
----------
A. Top-Off Assembler
B. Pre-Load
C. Upholster Box Spring
VI. Beautyrest Coil Assembly
A. H.M.B. Operator
B. Ultra-Sonic Operator
VII. Indirect Labor
--------------
A. Inspection
B. Material Handlers
C. Shipping
D. Receiving
E. Sweepers
F. Repair
2.02 Right of Recall. In the event of layoffs, any employee laid-off
---------------
for lack of work or for other reasons beyond his/her control, which, of
course, shall not include employee's own incompetency, shall have his
name placed on a seniority list consistent with Section 2.01, paragraphs
A and B above. All rehiring shall be done from this list and those at
the top of the list by reason of seniority within work groupings shall
be hired first.
A. The COMPANY will return the most senior employee on layoff to
such employee's former work grouping when an opening in any
one of the classifications contained therein occurs, provided
such employee can successfully perform the work available.
When the opening occurs in the employee's former classifi-
cation, he/she must return to that classification.
B. In the event there is an opening in another skill grouping
for which there are not employees available in such skill
grouping on surplus labor and provided a senior employee
from another skill grouping on surplus labor can successfully
perform the
<PAGE>
available work, such employee will be given an opportunity to
return to the active payroll prior to the hiring of a new
employee. When an opening occurs in the employee's former
classification, he/she must return to that classification.
C. If there are no openings for incentive classifications, but
there is a need in Grouping VII, the most senior employee on
surplus labor will be given an opportunity to qualify, for
such work before the COMPANY hires new employees. Those
who have been transferred into Group VII and are learning
will receive either their day work rate or base rate of the
new job, whichever is higher.
A copy of the seniority list as kept by the COMPANY shall be
furnished to the UNION, and in the event of any changes in
such list, the UNION shall be promptly advised.
2.03 Probationary and Training Period. New employees shall be
----------------------------------
considered probationary employees during the first ninety (90) calendar
days (incentive employees) and the first sixty (60) calendar days
(non-incentive employees) of service with the EMPLOYER and may be
discharged for any reason during this period with or without cause. If
retained in employment after the expiration of the probationary period,
the seniority rating of new employees shall commence with the first day
of their last employment with the EMPLOYER.
New employees shall receive a training period of the first ninety
(90) calendar days (incentive employee) and the first sixty (60) days
(non-incentive employees) and perform satisfactory work by meeting
inspection standards in order to maintain employment. Those who do not
show progressive improvement during the training period will be
discharged.
2.04 An employee can change shifts if a job opens up on a shift he
desires in the same job classification. Then, if the employee wants the
job that has opened up, he/she must bid for the opened job and will be
given it provided he/she is the senior bidder from that classification.
Any employee
<PAGE>
making a choice of shifts must remain on that shift for at least six (6)
months before he/she is eligible again to make a choice of shifts.
2.05 Discontinuance of Departments. In the event of a
------------------------------
discontinuance of any department or operation, the
employees affected with the most seniority must be
transferred to another department where best qualified, as
determined by MANAGEMENT and Plant Committee
2.06 Restoration of Discontinued Departments. If a discontinued
---------------------------------------
department or operation is restored within one (1) year,
employees affected by transfer shall have the right to
return to their former job, provided employee has not
(by his/her own choice) exercised his/her seniority right to
acquire another job.
2.07 A UNION representative returning from a leave of absence shall
be returned to his/her former classification if his/her
seniority permits his/her return. If said classification is
not in existence at that time, he/she shall replace the
employee with the least seniority in the plant
2.08 In the event a layoff is necessary in any department or branch
of work, whether incentive, hourly work or whatever, the
layoff shall be made in the following manner: the number of
employees to be laid-off shall be determined; then that many
of the youngest employees in point of seniority in the plant
shall be laid-off, whether there is a shortage of work for
their jobs or not. If the work shortage exists in some
department or departments, other than those where the layoffs
are made, then the junior employees in point of seniority
in the department where the work shortage exists shall be
given their choice of the vacated jobs according to their
respective seniorities. All layoffs shall be made strictly
in accordance with the seniority rule as stated in the
commencement of this Article.
2.09 Whenever a layoff occurs in any given job classification, the
employee laid-off shall follow the rules as stated in 2.01,
paragraph D above.
<PAGE>
2.10 Any employee who secures a leave of absence for illness in
accordance with Section 7.03 of the MASTER MULTI-PLANT WORKING
AGREEMENT shall be entitled to receive his/her own job back if the
employee returns to work within twelve (12) months of the commencement
of his/her leave of absence, providing his/her physical capability has
not been impaired.
After twelve (12) months, the employee on sick leave shall have the
right to return to a job in line with his/her seniority and physical
ability. It is understood that if an employee returns after a twelve
(12) month period, his/her bidding rights are restored.
2.11(A) Determination of Layoffs. When the hours of work fall
-------------------------
below thirty-two (32) hours per week, the COMPANY will lay off a
sufficient number of employees in order to provide thirty-two (32) hours
or more per week for the remaining group, provided the request has been
made and approved by the UNION Bargaining Committee Vacation weeks and
inventory week shall not be computed in the two week period.
2.11(B) Furlough. Furlough - When a temporary reduction in a
--------
Classification becomes necessary due to lack of orders the company will
seek volunteers for furlough, starting with the most senior employee by
shift in the classification. If there are no volunteers, junior
employees who are not needed to fill the daily production schedule will
be placed on furlough. The furloughed employees will be eligible for
unemployment benefits if otherwise eligible and receive U.I.U.
health/welfare benefits. Employees must continue to pay their portion of
the health benefit contribution while on furlough. A furlough may last
up to eight weeks and be a minimum of one week. For record keeping
purposes the President of Local 173 or his appointee will be notified of
such furlough by letter, signed by Operations or Human Resources
Manager.
2.12 Layoff Notice. It is mutually agreed here on temporary layoffs,
-------------
no less than four (4) working hours notice will be given. On permanent
layoffs, ample notice is to be given, but in no event will the notice of
a permanent layoff be less than one (1) week.
<PAGE>
- A temporary layoff is when an employee is laid-off for a period not
exceeding seven (7) days (one calendar week).
- A permanent layoff is when an employee is laid-off for more than one
(1) calendar week
2.13 All transfers of employee(s) for more than an eight (8) hour
period shall be discussed by Plant Committee and MANAGEMENT during the
second eight (8) hour period of such transfer. Any employee must be given
a thirty (30) days fair trial on a new job before being declared
incompetent by MANAGEMENT and Plant Committee.
2.14 Job Bidding. Any employee with at least twelve (12) months
-----------
seniority shall be entitled to bid on any new or vacated job. Notice of
such new or vacated jobs shall be posted on the bulletin board by the
COMPANY for a minimum of twenty-four (24) hours, excluding Saturday and
Sunday. People on surplus labor or on layoff will have forty eight (48)
hours to bid on job. Any person accepting the posted job must remain on that
job for twelve (12) months. Rule of seniority shall apply. Any person
accepting the posted job will be given a trial period of at least thirty (30)
days provided he/she shows progressive improvement, and failing to do so,
he/she shall be disqualified, in which event he/she may bump in accordance with
Article II above, the least senior employee in Group VII, provided his/her
seniority so permits. Any person who is the successful bidder for an open job
and refuses to accept the job is ineligible to bid for a period of one (1)
year. It is understood that employee(s) who are on vacation at the time a job
is posted for bid may have his/her name entered for bid by the Shop Steward.
The successful bidder shall be announced within two (2) working days
after the expiration of the posting period. The employee assigned the
new job shall be transferred to the bid job employee is assigned a new
job, he/she will be allowed reasonable time for training.
In the event a job is posted for bid and there are no bidders, the
most senior employee on layoff who is qualified to perform the posted
job duties will be given an opportunity to take the open
<PAGE>
job. It is clearly the responsibility of the employee to make known to
MANAGEMENT his desire to identify the job he wishes to return to in
writing.
2.15 Active Seniority List. The COMPANY will post on the bulletin
---------------------
board the active seniority list of employees and will revise same
quarterly.
ARTICLE III
-----------
WORKING HOURS
3.01 Shift Schedule
--------------
(A) Normal starting time for first shift will be 7:00 a.m until
3:30 p.m. As customer requirements demand, the start time
can be varied from between 5:00 am. and 9:00 a.m., with a
thirty (30) minute lunch period without pay from 12:00 noon
to 12:30 p.m.
(B) Normal starting time for second shift will be 4:00p.m. until
12:30a.m. As customer requirements demand the start time can
be varied from between 2:00p.m. and 6:00p.m. with thirty (30)
minutes lunch period without pay from 8:30p.m. to 9:00p.m.
(C) If three shifts are required, the first will be from 7:00a.m
until 3:00p.m. the second will be from 3:00p.m. until
11:00p.m.; and the third will be from 11:00p.m until
7:00a.m. Each shift will have a thirty (30) minute lunch
period.
(D) Any deviation from the time set out as starting and quitting
time shall be made by AGREEMENT between the UNION GRIEVANCE
COMMITTEE and PLANT MANAGEMENT.
(E) If the Company starts the first shift at 9:00 a.m. the shift
will work a maximum of 9 hours. If the Company starts the
shift between the hours of 5:00 a.m. to 8:00 a.m. Kansas City
Plant Supplement - Addendum Item 1 - Overtime will apply. The
<PAGE>
Company has agreed that if a Saturday is scheduled, to work a
maximum of 10 hours on Friday by seniority. The Company has
agreed not to start on half hours.
(F) Due to the differences of operations at each of the local
plants, the parties agree that if there is a conflict between a
provision of this Article of the MMPWA and any provision of a
local Plant Supplement, the Local Plant Supplement shall
govern notwithstanding any other provision of the MMPWA or
the Multi-Plant Bargaining Procedures Contract to the contrary.
3.02 Whenever three (3) shifts are necessary, each shift shall be
paid for eight (8) hours work with the thirty (30) minute lunch period
included. Pieceworkers shall be paid at their average hourly earnings
rate and hourly workers at their rate for the thirty (30) minute lunch
period.
3.03 Rest Period. All employees will be allowed two (2) ten (10) minute
-----------
rest periods daily.
3.04 Overtime Notice. When MANAGEMENT desires any employee to work
---------------
overtime, twenty-four (24) hours notice will be given except in those
cases of emergency. Pursuant to the scheduling of overtime, PLANT
MANAGEMENT will make a realistic evaluation of its production needs,
delivery time and customer needs.
3.05 Overtime. All work performed in excess of forty (40) hours in
--------
one (1) week or eight (8) hours in one (1) day shall be considered
overtime and shall be compensated at the rate of time and one-half at
average hourly rate if on piecework, and time and one-half the regular
hourly rate if on hourly paid basis.
All work performed on Saturday shall be compensated at one and one-
half times the regular rate of pay.
All work performed on Sunday shall be compensated at double the
regular rate of pay.
<PAGE>
All work performed on New Year's Day, Martin Luther King, Jr's
Birthday, Good Friday, Memorial Day, Fourth of July, Labor
Day, Thanksgiving Day, the day following Thanksgiving Day, the
last working day before Christmas, Christmas Day, and the day
following Christmas shall be compensated at the rate of double
time.
3.06 The COMPANY agrees, insofar as feasible, to divide reasonably
equally the available work among qualified employees who constitute the
various classifications.
ARTICLE IV
----------
WAGES
4.01 The EMPLOYER and the UNION have agreed upon the basic rates of
classifications for pieceworkers as set forth in Schedule "A" and the
hourly rates of classifications for hourly workers as set forth in
Schedule "B", which are hereunto annexed and made a part hereof.
4.02 Training and Hiring Rates
-------------------------
Training
Rate for
Hiring Hiring Incentive
Rate Rate (Part Time) Workers
---- ---- ---------- -------
$6.00 $6.50* $6.00
*Increased to Rate of Classification in Schedule "B" after thirty (30)
calendar days.
The hiring rate described is minimal. The parties can adjust this
rate as needed depending on experience of applicant to any point between
the minimum hiring rate and the base rate of the classification.
There shall be an increase of five cents (5 cents) per hour for every
thirty (30) days for incentive workers until they reach the training
rate. Hourly workers shall be increased every thirty (30) days on a pro-
rata basis for the difference between the minimum hiring rate and the
hourly
<PAGE>
worker's classification rate, so that the classification rate will be
reached by the end of three (3) months, except for the following
classifications:
Time Required
Classification to Reach Rate
-------------- -------------
Lead Employee - Wood Four (4) months
Cutters Three (3) months
Set-up Employee Six (6) months
Janitors Ten (10) days
Stock Handlers One (1) month
4.03 No time sheets, incentive work envelopes, or time clock work
cards shall be changed by the COMPANY without notifying the employee(s)
affected, and/or the Department Steward, giving the reason for such
change.
4.04 When there is no work available on an incentive job, and an
employee is given work in the plant, he/she will receive the basic rate
of pay for the job to which assigned, or his/her individual basic rate
of pay, whichever is higher.
4.05 Work Wait. In the event that incentive workers are required to
---------
wait for a period of ten (10) minutes or more, non-cumulative time, they
will be compensated for all time lost due to waiting at eighty-five
percent (85%) of their average rate of pay. Should these incentive
workers be assigned to another job while in such work wait status, they
will receive one hundred percent (100%) of their individual hourly rate.
It is agreed that the COMPANY shall have no liability regarding the
above provisions in the event of a breakdown of power outside the Plant
or if inside of Plant and not maintained by the COMPANY, General Plant
Fire, Act of God, Act of Public Enemy, or because of conditions beyond
the control of the Company.
<PAGE>
It is agreed that in the event of one of the occurrences listed in
the preceding paragraph, employees will stand by until instructed by the
COMPANY to go home or to return to work. If the COMPANY, within one (1)
hour after the moment of the occurrence, instructs employee to go home
or to return to work, the employee will not be paid for time lost within
this one(1) hour. If the COMPANY does not instruct any employee within
one (l) hour after the beginning of one of the above occurrences to go
home or to return to work, he/she will be paid his/her average hourly
earnings as computed in Section 8.05 of the MASTER MULTI-PLANT WORKING
AGREEMENT if an incentive worker, and at the hourly day work rate of his
classification if a day worker for all time lost from the end of the
first minute of one of the above-listed occurrences to the time he/she
is either instructed to go home or to return to work.
4.06 Rate for Reporting Pay. Implementing 4.10 of the MASTER
-----------------------
MULTI-PLANT WORKING AGREEMENT, reporting pay shall be paid at the
employee's average hourly rate of pay if an incentive worker, or his
regular hourly rate of pay if an hourly worker.
4.07 Computing Average Hourly Rate. Implementing 8.05 of the MASTER
------------------------------
MULTI-PLANT WORKING AGREEMENT, the COMPANY will compute the average
hourly rate of employees following each quarter, and furnish a copy of
same to the UNION within two (2) weeks, and become effective immediately.
4.08 When an inexperienced or borrowed employee(s) is used in a
team, the other member(s) of the team shall receive their average rate
of pay or incentive, whichever is higher, until members of the team make
basic rate of the classification for five (5) consecutive days.
4.09 Team Operations. In the event one (1) member of a two (2)
---------------
member team is absent and the remaining member works with a substitute
on incentive and such team is averaging twenty-six cents (.26) per hour
or more below the remaining partner's normal earnings, such teams and
earnings will not be reflected in the average rate computation unless
the substitute remains for a continuous period in excess of five (5)
working days.
<PAGE>
4.10 Shift Premium. Employees assigned to work on the second shift
--------------
shall be paid a shift premium of fifty (50) cents per hour.
This shift premium was negotiated in exchange for flexible
hours as described in Article III - WORKING HOURS. The parties
agree that if there is a conflict between a provision of
Article III of this local Plant Supplement and the MMPWA, the
Local Plant Supplement shall govern notwithstanding any other
provision of the MMPWA or the Multi-Plant Bargaining
Procedures Contract to the contrary. Should any provision
of the MMPWA prevail over Article III of this local plant
supplement, both parties agree that the additional shift
premium will be forfeited.
ARTICLE V
----------
PAID HOLIDAYS
5.01 In addition to the seven (7) paid holidays listed in Section 10.01
of the MASTER MULTI-PLANT WORKING AGREEMENT, the following four (4)
additional paid holidays shall be celebrated in accordance with Article
X of the MASTER MULTI-PLANT WORKING AGREEMENT:
Good Friday
Day following Thanksgiving Day
Last working day before Christmas
Day following Christmas Day
5.02 Holiday pay will be paid to employees provided they meet all of
the following conditions:
(a) The employee has thirty (30) days or more continuous service
with the COMPANY as of the date of the holiday, and
(b) the employee would otherwise have been scheduled to
work on such day, if it had not been observed as a holiday,
and
<PAGE>
(c) The employee must have worked the last scheduled work day
prior to and the next scheduled work day after such holiday.
5.03 When a holiday falls on Friday, the failure of an eligible
employee to report for work on the following Saturday shall not result
in his forfeiture of such holiday pay.
5.04 When a holiday falls on Saturday, eligible employees shall
receive holiday pay, provided they worked on the last preceding
scheduled work day prior to and the next scheduled workday after such
holiday.
5.05 Any of the paid holidays that fall within the period of fifteen
(15) days immediately prior to the return of an employee from sick
leave, or during the fifteen (15) day period immediately following the
departure of an employee on a sick leave, will be paid to such employee
if he/she is otherwise eligible despite his her absence. The COMPANY may
require proof that legitimate illness caused the absence.
5.06 When an eligible employee is on an approved leave of absence
and returns to work following the holiday, but during the week in which
the holiday falls, he/she shall be eligible for holiday pay.
5.07 Employees who have accepted such holiday work assignment and
then fail to report for and perform such work, without reasonable cause
acceptable to MANAGEMENT, shall not receive pay for the holiday.
5.08 Birthday - Floating Holiday. It is agreed that employee may
----------------------------
select the birthday holiday currently provided in the MASTER MULTI-PLANT
WORKING AGREEMENT, Section XXIII, as a floating holiday. Such selection is
contingent upon the employee giving the COMPANY at least five (5) days
advance notice of the day which he/she desires to be off and approval of
the plant manager. Selection will be administered so that no more than
one employee in the same classification
<PAGE>
will be off the same day. In the event more than one (1) employee
desires off the same day, seniority will determine which employee has
preference.
5.09 Personal Days- Paid and Non-Paid.
---------------------------------
(A) Personal Day - Paid.
A personal day will be paid to employees provided they meet
all of the following conditions:
(1) The employee has one (1) or more continuous years seniority
(2) One employee per classification will be granted a
personal day at any given time with twenty-four (24)
hours advance notice.
(3) If the employee decides to apply such paid personal day
as a sick day, all call-in guidelines of the attendance
policy must be met to be eligible to be accounted as a
sick day.
(B) Personal Day - Non Paid.
A personal day will be granted to employees provided they meet
all of the following conditions:
(1) The employee has one (1) or more continuous years
seniority.
(2) One employee per classification will be granted a
personal day at any given time with twenty four (24)
hours advance notice.
(3) If the employee decides to apply such personal day as a
sick day, all call-in guidelines of the attendance policy
must be met to be eligible to be accounted as a sick day.
(C) One paid personal day and one unpaid personal day was negotiated in
exchange for flexible hours as described in ARTICLE III WORKING HOURS.
The parties agree that if there is a conflict between a provision of
this article or of Article III of this local plant supplement and the
MMPWA, the Local Plant Supplement shall govern notwithstanding any other
provision of the MMPWA or the Multi-Plant Bargaining Procedures Contract
to the contrary. Should any provision
<PAGE>
of the MMPWA prevail over Article III of this local plant supplement,
both parties agree that the paid and unpaid personal days will be
forfeited.
ARTICLE VI
----------
PAID VACATION
6.01 All employees covered by this AGREEMENT who have continuous
seniority for twelve (12) months shall receive vacation benefits by
classification, by seniority as set forth in the MASTER MULTI-PLANT
WORKING AGREEMENT. Each week of vacation shall be computed on the
employee's last published quarterly average, straight time hourly
earnings if an incentive worker, or the employee's current rate of pay
if an hourly worker, times forty (40) hours, including shift premium.
6.02 All vacations are to be taken at a time designated by the
COMPANY. The COMPANY will, insofar as efficient operating conditions
permit, endeavor to comply with eligible employees' requests filed
(including those eligible for three (3) weeks) and such requests shall
be given consideration by classification in accordance with the
employee's seniority.
6.03 If the vacation is on a plant shutdown basis, it is agreed that
the cut-off date for service record will be October 1. If the vacation
is on a staggered basis, an employee's anniversary date of hire will be
used to determine the length of each employee's vacation
6.04 Any employee hired prior to October 1 will receive vacation pay
in accordance with Section 6.01, provided he/she is employed at the time
of the vacation period.
6.05 COMPANY agrees that an employee will not be required to work
Saturday or Sunday immediately preceding the start of his/her vacation.
6.06 Employees reduced from their classification and transferred to
a vacation replacement job will be paid the higher of their averages or
the vacation replacement rate for vacations and
<PAGE>
holidays for the balance of the quarter during which their averages
current at the time of the reductions are in effect.
ARTICLE VII
-----------
LEAVE OF ABSENCE
7.01 Employees returning from leave of absence must be given a job
in their former classification in line with their seniority and must
give the COMPANY three (3) working days prior notice of the date
employee will return to work. If there is no opening when such employee
returns, the employee shall take the job of the youngest employee in the
plant from the point of seniority.
ARTICLE VIII
------------
GRIEVANCE PROCEDURE
8.01 Grievance Procedure. In the event of any complaint or grievance
-------------------
arising under the terms and provisions or of any differences between the
parties as to the interpretation and application of this AGREEMENT, they
shall be, by the parties, settled and determined exclusively by the
grievance and arbitration machinery provided in Article III Master
Multi-Plant Working Agreement
8.02 Union/Management Meetings - Method of Payment
---------------------------------------------
(A) Union officials will be paid at their previous quarter's average
hourly rate, as computed in Section 8.08 Of The Master, for conference
with the management requested by the Company. The Union official(s)
and management representative(s) must sign off on daily time sheet in
order for such payment to occur.
(B) Time spent in conference with the Company requested by the Union such
as grievances and arbitrations, negotiations, or subsequent hearing
before Federal or Governmental Agencies pertaining to such contract
shall be compensated for by the Union.
<PAGE>
ARTICLE IX
----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to qualified
persons without regard to race, color, religion, creed, national origin,
age, sex, ancestry, handicap, HIV infection, AIDS or AIDS related
complex, or veteran status except where religion, sex, national origin
or age is a bona aide occupational qualification. Our policy relates to
all phases of employment including recruitment, placement, promotion,
training, demotion, transfer, layoff, recall and termination, rates of
pay, employee benefits and participation in all SIMMONS sponsored
employee activities.
We are opposed to all forms of harassment including sexual, racial,
ethnic or religious harassment. Unwelcome sexual advances, requests for
sexual favors, and other verbal or physical conduct of a sexual nature
or verbal or physical conduct directed at a person's race, color,
religion, sex, national origin, age, handicap or veteran status may
constitute harassment. Claims of harassment which come to our attention
may result in discipline up to and including discharge. At any time, if
you believe that you have been harassed, you must report the harassment
to your immediate Supervisor or your Human Resources Manager. A
confidential investigation will be conducted.
ARTICLE X
---------
DURATION AND TERMINATION OF SUPPLEMENT
10.01 This supplemental AGREEMENT shall be in full force and effect
for three (3) years, from October 16, 1994 until October 16, 1997.
10.02 The parties agree that this AGREEMENT together with the MASTER
MULTI-PLANT WORKING AGREEMENT, constitutes the entire AGREEMENT between
the parties, and at no time during the life of this AGREEMENT shall
either party have any obligation to negotiate or bargain with the other party,
with respect to any points not covered by this AGREEMENT, and as to the matter
covered by this AGREEMENT, only in the manner and to the extent herein
provided.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto set their hands and seals
as hereinbefore stated.
The United Steel Workers of America, SIMMONS COMPANY
A.F.L., C.I.O., C.L.C. (Upholstery
Industries Division)
Through its Agent, Local Union #173
By /s/ Greg Crane /s/ James Tobin
------------------------ ----------------------
/s/ Chester Martin /s/ Lucy A. Williams
------------------------ ----------------------
------------------------ ----------------------
/s/ Greg Crane /s/ R. Barton 12/9/94
------------------------ ----------------------
------------------------ ----------------------
This 16 day of October , 1994
---- --------- ------
The United Steel Workers of America, A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
By /s/ Ernest F. Shorn
------------------------------------------
Director of Upholstery Industries Division
<PAGE>
KANSAS CITY Revised: 10/25/94
-----------
SCHEDULE "A"
INCENTIVE WORK BASIC TIMING RATES
---------------------------------
RATES EFFECTIVE
---------------
DEPT CLASSIFICATION 10/16/94 10/16/95 10/16/96
- ---- -------------- -------- -------- --------
BORDER DEPARTMENT
-----------------
105 Border Machine Operator 8.14 8.39 8.64
Misc. Border Operations 8.04 8.29 8.54
Border Quilt Mach. Oper. 8.22 8.47 8.72
BOX SPRINGS DEPARTMENT
----------------------
150 Pre-Load 8.20 8.45 8.70
150 Upholster in Press 8.65 8.90 9.15
160 Top Off Assembler 8.35 8.60 8.85
165 Wood Shop Assembly 8.35 8.60 8.85
QUILTING DEPARTMENT
-------------------
120 Quilt Machine Operator 8.22 8.47 8.72
QUILT SEWING DEPARTMENT
-----------------------
120 Misc. Quilt Sewing 8.04 8.29 8.54
MATTRESS AND BOX SPRING SEWING
------------------------------
115 Misc. Box Spring Sewing 8.04 8.29 8.54
MATTRESS ASSEMBLE
-----------------
130 Close Mattress 8.81 9.06 9.31
Hogring Mattress 8.55 8.80 9.05
ULTRA-SONIC COIL ASSEMBLY
-------------------------
225 H.M.B. Operator 8.40 8.65 8.90
Ultra-Sonic Coiler 8.15 8.40 8.65
<PAGE>
KANSAS CITY
-----------
SCHEDULE "B"
RATES FOR HOURLY WORKERS
------------------------
RATES EFFECTIVE
---------------
DEPT. CLASSIFICATION 10/16/94 10/16/95 10/16/96
- ---- -------------- -------- -------- --------
Shipping/Receiving 8.50 8.80 9.10
Inspector 8.50 8.80 9.10
Cutter 8.56 8.86 9.16
Sweeper 8.10 8.40 8.70
Material Handler 8.25 8.55 8.85
Inventory Rate 10.00 10.00 10.00
Repair Quilt Panels & Borders 8.25 8 55 8.85
H.M.B. Inspector 8:25 8.55 8.85
Automatic Pack Mach/Inspect 8.75 9.05 9.35
Part Time 7.00 730 7.60
<PAGE>
KANSAS CITY PLANT SUPPLEMENT
ADDENDUM
The AGREEMENT detailed below between SIMMONS COMPANY, Kansas City,
Missouri, and the United Steel Workers of America, AFL, CIO, CLC
(Upholstery Industries Division) Local UNION No. 173 will take effect on
and continue until the termination date of the MASTER MULTI-PLANT
WORKING AGREEMENT.
In all cases where the language below conflicts or is otherwise in
disagreement with the "Kansas City Supplement" the language below shall
prevail.
1. Overtime: The normal overtime schedule for production employees
--------
will be limited to ten (10) hours per day Monday through Friday
and no more than eight (8) hours on Saturday. In the event of a
serious customer service requirement, overtime hours may
be expanded to a maximum of twelve (12) hours per day Monday
through Friday and eight (8) hours on Saturday. If twelve (12)
hours are necessary the COMPANY will first seek volunteers. If
there are not enough volunteers, then the overtime will be
scheduled according to seniority. Production on Sundays and
holidays may be performed by volunteers but will not be mandatory.
On those occasions where the COMPANY's orders are heavy they
must have the right to schedule overtime to satisfy the customer's
requirements.
If the overtime requirement continues, the COMPANY will hire
new people and train them or even bring in finished stock from
other factories rather than work continued overtime. Over the long
run heavy overtime tends to be counterproductive and is not in the
best interest of SIMMONS COMPANY or its employees.
<PAGE>
The COMPANY's intent here is to have the flexibility needed to
work overtime on a limited basis to satisfy the customers.
In all cases the COMPANY will make every effort to use the
variable starting times by department so as to reduce the amount of
overtime required on a daily basis. (All other overtime restrictions
in the current contract referring to working more than two
consecutive Saturdays in "peak season" months will be eliminated.)
2. Borrowed Person: When an employee is borrowed for the convenience
---------------
of the COMPANY and given a type of work to perform On Which He/She
Has Not Been Qualified (previously earned incentive rate), then
his/her rate shall be his/her average hourly earnings rate,
provided such average rate is greater than his/her earnings on
incentive or the day work rate for the work being performed. In
those cases where an employee is borrowed into a job on which
he/she has previously qualified, his/her earnings shall be at
incentive rate for that job. The Following Refreshing of
Skills chart will apply to those individuals:
0 - 15 days No training allowance
16 - 29 days 4 hours at average
30 - 59 days 8 hours at average
60 days - 6 mos. 24 hours at average
6 mos. - 1 year 40 hours at average
3 years or more Retrain Completely
An employee who has been trained on a job may not delete himself/herself
from that job unless it is mutually agreed by both the COMPANY and the UNION.
3. Where any jobs deemed to be less than an eight-hour-per-day job, it
shall be subject to combinations with other jobs. These jobs will be
performed at the rate of pay if it is an indirect job or performed on
incentive if it is a direct job. Averages will be established for all
hours worked on these combination jobs. Classifications of employees
with fifteen (15) or more years of continuous service will be sub-
tracted to combinations of Classifications in less
<PAGE>
than an eight-hour-per-day job, he/she will be subjected to
Article 11 Seniority Section 2:11 - Determination of Layoffs.
4. The COMPANY will provide some type incentive for material handlers
in the Hogring area, Box Spring Construction and Upholstery, provided
the material handlers learn to operate forklifts and keep production
line loaded when all materials are available. Keep downtime in
departments to a minimum.
<PAGE>
LOS ANGELES PLANT
SUPPLEMENT
LOCAL #515
<PAGE>
LOS ANGELES INDEX
ARTICLE ITEM . . . . . . . . . . . . . . . . . . . PAGE
I RECOGNITION AND UNION SECURITY
1.01 Purpose . . . . . . . . . . . . . . . 4
1.02 Designation of Bargaining Agency . . 4
1.03 Union-Shop Provisions . . . . . . . . 4
1.04 Dues Deduction . . . . . . . . . . . 5
II DISCIPLINARY PROCEDURE . . . . . . . . . . . . 6
2.01 Purpose . . . . . . . . . . . . . . . 6
2.02 Disciplinary Interview . . . . . . . . 6
2.03 Steward Protection . . . . . . . . . . 6
III WORKING HOURS, OVERTIME AND HOLIDAY PAY
3.01 Working Hours . . . . . . . . . . . . 7
3.02 Overtime . . . . . . . . . . . . . . 7
3.03 Shift Differential . . . . . . . . . . 8
3.04 Shift Change . . . . . . . . . . . . . 8
3.05 Temporary Employees . . . . . . . . . 8
3.06 Holidays . . . . . . . . . . . . . . 8
3.07 Birthday Pay . . . . . . . . . . . . . 9
3.08 Holiday pay on vacation . . . . . . . 9
3.09 Holiday pay on sick leave . . . . . . 9
3.10 Saturday Holiday . . . . . . . . . . 10
3.11 Pay for Holiday Worked . . . . . . . . 10
IV WAGES
4.01 Wage Agreement . . . . . . . . . . . 10
4.02 Incentive Compensation Plans . . . . . 10
4.03 Work Wait . . . . . . . . . . . . . 10
4.04 Reporting-in Pay . . . . . . . . . . . 11
4.05 Rate of Borrowed Man . . . . . . . . . 11
4.06 Incentive Pay Computation . . . . . . 11
4.07 Hiring Rates . . . . . . . . . . . . 12
4.08 Incentive Employee Progression
and Training . . . . . . . . . . . . 12
V SENIORITY AND LAYOFF
5.01 Layoffs and Recalls . . . . . . . . . 13
5.02 Workshare Hours . . . . . . . . . . . 13
5.03 Furlough . . . . . . . . . . . . . . 13
5.04 Layoffs . . . . . . . . . . . . . . 13
5.05 Job Bidding . . . . . . . . . . . . . 14
5.06 Promotions Outside Bargaining Unit . . 15
5.07 Seniority Accumulation During
Leave of Absence . . . . . . . . . . . 15
5.08 Probationary Period . . . . . . . . . 16
5.09 Overtime Preference . . . . . . . . . 16
5.10 Steward Seniority . . . . . . . . . . 16
5.11 Loss of Seniority Rights . . . . . . . 16
5.12 Severance Notice . . . . . . . . . . 17
5.13 Inventory . . . . . . . . . . . . . 17
<PAGE>
VI LEAVE OF ABSENCE . . . . . . . . . . . . . . . . 17
6.01 Purpose . . . . . . . . . . . . . . . . 17
6.02 Leave for Union Business . . . . . . . . 18
6.03 Bereavement . . . . . . . . . . . . . . 18
VII VACATIONS . . . . . . . . . . . . . . . . . . . 18
7.01 Scheduling . . . . . . . . . . . . . . . 18
7.02 Vacation Pay . . . . . . . . . . . . . . 18
7.03 Eligibility . . . . . . . . . . . . . . 18
VIII REST PERIODS . . . . . . . . . . . . . . . . . . 19
IX STEELWORKERS HEALTH AND WELFARE FUND . . . . . . 19
9.01 Benefit Plan . . . . . . . . . . . . . . 19
9.02 Contribution Rate . . . . . . . . . . . 19
9.03 Eligibility . . . . . . . . . . . . . . 20
9.04 Employee Contribution . . . . . . . . . 20
9.05 Life Insurance . . . . . . . . . . . . 21
9.06 Payment of Contribution . . . . . . . . 21
9.07 Coverage . . . . . . . . . . . . . . . 21
9.08 Election of Category & Right to Change . 22
9.09 Requirements . . . . . . . . . . . . . . 22
9.10 Exempt from grievances, lawsuits, etc. . 22
9.11 Reinstatement of Coverage . . . . . . . 23
9.12 Part-time employees . . . . . . . . . . 23
9.13 Audit Privileges . . . . . . . . . . . 23
9.14 Summary . . . . . . . . . . . . . . . . 24
X DISCIPLINE AND DISCHARGE CLAUSE . . . . . . . . . 24
XI MANAGEMENT RIGHTS . . . . . . . . . . . . . . . . 25
XII GRIEVANCE PROCEDURES . . . . . . . . . . . . . . 25
12.01 Purpose . . . . . . . . . . . . . . . 25
12.02 Payment of Steward . . . . . . . . . . 25
XIII GENERAL CONDITIONS
13.01 Business Representative . . . . . . . . 26
13.02 Stewards . . . . . . . . . . . . . . . 26
13.03 Picket Line . . . . . . . . . . . . . . 26
XIV EQUAL EMPLOYMENT OPPORTUNITY . . . . . . . . . . 27
XV DURATION AND TERMINATION OF CONTRACT . . . . . . 28
APPENDIX I
Memorandum on apprenticeship Schedule,
qualifications of apprentice and job description
of specialized Maintenance Mechanic . . . . . . 30
Memorandum Implementing Utility Classification. . 33
APPENDIX II
Supplemental Agreemeent . . . . . . . . . . . . . 35
A. UIU pension Trust . . . . . . . . . . . . . . 35
B. Wages . . . . . . . . . . . . . . . . . . . . 36
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
LOS ANGELES SUPPLEMENT
----------------------
AGREEMENT
THIS AGREEMENT, entered into this sixteenth (16th) day of October,
1994, by and between SIMMONS COMPANY, a Delaware Corporation, for and on
behalf of its bedding plant at Los Angeles, California, hereinafter
referred to as the COMPANY
and
THE UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C.,
(UPHOLSTERY INDUSTRIES DIVISION), through its agent, FURNITURE UNION,
LOCAL 515U, for itself and on behalf of the employees employed by
the EMPLOYER, hereinafter referred to as the UNION.
WITNESSETH:
NOW, THEREFORE, in consideration of the promises and of mutual
covenants and AGREEMENTS of the parties hereinafter set forth, the
parties do hereby agree as follows:
<PAGE>
ARTICLE I
---------
RECOGNITION AND UNION SECURITY
1.01 Purpose. The general purpose of this AGREEMENT is to maintain
-------
harmony, cooperation, and understanding between the COMPANY and the
UNION; to provide efficient and economical operation of the COMPANY'S
plant; and to provide for the protection of the plant and property,
protection of the various rights and privileges of the UNION members
granted in this Contract.
The UNION, and its members, and the COMPANY agree that every
effort will be made to administer this Contract in accordance with
the true intent of its terms and provisions, to the end of
maintaining sound Labor Relations. The parties hereto intend by this
AGREEMENT to provide an established relationship between them and
to insure uninterrupted production during the life of said AGREEMENT.
1.02 Designation of Bargaining Agency. The COMPANY hereby recognizes
--------------------------------
the UNION as the sole and exclusive collective bargaining agent for all
the COMPANY'S employees employed by it in connection with its operations
in the Los Angeles Plant covered by this Working AGREEMENT. This
excludes executives, sales employees, office workers, and supervisors.
1.03 UNION-Shop Provisions.
---------------------
a) The COMPANY agrees that as a condition of employment all
employees in the bargaining unit shall become members of
the UNION after the thirty-first (31) day of their
employment or thirty-one (31) days after the execution
date of this AGREEMENT, whichever is the later. All
employees who become members of the UNION shall remain
members of the UNION in good standing by proper tender of
dues and initiation fees during the term of this AGREEMENT.
b) Upon five (5) days after receipt of notice from the UNION
that any employee has failed, pursuant to the terms of this
Article, to tender payment of the regular dues and
initiation fee uniformly required by the UNION, as a
condition of acquiring or
4
<PAGE>
retaining membership in the UNION, the COMPANY shall
discontinue its employment of such employee.
c) The COMPANY shall have the exclusive right to hire and
shall be the sole judge of the requirements and
qualifications of each applicant until the completion of
the probationary period set forth in this AGREEMENT.
d) Whenever the EMPLOYER requires additional employees, it
will notify the UNION, and the UNION agrees that it will
use its best efforts to find skilled candidates. Such
notice does not preclude the EMPLOYER from securing
employees from other sources and the EMPLOYER may select
employees without discrimination as to UNION or non-UNION
status, race, color, religion, national origin, gender,
age, or disability.
e) After new employees are hired, the COMPANY agrees to
provide to the UNION the employees' name, address, date
of birth, social security number, date of hire, rate of
pay, classification assignment, and clock number.
f) Whenever employees are transferred, granted a leave of
absence, terminated, rehired, or quit, such information
will be made available to the UNION.
g) The provisions of the Section shall be applicable only to
the extent permitted by applicable state and federal
legislation.
1.04 Dues Deduction. Upon written voluntary authorization by each
--------------
employee and subject to the requirements of any applicable local, state,
or federal law, membership dues and initiation fees of the UNION as
authorized and approved by the International UNION General Executive
Board due and unpaid, shall be deducted from the wages of all employees
covered by this AGREEMENT on the last payroll period of the month for
the following month each and every month, and shall be remitted by the
COMPANY between the first (1st) and fifteenth (15th) day each and
every month to UNITED STEELWORKERS INTERNATIONAL TREASURY. Such
remittance shall be accompanied by an itemized statement showing the
name of each employee and the amount checked off for dues and initiation
fees, together with a list of employees from whom dues and initiation
fees have not been
5
<PAGE>
collected. A copy of this same remittance shall be sent to the local
union office. In so doing, the COMPANY is acting as a trustee of said
funds for the benefit of the UNION.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 Purpose. The COMPANY shall not discharge, suspend, or otherwise
--------
discipline any employee except for just cause, except also as provided
in Section 1.03 (c).
2.02 (a) Disciplinary Interview In the event that disciplinary
-----------------------
action involving loss of wages (suspension and/or discharge) is taken
against any employee, the employee involved shall be afforded an
interview concerning such disciplinary action, in which he may be
represented by his Shop Steward or the Business Agent. The UNION
representative shall be advised in writing of the disciplinary action
and be afforded an opportunity to discuss the case with the affected
employee and to participate in the interview with the COMPANY concerning
the matter. This interview shall not be construed as part of the
grievance procedure described elsewhere in this AGREEMENT. A
discharged employee shall be entitled to a hearing before the COMPANY
Plant Labor Relations Committee at 10:00 a.m. on any day following
his discharge, providing appropriate arrangements are made beforehand
with the COMPANY officials and providing further that once thirty
(30) calendar days lapse following the discharge, the action of the
COMPANY shall be deemed final and there shall be no further appeal by
either the UNION or the employee.
2.02 (b) In the event an employee is disciplined, suspended or
discharged, such action shall be subject to the grievance and
arbitration procedure as provided in Article III of the MMPWA. In
exchange for the thirty (30) calendar day period described in 2.02 (a)
above, it is agreed that the COMPANY shall not be liable for any
retroactivity, should the employee be subsequently reinstated.
2.03 Steward Protection No employee acting in the capacity of a
------------------
Shop Steward, Department Steward, or Shop Committee member shall be
disciplined for carrying out his/her duties
6
<PAGE>
in good faith provided those duties do not interfere with normal
business operations, except in matters which require immediate
attention, under the provisions of this AGREEMENT or as permitted by
applicable law. The UNION agrees to notify the COMPANY in writing when
it designates Stewards and Shop Committee members.
ARTICLE III
-----------
WORKING HOURS, OVERTIME AND HOLIDAY PAY
3.01 Working Hours. For the purpose of computing overtime pay, eight
-------------
(8) hours shall constitute a day's work; forty (40) hours, from Monday
to Friday inclusive, shall constitute a week's work.
3.02 (a) Overtime. All work performed in excess of forty (40) hours
--------
in one (1) week or eight (8) hours in one day, or before or after the
regular starting or quitting time, shall be considered overtime, and
shall be compensated at the rate of time and one-half at average hourly
earnings if on piecework, or time and one-half the hourly rate if on
day work, with the provision, however, that this paragraph shall not
prevent payment of double time wherever such payment is specified. Any
exception to the above shall be only upon mutual AGREEMENT between the
COMPANY and the UNION.
3.02 (b) Employees must be available for all work as scheduled,
regular or overtime. If overtime is required to meet the shipment
requirements and sufficient volunteers will not stay, the Company can
-------
require overtime starting with the least senior person who is qualified
and working up in seniority until the required number of people is
reached. The maximum number of hours under this clause will be ten (10)
hours per day. If this requirement for overtime continues, the Company
-------
will hire new employees to reduce the overtime. This will apply to
Fridays also. Overtime preference is determined by seniority within
classification and department. Employees who have a valid reason shall
be excused by Management from working regular or overtime work at any
particular time.
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<PAGE>
3.02 (c) When employees are required for overtime work outside their
regular classification, such overtime will be offered to senior
qualified employees in the department involved. Should qualified
employees not be available in the department, then insofar as possible,
senior qualified employees in the Plant will be utilized in the
assignment of such overtime work.
3.03 (a) Shift Differential. All work performed on the second or
------------------
third shift shall be paid a premium of twenty (20) cents per hour.
3.03 (b) There shall be no pyramiding of any premium or overtime
pay under this AGREEMENT for the same hours worked. Where one or more
premium or overtime rate is payable, the single higher rate shall be
paid.
3.04 Shift Change. Based upon seniority, an employee is allowed to
------------
change shifts four (4) times within the contract year on the following
dates: January 1, April 1, July 1, and October 1.
3.05 Temporary Employees. The Company may utilize up to ten (10)
-------------------
temporary employees (temps) for four (4) months. Payment will be made
at the base rate of the classification they are assigned. No benefits,
pension, holidays or vacation will be paid. At the time the Company
determines that the position is full-time or at the end of four months
(whichever comes first), the job will be filled in accordance with the
contract.
3.06 Holidays. The COMPANY will pay eleven (11) paid holidays as
--------
follows:
New Year's Day Labor Day
Washington's Birthday Thanksgiving Day
8
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Good Friday Day After Thanksgiving Day
Memorial Day Day Before Christmas
Independence Day Christmas Day
Martin Luther King's
Birthday
3.06 (b) All employees who have thirty (30) days or more of service
on the day of the holiday and who worked the last
scheduled work day before and the first scheduled work
day after the holiday, shall be paid for such holiday. If
the employee is excused from such work by the COMPANY, or
if it is proved that his absence was due to illness
he/she will be paid for such holiday.
3.06 (c) Payment will be made at eight (8) times the employee's
average hourly earnings rate as per Section 4.06, if a
pieceworker, and the employee's regular hourly rate if
paid on an hourly basis, excluding overtime premiums.
3.07 Birthday Pay. Each otherwise eligible employee will receive
-------------
at his option either a day off with pay or eight hours pay at average
rate on his or her birthday, as set forth in the Master Multi-Plant
Working AGREEMENT.
3.08 Holiday Pay on Vacation. When one of the above holidays
------------------------
falls within an eligible employee's approved vacation period, and he
is absent from work during his regularly scheduled work week
because of such vacation, he shall be paid for each such holiday,
in addition to his vacation and shall have each such day off.
3.09 Holiday Pay on Sick Leave. When an eligible employee goes on
---------------------------
sick leave within thirty (30) days prior to or the day following a
holiday he shall receive pay for one such holiday.
9
<PAGE>
3.10 Saturday Holiday. Whenever a holiday falls on a Saturday it
----------------
shall, at the discretion of the plant manager, be celebrated on either
the preceding Friday or the following Monday. Notice of the date
selected will be posted one (1) week in advance. In this situation, no
work will be scheduled on such Saturday to avoid holiday premium pay.
3.11 Pay for Holiday Worked. In the event work is performed on any
-----------------------
of the AGREEMENT holidays, double time the rate of pay shall be paid in
addition to the holiday pay. This will not apply to 3.07.
ARTICLE IV
----------
WAGES
4.01 Wage Agreement. The COMPANY and the UNION have agreed to Labor
--------------
Grade rates and relative job values as described in this AGREEMENT.
4.02 Incentive Compensation Plans. It is agreed that the COMPANY at
----------------------------
any time may install an incentive compensation plan in any operation
where in its judgment such a plan is practicable. Such incentive
compensation plans when established may be made applicable to
individuals or groups of individuals depending upon the nature of the
work and will provide an earnings opportunity to experienced average
employees twenty-five percent (25%) higher than the labor grade rate.
It is further agreed that the COMPANY may at any time revise all or part
of any incentive compensation plan where in its judgment the incentives
have proven unsound. The current Los Angeles Standard Allowed Hour
System will be maintained. There is nothing in the contract to prohibit
the COMPANY from paying incentives to day workers if they find it
feasible.
4.03 Work Wait. If due to lack of materials, components, supplies,
---------
or other reasons controllable by the COMPANY, an incentive worker is
required to wait for any continuous period of more than ten (10) minutes
after he has notified his Supervisor, he shall be compensated at 75% of
his average hourly earnings rate from that point on.
10
<PAGE>
An incentive worker's work wait status shall commence only after he
notified his own Supervisor who shall forthwith record the time. If the
employee's own Supervisor is not available he shall notify any other
Supervisor.
The COMPANY shall have no liability regarding this paragraph in the
event of a breakdown of power outside of the plant, act of public enemy
or because of conditions beyond the control of the COMPANY.
4.04 Reporting-in Pay. When an employee reports for work at the
----------------
regular starting time of his shift without previous notice not to report
and his regular work is not available, he will receive a minimum of two
(2) hours work or pay at his average hourly earnings rate provided,
however, at the COMPANY'S option, he may be assigned to another
classification for any portion of said two (2) hours. The COMPANY shall
have no liability regarding the above paragraph, in the event of a
breakdown of power outside of the plant, act of public enemy or because
of conditions beyond the control of the COMPANY.
4.05 Rate of Borrowed Man. When an employee still has work on his
--------------------
normal assignment and is borrowed for the convenience of the COMPANY to
another job and given a type of work to perform other than the type of
work at which he is (normally) employed, then his rate shall be his
average hourly earnings rate, provided such quarterly average hourly
rate is greater than his earnings at incentive or the labor grade rate
for the work being performed. It is understood that in consideration for
this premium rate the borrowed employee is to apply himself with the
same effort and skill that he used in order to develop the quarterly
average hourly rate. Borrowed man would carry seniority to borrowed
classification for overtime purposes
4.06 Incentive Pay Computation. Individual average hourly earnings
-------------------------
rate for employees working on incentive classifications will be computed
quarterly by dividing the total number of hours that the incentive
employee has worked into the total straight time earnings of that
individual. The
11
<PAGE>
hours shall include the total hours of any incentive worker except those
hours when he is in a holiday or vacation status, or time working on any
classification other than his own.
When an incentive employee is used on a classification other than
the one to which he is normally assigned, his incentive earnings and
hours on such classification will be marked "special" so as not to
affect the computation of his individual average hourly rate.
4.07 Hiring Rates.
------------
a) The hiring rate for new incentive employees will be
base rate of the job.
b) The hiring rate for non-incentive classifications will be
twenty cents (20 cents) per hour under the assigned
classification rate. If the employee is retained, he/she
will be paid the rate of the classification after sixty
(60) days of employment.
4.08 Incentive Employee Progression and Training. The Company and
--------------------------------------------
the Union agree that there shall be no ceiling on production or
incentive earnings, and that the highest degree of efficiency and
productivity will be encouraged at all times.
It is understood that if an incentive employee acquires the skill
needed to earn incentive pay while still in his sixty (60) day
probationary period, he or she will receive such incentive pay.
In the event a probationary incentive employee has not acquired the
necessary skills to earn incentive pay, upon the first sixty (60) days
he or she may be terminated from the Company; or the employee's rate of
pay will remain at their hiring rate (base rate of their classification)
for a designated period of time not to exceed forty-five (45) days,
until they are able to improve their productivity to earn incentive pay;
or if the employee is still unable to earn incentive pay after his
probationary period he may be place in a non-incentive position if such
a position is open in the Company.
The UNION and the COMPANY are agreed that all incentive employees
will be encouraged and expected to produce to the full extent of their
capabilities and that this productivity must exceed
12
<PAGE>
the Labor Grade Rate. Based on progressive disciplinary action, those
employees who are unable to exceed the Labor Grade Rate may be
terminated at any time. Notice of such COMPANY action shall be given to
the UNION with a copy to the Shop Steward five (5) working days prior to
the employee's termination.
ARTICLE V
---------
SENIORITY AND LAYOFF
5.01 Layoffs & Recalls. Seniority shall be applied in layoffs and
-----------------
rehiring in the manner hereinafter set forth.
5.02 Workshare hours In the event of a 1 (one) day shortage of
---------------
work, the available hours of work will be shared between the first and
second shifts. This can occur no more than 4 (four) times within the
contract year. After four (4) workshares, a senior employee may change
shifts but must remain on that shift until their quarterly shift
change (article 3.04).
5.03 Furlough lf a shortage of work extends beyond one (1) day an
--------
employee is furloughed by classification, department and shift for up to
6 (six) weeks. Senior employees on each shift are given right of refusal
for a furlough, however if they change shifts they must remain on that
shift until their quarterly shift change (article 3.04).
5.03 (b) Recall from furlough. If recalled from a voluntary furlough
--------------------
an employee has 5 (five) days to return to work. If recalled from an
involuntary furlough an employee has 3 (three) days to return to work.
5.04 (a) Layoffs. When decreases in the working force become
-------
necessary for a period of time longer than six (6) weeks, they should be
made on the basis of seniority within non-interchangeable occupational
groups applying the following factors:
1. Length of service
13
<PAGE>
2. Training, skill and physical fitness.
Length of continuous service as pertaining to employees with
more than six (6) months seniority shall govern where as between two (2)
or more employees, the factors in item (2) are relatively equal. Laid-
off employees who have seniority rights will be recalled in accordance
with their job experience and seniority before new employees are hired.
Preference shall be given to employees who are laid off because of a
lack of work before hiring new employees, provided such laid off
employees are capable of performing the available work, except as
provided in Section 5.10.
5.04 (b) Before an employee with more than six (6) months seniority
is laid-off, the COMPANY will make every reasonable effort to transfer
him/her to another job if there is such a job open and available and the
employee is qualified to do the work.
5.05 Job bidding. The COMPANY will provide an opportunity for
-----------
qualified employees seeking promotion to higher rated classifications by
posting open jobs for bid for a twenty-four (24) hour period. Posted
jobs may be bid on only within the department in which the opening
occurs. If there is no bid in the department, bidding will be open to
qualified employees from any other departments of the plant.
The Job Bidding Procedure will be as follows:
1. In order for an employee to be eligible to bid for a
posted opening the employee must:
(a) Have been on the active payroll for a period of
nine (9) months preceding date of bid.
(b) Have not been awarded a job by means of successful
bidding for a period of nine (9) months preceding
date of bid.
2. Posted bid job will be awarded to the qualified eligible
bidder with the most seniority.
14
<PAGE>
3. (a) Any employee who is a successful bidder will be
reclassified in accordance with the job he/she bid
for and will be paid the Labor Grade Rate for such
classification.
(b) The successful bidder will be allowed the established
learner's time for that particular classification.
If, at the completion of the established learner's
time, the employee's earnings are not exceeding the
Labor Grade Rate, he/she will be returned to his
original job.
(c) When openings occur in the following classifications,
bidding will be open only to those employees of
proved mechanical aptitude and excellent attendance
records:
1. Pocket Machine Operators
2. Closers
(d) The COMPANY reserves the right to hire at any time
qualified candidates from outside sources for the
closing and pocket machine operations.
5.06 Promotions Outside Bargaining Unit. In the event any employee
-----------------------------------
covered by this AGREEMENT is transferred to a position outside the
Bargaining Unit, and such an employee is subsequently transferred back
into his/her classification within the Bargaining Unit, he/she shall be
credited with the amount of seniority which he/she had acquired before
his/her transfer. He/she shall not be eligible to replace any employee
other than that employee with the least amount of seniority in the
department to which he is returned.
After an employee has been transferred out of the Bargaining Unit
for a period in excess of six (6) continuous months, he shall not have
any seniority rights under Article V, unless such is mutually agreed to
by the COMPANY and the UNION in writing.
5.07 Seniority Accumulation During Leave of Absence. Leaves of
----------------------------------------------
absence granted in accordance with the terms of the AGREEMENT, unless
herein otherwise specifically provided, shall be considered as service
for seniority purposes.
15
<PAGE>
5.08 Probationary Period. New employees shall be considered
-------------------
probationary employees during the first sixty (60) calendar days of
service with the COMPANY and may be discharged for any reason during
this period. There shall be no accumulation of seniority during the
sixty (60) days probationary period.
Upon satisfactory completion of the probationary period,
seniority will be calculated from the first day of employment.
5.09 Overtime preference Senior employees shall be given preference
-------------------
on available overtime in their particular job assignment.
5.10 Steward seniority The Chief Shop Steward shall have top
-----------------
seniority during his term of office provided this employee has at least
one (1) year of service with the Company.
5.11 Loss of Seniority Rights. An employee's continuous service
------------------------
record shall be considered to be broken and he shall lose all his
seniority rights for any of the following reasons:
a. When the employee resigns.
b. When the employee is discharged for just cause.
c. For absence from the EMPLOYER's payroll longer than
twelve (12) continuous months due to layoff or
non-industrial illness.
d. When an employee is recalled to work after a layoff and
does not return to work, or does not notify the Company of
his intent to return to work within three (3) working days.
It is the employee's responsibility to provide the Company
with his most recent correct address and telephone number.
An incorrect address or telephone number held by the
Company will not excuse an employee.
e. When an employee falsities any information given in
connection with a leave of absence, or with his
application for employment.
f. For failure to progress in learning within reasonable time
limits set by the COMPANY.
16
<PAGE>
g. Employees shall not have their seniority breached if they
are absent due to any injury on the job and shall upon
return be reinstated with full seniority rights,
provided they are physically capable of satisfactorily
performing the available work.
5.12 Severance Notice. Employees who have been employed with the
----------------
COMPANY one (1) year or longer and who are dismissed from employment
as a result of discontinuance of business or as a result of permanent
reduction in production, shall be entitled to one (1) week notice of
discontinuance of employment or one (1) week severance pay in lieu of
notice, and prorated vacation pay. The foregoing provisions shall not
apply to normal layoffs resulting from temporary or seasonal variations
in production requirements.
5.13 Inventory. Employees will be selected for inventory on the
---------
basis of qualifications with preference given to day workers over
incentive workers. Day workers if selected will receive the rate of
their classification. Incentive workers when selected will receive
base rate of their classification.
ARTICLE VI
----------
LEAVE OF ABSENCE
6.01 (a) Purpose. The COMPANY may grant to any employee who has
-------
been in continuous service with the COMPANY for one (1) year or more, a
leave of absence not to exceed sixty (60) days. In the case of illness
a leave of absence shall be granted extending through a reasonable
period of convalescence, but not to exceed one (1) year. Proof of
illness shall be submitted to the COMPANY upon request.
6.01 (b) In order to determine whether an employee returning from a
sick leave, job connected or not, is physically able to satisfactorily
perform the work without risking further injury to himself or others,
the COMPANY may require such returning employee to submit medical proof
of his/her recovery, including a physical examination and drug screen
by a COMPANY doctor if desired by the EMPLOYER.
17
<PAGE>
6.02 Leave for Union Business The job of no employee shall be
------------------------
jeopardized should he/she be called from work on authorized UNION
business, providing such absence does not exceed thirty (30) days. In
all cases, the UNION shall give the COMPANY at least one (1) day
notice of such authorized UNION business.
6.03 Bereavement. Bereavement pay will be granted up to a maximum of
-----------
three days for time lost due to death in the immediate family. Immediate
family is defined as mother, mother-in-law, father, father-in-law,
brother, half brother, sister, half sister, grandchildren, spouse
or child. Bereavement will apply to grandparents without pay.
The pay for such loss of time from work will be for eight hours,
straight time at the employee's previous quarter average hourly rate if
an incentive employee and at the classification rate of pay if a day
worker.
ARTICLE VII
-----------
VACATIONS
7.01 Scheduling Vacation time will be scheduled at the first of the
----------
year and consideration will be given to allow employee preference as
often as possible. In conflicts between two employees scheduling a
vacation at the same time, the employee with the most seniority will be
given preference.
7.02 Vacation pay Pay for each week of vacation will be figured at
------------
forty (40) times an employee's average hourly earning rate for the
previous quarter, if an incentive worker and the employee's regular
Labor Grade Rate if paid on an hourly rate, including shift
differential, but not including overtime premiums.
7.03 Eligibility Full vacation benefits will be paid to all
-----------
employees who work at sometime during the calendar year, with the
exception of employees who are on a layoff status, or who are
discharged, or quit. Those employees will be paid on a pro-rata basis
of 1/12th for each month worked--five (5) working days will be
considered a month worked--(1/12th credit).
18
<PAGE>
ARTICLE VIII
-------------
REST PERIODS
8.01 (a) Every employee shall be allowed two (2) ten (10) minute
rest periods each day worked without deduction in pay; one (1) of said
rest periods shall be in the morning and the other in mid-afternoon.
8.01 (b) At least thirty (30) minutes (unpaid) shall be allowed for
the lunch period.
ARTICLE IX
----------
STEELWORKERS HEALTH AND WELFARE FUND
9.01 Benefit Plan. The parties to this agreement desire that certain
------------
HMO Health, Dental, Vision and Prescription Benefits, as well as life
insurance coverage as designated by Maxicare, be provided to the
employees employed in the Union's Bargaining Unit through the
Steelworkers Health and WELFARE FUND.
9.02 Contribution Rates. The month for which the contribution is due
------------------
is referred to as the "benefit month" and the month immediately
preceding the benefit month is referred to as the "wage month". The
EMPLOYER shall each and every benefit month make the following monthly
contribution to the Fund on each and every eligible employee who elects
benefit coverage.
EFFECTIVE 11/01/94
----------------------
Company Union Total
Single $140.00 $15.00 $155.00
Single+1 $276.00 $25.00 $301.00
Family Co. $378.00 $40.00 $418.00
19
<PAGE>
The Employer and the Union agree that in the event of an increase
in the above stated premiums 1995 and 1996, the company and the
employee will share proportionately in the increase up to eight
percent (8%) each year at the same percentage of premiums. Should the
plan premium increase exceed 8%, the Company and the Union reserve
the right to review the plan and mutually determine continuation of
the plan or replacement of the plan with another plan offering
comparable coverage.
9.03 Eligibility. Eligible employees are full-time employees
-----------
employed within the Union's Bargaining Unit who have completed thirty
(30) days employment prior to the first calendar day of the Benefit
Month. The term also includes eligible employees who did not work at all
during the wage month for any of the following reasons:
a. Disability due to sickness or accident, up to a maximum of
six (6) months per disability.
b Vacation
c. Attendance at Union or Fund Convention, seminar or
grievance hearing.
The employer is not required to make a contribution on an employee
whose employment is terminated during the wage month.
9.04 Employee Contributions. Each such employee must in writing
----------------------
authorize the Employer to deduct the employee's contributions from the
employee's wages and to transmit same to the Fund. When supplied with
such a written authorization the Employer agrees to make the required
deductions and to promptly transmit same to the Fund. Employee
contributions are due at the same time as the Employer contributions.
20
<PAGE>
Employees who refuse or neglect to provide the Employer with the
necessary written authorization to deduct the required employee
contributions will receive no fund coverage. In those cases in which
an employee has supplied the Employer with the required written
authorization but because of lack of wages the Employer is unable to
deduct the employee contribution due for a particular benefit month, it
is the obligation of the employee to pay, in a timely fashion, to the
Employer for transmittal to the Fund, the required employee
contribution. The coverage of such an employee failing to make the
required payment on time is automatically terminated. Employee pre-tax
co-pay will be deducted on a weekly basis.
9.05 Life Insurance For those eligible employees who do not elect
--------------
medical and dental coverage during the defined time period, the Company
will make a monthly contribution to the Fund of $7.00 for Life Insurance
Coverage as provided by the Steelworkers Health and Welfare Fund Trust.
9.06 Payment of Contributions Contributions will be sent by the
------------------------
Employer on the first (1st) Thursday of each benefit month, commencing
with the month of November 1994, and each and every month thereafter so
long as this agreement is in force.
9.07(a) Coverage Coverage for newly hired employees and any named
--------
dependents will begin on the first day of the month following completion
of thirty (30) days of employment. Previously covered employees shall be
covered the first day of the calendar month following their return to
work.
21
<PAGE>
9.07(b) These provisions for newly hired employees shall not apply
in the case of those employees who have been "Previously Covered" under
the Fund. Such employees and their dependents shall be eligible for all
benefits from the date of hire.
9.08 Election of category of coverage and right to change.
-----------------------------------------------------
Employees shall elect a category of coverage no later than the
first day of the calendar month following the completion of thirty (30)
days employment. This election may be changed only as provided for in
the Plan. Newly born children must be enrolled within 31 days of birth.
9.09 Requirements The employer shall transmit to the Fund with
------------
each contribution a contribution report on the form furnished by the
Fund on which the employer shall report the names, status, hire and
termination dates as applicable, as well as the total gross
earnings of each eligible employee during the wage month.
The employer further agrees to supply the Fund such further
information as may from time to time be requested by it in connection
with the benefits provided by said Fund to said employees, and to permit
audits of its books and records by the Fund for the sole purpose of
determining compliance with terms and conditions of this agreement.
9.10 Exempt from grievances, etc. The Company agrees solely to make
----------------------------
the contributions required by the terms of this agreement. The Union and
the Steelworkers Health and Welfare Fund agree to hold harmless and
indemnify the Company from any and all claims, grievances, lawsuits,
22
<PAGE>
actions at law or inequity relating to the Plan, except a claim that the
Company has not paid the contribution required by this agreement.
The Company does not agree to be bound by, and expressly disavows
any obligations imposed upon the Company by, the provisions of any Trust
Agreement or other document pertaining to the Steelworkers Health and
Welfare Fund to which the Company is not a signatory party.
9.11 Reinstatement of Coverage The Fund may, in its sole
-------------------------
discretion, elect to reinstate coverage either retroactively or
prospectively or both once the amounts owed to the Fund by the Employer
are paid in full. If coverage is reinstated prospectively, there shall,
nevertheless, be no coverage for illnesses first manifested during the
10 day period following the date of reinstatement.
9.12 Part-time Employees For the purpose of Fund coverage, a part-
-------------------
time employee is one who is hired to regularly work less than the number
of hours established as the regular work week in this Agreement, which
definition does not include regular full-time employees who are hired to
work a full work week but who might be working short hours because of
lack of work, sickness, etc. Part-time employees shall not receive Fund
coverage nor shall the Employer pay a contribution for such employees.
Nothing in this clause shall be construed as an affirmation or negation
of the Employer's right to hire part-time employees.
9.13 Audit privileges The Company shall have the right to audit
----------------
the Steelworkers Health and Welfare Fund periodically.
23
<PAGE>
9.14 Summary In consideration of the Employer's aforesaid payment
-------
to said Fund as hereinabove provided, the Union warrants that the Board
of Trustees of the United Steelworkers Health and Welfare Fund will,
beginning on the date of receipt by the Fund of the Employer's first
said payment, and during such part of the life of this Agreement as the
Employer fully complies with the terms of such Agreement in all
respects, extend and made available to Employer's said employee the
benefits for which employees are eligible under the above designated
benefit plan. No benefits will be paid or services furnished to
any employee or employees for whom the Employer has not paid the
required contribution to the Fund except as, and only to the extent,
otherwise required by any applicable State Disability Benefit
Insurance Law.
ARTICLE X
---------
DISCIPLINE AND DISCHARGE CLAUSE
As indicated in Article II above, the COMPANY retains the right to
discipline and discharge employees for just cause.
If the parties are unable to settle said grievance, as provided for
in said Article II, then, upon written demand to the COMPANY, the UNION
may submit said grievance to arbitration as provided for in Article III
of the MMPWA.
If the UNION fails to protest the COMPANY'S action in writing and
within the time limits set forth above, the COMPANY'S action shall be
deemed final and binding and shall not be subject to said grievance and
arbitration provisions.
24
<PAGE>
ARTICLE XI
----------
MANAGEMENT RIGHTS
The UNION recognizes the rights and responsibilities belonging
solely to the COMPANY prominent among which, but by no means wholly
inclusive, are the rights to hire, direct, promote, discharge, or
discipline for cause and to maintain discipline and efficiency of
employees, to decide the products to be manufactured, the location of
plants, the schedule of production, the methods, processes, and means of
manufacturing and the control and selection of raw materials, semi-
manufactured, and finished parts which may be incorporated into the
products manufactured. Such authority shall not be used for the
purpose of discriminating against any employee nor shall it be
applied in a manner inconsistent with any of the other provisions of
this contract.
ARTICLE XII
-----------
GRIEVANCE PROCEDURES
12.01 Purpose. In the event of any complaint or grievance arising
-------
under the terms and provisions of this AGREEMENT or of any differences
between the parties as to the interpretation and application of this
AGREEMENT, they shall be settled and determined by the parties
exclusively by the grievance and arbitration procedure in Article III of
the MMPWA.
12.02 Payment of Steward. The COMPANY will only pay for lost time of
------------------
any Shop Steward or Shop Committee when such persons are called to a
conference by the COMPANY during working hours.
25
<PAGE>
ARTICLE XIII
------------
GENERAL CONDITIONS
13.01 Business Representative. It is agreed that the Business
-----------------------
Representative of the UNION is permitted on the premises for the purpose
of discussing with the employees at any time any business pertaining to
the functions of the UNION after making his presence known to
MANAGEMENT.
13.O2 (a) Stewards. A Shop Steward, Shop Committee, or Department
--------
Steward may be established in the plant. The Shop Steward, Department
Steward, and Shop Committee shall be selected by the UNION members in
said plant in accordance with the rules of the UNION.
13.02 (b) It shall be the duty and function of the Shop Steward,
Department Steward, and Shop Committee to assist in carrying out the
terms and provisions of the AGREEMENT, including the right to adjust
grievances and complaints as herein designated by it for that purpose.
13.02 (c) When a new employee is hired, he/she shall be introduced
by his/her supervisor to the Department Steward.
13.03 Picket Line. It shall not be considered a violation of this
-----------
AGREEMENT if USWA-UD employee members fail to report to work because of
refusal to cross a legitimate authorized picket line established by the
TEAMSTERS UNION representing the truck drivers or warehouse employees of
the Los Angeles Plant provided such UNION is the recognized bargaining
agent for said
26
<PAGE>
employees and provided such authorized picket line is at the plant
location where the USWA employees work only when such picket line is in
connection with a strike over contract negotiations and provided said
picket line has been recognized by the USWA and such picket line has
been sanctioned by the Joint Council of Teamsters Local #42.
ARTICLE XIV
-----------
EQUAL EMPLOYMENT OPPORTUNITY
SIMMONS COMPANY provides equal employment opportunity to
qualified persons without regard to race, color, religion, creed,
national origin, age, gender, ancestry, marital status, medical
condition, disability, pregnancy, childbirth or related medical
condition, or veteran status except where religion, gender, national
origin or age is a bona fide occupational qualification. Our policy
relates to all phases of employment, including recruitment, placement,
promotion, training, demotion, transfer, layoff, recall and termination,
rates of pay, employee benefits and participation in all SIMMONS
sponsored employee activities.
We are opposed to all forms of harassment including sexual, racial,
ethnic or religious harassment. Unwelcome sexual advances, requests for
sexual favors, and other verbal or physical conduct of a sexual nature
or verbal or physical conduct directed at a person's race, color,
religion, gender, national origin, age, disability or veterans status
may constitute harassment. Claims of harassment which come to our
attention may result in discipline up to and including discharge. At
27
<PAGE>
any time, if you believe that you have been harassed, you must report
the harassment to your immediate Supervisor or your Human Resources
Manager. A confidential investigation will be conducted.
ARTICLE XV
----------
DURATION AND TERMINATION OF CONTRACT
This AGREEMENT shall be in full force and effect from October 16,
1994, running through October 15, 1997.
The parties agree that there shall be no reopening of this AGREEMENT
and that this AGREEMENT constitutes the entire AGREEMENT between the
parties and at no time during the life of this AGREEMENT shall either
party have any obligation to negotiate or bargain with the other party
with respect to any points not covered by this AGREEMENT and as to
matters covered by this AGREEMENT only in the manner and to the extent
herein provided.
This AGREEMENT shall become effective when countersigned by a duly
authorized officer of the International UNION as hereinafter set forth.
When so countersigned, the within AGREEMENT shall be deemed to have
become effective as of the date set forth in the first paragraph of this
Article.
This AGREEMENT, when signed by the officers of the COMPANY and the
UNION, shall become effective as described above for a period beginning
October 16, 1994, and shall continue to remain in full force and effect
from year to year thereafter, unless written notice is given by either
28
<PAGE>
party hereto to the other on or before sixty (60) days prior to the
annual expiration date, requesting that the AGREEMENT be modified or
terminated. In the event of such notification, the parties hereto
shall immediately confer and negotiate with reference to a new or
modified AGREEMENT. Negotiations for a new contract shall commence not
later than thirty (30) days from the date of the written notice
herein mentioned. In the event that either party notifies the
other of its desire to modify this AGREEMENT, subject to such
notification, shall continue to remain in effect during the period of
negotiations until a new AGREEMENT has been reached or until either
party shall give the other party ten (10) days notice of cancellation.
No other notice of modification or of termination of contract shall be
required by either party other than the notice herein specified. In
any event, nothing herein contained shall preclude either party
from modifying or changing or amending its proposals for a new
AGREEMENT.
29
<PAGE>
MEMORANDUM ON APPRENTICESHIP SCHEDULE, QUALIFICATIONS OF
APPRENTICE AND JOB DESCRIPTION OF
SPECIALIZED MAINTENANCE MECHANIC
--------------------------------
SPECIALIZED MAINTENANCE MECHANIC
--------------------------------
1. Plan and maintain in a state of good repair and efficient
running order of complicated and expensive plant
machinery (machines valued up to $50,000).
2. Make parts involving intricate setups and rigid tolerances and
finish requirements extremely difficult to meet.
3. Diagnose and correct complex machine trouble involving
dismantling and reassembly operations requiring a high degree
of mechanical skill, fitting and aligning.
4. Also affixes special attachments, sets dies, oils and greases
machinery, repairs belts, and performs other similar duties as
necessary.
5. Is required to have a knowledge of the operation of the
machines he/she repairs.
6. Must be able, when required, to train machine operators.
7. Work from machine drawings, sketches, and samples.
The above job outline includes only the main functions of the job
and shall not be considered a detailed description of all work
requirements of the job pertaining to specialized maintenance mechanics.
30
<PAGE>
QUALIFICATIONS FOR MAINTENANCE APPRENTICE:
-----------------------------------------
I Must have good mechanical aptitude.
II Must be good in mathematics (especially decimals and
fractions).
III Must be able to read operating and/or maintenance manuals.
IV Apprenticeship: thirty (30) months minimum duration.
31
<PAGE>
MEMORANDUM ON APPRENTICESHIP SCHEDULE, QUALIFICATIONS OF
APPRENTICE AND JOB DESCRIPTION OF
SPECIALIZED MAINTENANCE MECHANIC (continued)
APPRENTICESHIP TRAINING SCHEDULE AND PAY PROGRESSION SCALE
----------------------------------------------------------
EFFECTIVE RATE
--------- ----
Hiring Rate $10.05
After 30 days 10.30
After 90 days 10.45
After 6 months 10.60
After 9 months 10.75
After 12 months 10.90
After 24 months 11.15
After 30 months Base rate of job
The COMPANY reserves the right to terminate any apprentice at any
point in the training schedule, should that apprentice fail to
satisfactorily progress in learning the skills of the Specialized
Maintenance Mechanic.
32
<PAGE>
MEMORANDUM IMPLEMENTING UTILITY CLASSIFICATION
FLEXIBILITY IN OPERATIONS
-------------------------
(A) In order to ensure flexibility in operations including balancing
of work flow, the COMPANY has the right to install utility
classifications which are designed to blend a variety of jobs
into a single grouping so that specific individuals will be
required to perform a multiplicity of job functions as described
in the attached appendix on a piecework basis.
(B) The utility classification will be exempt from any and all bumping
with the exception of senior employees who have previously
successfully performed on one or more of the job functions now
embraced by the utility designation and who can satisfactorily
perform the range of work contained in any particular utility
grouping. Such senior employees will be granted an opportunity to
perform in the utility classification, and should they prove to be
unsuccessful, will be given the opportunity of bumping the least
senior employee in the plant.
(C) The COMPANY will determine the number of employees required in any
particular utility grouping. Once such determination is made, the
job or jobs will be posted for bid. In the event no eligible bids
are received within twenty four (24) hours of posting, MANAGEMENT
is free to hire appropriate candidates from whatever source it
chooses.
33
<PAGE>
(D) The COMPANY will train the utility employees on all jobs assigned
to them and will ensure maintenance of skills by utilizing such.
The COMPANY will review the assignment of utility personnel each
quarter to make certain that these employees have had an
opportunity to exercise the utility skills for which they were
trained.
(E) MANAGEMENT will make every effort to assign a minimum of four (4)
hours work each time a utility employee is assigned to a different
operation. Normally a utility person will work a maximum of five
(5) continuous days on a particular assignment, unless operational
problems such as prolonged absence, product mix, or similar reason
require continuance of assignment.
(F) Each utility base rate will be equal to the highest base rate of
its particular classification grouping in each local plant
supplement. Utility workers must first succeed on the job paying
the highest base rate before they will be given an opportunity to
learn other jobs.
During the training period the utility employees will be paid at
the agreed upon base rate. On those rare occasions when utility
personnel are assigned hourly work, they will be paid at their
average hourly earnings rate.
(G) The COMPANY will not abuse the use of such classifications, but
rather will determine the number of utility workers by its
operational and marketing needs.
34
<PAGE>
It is the desire of the parties that the foregoing language
will have a positive effect upon the regular employees in the
regular classifications in the utility groupings as contained in
the local plant supplement AGREEMENTS.
SUPPLEMENTAL AGREEMENT
Supplement to the Principal AGREEMENT dated October 16, 1994 between
SIMMONS COMPANY, 20100 South Alameda, Compton, California 90220, and THE
UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O, C.L.C. (Upholstery
Industries Division), acting through its Agent, FURNITURE UNION LOCAL
515, hereinafter referred to as the UNION.
A. U.I.U PENSION TRUST
--------------------
The COMPANY shall make contributions to the U.I.U. Pension Trust for all
of the employees at the Los Angeles Plant. Such employees shall be
eligible for benefits as set forth in the U.I.U. Pension Trust described
in Article XII of the Master Multi-Plant Working AGREEMENT.
35
<PAGE>
B. WAGES
-----
Listed below are the Job Titles and Labor Grade Rates for the various
classifications of work at the Los Angeles Plant:
INCENTIVE JOBS
--------------
Labor Grade
Rates Effective
---------------
Job Title 10/16/94 10/16/95 10/16/96
--------- -------- -------- --------
Closer 10.36 10.61 10.86
Upholster Box Spring Units 9.33 9.58 9.83
Nailing Machine Operator 9.00 9.25 9.50
Box Spring Frame Assembler 9.00 9.25 9.50
Assemble Box Spring Units 9.00 9.25 9.50
Misc. Borders 8.90 9.15 9.40
Mattress and Box Spring Sewer 8.90 9.15 9.40
Quilting Machine Operator 9.00 9.25 9.50
R Coiler (Uitrasonic) Operator 9.00 9.25 9.50
HMB Operator 9.00 9.25 9.50
Hog-Ring Operator 8.73 8.98 9.23
Border Machine Operator 8.68 8.93 9.18
Miscellaneous Sewers Quilt 8.68 8.93 9.18
HOURLY RATED JOBS
-----------------
Cutting 9.38 9.68 9.98
Material Handler 9.05 9.35 9.65
Material Coordinator 9.25 9.55 9.85
Janitor 9.05 9.35 9.65
Inspector 9.05 9.35 9.65
Quilt Repair Operator 9.20 9.50 9.80
Wrapper & Bagger,
Packer, Inspector 9.05 9.35 9.65
Stock Clerk 9.25 9.55 9.85
Specialized Maintenance
Mechanic 12.95 13.25 13.55
Repairman 10.13 10.43 10.73
Flotation Assembler 9.35 9.65 9.95
Lineman 9.05 9.35 9.65
Lead Person $.50 per hour above labor grade
rate
36
<PAGE>
IN WITNESS WHEREOF the parties hereunto set their hands and seals this
day of , 1992.
The United Steel Workers of America, SIMMONS COMPANY
---------------
A.F.L., C.I.O., C.L.C. LOS ANGELES, CALIFORNIA
(Upholstery Industries Division)
Through its Agent,
UNITED STEELWORKERS
ASSOCIATION, Local #515
For the UNION For the COMPANY
By /s/ Raymond E. Valdez /s/
------------------------- ------------------------
/s/
------------------------- ------------------------
/s/ Robert K. Barton
------------------------- ------------------------
This 8th Day of December, 1994
--- --------
The United Steel Workers of America, A.F.L., C.I.O., C.L.C.
(Upholstery Industries Division)
By /s/ Ernest F. Shorn
---------------------------------------------
Director of Upholstery Industries Division
37
Exhibit 10.26
FINANCING ADVISORY AGREEMENT
This Agreement is made effective as of the 20th day of March,
1996, by and between Investcorp International, Inc., a Delaware corporation
("III"), and Simmons Acquisition Corp., a Delaware corporation ("SAC").
WHEREAS, pursuant to a Stock Purchase Agreement dated as of
February 21, 1996, among Merrill Lynch Capital Appreciation Partnership No.
B-XI, L.P., MLCP Associates L.P. No. II, ML IBK Positions Inc., ML Offshore LBO
Partnership No. B-XI, Merchant Banking L.P. No. IV, Simmons Company ("Simmons"),
Merrill Lynch KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1989, NationsBank,
N.A. (South), solely in its capacity as trustee of the Simmons Company Employee
Stock Ownership Trust, certain management stockholders, SAC and Simmons
Holdings, Inc., SAC will purchase (the "Purchase") the stock of Simmons;
WHEREAS, SAC intends to arrange borrowing facilities with one or
more financial institutions unaffiliated with III in the aggregate amount of
approximately $115 million (the "Financing");
WHEREAS, III and its officers, employees, agents and affiliates
are experienced in the field of obtaining debt financing and are willing to act
as a financial advisor to SAC; and
WHEREAS, SAC is desirous to avail itself of the assistance and
expertise of III in arranging the Financing;
NOW, THEREFORE, the parties do hereby agree as follows:
1. Services of III. III shall assist SAC in arranging the
Financing. In connection therewith, III may, solely in its discretion and on
behalf of SAC:
(a) seek out financial institutions that may provide the
Financing;
(b) enter into negotiations with banks and other financial
institutions regarding the terms and conditions upon which the
Financing is to be provided;
(c) advise, conduct and participate in the negotiation
and drafting of any agreements,
<PAGE>
contracts, or other documents relating to the placement of the
Financing; and
(d) take all such other actions as it may deem necessary
to arrange for the Financing.
2. Fees. In consideration of the services contemplated by
Section 1 hereof, SAC shall pay to III a fee in the amount of $3,450,000 (3
percent of the Financing), payable on the closing of the Purchase.
3. Reimbursement. SAC shall pay directly any commitment fees,
arrangement fees, or other actual out-of-pocket expenses incurred in connection
with the performance of III's services under this Agreement, including, but not
limited to, fees and disbursements of III's legal counsel.
4. Cooperation and Information. SAC shall cooperate with III in
the performance of its obligations hereunder and shall furnish III with such
information as III may request (all such information so furnished hereinafter
referred to as the "Information"). SAC recognizes and confirms that III:
(a) will use and rely primarily on the Information and on
information available from generally recognized public sources in
performing the services contemplated by this Agreement without
having independently verified the same;
(b) does not assume responsibility for the accuracy or
completeness of the Information; and
(c) will not make an appraisal of any of the assets of
SAC.
All information so furnished to III will be kept confidential by III, except
such information as is in the public domain or as SAC agrees may be disclosed or
as III is required by law to disclose; provided, however, that III may provide
such Information as it deems necessary or appropriate to financial institutions
in connection with obtaining, negotiating or arranging the Financing in
accordance with the terms of this Agreement.
5. Termination. Subject to the provisions of Paragraph 6
hereof, which shall survive any termination of this Agreement, this Agreement
shall terminate if the Purchase is not consummated on or before June 25, 1996,
unless extended by the parties' mutual consent.
<PAGE>
6. Indemnification. SAC shall:
(a) indemnify III and hold it harmless against any losses,
claims, damages or liabilities to which III may become subject
arising in any manner out of or in connection with the rendering
of services by III hereunder, unless it is finally judicially
determined that such losses, claims, damages or liabilities arose
primarily out of the gross negligence or bad faith of III; and
(b) reimburse III immediately for any legal or other
expenses reasonably incurred by it in connection with
investigating, preparing to defend or defending any lawsuits or
other proceedings arising in any manner out of or in connection
with the rendering of services by III hereunder; provided,
however, that in the event a final judicial determination is made
to the effect specified in subparagraph 6(a) above, III will
remit to SAC any amounts reimbursed under this subparagraph 6(b).
SAC agrees that (i) the indemnification and reimbursement
commitments set forth in this paragraph shall apply whether or
not III is a formal party to any such lawsuits, claims or other
proceedings, (ii) III is entitled to retain separate counsel of
its choice at the expense of SAC in connection with any of the
matters to which such commitments relate, and (iii) such
commitments shall extend, upon the terms set forth in this
paragraph, to any controlling person, director, officer, employee
or agent of III; provided, however, that to the extent that III
retains separate counsel in connection with any matters set forth
in this subparagraph 6(b), such counsel shall coordinate its
efforts with counsel to SAC.
7. Amendments. No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall be effective unless the same shall be in writing and signed by the parties
to this Agreement, and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
8. Notices. All notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when
<PAGE>
mailed, if the same shall be sent by registered or certified mail, return
receipt requested, and the mailing date shall be deemed the date from which all
time periods pertaining to a date of notice shall run. Notices shall be
addressed to the parties at the following addresses:
If to III, to:
Investcorp International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention: Christopher J. O'Brien
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, NW
Washington, D.C. 20036
Attention: Peter L. Baumbusch, Esq.
If to SAC, to:
Simmons Acquisition Corp.
c/o Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis
9. Entire Agreement. This Agreement shall constitute the entire
Agreement between the parties with respect to the subject matter hereof and
shall supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating thereto.
10. Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York and shall inure to
the benefit of, and be binding upon, III and SAC, and their respective
successors and assigns.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned parties has caused
this Financing Advisory Agreement to be executed and delivered by its duly
authorized officer or agent as of the date first set out above.
INVESTCORP INTERNATIONAL, INC.
By: /s/
--------------------------------
Name:
Title:
SIMMONS ACQUISITION CORP.
By: /s/
--------------------------------
Name:
Title:
Exhibit 10.27
SIMMONS ACQUISITION CORP.
c/o Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
December 1, 1995
Investcorp International, Inc.
280 Park Avenue, 37th Floor
New York, New York 10017
Dear Sirs:
This will confirm the understanding and agreement (the "Agreement")
between Investcorp International, Inc. ("III") and Simmons Acquisition Corp.
("SAC").
l. SAC hereby engages III to render financial advisory services
concerning its proposed acquisition of the assets of Simmons
Company ("Simmons").
2. III hereby accepts the engagement and, in that connection, agrees
to:
(a) conduct such financial review of Simmons and its business
and operations as III shall deem appropriate and feasible,
which review shall be limited to an analysis of (i)
publicly available information with respect to Simmons,
and (ii) such other information as shall be supplied to
III by Simmons;
(b) assist in negotiations and related acquisition strategy;
and
(c) advise with respect to executive compensation matters
regarding the executives of Simmons.
3. For purposes of this Agreement, "acquisition" shall mean any
transaction or series or combination of transactions, other than
in the ordinary course of trade or business, whereby, directly or
indirectly, control of or a material interest in Simmons or any
of its businesses or assets is transferred to SAC for
consideration, including, without limitation, a sale or exchange
of capital stock or assets, a lease of assets with or without a
purchase option, a merger or consolidation, a tender or exchange
offer, a leveraged buy-out, the formation of a joint venture or
partnership, or any similar transaction.
4. The term of III's engagement hereunder shall extend from the date
hereof through the later of June 25, 1996 or the closing of the
acquisition of Simmons. Subject to the provisions of paragraphs 5
through 10 hereof, which shall survive any termination of this
Agreement (including by operation of the preceding sentence),
<PAGE>
SAC may terminate III's engagement hereunder at any time by
giving III at least 10 days prior written notice.
5. If an acquisition (as defined in paragraph 3 above) of Simmons by
SAC occurs during the term of III's engagement hereunder, or at
any time during a period of 12 months following the effective
date of termination of III's engagement hereunder, regardless of
whether or not III rendered advice concerning the acquisition,
then SAC shall pay the sum of $6.675 million to III at the
closing of the acquisition (which amount is equal to 2.4 percent
of the approximately $278 million total transaction amount).
6. SAC shall reimburse III for its reasonable out-of-pocket expenses
incurred during the period of its engagement hereunder with
respect to the services to be rendered by it. Out-of-pocket
expenses shall include, but not be limited to, professional fees
and disbursements incurred by III.
7. SAC shall:
(a) indemnify III and hold it harmless against any losses,
claims, damages or liabilities to which III may become
subject arising in any manner out of or in connection with
the rendering of services by III hereunder, unless it is
finally judicially determined that such losses, claims,
damages or liabilities arose primarily out of the gross
negligence or bad faith of III; and
(b) reimburse III immediately for any legal or other expenses
reasonably incurred by it in connection with investigating,
preparing to defend or defending any lawsuits or other
proceedings arising in any manner out of or in connection
with the rendering of services by III hereunder; provided,
however, that in the event a final judicial determination
is -------- ------- made to the effect specified in
subparagraph 7(a) above, III will remit to SAC any amounts
reimbursed under this subparagraph 7(b). SAC agrees that
(i) the indemnification and reimbursement commitments set
forth in this paragraph shall apply whether or not III is a
formal party to any such lawsuits, claims or other
proceedings, and (ii) III is entitled to retain separate
counsel of its choice in connection with any of the matters
to which such commitments relate, and (iii) such
commitments shall extend upon the terms set forth in this
paragraph to any controlling person, director, officer,
employee or agent of III; provided, however, that to the
extent that III retains separate counsel -------- -------
in connection with any matter set forth in this
subparagraph 7(b), such counsel shall coordinate its
efforts with counsel to SAC.
8. Except as contemplated by the terms hereof or as required by
applicable law, III shall keep confidential all material
non-public information provided to it by SAC
<PAGE>
or Simmons and shall not disclose such information to any third
party, other than such of its employees and advisors as III
determines to have a need to know.
9. Except as required (i) by applicable law or (ii) under the terms
of any agreement relating to the acquisition, any advice to be
provided by III under this Agreement shall not be disclosed
publicly or made available to third parties without the prior
approval of III, which approval shall not be unreasonably
withheld or delayed.
10. SAC agrees that III has the right to place advertisements in
financial and other newspapers and journals at its own expense
describing its services to SAC hereunder, provided that III will
submit a copy of any such advertisement to SAC for its approval,
which approval shall not be unreasonably withheld or delayed.
11. SAC and III acknowledge and agree that there are no brokers,
representatives or other persons which have an interest in
compensation due to III from any transaction contemplated herein.
12. No amendment or waiver of any provision of this Agreement, or
consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in
writing and signed by the parties to this Agreement and then such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. Any and all notices hereunder shall, in the absence of receipted
hand delivery, be deemed duly given when mailed, if the same
shall be sent by registered or certified mail, return receipt
requested, and the mailing date shall be deemed the date from
which all time periods pertaining to a date of notice shall run.
Notices shall be addressed to the parties at the following
addresses:
If to III, to:
Investcorp International, Inc.
280 Park Avenue
37th Floor
New York, New York 10017
Attention: Christopher J. O'Brien
with a copy to:
Gibson, Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Suite 900
Washington, D.C. 20036
Attention: Peter L. Baumbusch, Esq.
<PAGE>
If to SAC, to:
Simmons Acquisition Corp.
c/o Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq.
14. This letter agreement may be signed in one or more counterparts,
each of which shall constitute an original and which together
shall constitute one and the same agreement.
15. This letter agreement shall constitute the entire agreement
between the parties with respect to the subject matter hereof and
shall supersede all previous oral and written (and all
contemporaneous oral) negotiations, commitments, agreements and
understandings relating thereto.
16. This Agreement shall be construed and enforced in accordance with
the laws of New York and shall inure to the benefit of, and be
binding upon, III and SAC, and their respective successors and
assigns.
17. The waiver by any party of any breach of this Agreement shall not
operate or be construed to be a waiver of any subsequent breach.
If the foregoing correctly sets forth the Agreement between III and SAC,
please so indicate in the space provided for that purpose below, whereupon this
letter shall constitute a binding agreement as of the date first above written.
SIMMONS ACQUISITION CORP.
By: /s/ John M. Kenney
-------------------------------------
Name: John M. Kenney
Title:
AGREED:
INVESTCORP INTERNATIONAL, INC.
By: /s/
-------------------------------------
Name:
Title:
EXHIBIT 10.29
DENVER/
AURORA
LEASE
<PAGE>
INDUSTRIAL LEASE
----------------
THIS LEASE, made this 16th day of December, 1988, by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey Corporation,
hereinafter called "Landlord", and SIMMONS COMPANY, a Delaware corporation,
hereinafter called "Tenant":
1.
BASIC TERMS
-----------
1.01 Basic Terms.
-----------
A. Landlord: The Prudential Insurance Company of
--------
America.
B. Tenant: Simmons Company ("Simmons").
------
C. Address of Tenant: #6 Executive Park Drive NE,
-----------------
Atlanta, Georgia 30326.
D. Premises: Unit number 100 in the industrial
--------
building located at 12601 East 33rd Avenue, Denver, Colorado 80011, which
Premises are outlined on Exhibit A attached hereto for the purposes of
---------
identification.
E. Building: The Building in which the Premises are
--------
located.
F. Project: A single-building warehouse complex
-------
including all improvements and appurtenances thereto and located at 12601
East 33rd Avenue, Aurora, Colorado, such complex depicted and described on
Exhibits A and E attached hereto.
- ---------- -
G. Lease Term: The Term of this Lease shall commence at
----------
noon on January 1, 1989 (the "Commencement Date"), and shall terminate at
noon on the last day of April, 1993, except as otherwise provided for in
Section 18.01.
H. Rent: All sums, moneys, or payments are required to
----
be paid by Tenant to Landlord pursuant to Sections 5.01, 22.01, 22.02, and
22.03 of this Lease.
I. Base Rent: See "Rider to Lease".
---------
J. Security Deposit: $-0-.
---------------- ---
K. Tenant's Proportionate Share: 35.95%.
----------------------------
1.02 Effect of Reference to Basic Terms.
----------------------------------
Each reference in this Lease to any of the Basic Terms contained in
Section 1.01 shall be construed to incorporate into such reference all of
the definitions set forth in Section 1.01 above.
2.
PREMISES
--------
2.01 In consideration of the rents, covenants, agreements, and
conditions hereinafter provided to be paid, kept, performed, and observed,
the Landlord leases to the Tenant and Tenant hereby hires from the Landlord
the Premises described in Section 1.01 (D).
2.02 Reservations by Landlord. Landlord excepts and reserves the
------------------------
roof foundation and exterior walls of the Building, and further
1
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reserves the right to place, install, maintain, carry through, repair, and
replace such utility lines, pipes, wires, appliances, tunneling, and the
like in, over, through, and upon the Premises as may be reasonably
necessary or advisable for the servicing of the Premises or any other
portions of the Project, provided, however, that Landlord shall during
normal business hours use reasonable efforts to prevent extraordinary
interference with Tenant's use of the Premises.
Notwithstanding any provision in this Lease to the contrary, it is
agreed that the Landlord reserves the right, without invalidating this
Lease or modifying any provision thereof, at any time, and from time to
time, (i) to make alterations, changes, and additions to the Building and
other improvements in the Project (including, without limitation, the
Building in which the Premises are located), (ii) to add additional areas
and buildings to the Project and/or to exclude areas therefrom, (iii) to
construct additional buildings and other improvements in the Project, (iv)
to remove or relocate the whole or any part of any building or other
improvement in the Project, and (v) to relocate any other Tenant in the
Project. It is further understood that the existing layout of the
buildings, walks, roadways, parking areas, entrances, exits, and other
improvements shall not be deemed to be a warranty, representation, or
agreement on the part of the Landlord that the Project shall remain exactly
as presently built, it being understood and agreed that the Landlord may
change the number, dimensions, and locations of the walks, buildings, and
parking spaces as Landlord shall deem proper, subject to the provisions of
Article 21.
3.
USE
---
3.01 The Premises hereby leased shall be used by Tenant for the
purpose of manufacturing, sale, storage, and distribution of mattresses,
furniture and their related products and for no other purposes. In no
event shall the Premises be used for the storage, use, disposal,
manufacture, or transfer of any substance which may be deemed hazardous
under local, federal, state or other governmental authority promulgated
rule, regulation, statute or ordinance. Landlord makes no representation
to Tenant that the use limited in this Section 3.01 constitutes a lawful
use under applicable zoning regulations, or that the lawful uses for the
Premises as of the date of this Lease shall not change during the Lease
Term. Tenant shall, at its own expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, and
requirements in effect during the Term or any part of the Term hereof
regulating the use by the Tenant of the Premises. Tenant shall not use or
permit the use of the Premises in any manner that will tend to create waste
or a nuisance, or which will tend to unreasonably disturb such other
Tenants in the Project. The Tenant, its employees, and all persons
visiting or doing business with the Tenant in the Premises shall be bound
by and shall observe the Rules and Regulations attached to this Lease as
Exhibit B, and such further and other reasonable Rules and Regulations made
- ---------
hereafter by the Landlord relating to the Project or the Premises,
including but not limited to the safety, care and cleanliness thereof, of
which notice in writing shall be given to the Tenant, and all such Rules
and Regulations shall be deemed to be incorporated into and form a part of
this Lease.
4.
TERM
----
4.01 To have and to hold the leased Premises for and during the Term
described in Section 1.01(G), subject to the payment of
2
<PAGE>
the Rent and the full and timely performance by Tenant of the covenants and
conditions hereinafter set forth.
5.
BASE RENT
---------
5.01 Tenant agrees to pay Landlord the Base Rent set out in Section
33.01 to the Rider for the full Term. The first full monthly installment
of Base Rent shall be payable on the first day of the Term and each
succeeding monthly installment shall be due and payable on or before the
first day of each and every successive calendar month thereafter during the
Term hereof. In the event the Term of this Lease ends on a date other than
the last day of a month, the last monthly payment of Base Rent shall be in
a pro rata portion of the applicable Base Rent based on the number of days
in such month prior to and including the last day of the Term of this
Lease.
The Base Rent and all other Rent or other charges provided for herein
shall be paid to Landlord without deduction or offset, and in lawful money
of the United States of America, at Bennett & Kahnweiler, 4685 Peoria
Street, Suite 231, Denver, Colorado 80239, or to such other person or at
such other place as Landlord may from time to time designate in writing.
6.
UTILITIES AND SERVICES
----------------------
6.01 Tenant shall contract in its own name and pay for all charges
for electricity, gas, fuel, telephone, trash hauling, and any other
services or utilities used in, servicing, or assessed against the Premises,
unless otherwise herein expressly provided. Water and sewer services shall
be contracted for by the Landlord, with the Tenant paying its proportionate
share of such costs as part of the Common Area charges.
7.
QUIET ENJOYMENT
---------------
7.01 The Landlord covenants that the Tenant, on paying the Rent
herein provided, and on keeping, performing, and observing the covenants,
agreements, and conditions herein required of Tenant, shall peaceably and
quietly hold and enjoy the Premises for the Term aforesaid, subject,
however, to the terms of this Lease.
8.
ASSIGNMENT AND SUBLETTING
-------------------------
8.01 Tenant shall not assign this Lease or any interest therein or
sublet all or any part of the Premises without the prior written consent of
the Landlord, which consent may not be unreasonably withheld or delayed,
provided that (i) comparable certified financials are supplied to Landlord;
(ii) use does not vary and there is no hazardous waste use, storage,
disposal or manufacture; (iii) all increases in rent over Base Rent are
paid to Landlord; further, provided, however, that Tenant may assign or
------- -------- -------
sublet all or any part of the Premises without the prior written consent of
the Landlord to any direct and indirect subsidiary or parent of Tenant, or
to a division of Tenant, as long as Tenant remains liable for all
obligations under this Lease and notifies Landlord of said subletting or
assignment. If the Tenant wishes to sublet or assign all of the Premises,
it shall give notice to the Landlord in writing and the Landlord shall have,
within thirty (30) days of receipt of such notice, the right to terminate this
3
<PAGE>
Lease or to approve said subletting or assignment in accordance herewith by
written notice to the Tenant. If no notice is given, the Landlord shall be
deemed to have elected to have approve the subletting or assignment. If
the subletting or assignment and the sum of the rents and other charges
provided for herein are approved by the Landlord, then the Landlord shall
have the further option either (a) to convert the sublease or assignment
into a prime lease and to receive all of such rents and other charges, in
which case the Tenant shall be relieved of further liability hereunder and
under the proposed sublease or assignment, or (b) to require Tenant to
remain liable under this Lease, in which event, the Tenant shall be
entitled to retain one-half of the rents provided for in the sublease or
assignment that are in excess of the rents required by this Lease for the
applicable space, and the remaining one-half of such excess rents and the
other charges shall be payable to the Landlord.
9.
DAMAGE OR DESTRUCTION
---------------------
9.01 If the Premises, the Building, or the Project described above
or any part thereof is damaged by fire or other casualty, cause, or
condition whatsoever and such damage cannot, in Landlord's reasonable
determination, be repaired or replaced in one hundred twenty (120) days
from the date of the damage, then Landlord or Tenant may, by written notice
to the other given within thirty (30) days after the determination of
whether it can be repaired, elect to terminate this Lease as to all of the
Premises covered by the Lease. Such termination shall become effective as
of the date of the damage. If this Lease is not terminated as above
provided, and if said Premises are made partially or wholly untenantable as
aforesaid, the Landlord, at its own expense, shall restore said Premises,
Building, or Project with reasonable promptness to the condition in which
the Landlord furnished the Premises to the Tenant at the commencement of
the Term of this Lease as to those items that were provided to the Premises
at the Landlord's expense without any reimbursement by the Tenant.
Landlord shall be under no obligation to restore any alterations,
improvements, or additions to the Premises made by the Tenant or paid for
by the Tenant, including, but not limited to, any of the initial Tenant
finish done or paid for by the Tenant or any subsequent changes,
alterations, or additions made by the Tenant.
If the Premises are rendered totally untenantable but this Lease is
not terminated, all rent shall abate from the date of the fire or other
relevant cause or condition until the Premises are ready for occupancy and
are reasonably accessible to the Tenant. If a portion of the Premises is
untenantable, rent shall be prorated on a per diem basis and apportioned in
accordance with the portion of the Premises which is usable by the Tenant
until the damaged part is ready for the Tenant's occupancy. In all cases,
due allowance shall be made for reasonable delay caused by strikes, labor
difficulties, or any cause beyond Landlord's reasonable control. For the
purposes of this Lease, said Premises shall be considered tenantable so
long as, and to the extent that, the Premises are used or occupied. In any
event, the Tenant shall be responsible for the removal (or restoration,
when applicable) of all its damaged property and debris from the Premises
within forty-five (45) days after written request of Landlord; upon failure
of Tenant to remove such property and debris after such forty-five (45) day
period, Landlord may remove it and Tenant shall reimburse Landlord for the
cost of removal.
4
<PAGE>
10.
LANDLORD'S RIGHTS
-----------------
10.01 Landlord reserves the following rights:
(a) To change the name of the Building or the Project without
notice or liability of the Landlord to Tenant;
(b) During the last ninety (90) days of the Term of this Lease
or any renewal hereof or any part hereof, if during or prior to that time,
the Tenant has vacated the Premises, to decorate, remodel, repair, alter,
or otherwise prepare the Premises for occupancy;
(c) To exhibit the Premises to others and to display "For Rent"
signs on the Premises during the last ninety (90) days of the Term of this
Lease or any renewal hereof;
(d) To remove from the parking lot abandoned or unlicensed
vehicles and vehicles that are unreasonably interfering with the use of
said parking lot by others and to charge the responsible Tenant for the
expense of removing said vehicles; and
(e) To take any and all measures, including making inspections,
repairs, alterations, additions, and improvements to the Premises or
Project as may be necessary or desirable for the safety, protection, or
preservation of the Premises or the Project or the Landlord's interests, or
as may be necessary or desirable in the operation of the Premises or the
Project.
Landlord may enter upon the Premises for the purpose of exercising any
or all of the foregoing rights hereby reserved without being deemed guilty
of an eviction or disturbance of the Tenant's use or possession of the
Premises and without being liable in any manner to the Tenant.
11.
HOLDING OVER
------------
11.01 In the event of a holding over by the Tenant after the
expiration or termination of this Lease without the written consent of the
Landlord, Tenant shall be deemed a Tenant at will and shall pay, as
liquidated damages, double rent for the entire holdover period, and all
attorney's fees and other expenses incurred by the Landlord in enforcing
its rights hereunder. Any holding over with the consent of the Landlord
shall constitute the Tenant a month-to-month Tenant at the same Base Rent
and additional Rent paid or payable by Tenant for the last full month of
this Lease or any renewal or extension hereof.
12.
SIGNS AND ADVERTISEMENTS
------------------------
12.01 Tenant shall not put upon nor permit to be put upon or affixed
to any part of the Premises or Project any signs, billboards, or
advertisements of whatsoever kind or nature, except as Landlord has
specifically approved in writing.
13.
MORTGAGE AND TRANSFER
---------------------
13.01 Landlord shall have the right to transfer, mortgage, pledge,
or otherwise encumber, assign, and convey, in whole or in part, the
Premises, Building, Project, this Lease, and all or any
5
<PAGE>
part of the rights now or hereafter existing and all rents and amounts
payable to the Landlord under the provisions hereof. Nothing herein
contained shall limit or restrict any such rights, and the rights of the
Tenant under this Lease shall be subject to and subordinate to all
instruments executed and to be executed in connection with the exercise of
any such rights, including, but not limited to, the lien of any mortgage,
deed of trust, or security agreement now or hereafter placed upon the
Landlord's interest in the Premises; provided, however, that any such
-------- -------
instrument or instruments provide in substance that, if by foreclosure or
otherwise such mortgagee or any successor in interest shall come in
possession of the Premises or become the owner of the same or take over the
rights of Landlord in the same, it will not disturb the possession, use or
enjoyment of Premises by Tenant, its successors or assigns, nor disaffirm
this Lease or Tenant's rights or stay hereunder, so long as all the
obligations of Tenant are fully performed in accordance with the terms of
this Lease. This paragraph shall be self-operative; however, Tenant
covenants and agrees to execute and deliver upon demand such further
instruments subordinating this Lease to the lien of any such mortgage, deed
of trust, or security agreement as shall be reasonably requested by the
Landlord and/or mortgagee or holder of any security agreement, and the
Tenant hereby irrevocably appoints the Landlord as its agent and attorney
to execute and deliver any such instrument for and in the name of the
Tenant.
14.
EMINENT DOMAIN
--------------
14.01 If all of the Premises or the Project or any substantial part
of either shall be taken by any competent authority under the power of
eminent domain or be acquired for any public or quasi-public use or
purpose, the Term of this Lease shall cease and terminate upon the date
when the possession of the said Premises or the part thereof so taken shall
be required for such use or purpose and without apportionment of the award,
and Tenant shall have no claim against Landlord for the value of any
unexpired Term of this Lease. If any condemnation proceeding shall be
instituted in which it is sought to take less than a substantial part of
the Project, or to change the grade of any street or alley adjacent to the
Premises and such taking or change of grade is so material as to make it
necessary to remodel the Building or the Project to conform to the changed
grade or the Taking, the Landlord shall have the right to cancel this Lease
after having given written notice of cancellation to the Tenant not less
than ninety (90) days prior to the date of cancellation designated in the
notice. In either of the said events, Base Rent at the then current rate
and all additional Rents shall be apportioned as of the date of the
termination. No money or other consideration shall be payable by the
Landlord to the Tenant for the right of cancellation, and the Tenant shall
have no right to share in the condemnation award or in any judgment for
damages caused by the taking or the change of grade. Nothing in this
paragraph shall preclude an award being made to Tenant for loss of business
or cost of removal of equipment or fixtures.
15.
LANDLORD'S INABILITY TO PERFORM
-------------------------------
15.01 If, by reason of inability to obtain and utilize labor,
materials, or supplies; circumstances directly or indirectly the result of
a state of war or national or local emergency; laws, rules, orders,
regulations, or requirements of any governmental authority now or hereafter
in force; strikes or riots; accident in, damage to, or the making of
repairs, replacements, or improvements to the Premises or any of the
equipment thereof; or by reason of
6
<PAGE>
any other cause beyond the reasonable control of either party, such party
shall be unable to perform or shall be delayed in the performance of any
covenant to supply any service, such nonperformance or delay in performance
shall not render the Landlord liable in any respect for damages to either
person or property, constitute a total or partial eviction (constructive or
otherwise), work an abatement of Rent, or relieve the other party from the
fulfillment of any covenant or agreement contained in this Lease, provided,
however, that this section shall not apply to any obligation of Tenant to
pay Base Rent or any other sum due and payable hereunder.
16.
ASSIGNMENT TO TRUSTEE
---------------------
16.01 Neither this Lease nor any interest herein nor any estate
hereby created shall pass to any trustee or receiver in bankruptcy or to
any other receiver or assignee for the benefit of creditors, or otherwise
by operation of law during the term of this Lease or any renewal hereof.
17.
COMMON AREAS
------------
17.01 The Term "Common Areas" means all the areas of the Project not
intended for renting and, instead, designed for the common use and benefit
of the Landlord and all of the Tenants, their employees, agents, customers,
and invitees. The Common Areas include, but not by way of limitation,
parking lots, truck courts, landscaped and vacant areas, driveways, walks,
and curbs, with facilities appurtenant to each, as such areas may exist
from time to time. Landlord expressly reserves the right to add additional
Common Area to the Project from time to time, and in the event such
additions are made, the percentile set out in Section 1.01 above for
Tenant's Proportionate Share of the charges provided for in Section 22.01
of this Lease shall not increase solely by reason of the addition of Common
Area to the Project. Landlord shall operate and maintain the Common Areas
of the Project, and the cost of same shall be reimbursed by Tenant to
Landlord as provided for hereinafter. Landlord hereby grants to Tenant the
nonexclusive revocable use of the Common Areas by the Tenant, Tenant's
employees, agents, customers, and business invitees, which use shall be
subject at all times to such reasonable, uniform, and nondiscriminatory
rules and regulations as may from time to time be established by the
Landlord.
18.
ACCEPTANCE OF PREMISES
----------------------
18.01 Landlord, subject to delays beyond its control, agrees to
perform its obligations with respect to the Premises as set forth
hereinafter and in Exhibit C, hereto, the Work Agreement.
---------
(A) Unless Tenant elects to independently contract for the
Tenant Finish Work for the Premises ("Tenant Finish Work"), as provided in
the Work Agreement, Landlord shall complete the Tenant Finish Work as set
forth more fully in the Work Agreement. Other than as set forth in the
Work Agreement, Landlord shall have no obligation for the completion of the
Premises and Tenant shall accept the Premises in its "as is" condition on
the date Landlord delivers possession of the Premises to Tenant in
accordance with the provisions of this Lease and the Work Agreement.
(B) Provided that Landlord completes the Tenant Finish Work, if
the Premises, or any portion, is not "Ready for Occupancy"
7
<PAGE>
on the date the Term is scheduled to begin (as provided in Section 1.01G,
then Tenant's obligation to pay Rents and other sums owing under this Lease
attributable to the Premises shall not commence until the Premises is Ready
for Occupancy. Landlord shall deliver and Tenant shall accept possession
of the Premises at such time as the Premises is ready for occupancy. The
postponement of Rent and other sums herein provided to be paid by Tenant
attributable to such space for any period prior to the delivery of Tenant
of such space Ready for Occupancy shall be in full settlement of all claims
which Tenant might otherwise have by reason of such space not being Ready
for Occupancy on the date the Term is scheduled to begin. "Ready for
Occupancy" as used herein shall mean the date that Landlord shall have
Substantially Completed the Premises as set forth in paragraph 4 of Exhibit
C and a certificate of occupancy has been issued or a temporary certificate
of occupancy has been issued. The later to occur of issuance of a
temporary certificate of occupancy for such space (or its equivalent), or
certification by Landlord's architect or space planner verifying
Substantial Completion of the Tenant Finish Work shall conclusively control
the date upon which the space is Ready for Occupancy and the commencement
of the Tenant's obligation to pay Rent, provided that the Landlord, Tenant
and contractor have prior to or concurrently therewith completed a walk
through and mutually generated a punchlist of items to be completed within
thirty (30) days or if same cannot reasonably be completed within thirty
(30) days, as soon thereafter as is reasonable. Notwithstanding anything
in the foregoing to the contrary, should Landlord fail to have the Premises
Ready for Occupancy on or before January 2, 1989, then Tenant shall have
the option to terminate this Lease upon written notice, the effective date
of termination to be at least thirty (30) days after the date of delivery
of Tenant's notice; provided, however, should Landlord have the Premises
Ready for Occupancy prior to the effective termination date then such
termination notice shall be of no force and effect and this Lease shall
continue in full force and effect between the parties. In the event this
Lease is terminated as provided immediately above, then neither Landlord
nor Tenant shall have any claim or obligation to the other by reason of
this Lease or the termination thereof.
(C) As used in this Lease, the term "Commencement Date" shall
mean the later to occur of: (i) the first day of the calendar month
immediately following the date the Premises are Ready for Occupancy, or
(ii) the Commencement Date set out in Section 1.01G above. If the Tenant's
obligation to pay Base Rent with respect to the Premises begins on other
than the first day of a month, Tenant shall pay Base Rent at the same
monthly rate for such partial month (also in advance) and all other terms
and conditions of this Lease shall be in force and effect during such
partial month. As soon as the Commencement Date is established Landlord
and Tenant shall execute an addendum to this Lease, which may be requested
by either party, setting forth the exact Commencement Date, and the date of
expiration of the term hereof shall be modified accordingly, if necessary,
to provide a full fifty-two (52) month term from the Commencement Date.
Notwithstanding anything contained in this Section 18.01 to the contrary,
it is understood and agreed that at such time as Tenant occupies all or any
portion of the Premises for the purposes permitted or allowed in this
Lease, its Rental obligation with respect to the portion so occupied shall
commence.
18.02 Maintenance and Care by Tenant. Tenant shall be responsible
------------------------------
for all maintenance and repair to the Premises of whatsoever kind or nature
that is not hereinafter set forth specifically as the obligation of the
Landlord. Tenant shall take good care of the Premises and fixtures, and
keep them in good repair, free from filth, overloading, danger of fire, or
any pest or nuisance, and shall repair any damage or breakage done by the
Tenant or its agents, employees, or invitees, including damage done
8
<PAGE>
to the Premises by Tenant's equipment and/or installations. Tenant shall
be responsible for the repair and replacement of all glass and plate glass
on the Premises. Tenant shall furnish and pay for the upkeep, maintenance,
repair, and periodic servicing of the heating, ventilating, and air
conditioning systems servicing the Premises, except that the Landlord, at
Landlord's option, may elect to enter into a service contract for the
maintenance and periodic inspection of the heating, ventilating, and air
conditioning equipment provided pursuant to such service contract. At the
end of the Term of this Lease or any renewal hereof, Tenant shall quit and
surrender the Premises "broom-clean", and in as good condition as when
received by the Tenant, normal wear and tear, and damage by fire or the
perils covered by extended coverage insuranced excepted. In the event that
the Tenant fails to maintain the Premises as required herein, the Landlord
shall have the right (if Tenant fails to commence repairs within fifteen
(15) days of notice and prosecute same to completion), but not the
obligation, to perform such maintenance and/or repairs, and the Tenant
shall promptly reimburse the Landlord for the Landlord's costs in providing
such maintenance and/or repairs, together with a ten percent (10%) charge
for the Landlord's overhead, upon receipt of such a bill from the Landlord
to the Tenant. If any portion of the Premises which the Tenant is
obligated to repair or maintain is damaged through the fault or negligence
of Landlord, its agents, employees, or invitees, then Tenant shall not be
obligated to make the repairs necessitated by such damage.
18.03 Maintenance and Repair by Landlord. During the Term of this
----------------------------------
Lease, the Landlord shall keep and maintain the roof, exterior walls
(excluding glass or plate glass), gutters, and downspouts of the Building
in good condition and repair. Landlord shall be under no obligation and
shall not be liable for any failure to make repairs that are the Landlord's
responsibility as designated herein until and unless the Tenant notifies
the Landlord in writing of the necessity therefor, and the Landlord shall
have a reasonable time after such notice to make such repairs. Landlord
reserves the right to the exclusive use of the roof and exterior walls of
the Building. If any portion of the Premises which the Landlord is
obligated to maintain or repair is damaged through the fault or negligence
of Tenant, its agents, employees, or invitees, then repairs necessitated by
such damage shall be paid for the Tenant on demand of the Landlord.
19.
ALTERATIONS AND ADDITIONS
-------------------------
19.01 Tenant shall not make any alterations, improvements, or
additions to the base building portions of the Premises which shall include
electrical, plumbing, HVAC, any structural portion of the Building and the
roof without the Landlord's prior written consent and approval of the plans
and specifications. Tenant may make other alterations to the Premises
which do not affect the base building or other portions of the Building as
set forth above without Landlord's consent, provided the aggregate cost of
any single alteration or improvement or related group of alterations on
improvements does not exceed $5,000.00 and further provided the Tenant
notifies Landlord of such alterations. Alterations, improvements, or
additions so made by either of the parties upon the Premises, except
movable furniture, trade fixtures and equipment placed in the Premises at
the expense of the Tenant, shall become the property of the Landlord and
shall remain upon and be surrendered with the Premises as a part thereof
at the termination of this Lease, without disturbance, molestation, injury,
or damage unless the Landlord elects to require the Tenant to remove such
alterations, improvements, or additions from the Premises at the expiration of
this Lease. In the event damage to the Building shall be caused by moving said
furniture and/or
9
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equipment in or out of the Premises, such damage shall be repaired at the
expense of the Tenant.
19.02 Mechanic's Liens. Tenant shall not permit any mechanic's
----------------
liens or other liens to be placed upon the Premises, the Building, or the
Project during the Term of this Lease, and in the case of the filing of any
such lien, Tenant shall promptly pay same; however, the Tenant shall have
the right to contest the validity or amount of any such lien provided such
lien is discharged or appropriately bonded within twenty (20) days after
notice from Landlord thereof. Tenant agrees to pay all reasonable legal
fees that might be incurred by the Landlord because of any mechanic's liens
or other liens placed upon the Premises.
20.
INSURANCE
---------
20.01 Tenant covenants and agrees to maintain on the Premises at all
times during the Term of this Lease or any renewal hereof a current, paid
policy or policies of general comprehensive public liability and property
damage insurance insuring Tenant and Landlord against any liability arising
out of the ownership, use, occupancy, or maintenance of the Premises and
all areas appurtenant thereto used or enjoyed by the Tenant. Such
insurance shall be in an amount not less than $1,000,000.00 combined single
limit for both bodily injury and property damage. All such policies of
insurance shall provide ten (10) days' prior written notice to Landlord of
cancellation or of a material change in coverage.
20.02 Mutual Subrogation. Landlord and Tenant do each hereby
------------------
release the other from any and all liability or responsibility (to the
other or to anyone claiming through or under the other by way of
subrogation or otherwise) for any loss or damage to property caused by
fire, any of the extended coverage perils, or any other insured peril, even
if such fire or other casualty shall have been caused by the fault or
negligence of the other party or of anyone from whom such party may be
responsible. Such waiver of subrogation shall be effective with respect to
loss or damage occurring only during such time as the Landlord's and the
Tenant's policies shall be in force and effect with respect to such loss or
damage and shall contain a clause or endorsement to the effect that any
such release shall not adversely affect or impair said policies or
prejudice the right of the releasing party to recover thereunder. Landlord
and Tenant each agree that their policies shall include such a clause or
endorsement. Tenant shall comply with all reasonable insurance regulations
so the lowest fire, lightning, and explosion extended coverage and liability
insurance rates may be obtained. Tenant agrees that it shall do nothing
and/or keep nothing in or on the Premises which will cause an increase in
the premium for any such insurance on the Premises or on any Building of
which the Premises are a part, or on any contents located therein, over the
rate usually obtained for the proper use of the Premises permitted by this
Lease or which could cause cancellation of any such insurance.
20.03 Indemnification of Landlord. Tenant shall indemnify Landlord
---------------------------
and save it harmless from and against any and all loss (including loss of
Rents payable by the Tenant or by other Tenants), and against all claims,
actions, damages, liability, and expenses in connection with loss of life,
bodily and personal injury, or damage to property (real or personal)
arising from any occurrence in, upon, or at the Premises or any part
thereof, or occasioned wholly or in part by any act or omission of the
Tenant, its agents, contractors, employees, servants, licensees,
concessionaires, or invitees or by anyone permitted to be on the Premises
by the Tenant. Tenant assumes all risks of and Landlord shall not be
liable for injury to person or damage to Tenant's
10
<PAGE>
property (real or personal) or the property of the Tenant's agents,
servants, or employees resulting from the condition of the Premises, or
from the bursting or leaking of any and all pipes, utility lines,
connections, or air conditioning, ventilating, or heating equipment in, on,
or about the Premises, or from water, rain, or snow which may leak into,
issue from, or flow from any part of the roof or the Building. Tenant
agrees, at all times, to indemnify and hold Landlord harmless against all
actions, claims, demands, costs, damages, or expenses of any kind which may
be brought against or made against the Landlord or which the Landlord may
pay or incur by reason of Tenant's occupancy of the Premises or the
Tenant's negligent performance or failure to perform any of its obligations
under this Lease. In the event that the Landlord shall, without fault on
its part, be made a party to any litigation commenced by or against the
Tenant, the Tenant shall protect and hold the Landlord harmless and shall
pay all costs, expenses, and reasonable attorney fees incurred or paid by
the Landlord in connection with such litigation. In no event shall Tenant
indemnify and hold Landlord harmless from Landlord's own willful misconduct
or negligence.
21.
USE OF COMMON AREAS BY TENANT
-----------------------------
21.01 Landlord agrees that Tenant shall have the nonexclusive use of
76 of the 94 parking spaces shown on Exhibit E. Furthermore, so long as
there are no other tenants in the Project in the Project, Tenant shall have
the right to use all or any portion of the parking spaces in excess of the
76 allocated to Tenant.
21.02 Tenant shall not use any part of the Project for outside
storage. Tenant shall not park any trucks or trailers, loaded or empty,
except in front of the loading docks or in areas specifically provided for
or designated for such purposes. Any trucks parked in parking spaces shall
be deemed to have used such spaces for the purposes of any parking
requirements set forth in Article 21.01, above, and the parking of said
trucks shall be for periods not to exceed five (5) days for any truck or
trailer, it being understood that trucks or trailers are not to be stored
on any part of the Project.
22.
ADDITIONAL RENT
---------------
22.01 Real Estate Taxes.
-----------------
(i) Tenant shall pay to Landlord, as additional Rent, Tenant's
Proportionate Share of Landlord's Real Estate Taxes for the Project for
each Tax Year during the Term of this Lease or any renewal, extension, or
holding over hereof. Such additional Rent payments by Tenant shall be due
and payable on the first day of each month during each Tax Year, each such
payment in an amount equal to one-twelfth (1/12) of Tenant's Proportionate
Share of the Landlord's obligation for Real Estate Taxes for the applicable
Tax Year. In the event the sum of such monthly payments by Tenant for a
particular Tax Year exceeds Tenant's Proportionate Share of Landlord's Real
Estate Taxes for the applicable Tax Year, the Landlord shall promptly
refund such excess payment to the Tenant. In the event the sum of the
Tenant's monthly payments for a particular Tax Year is less than Tenant's
Proportionate Share of Landlord's Real Estate Taxes for the applicable Tax
Year, the Tenant shall pay such deficiency upon demand. "Tax Year", as
used herein, shall mean each calendar year during the Term of the Lease or
any renewal, extension, or holding over hereof in which Real Estate Taxes
are billed against the Project regardless of the year
11
<PAGE>
in which the assessment for Real Estate Taxes occurs. For the purposes of
this Section, the first Tax Year shall be the calendar year in which the
Lease Term commences.
(ii) "Real Estate Taxes" shall mean: (a) all ad valorem Real
Estate Taxes on the Project (adjusted after protest or litigation, if any)
for any part of the Term of this Lease, exclusive of penalties; (b) any
taxes which shall be levied in lieu of any such ad valorem Real Estate
Taxes; (c) any special assessments for benefits on or to the Project paid
or payable in annual installments by Landlord; (d) occupational taxes or
excise taxes levied on rentals derived from the operation of the Project
for the privilege of leasing property; and (e) the expense of protesting,
negotiating, or contesting the amount or validity of any such taxes,
charges, or assessments, such expense to be applicable to the Tax Year of
the item contested, protested, or negotiated and the costs of such contest
included in "Real Estate Taxes" shall not exceed the Real Estate Taxes
saved in such contest. "Real Estate Taxes" shall not include any of
Landlord's federal, state or local income taxes.
(iii) If the Term of this Lease shall end during a Tax Year of
which only part is included in the Term hereof, the amount of such
additional Rent shall be prorated on a per diem basis and shall be paid on
or before the last day of the Term. If the Term of this Lease ends during
any Tax Year before the amount of the Real Estate Taxes is established and
the amount payable by the Tenant has been determined under the provisions
of this Section, an amount payable for the portion of the Lease Term during
the Tax Year shall be reasonably estimated by the Landlord, and the
estimated amount shall be promptly paid by the Tenant.
22.02 Heating, Ventilation, and Air Conditioning Maintenance.
------------------------------------------------------
During the Term of this Lease or any renewal, extension, or holding over
hereof, in the event the Landlord elects to enter into service and
maintenance agreements for heating, ventilating, and air conditioning
systems servicing the Premises (as more fully described in Section 18.02
above) and their controls, the Tenant shall pay to the Landlord, as
Additional Rent, the Landlord's actual reasonable costs and expenses with
respect to such agreements and to repairs and replacements made to said
systems and their controls. However, in no event may Landlord employ an
affiliated entity to perform the service and maintenance agreements for
such HVAC systems without first obtaining Tenant's written consent which
may not be unreasonably withheld provided said service and maintenance
agreements are competitive with other maintenance and service companies in
the Denver metropolitan area.
22.03 Common Area Expenses.
--------------------
(i) During the Term of this Lease or any renewal, extension,
or holding over hereof, Tenant shall pay to Landlord, as Additional Rent,
Tenant's Proportionate Share of the Common Area operating costs.
(ii) For the purposes of this Section, the "Common Area
Operating Cost" means the Landlord's total costs and expenses incurred in
owning, operating, maintaining, and repairing the Common Areas, herein
defined, including, but without limitation by enumeration: costs for all
electrical current, gas, water, sewer, or fuels used in connection with the
operation, maintenance, and repair of the Common Areas or the Building; the
amount paid for all electricity furnished to the Common Area to light the
parking lots or for any other common purpose; the amount paid for all labor
and/or wages and other payments, including costs to Landlord of workmen's
compensation and disability insurance, payroll taxes, and welfare and
fringe benefits, made to janitors, employees, contractors, and
subcontractors of the Landlord who are involved
12
<PAGE>
in the operation and maintenance of the Common Areas and the Project;
charges of any independent contractors employed in the care, operation,
maintenance, cleaning, and landscaping of the Common Areas; the amount paid
for all supplies, tools, replacement parts or components, equipment, and
necessities which are occassioned by everyday wear and tear; the premiums
for all insurance maintained by the Landlord for the Project; and the pro
rata costs of machinery and equipment purchased and/or leased by the
Landlord in order to perform Common Area maintenance. To the extent that
the Landlord provides services which are not separately metered or directly
billed to the Tenant (such as water, sewer, and trash hauling), the costs
of such services shall be included in the Common Area Operating Costs.
Common Area Operating Costs shall include the charges incurred by the
Landlord pursuant to Section 22.02 above. Common Area Operating Costs
shall not include interest on debt, capital retirement of debt,
depreciation, and costs properly chargeable to the capital account.
Notwithstanding the foregoing, Common Area Operating Costs shall include
those of Landlord's capital expenditures incurred for the purpose of
reducing Common Area or Building Operating Costs, and capital expenditures
incurred by the Landlord that are required by changes or amendments in laws
or regulations governing the Premises or the Project, amortized over the
useful life of the respective improvements of a capital nature (as
prescribed in accordance with Generally Accepted Accounting Principles).
Common Area Operating Costs shall not include the cost associated with any
employees of Landlord which are not directly involved with the Project.
22.04 Payment of Additional Rent. Any additional Rent payable by
--------------------------
the Tenant under Sections 22.02 and 22.03 hereof shall be paid within
thirty (30) days of the billing therefor by the Landlord.
23.
DEFAULT AND REMEDIES
--------------------
23.01 In the event:
(A) Tenant shall at any time fail to pay Rent within five (5)
business days of when due; or
(B) Tenant shall fail to keep, perform, or observe any other
covenant, agreement, condition, or undertaking described hereunder and
shall fail to remedy such default within fifteen (15) days after written
notice thereof has been mailed by the Landlord to the Tenant; or if such
default is one that will take longer than fifteen (15) days to remedy, the
Tenant fails to commence the cure of such default within said fifteen (15)
day period and/or fails to diligently pursue such cure to completion; or
(C) This Lease or the Premises or any part thereof shall be
taken upon execution or by other process of law directed against the Tenant
or shall be taken upon or subject to any attachment at the instance of any
creditor of or claimant against the Tenant and said attachment shall not be
discharged or disposed of within fifteen (15) days after the levy thereof;
or
(D) There is a filing of any petition or commencement of any
case or proceeding by the Tenant under any provision or chapter of the
Federal Bankruptcy Act or any other similar federal or state law relating
to Tenant's insolvency, bankruptcy, or reorganization; or
(E) There is a filing of any petition or commencement of any
case or proceeding described in subparagraph (D) above against the Tenant,
unless such petition and all proceedings
13
<PAGE>
initiated thereby are dismissed within sixty (60) days from the date of
such filing; or
(F) The Premises shall be vacated or abandoned by the Tenant for
reasons other than temporary shutdown due to economic or market conditions,
regardless of whether or not the Tenant continues to pay Rent and Tenant
fails to give thirty (30) days prior written notice of said temporary
vacation to Landlord;
the Landlord shall have the right, without further notice to or demand upon
the Tenant, to re-enter and take exclusive possession of the Premises, with
or without force or legal process; to refuse to allow Tenant to enter the
same or have possession thereof; to change the locks on the doors to the
Premises; to take possession of any furniture or other property in or upon
the Premises (Tenant hereby waiving the benefit of all exemptions by law)
and to sell the same at public or private sale without notice but in
accordance with applicable law and apply the proceeds thereof to the costs
of sale, payment of damages, and payment of the rent due under this Lease;
all without the Landlord being liable to the Tenant for any damages or any
prosecution therefor; and the Landlord shall have the right;
(i) As agent of the Tenant, to relet the Premises for the
balance of the Term of this Lease or for a shorter or longer Term, with or
without the granting of free-rent or other market concessions, and to
receive the Rents therefor, applying them first to the payment of all of
the Landlord's expenses of such reletting, such as, repairs, improvements,
broker's commissions and, second, to the payment of remedying all damages
suffered to the Premises and to all Rent due and thereafter becoming due
under this Lease, with Tenant remaining liable for and hereby agreeing to
pay Landlord any such deficiency on a monthly basis during the Lease Term
on the days Rent would be due hereunder; or
(ii) To cancel and terminate the remaining Term of this Lease,
regardless of whether Landlord has previously elected to relet or has relet
the Premises as permitted in (i) above, to re-enter and take possession of
the Premises free of this Lease, and thereafter this Lease shall be null
and void, and the Rent in such case shall be apportioned and paid on and up
to the date of such entry and possession by Landlord. Thereafter, both
parties shall be released and relieved from and of any and all obligations
thereafter to accrue hereunder. Tenant shall be liable for and pay all
Rents accrued, due or owing as of the date or termination, as well as all
loss and damage incurred by Landlord by reason of such breach or default;
or
(iii) To treat such default as a breach of this Lease and
terminate this Lease and, as liquidated damages for such default, to be
difference, if any, between the sum which, at the time of such termination
represents the then present value (computed at the rate of ten percent
(10%) per annum) of the aggregate Rents payable hereunder that would have
accrued over the balance of the Term of this Lease had such Term not been
prematurely terminated, over the aggregate market rental value of the
Premises during the Term that the Lease would have run had it not been
prematurely terminated by reason of Tenant's default.
All rights and remedies expressly provided in the Lease for the
Landlord's protection shall be cumulative and shall be in addition to any
other rights and remedies provided by law. Landlord shall be entitled to
recover from Tenant reasonable attorneys' fees and costs incurred by
Landlord in enforcing its rights hereunder. In the event Landlord elects
to re-enter or take possession of the Premises, Tenant agrees to quit and
peaceably surrender the Premises to Landlord, and Landlord may enter upon
and re-enter the Premises and possess and repossess itself thereof, and
14
<PAGE>
may have, hold, and enjoy the Premises and the right to receive all rental
income of and from the same. No such re-entry and taking of possession by
Landlord shall be construed as an election on Landlord's part to terminate
or surrender this Lease unless Landlord gives notice to Tenant specifically
terminating the Lease. Unless a written notice of such intention is served
on Tenant, the service of Demand for the Payment of Rent or Possession
required by the Colorado Forcible Entry and Unlawful Detainer Statute does
not constitute an election on the part of Landlord to terminate this Lease,
nor shall such notice or re-entry by Landlord or forfeiture by Tenant
relieve Tenant of its continuing liability for unaccrued rent.
A waiver by the Landlord of any breach or default by the Tenant under
the terms and conditions of this Lease shall not be construed to be a
waiver of any subsequent breach or default or of any other term or
condition of this Lease, and a failure of the Landlord to assert any breach
or to declare a default by the Tenant shall not be construed to constitute
a waiver thereof, so long as such breach or default continues unremedied.
24.
NOTICES
-------
24.01 Except as otherwise herein provided, whenever by the terms of
this Lease notice shall or may be given either to the Landlord or to the
Tenant, such notice shall be in writing and shall be deemed to have been
properly served if sent by Federal Express or other reputable overnight
courier service, or by certified mail, return receipt requested, postage
prepaid, to Landlord at the place where Rent is payable and/or to Tenant
at the Premises. The date of mailing shall be deemed the date of service
of notice. Notice may also be served by Landlord or Tenant in the same
manner provided for service in Rule 4 of Colorado Rules of Civil
Procedure, as amended from time to time.
24.
PERSONS BOUND
-------------
25.01 The agreements, covenants, and conditions of this Lease shall
be binding upon and shall inure to the benefit of the heirs, legal
representatives, successors, and assigns of each of the parties hereto,
except that no assignment, encumbrance, or subletting by the Tenant, unless
permitted by the provisions of this Lease, without the prior written
consent of the Landlord, shall vest any right of an assignee, encumbrance,
or sublessee of the Tenant. The singular herein, in referring to either
Landlord or Tenant, shall be deemed to include the plural where the context
so requires. If there be more than one Tenant herein named, the provisions
of this Lease shall be applicable to and binding upon such Tenant jointly
and severally.
26.
SECURITY DEPOSIT
----------------
Intentionally Deleted
27.
LATE PAYMENT
------------
27.01 Tenant's failure to pay Rent or any other payment required of
the Tenant hereunder within five (5) business days of the due date therefor
shall result in the imposition of a service charge for such late payment in
the amount of five percent (5%) of
15
<PAGE>
such required payment to cover Landlord's administrative costs to handle late
payments. Imposition of and/or payment of a service charge for late payment
shall not constitute a cure or waiver for such default in payment.
28.
RIDER
-----
28.01 A rider consisting of 1 page, with paragraphs numbered 32.01, 33.01
and 34.01, is attached hereto and made a part hereof.
29.
PARTIAL INVALIDITY
------------------
29.01 If any term, covenant, condition or provision of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, or violate a party's legal rights, then such term,
covenant, condition or provision shall be deemed to be null, void, and
unenforceable; however, all provisions of this Lease, or the application of such
term or provision to persons or circumstances other than those to which are held
invalid, unenforceable, or violative of legal rights, shall not be affected
thereby, and each and every other term, covenant, condition or provision of this
Lease shall be valid and shall be enforced to the fullest extent permitted by
law.
30.
CAPTIONS
--------
30.01 The captions used throughout this Lease are for convenience and
reference only and shall in no way be held to explain, modify, amplify, or aid
in the interpretation, construction, or meaning of any provisions in this Lease.
31.
ENTIRE AGREEMENT
----------------
31.01 This Lease, together with the referenced Rider and Exhibits,
contains the entire agreement between the parties, and no modification of this
Lease shall be binding upon the parties unless evidenced by an agreement, in
writing, signed by the Landlord and the Tenant after the date hereof. Time is of
the essence hereof.
IN WITNESS WHEREOF, the parties have signed triplicate copies hereof.
LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, a New Jersey corporation
By: Bennett & Kahnweiler of Colorado,
Inc., a Colorado corporation,
as Agent for the Landlord
By: /s/
-----------------------
President
TENANT:
SIMMONS COMPANY, a Delaware
corporation
By: /s/
-----------------------
16
<PAGE>
RIDER TO LEASE
dated December 16, 1988 between
The Prudential Insurance Company of America,
a New Jersey corporation ("Landlord")
and SIMMONS COMPANY,
a Delaware corporation ("Tenant")
32.
RULES AND REGULATIONS CHANGES
32.01 Although Landlord may change the rules and regulations from time to
time or implement new rules and regulations, in no event may Landlord materially
and adversely affect the terms of this Lease.
33.
SCHEDULE OF BASE RENT
33.01 The Base Rent payable monthly shall be paid for the respective
months of the Term as follows:
January 1, 1989-June 30, 1991
(30 months) $12,220.31/month
July 1, 1991-April 30, 1993
(22 months) $14,678.64/month
34.
TENANT IMPROVEMENTS
34.01 The Landlord will fund all tenant improvements as provided for in
the revised contractor's expense schedule dated October 12, 1988 (Exhibit "D"
attached).
17
<PAGE>
EXHIBIT "A"
Legal Description
-----------------
A part of Block 20, MORRIS HEIGHTS FILING NO. 2, AMENDED MAP, more particularly
described as follows:
Commencing at the point of intersection between the North line of said Block 20
and the centerline of Scranton Street defined as "Parcel No. 3" in instrument
recorded in Book 1905, at Pages 373 to 375 of the records of Adams County
Colorado; thence South 00 degrees 00 minutes 00 seconds West along said
centerline of Scranton Street, a distance of 209.03 feet to a point of
intersection with the North line of a railroad spur easement: thence North 83
degrees 56 minutes 45 seconds West and along the North line of said easement a
distance of 25.14 feet to the TRUE POINT OF BEGINNING; thence continuing along
said North line and North 83 degrees 56 minutes and 45 seconds West a distance
of 1219.66 feet; thence North 6 degrees 03 minutes 15 seconds East and radially
to a curve a distance of 1.50 feet; thence continuing along the North line of
said easement and along a curve to the right having a radius of 451.43 feet and
a control angle of 5 degrees 02 minutes 51 seconds an arc distance of 39.77 feet
to a point of intersection with the East right of way line of Revere Street
defined as "Parcel No. 2" in the hereinbefore mentioned instrument recorded in
Book 1905 at Pages 373 to 375; thence South 00 degrees 00 minutes 00 seconds
East and along said East right of way line 321.47 feet to a point of curvature;
thence along a corner curve to the left having a radius of 25.00 feet and a
central angle of 83 degrees 56 minutes 45 seconds an arc distance of 36.63 feet
to a point of tangency, which is also a point on the North right of way line of
East 33rd. Avenue defined as "Parcel No. 4" in the hereinbefore mentioned
instrument recorded in Book 1905, Pages 373 to 375; thence South 83 degrees 56
minutes 45 seconds East and along said North right of way line 12.08.75 feet to
a point of curvature; thence along a corner curve to the left having a radius of
25.00 feet and a central angle of 96 degrees 03 minutes 15 seconds an arc
distance of 41.91 feet to a point of tangency which is also a point on the West
right of way line of said Berenton Street; thence North 00 degrees 00 minutes 00
seconds West and along said West right of way line, a distance of 312.90 feet to
the TRUE POINT OF BEGINNING, in the County of Adams, State of Colorado.
<PAGE>
EXHIBIT B
Rules and Regulations
---------------------
1. Landlord shall furnish Tenant two (2) keys for each separately keyed
door for every entrance into the Premises without charge. Additional keys shall
be furnished at a reasonable charge. No additional locks shall be placed on any
of the doors of the Premises without the Landlord's prior written approval,
which shall not be unreasonably withheld.
2. If Landlord's approval is specifically required under Section 19.01 of
the Lease, Tenant shall refer all its contractors, contractor's represen-
tatives, and installation technicians, rendering any service on or to the
Premises, to the Landlord for Landlord's approval which shall not be
unreasonably withheld or delayed and supervision prior to performance of any
work on or to said Premises.
3. No Tenant shall, at any time, occupy any part of the Premises as
sleeping or lodging quarters.
4. No live birds, live fowl, or other live animals shall be brought into
or kept in or about the Premises.
5. None of the entries, passages, doors, stairways, or vestibule shall be
blocked or obstructed, nor shall any rubbish, litter, trash, or materials of any
nature be placed, emptied or thrown into such areas, nor shall such areas be
used at any time except for ingress and egress by Tenant, or the Tenant's
agents, employees or business invitees.
6. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to such water closets and water fixtures from misuse, or by the
defacing of or injury to any part of the Building, shall be borne by the person
who shall cause it. No person shall waste water by interfering with the faucets
or otherwise.
7. No person shall disturb the occupants of the Building by the use of
any musical instrument, the making of unseemly noises, or any unreasonable use.
Landlord acknowledges that Tenant's current operations are acceptable.
8. Tenant shall provide its own dumpster or trash compactor for trash
storage and removal, and agrees not to leave or store any materials (except for
stacked wooden grates adjacent to the dumpster), litter, or trash on the Common
Areas, including parking areas. Landlord reserves the right to approve the type
of dumpster or trash compactor utilized by the Tenant, which approval shall not
be unreasonably withheld or delayed. Landlord acknowledges that the dumpster
currently on the Premises is acceptable.
9. The use of parking areas shall be subject to such reasonable rules and
regulations as the Landlord may promulgate uniformly for all Tenants subject to
the provision of paragraph 10.01 of the Lease. Tenant agrees that it shall not
use or permit the use by its employees of the parking and loading dock areas for
the overnight storage of automobiles or other vehicles which would interfere
with traffic flow, emergency vehicles, or other intended uses of the Project.
Tenant agrees that it shall provide Landlord with no fewer than three (3)
emergency numbers and will immediately remove and trucks or vehicles if called
by Landlord. Landlord shall have the right to tow any vehicle belonging to
Tenant, its agents, employees, or invitees which is improperly parked and which
19
<PAGE>
the Tenant fails to remove after such written notice by the Landlord in
accordance with paragraph 10.01 of the Lease.
10. No sign, advertisement, or other lettering shall be painted, affixed,
or exposed on the windows, doors, or any part of the outside of the Building or
the Premises other than as specifically permitted in writing by the Landlord,
which permission shall not be unreasonably withheld or delayed. Landlord
acknowledges that Tenant's current signage is acceptable.
11. Landlord shall not be responsible for lost or stolen personal
property, equipment, money, or jewelry from the Premises, unless such loss
occurs because Landlord has failed to lock against entry an area under
Landlord's care or is otherwise negligent.
12. Tenant shall not park, nor allow its employees, agents, or business
invitees to park any trailers or trucks, whether loaded or empty, except in
front of the docks or other designated areas set forth on Exhibit "E". Tenant
shall be responsible for any damage to paving caused by the parking or loading
of such trailers or trucks, to the extent such damage was willfully or
negligently caused by Tenant, its agents, employees, contractors or invitees.
13. Tenant, and its employees, agents and invitees, shall have exclusive
use of the restroom facilities delineated in blue on Exhibit "F", and shall have
sole responsibility for maintaining, cleaning, and providing cleaning and toilet
supplies for such restroom facilities.
It is the Landlord's desire to maintain in the Building the highest
standard of dignity and good taste, consistent with comfort and convenience for
the Tenants. Any action or condition not meeting with this standard should be
reported directly to the Landlord. Landlord's and Tenant's cooperation will be
mutually beneficial and sincerely appreciated. Landlord reserves the right to
make such other and further reasonable rules and regulations as in its judgment
may from time to time be needful for the safety, care, and cleanliness of the
Premises, and for the preservation of good order therein, subject to Tenant's
right of approval as set forth in Article 3.01 of the Lease.
20
<PAGE>
EXHIBIT "C"
WORK AGREEMENT
--------------
1. Landlord's Commitment to Completion of Improvements. Landlord
---------------------------------------------------
covenants and agrees to cause to be constructed the Improvements referred to in
the Lease and Exhibit "D" to which this Addendum is attached (the "Lease").
2. Landlord's Commitment to Complete Specified Tenant Finish. Landlord
---------------------------------------------------------
hereby agrees to complete, in a good and workmanlike manner and at Landlord's
sole cost and expense, partitions, painting, wall finish, electric outlets and
other items as detailed in the contractors Bid Sheet (Exhibit "D") and to
otherwise suitably prepare the Demised Premises for installation by Tenant of
furnishing furniture and equipment of Tenant.
3. Estimated Completion Date. Landlord shall make reasonable effort to
-------------------------
cause the Building, Improvements and Specified Tenant Finish to be substantially
completed on or before December 1, 1988 (the "Estimated Completion Date"),
subject to delays from causes beyond the reasonable control of Landlord such as,
but not limited to, acts of God, strikes, work stoppages, unavailability of or
delay in receiving labor or materials, defaults by contractors of
subcontractors, weather conditions, fire or other casualty, or action of
governmental authorities.
4. Determination of Substantial Completion. "Substantial Completion"
---------------------------------------
shall mean substantial completion of the Building, Improvements and Specified
Tenant Finish substantially in accordance with the Plans and with applicable
rules, regulations and requirements of governmental authorities. Substantial
Completion shall be deemed to occur upon the giving of notice thereof ("Notice
of Substantial Completion") by Landlord to Tenant accompanied by a certificate
from Landlord's architect stating that Substantial Completion has occurred.
Substantial Completion shall be deemed to have occurred notwithstanding the non-
completion of minor "punch list" type items, which items Landlord shall promptly
thereafter complete.
5. Effect of Delay on Lease Term. In the event the Building, Improvements
-----------------------------
and Specified Tenant Finish are not substantially completed by the Estimated
Completion Date, this Lease shall not be affected or modified and shall remain
in full force and effect and Landlord shall not be liable for any damage on
account of any delay in completion.
6. Rent Commencement Date of Lease Term. The "Rent Commencement Date of
------------------------------------
the Lease Term" shall mean the date Substantial Completion occurs.
<PAGE>
EXHIBIT D-1
TENANT NAME: SUITE 101/SIMMONS @ COMMERCE PARK
LOCATION: SUITE 101 12601 EAST 33RD AVENUE, AURORA, CO
OWNER/AGENT: JOE IMERIANI/BENNETT AND KAHNWEILLER
TOTAL SQUARE FOOTAGE: 75930 APPROXIMATE
DATE: OCTOBER 5, 1988 REVISED OCTOBER 12, 1988
PLANS DATED: SEPTEMBER 15, 1988
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION QUANTITY UNIT UNIT UNIT CATEGORY O & P TOTALS COST
TAKE OFF COST SUBTOTAL SUBTOTAL 0.1 PER SQ.FT.
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEMOLITION
demo demising walls 182 LF 22.00 4004.00 400.40 4404.40 0.06
strip columns 4 EA 100.00 400.00 40.00 440.00 0.01
dumpster fee 1 LS 180.00 180.00 18.00 198.00 0.00
remove hm door/frame 1 EA 90.00 90.00 9.00 99.00 0.00
reception counter 1 EA 30.00 30.00 3.00 33.00 0.00
interior walls 22 LF 5.00 110.00 11.00 121.00 0.00
ceiling grid/tile 112 SF 0.25 28.00 2.80 30.80 0.00
SUBTOTAL 4842.00 0.07
CONCRETE/LANDSCAPE PREP
footings for hc ramp 14 EA 40.00 560.00 56.00 616.00 0.01
conc. ramp/curb cut 1 LS 300.00 300.00 30.00 330.00 0.00
asphalt patching 1 LS 65.00 65.00 6.50 71.50 0.00
rew.sprinkler/landscap 1 LS 235.00 235.00 23.50 258.50 0.00
SUBTOTAL 1160.00 0.02
S.STEEL/WELDING
remove stairs
f&i new steel ramp
prime stairs (black) 1 LS 10051 10051.00 1005.10 11056.10 0.15
smoke vent supports 23 EA 202.69 4661.87 466.19 5128.06 0.07
flame fighter 40 HRS 12.00 480.00 48.00 528.00 0.01
reinforce/weld ctn.wal 1 LS 1449.00 1449.00 144.90 1593.90 0.02
SUBTOTAL 16641.87 0.24
PARTITIONS
demo scars 4 EA 35.00 140.00 14.00 154.00 0.00
texture set up 1 LS 75.00 75.00 7.50 82.50 0.00
track @ curtain wall,
fire tape curtain wall 1 LS 1190.00 1190.00 119.00 1309.00 0.02
lift rental 1 WK 420.00 420.00 42.00 462.00 0.01
SUBTOTAL 1825.00 0.03
CEILING WORK
ceiling grid/tile 112 SF 1.25 140.00 14.00 154.00
SUBTOTAL 140.00 0.00
DOORS
furnish hm door/frame 1 LS 263.90 263.90 26.39 290.29 0.00
</TABLE>
<PAGE>
EXHIBIT D-2
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
install above 1 EA 110.00 110.00 11.00 121.00 0.00
caulk in @ above 1 LS 35.00 35.00 3.50 38.50 0.00
SUBTOTAL 408.90 0.01
PAINTING
walls @ repair 1080 SF 0.24 259.20 25.92 285.12 0.00
paint hm door/frame 1 EA 45.00 45.00 4.50 49.50 0.00
SUBTOTAL 304.20 0.00
ELECTRICAL
scope is as follows:
rel. fixtures for guilters and B/S sewers
raise fixtures in new rack area
replace all lamps and ballasts in warehouse strips that are not functioning
add 8' strips along grid #8 for additional light in area
relocate fixtures in one office and recircuit
add 2ea 3-way switches in office
add 4ea duplexes in office area
add 2ea dedicated outlets at computer room
relocate UPS and EPO
add 4ea outlets for fans
special outlets for equipment as per plans
relocate 3 unit heaters
add panel G and move buck boosters
relocate panel F
provide power to new sprinkler flow switch
demo old circuitry after equipment is moved
demo misc in office area and battery chargers
engineering/permits/taxes
Overtime ALLOWANCE of 20 hours
2 ea. motor starters
credit 2 unit heater hook ups
temporary power
add 1ea. 220v for 37&38
add 1ea. 110v for 39
hourly rate journeyman: $28.50 overtime: $40.00
hourly rate for apprentice: $19.00 overtime: $27.00
PSCO fees 1 ALLOW 1000 1000.00 100.00 1100.00 0.01
quote 1 LS 14710 14710.00 1471.00 16181.00 0.21
SUBTOTAL 15710.00 0.23
FLOORING
carpeting 32 YDS 12.00 384.00 38.40 422.40 0.01
vinyl base 74 LF 0.84 62.16 6.22 68.38 0.00
floor prep 1 LS 35.00 35.00 3.50 38.50 0.00
SUBTOTAL 481.16 0.01
FIRE PROTECTION
modifications and rack system to include 52 heads and head guards. Flow switch by electrician.
add hose station
quote 1 LS 6633.0 6633.00 663.30 7296.30 0.10
SUBTOTAL 6633.00 0.10
</TABLE>
<PAGE>
EXHIBIT D-3
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HVAC
fan at computer rm
vented to warehouse
f&i new unit heater 1 LS 2330.0 2330.00 233.00 2563.00 0.03
SUBTOTAL 2330.00 0.03
SMOKE VENTS
furnish 165deg. vents 23 EA 772.19 17760.37 1776.04 19536.41 0.26
co roof/curb/install 23 EA 265.50 6106.50 610.65 6717.15 0.09
flash-in roofing 23 EA 161.53 3715.19 371.52 4086.71 0.05
SUBTOTAL 27582.06 0.40
GENERAL CONDITIONS
building permit(88K) 1 LS 590.00 590.00 59.00 649.00 0.01
use tax 1 LS 1584.0 1584.00 158.40 1742.40 0.02
plan review fee 1 LS 443.00 443.00 44.30 487.30 0.01
supervision 160 HR 25.00 4000.00 400.00 4400.00 0.06
labor 40 HR 20.00 800.00 80.00 880.00 0.01
final cleaning 1 LS 500.00 500.00 50.00 550.00 0.01
design fees 1 LS 2125.0 2125.00 212.50 2337.50 0.03
engineering details 1 LS 350.00 350.00 35.00 385.00 0.01
SUBTOTAL 10392.00 0.15
TOTALS 88450.19 88450.19 8845.02 97295.21 1.28
Architectural and Engineering Fees 2337.50
-------
Total $99632.71
</TABLE>
CLARIFICATIONS
<TABLE>
<S> <C>
1. All work to be done during normal working hours.
2. The architectural and design fees are not included above and amount to total of $ 2337.50
3. The above estimate does not include ALL premium hours for tenant phasing which will be determined by
tenant.
4. Office areas to remain as is except as noted in estimate above.
6. The public service fees listed under electrical are an allowance figure only and can
vary from $ 500.00 - 1000.00. Any portion not used will be refunded.
7. No winter weather protection is included.
</TABLE>
<PAGE>
EXHIBIT "E"
[ENGINEERING DRAWING]
SITE PLAN - E. 33rd AVENUE
<PAGE>
FIRST AMENDMENT TO INDUSTRIAL LEASE
This First Amendment to Industrial Lease (hereinafter "Amendment") is
entered into this 17 day of August 1992, by and between THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation (hereinafter "Landlord") and
SIMMONS COMPANY, a Delaware corporation (hereinafter "Tenant") with reference to
the following facts:
1. Landlord and Tenant entered into that certain Industrial Lease dated
December 16, 1988, (hereinafter "Lease") for the premises ("Premises") commonly
known as 12601 East 33rd Avenue, Unit 100, Aurora, Colorado 80011, the Premises
being more particularly described in said Lease; and
2. Landlord and Tenant wish to extend the term of the Lease; and
3. Landlord wishes to grant Tenant options to further extend the term.
NOW THEREFORE, based upon the foregoing facts and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Landlord and Tenant hereby amend the Lease as follows:
A. Section 1.01G Lease Term. Shall be amended so that the Lease shall
----------
terminate at noon on the last day of August, 1999.
B. Section 33.01 Schedule of Base Rent. The line stating the following
---------------------
shall be deleted. July 1, 1991 - April 30, 1993 (22 months) $14,678.64. The
following should be added in its stead:
July 1, 1991 through August 31, 1992 $14,678.64/month
September 1, 1992 through August 31, 1996 $12,655.00/month
September 1, 1996 through August 31, 1999 $14,553.25/month
C. Section 24.01 Notices. Shall be amended to read so that notices to
-------
Tenant be provided at:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Attn: General Counsel
D. The following sections shall be incorporated into the Lease:
35.
OPTION TO EXTEND
----------------
35.01 Provided there are no uncured events of default hereunder, Tenant
shall have one (1) option to extend this Lease, for an additional term of three
(3) years. The extension of this Lease shall be upon the same terms, covenants
and conditions as are herein set forth except with regard to obligations of
Landlord for performance of work as set forth in Exhibit C and Base Rent. Tenant
expressly acknowledges that the work called for in Exhibit C has been fully
performed by Landlord and that the work has been accepted by Tenant. Base Rent
for the extension term shall be based upon 95% of the then current market rental
rate, as the same is reasonably determined by Landlord, using the criteria in
this section, to be prevailing as of the date of the expiration of the Primary
Lease Term as hereinabove amended.
Tenant must notify Landlord in writing at least six (6) months prior to the
expiration of the term of this Lease of its election to exercise the option.
Landlord, provided notice is timely received from Tenant, shall notify Tenant in
writing of the market-rental Base Rent at least five (5) months prior to the
expiration of the Primary Lease Term. In the event Tenant fails to timely
exercise its rights hereunder, the option as set forth herein shall
automatically terminate and be of no further force or effect.
The market rental rate, as used herein, shall mean the prevailing market
rate, on a rentable per square foot basis, then being obtained by landlords of
similar industrial warehouse buildings located in Denver and Aurora, Colorado.
It is agreed by Tenant that Landlord, in determining the market-rental rate
for extension term shall be entitled to consider the rental rates per rentable
square foot then being obtained by Landlord for space within the building in
which the Premises are located.
36.
HAZARDOUS MATERIALS
-------------------
36.01 Landlord's Prior Consent. Notwithstanding anything contained in this
------------------------
Lease to the contrary, Tenant shall not cause or permit any Hazardous Materials
(as defined in subparagraph (b) below) to be brought upon, kept, stored,
discharged, released or used in, under or about the Premises by Tenant, its
agents, employees, contractors, subcontractors, licensees or invitees, without
the prior written consent of Landlord. Landlord will grant consent if Landlord
<PAGE>
is reasonably satisfied that such Hazardous Materials are necessary to Tenant's
business and such Hazardous Materials will be used, kept and stored in a manner
which complies with all Hazardous Materials Laws (as defined in Section 36.02
below) and such rules or requirements as Landlord may from time to time
reasonably impose.
1
<PAGE>
36.02 Compliance with Hazardous Materials Laws. Tenant shall at all times
----------------------------------------
and in all respects comply with all federal, state and local laws, ordinances
and regulations relating to or involving the use, generation, manufacture,
storage, discharge, release, disposal or transportation of any materials,
substances or wastes which are considered to be or may be hazardous to human
health or safety or to the environment due to their radioactivity, ignitability,
corrosivity, reactivity, carcinogenicity, infectiousness or other harmful or
potentially harmful properties and which are defined as or included within the
definition of "hazardous materials", "toxic substances" or "chemicals known to
cause cancer or reproduce toxicity" under any Hazardous Materials Laws
(collectively, "Hazardous Materials"). All laws, ordinances and regulations
relating to industrial hygiene, environmental protection or the use, analysis,
generation, manufacture, storage, discharge, release, disposal or transportation
of Hazardous Materials are collectively referred to herein as "Hazardous
Materials Laws."
Tenant shall handle, treat, deal with and manage any and all Hazardous
Materials in, on, under or about the Premises in total conformity with all
applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials. Upon expiration or earlier termination
of this Lease, Tenant shall, at Tenant's sole cost and expense, cause all
Hazardous Materials brought or allowed on the Premises during the lease term to
be removed from the Premises and transported for use, storage or disposal in
accordance and in compliance with all applicable Hazardous Materials Laws.
Tenant shall not take any remedial action in response to the presence of any
Hazardous Materials in or about the Premises or enter into any settlement
agreement, consent decree or other compromise in respect to any claims relating
to any Hazardous Materials in any way connected with the Premises, without first
notifying Landlord of Tenant's intention to do so and affording Landlord ample
opportunity to appear, intervene or otherwise appropriately assert and protect
Landlord's interests with respect thereto.
36.03 Notices. Tenant shall immediately notify Landlord in writing of: (i)
-------
any enforcement, cleanup, removal or other governmental or regulatory action
threatened, instituted, or completed pursuant to any Hazardous Materials Laws;
(ii) any claim made or threatened by any person against Tenant or the Premises
relating to damage, contribution, cost recovery compensation, loss or injury
resulting from or claimed to result from any Hazardous Materials; and (iii) any
reports made to any environmental agency arising out of or in connection with
any Hazardous Materials on or removed from the Premises, including any
complaints, notices, warnings or asserted violations in connection therewith.
Tenant shall also supply to Landlord as promptly as possible, and in no event
later than five (5) business days after Tenant first receives or sends the same,
copies of all claims, reports, complaints, notices, warnings or asserted
violations relating in any way to the Premises or Tenant's use thereof. Tenant
shall maintain copies of hazardous waste manifests reflecting the legal and
proper disposal of all Hazardous Materials removed from the Premises and supply
Landlord with copies of same on request.
36.04 Indemnification of Landlord. Tenant shall indemnify, defend and hold
---------------------------
Landlord harmless from any and all damages, losses, expenses, liabilities,
obligations, costs, etc., arising out of handling of Hazardous Materials on the
Premises by Tenant or any party subject to its control. Notwithstanding the
foregoing, Tenant shall have no responsibility for any Hazardous Materials
present in, on, under or about the Premises prior to Tenant's occupancy of the
Premises, provided that Tenant or any party subject to its control does not
exacerbate by its action any contamination by such Hazardous Materials.
E. Except as amended herein, all other terms and conditions of Lease
remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the date first written above.
LANDLORD:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
a New Jersey corporation
By Colliers, Bennett & Kahnweiler, Inc.,
a Colorado corporation as Agent for the Landlord
s/ Brad W. Calbert
- ----------------------------
By: Brad W. Calbert
TENANT:
SIMMONS COMPANY, a Delaware corporation
By: /s/
----------------------
Its: Sr. V.P.
----------------------
2
<PAGE>
STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )
The foregoing instrument was acknowledged before me this 8th day of
September, 1992 by Brad W. Calbert as President of Colliers, Bennett &
Kahnweiler, Inc., a Colorado corporation, as Agent for The Prudential Insurance
Company of America, a New Jersey corporation.
Witness my hand and official seal.
My commission expires: August 29, 1994
---------------
/s/
---------------
Notary Pubic
STATE OF GEORGIA )
) ss.
COUNTY OF DEKALB )
The foregoing instrument was acknowledged before me this 11th day of
September, 1992, by Jeffrey J. Lewis as Senior Vice President of Simmons
Company, a Delaware corporation.
Witness my hand and official seal.
My commission expires: June 3, 1995
---------------
/s/
---------------
(Seal of Notary Public) Notary Public
3
<PAGE>
SECOND AMENDMENT TO INDUSTRIAL LEASE
This Second Amendment to Industrial Lease (hereinafter "Amendment") is
entered into this 1st day of June, 1994, by and between SECURITY CAPITAL
INDUSTRIAL TRUST (hereinafter "Landlord") and SIMMONS COMPANY, a Delaware
corporation (hereinafter "Tenant") with reference to the following facts:
1. Landlord and Tenant entered into that certain Industrial Lease dated
December 16, 1988, as amended by the First Amendment to Industrial Lease dated
August 17, 1992 (hereinafter "Lease") for the premises ("Premises") commonly
known as 12601 East 33rd Avenue, Unit 100, Aurora, Colorado 80011, the Premises
being more particularly described in said Lease; and
2. Tenant wishes to lease Unit 108 in the building consisting of 22,160
square feet (hereinafter "Additional Space"); and
3. Landlord and Tenant wish to amend the Lease.
NOW THEREFORE, based upon the foregoing facts and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Landlord and Tenant hereby amend the Lease as follows:
A. Landlord hereby leases to Tenant the Additional Space subject to the
terms and conditions of Lease.
B. The Lease Term for the Additional Space shall commence on June 1, 1994
and terminate on May 31, 1997.
C. The Base Rent for the Additional Space is as follows:
June 1, 1994 - March 31, 1995: $2,770/month
April 1, 1995 - May 31, 1997: $4,155/month
D. Tenants Proportionate Share for the Additional Space shall be 10.45%
E. Tenant shall have an option to extend (hereinafter "First Option") the
Lease Term for the Additional Space for the period from June 1, 1997 through
August 31, 1999 provided there are no uncured events of default hereunder. The
Base Rent for the extension term shall be based upon 95% of the then current
market rental rate, as the same is reasonably determined by Landlord, however,
in no event shall the Base Rent be less than the Base Rent payable during the
last month of the primary term.
Tenant must notify Landlord in writing on or before November 1, 1996
of its election to exercise the option, and any failure to do so shall result
in an automatic termination of the option, which shall be of no further force or
effect. Landlord, provided notice is received from Tenant, shall notify Tenant
in writing of the market-rental Base Rent on or before December 1, 1996. If
Tenant does not agree to the amount of the Base Rent proposed by Landlord, and
the parties are unable to agree on the applicable rental rate on or before
January 1, 1997, then at Tenant's option its election to exercise the option
shall be null and void.
The market rental rate, as used herein, shall mean the prevailing
market rate, on a rentable per square foot basis, then being obtained by
landlords of similar industrial warehouse buildings located in Denver and
Aurora, Colorado. It is agreed by Tenant that Landlord, in determining the
market-rental rate for extension term shall be entitled to consider the rental
rates per rentable square foot then being obtained by Landlord for space within
the building in which the Premises are located.
F. Tenant shall have an additional option to extend (hereinafter "Second
Option to Extend") the Lease Term for the Additional Space for a period of three
(3) years provided there are no uncured events of default hereunder under the
same terms and condition as provided in Section E. hereinabove, provided,
however (i) the notice by Tenant of its election shall be sent by Tenant no
later than seven (7) months prior to expiration of the First Option Period, and
(ii) Landlord shall provide notice to Tenant of the proposed Base Rent no later
than six (6) months prior to expiration of the First Option Period; and provided
further that in no event shall the Base Rent be less than the Base Rent payable
during the last month of the First Option to Extend.
<PAGE>
G. Section 35.01 of the Lease shall be amended to include the following
at the end of the first paragraph;", however, in no event shall the Base Rent be
less than the Base Rent payable in August, 1999."
H. Landlord and Tenant acknowledge and agree that this Second Amendment
to Industrial Lease is strictly contingent upon the execution of an Agreement
for Termination of Lease by Chevron, U.S.A. Inc. and surrender of the Premises
by Chevron U.S.A., Inc. and by Grabel/Denver Movers, Inc.
In the event that either Chevron, U.S.A., Inc. or Grabel/Denver
Movers, Inc. does not execute the Agreement for Termination of Lease or
surrender the Premises on or before May 31, 1994, then this Second Amendment to
Industrial Lease shall become null and void and of no further force and effect.
I. The lease shall be amended to include the following provisions:
LIMITATIONS OF LIABILITY OF TRUSTEES, SHAREHOLDERS, AND OFFICERS OF
SECURITY CAPITAL INDUSTRIAL TRUST. ANY OBLIGATION OR LIABILITY WHATSOEVER OF
SECURITY CAPITAL INDUSTRIAL TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST,
WHICH MAY ARISE AT ANY TIME UNDER THIS LEASE OR ANY OBLIGATION OR LIABILITY
WHICH MAY BE INCURRED BY IT PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION, OR
UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED, IF AT ALL, ONLY OUT OF THE
ASSETS OF SECURITY CAPITAL INDUSTRIAL TRUST. NO SUCH OBLIGATION OR LIABILITY
SHALL BE PERSONALLY BINDING UPON, NOR SHALL RESORT FOR THE ENFORCEMENT THEREOF
BE HAD TO, THE PROPERTY OF ITS MANAGING AGENT OR ANY OF ITS OR ITS MANAGING
AGENT'S TRUSTEES, DIRECTORS, SHAREHOLDERS, OFFICERS, OR EMPLOYEES, REGARDLESS OF
WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT, OR
OTHERWISE.
J. Tenant agrees to accept the Additional Space in its current "as-is"
condition, except that all lighting, heating, electrical and plumbing and all
other utilities shall be in good operating condition and ready for use to the
same extent as currently used by Tenant in the Premises. Nothing contained
herein shall relieve Landlord of its repair and maintenance obligations
contained in the Lease.
K. Landlord and Tenant acknowledge that the parties are discussing the
possibility of the development by Landlord of a project which would include
Tenant as a tenant. It is the intention of the parties that any such project
would involve the relocation of Tenant from the Premises and the Additional
Space to the project, and that the parties would accordingly release each other
from the obligations of the Lease and all amendments thereto.
L. Except as amended herein, all other terms and conditions of Lease
remain in full force and effect. For purposes of Tenant's and Landlord's
obligations and rights contained in the Lease, the term "Premises" shall include
the Additional Space.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the date first written above.
LANDLORD:
SECURITY CAPITAL INDUSTRIAL TRUST,
a
By: /s/
--------------------------
Its: Vice President
--------------------------
SIMMONS COMPANY, a Delaware Corporation
By: /s/
--------------------------
Its: Executive Vice President
--------------------------
Finance & Administration
EXHIBIT 10.31
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA,
as the Landlord
AND
SIMMONS COMPANY (a Delaware Corporation)
as the Tenant
INDENTURE OF LEASE
Dated, 19 June, 1973
Demised Premises:
540 Beautyrest Avenue
Jacksonville, Florida 32205
<PAGE>
TABLE OF CONTENTS
Page
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Article I
Covenant to Pay Rent . . . . . . . . . . . . . . . . . . . . . . . 3
Article II
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Article III
Additional Rent, Taxes, Assessments, Water Rates, Charges, etc. . . 3
Other Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tax Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Contesting Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article IV
Hazard Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 5
Public Liability Insurance . . . . . . . . . . . . . . . . . . . . 5
Parties Protected by Insurance . . . . . . . . . . . . . . . . . . 5
Policies Delivered to Landlord . . . . . . . . . . . . . . . . . . 5
Unearned Premium Apportioned . . . . . . . . . . . . . . . . . . . 5
Article V
Landlord's Remedies in Event Tenant Fails to Pay Impositions . . . 6
Article VI
Repairs by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . 6
Article VII
Tenant's Compliance With Laws and Ordinances . . . . . . . . . . . 6
Tenant's Right to Contest Ordinances, etc. . . . . . . . . . . . . 7
Article VIII
Changes and Alterations . . . . . . . . . . . . . . . . . . . . . . 7
Article IX
Mechanic's Liens . . . . . . . . . . . . . . . . . . . . . . . . . 9
Article X
Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Article XI
Landlord's Right of Inspection . . . . . . . . . . . . . . . . . . 9
Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
Article XII
Assignment, Subletting or Mortgaging by Tenant Without Consent . 10
Article XIII
Excavation or Adjacent Building Operation . . . . . . . . . . . . 10
Article XIV
Light, Heat and Power . . . . . . . . . . . . . . . . . . . . . . 10
Article XV
Indemnification of Landlord for Claims Arising
from Accident, etc. . . . . . . . . . . . . . . . . . . . . . . 10
Physical Condition of Demised Premises . . . . . . . . . . . . . 11
Article XVI
Destruction and Restoration . . . . . . . . . . . . . . . . . . . 11
Application of Insurance Proceeds . . . . . . . . . . . . . . . . 11
Damage in Excess of Insurance Proceeds . . . . . . . . . . . . . 11
Article XVII
Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . 12
Partial Taking, Major . . . . . . . . . . . . . . . . . . . . . . 12
Partial Taking, Minor . . . . . . . . . . . . . . . . . . . . . . 13
Article XVIII
Subordination of Lease to Mortgage . . . . . . . . . . . . . . . 14
Article XIX
Use of Vaults Projecting Beyond Building Lines . . . . . . . . . 14
Article XX
Bankruptcy and Insolvency . . . . . . . . . . . . . . . . . . . . 15
Default in Covenants . . . . . . . . . . . . . . . . . . . . . . 15
Default in Payment of Rent or Additional Rent . . . . . . . . . . 15
Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Re-entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Article XXI
Renewal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Article XXII
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Article XXIII
Covenants as to Use . . . . . . . . . . . . . . . . . . . . . . . 18
Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article XXIV
Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
Article XXV
Definition of Landlord . . . . . . . . . . . . . . . . . . . . . 18
Article XXVI
Acknowledgement by Tenant that Lease is in Full Force
and Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article XXVII
Landlord's Remedies Cumulative . . . . . . . . . . . . . . . . . 19
Article XXVIII
Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 19
Article XXIX
Marginal Captions . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
Parties THIS INDENTURE, made the 19th day of June, 1973, by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a corporation organized and
existing under and by virtue of the laws of the State of New Jersey,
having its principal place of business at No. 763 Broad Street in the
City of Newark, County of Essex and State of New Jersey, party of the
first part (hereinafter referred to as the "Landlord"), and Simmons
Company, a corporation organized and existing under and by virtue of
the laws of the State of Delaware, having its principal place of
business at No. 280 Park Avenue, in the City of New York, County of
Manhattan, and State of New York, party of the second part
(hereinafter referred to as the "Tenant"),
W I T N E S S E T H:
Premises That the Landlord, for and in consideration of the rents, covenants
and agreements hereinafter reserved, mentioned and contained on the
part of the Tenant, its successors and assigns, to be paid, kept and
performed, has demised and leased, and by these presents does demise
and lease, unto the Tenant, and the Tenant does hereby take and hire
upon and subject to the conditions hereinafter expressed, the real
property together with the buildings* and improvements thereon
erected, bounded and described as follows:
540 Beautyrest Avenue
All that lot or parcel of land, with the buildings and improvements
thereon in the City of Jacksonville, County of Duval and State of
Florida 32205
See Exhibit "A" attached hereto and by reference made a part hereof.
*Subject to: Timely completion within the next twelve (12) months or
sooner, a masonry building addition of at least seventy five thousand
(75,000) square feet in accordance with the plans as prepared by A.
Epstein and Sons, Inc. Engineers of 2011 W. Pershing Road, Chicago,
Illinois 60609, dated December 5, 1972. Said plans are further
identified by sheet number CAE-1; A-2; A-3; A-4; S-1; S-2; S-3; PFP-1;
M-1; E-1; E-2. Prior to disbursement of Landlord's funds of eight
hundred fifty thousand dollars ($850,000) as reimbursement to Simmons
Company for funds expended for these improvements, A. Epstein and
Sons, Inc. shall submit to Landlord a final certificate of completion
certifying that these improvements have been completed in accordance
with the approved plans and specifications. The completion of all
improvements must be satisfactory to Landlord. All architectural and
engineering fees and expenses shall be paid by Simmons Company.
The above-described premises are hereinafter referred to as the
"demised premises."
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Terms TO HAVE AND TO HOLD the demised premises unto the Tenant, its
successors and assigns, for an initial term of thirty (30) years
commencing on the FIRST day of JULY, 1973, and expiring on the
thirtieth day of June, 2003 (unless this lease shall sooner terminate
as hereinafter provided), yielding and paying therefor during such
initial term a net annual basic rental, over and above the other and
additional payments to be made by the Tenant as hereinafter provided
as follows:
Basic Rent
Lessee covenants to pay to Lessor during such term, in such coin or
currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, at
the office of Lessor, a net basic rental, over and above the other
additional payments to be made by Lessees as hereinafter provided, as
follows:
For the period from JULY 1, 1973 to JUNE 30, 2003, an annual sum of
$99,000.
The said net basic rental shall be paid in equal monthly installments
of $8,250 each in advance on the first day of each and every calendar
month during the term commencing JULY 1, 1973.
The said net basic rental shall increase to an annual sum of
$155,500.00, to be paid in equal monthly installments of $12,958.33
each in advance on the first day of each and every calendar month upon
the occurrence of all following events:
1) Completion of improvements set forth in paragraph referenced
"subject to" on page 1 of this Indenture of Lease; and
2) Payment by landlord to tenant the sum of $850,000
3) Payment by tenant of all costs or charges to satisfy landlord
that the demised premises are lien free, including the cost of
title insurance for the new improvements.
4) Execution by landlord and tenant of an addendum to this lease
indicating the compliance of requirements 1, 2, and 3 above and
setting forth the beginning date of increased annual rental.
Basic Rent Said net annual basic rental shall be paid in equal monthly
installments in advance on the first day of each and every
calendar month hereafter in lawful money of the United States of
America at the office of the Landlord, The Prudential Insurance
Company of America, Newark, New Jersey, or at such other place as
may hereafter be designated by the Landlord. Rental for a period
of less than one month shall be adjusted pro-rata. Said net
annual basic rental is hereinafter sometimes referred to as the
"basic rent" or the "basic rent expressly reserved hereunder".
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ARTICLE I
Covenant to The Tenant covenants to pay the basic rent herein reserved
Pay Rent and all other sums which may become due hereunder, or be payable
by the Tenant hereunder, at the times and in the manner in this
lease provided.
ARTICLE II
Occupancy The Tenant agrees of use and occupy the demised premises
only for
Any lawful use
ARTICLE III
Additional Section 1. The Tenant covenants and agrees to pay, as
Rent, Taxes, additional rent, before any fine, penalty, interest or cost
Assessments, may be added thereto for the non-payment thereof, all real
Water Rates, estate taxes, assessments, water rates and charges, and
Charges, etc. other governmental charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and
nature whatsoever, including but not limited to assessments for
public improvements or benefits, which shall during the term
hereby demised be laid, assessed, levied or imposed upon or
become due and payable and a lien upon the demised premises or
any part thereof (all of which taxes, assessments, water rates or
charges, levies and other governmental charges are hereinafter
referred to as "imposition"); provided, however, that if, by law,
any such imposition is payable, or may at the option of the
taxpayer be paid, in installments (whether or not interest shall
accrue on the unpaid balance of such imposition), the Tenant may
pay the same together with any accrued interest on the unpaid
balance of such imposition in installments as the same
respectively become due and before any fine, penalty, interest or
cost may be added thereto for the non-payment of any such
installment and interest; and provided, further, that any
imposition relating to a fiscal period of the taxing authority, a
part of which period is included within the term of this lease,
and a part of which is included in a period of time after the
termination of the term of this lease, shall (whether or not,
during the term of this lease, such imposition shall be laid,
assessed, levied, or imposed upon or become due and payable and a
lien upon the demised premises or any part thereof) be adjusted
as between the Landlord and the Tenant as of the termination of
the term of this lease, so that the Landlord shall pay that
proportion of such imposition which that part of such fiscal
period included in the period of time after the termination of
the term of this lease, bears to such fiscal period, and the
Tenant shall pay the remainder thereof. With respect to any
imposition for public improvements or benefits which by law is
payable, or at the option of the taxpayer may be paid, in
installments, the Landlord shall pay the installments thereof
which become due and payable subsequent to the termination of the
term of this lease, and the Tenant shall pay those installments
which become due and payable during the term of this lease.
Other Tax Section 2. If at any time during the term of this lease,
under the laws of the State or any political subdivision thereof
in which the demised premises are situated, a tax or excise on
rents or other tax, however described, is levied or assessed by
said State or political subdivision against the Landlord or the
basic rent expressly reserved hereunder, the Tenant covenants to
pay and discharge such tax or excise on rents or other tax but
only to the extent of the amount thereof which is lawfully
assessed or imposed upon the Landlord and which was so assessed
or imposed as a direct result of the Landlord's ownership of the
demised premises, or of this lease or of the rentals accruing
under this lease, it being the intention of the parties hereto
that the rent to be paid hereunder shall be paid to the Landlord
absolutely net without deduction of any nature whatsoever,
foreseeable or unforeseeable, except as in this lease otherwise
expressly provided. The payment to be made by the Tenant
pursuant to this section shall be made before any fine,
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<PAGE>
ARTICLE IV
Hazard Section 1. The Tenant shall, at the Tenant's sole cost and
Insurance expense, keep all buildings erected upon the demised premises and
the fixtures therein, insured for the benefit of the Landlord and
the Tenant in amount equivalent to the full insurable value
thereof (excluding foundation and excavation costs), (a) against
loss or damage by fire and (b) against such other risks, of a
similar or dissimilar nature, as are or shall be customarily
covered with respect to buildings similar in construction,
general location, use and occupancy to the building then on the
demised premises, including, but without limiting the generality
of the foregoing, windstorm, hail, explosion, riot and civil
commotion, damage from aircraft and vehicles and smoke damage,
providing such additional coverage is obtainable. These insurance
provisions shall in no way limit or modify any of the obligations
of the tenant under any provision of this lease to restore the
premises.
Public Section 2. The Tenant shall also, at the Tenant's sole cost
Liability and expense, but for the mutual benefit of the Landlord and the
Insurance Tenant, maintain (a) general public liability insurance against
claims for personal injury, death or property damage occurring
upon, in or about the demised premises or any elevators or
escalators therein and on, in or about the adjoining streets and
passageways, such insurance to afford protection to the limit of
not less than $100,000 in respect to injury or death to a single
person, and to the limit of not less than $300,000 in respect to
any one accident, and to the limit of not less than $50,000 in
respect to property damage; (b) steam boiler insurance on all
steam boilers, pressure boilers or other such apparatus as the
Landlord may deem necessary to be covered by such insurance and
in such amount or amounts as the Landlord may from time to time
reasonably require; and (c) war damage insurance (whenever such
insurance shall be written and a state of war or public emergency
exists) upon all buildings and fixtures to the full insurable
value thereof.
Parties Section 3. All policies of insurance shall provide that
Protected the proceeds thereof shall be payable to the Tenant and the
Insurance Landlord as their respective interests may appear, except that
the policies described in Section 1 and subdivision (b) and (c)
of Section 2 of this Article shall, if the Landlord so requires,
also be payable to the holder of any mortgage now or hereafter
becoming a lien on the fee of the demised premises, or any part
thereof, as the interest of such holder may appear, pursuant to a
standard mortgagee clause. All policies of insurance shall
provide that any loss shall be payable to the Landlord
notwithstanding any act or omission of the Tenant which might
otherwise result in a forfeiture or reduction of said insurance.
Policies Section 4. All policies of insurance shall be written
Delivered in companies listed in the latest issue of Argus F. C.
to Landlord & S. Chart, a National Underwriters Publication and meeting the
following criteria:
(a) Surplus to policyholders-$50,000 or more if in business
5 or more years.
(b) Surplus to policyholders-$500,000 or more if in
business less than 5 years, all policies must name
Prudential as an insured owner, and if Prudential is
given a certificate of insurance rather than policies,
the certificates must have attached endorsements
providing for 10-day notice to Prudential of
cancellation or material change.
Section 5. It is the intention of the parties that the
Tenant shall take out, maintain in force at all times, pay for
and deliver to the Landlord all of the certificates of insurance
hereinabove referred to at such times and in such manner so that
the Landlord shall at all times during the initial term and any
renewal term of this lease be assured of policies which are in
full force and effect.
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ARTICLE V
Landlord's The Tenant covenants and agrees that if it shall at any
Remedies in time fail to pay any imposition pursuant to the provisons of
Event Tenant Article III hereof, or to take out, pay for, maintain or
Fails to Pay deliver any of the insurance policies provided for in Article
Impositions IV hereof, or shall fail to make any other payment or perform any
other act on its part to be made or performed as in this lease
provided, then the Landlord may, but shall not be obligated so to
do, and without notice to or demand upon the Tenant and without
waiving, or releasing the Tenant from, any obligations of the
Tenant in this lease contained, pay any such imposition, effect
any such insurance coverage and pay premiums therefor, and may
make any other payment or perform any other act on the part of
the Tenant to be made and performed as in this lease provided, in
such manner and to such extent as the Landlord may deem
desirable, and in exercising any such rights to pay necessary and
incidental costs and expenses, employ counsel and incur and pay
reasonable attorneys' fees. All sums so paid by the Landlord and
all necessary and incidental costs and expenses in connection
with the performance of any such act by the Landlord, together
with interest thereon at the rate of six per cent (6%) per annum
from the date of the making of such expenditure by the Landlord,
shall be deemed additional rent hereunder and, except as
otherwise in this lease expressly provided, shall be payable to
the Landlord on demand or at the option of the Landlord may be
added to any basic rent then due or thereafter becoming due under
this lease, and the Tenant covenants to pay any such sum or sums
with interest as aforesaid and the Landlord shall have (in
addition to any other right or remedy of the Landlord) the same
rights and remedies in the event of the non-payment thereof by
the Tenant as in the case of default by the Tenant in the payment
of the basic rent.
ARTICLE VI
Repairs by The Tenant covenants throughout the term of this lease
Tenant and any renewal term, at the Tenant's sole cost and expense, to
take good care of the demised premises, including the buildings
and improvements now or at any time erected thereon, the
equipment, fixtures, motors and machinery thereof, and the
sidewalks, curbs, roadways, parking areas, fences and vaults, if
any, and to keep the same in good order and condition, and shall
promptly at the Tenant's own cost and expense make all necessary
repairs, interior and exterior, structural and non-structural,
ordinary as well as extraordinary, foreseen as well as
unforeseen. When used in this Article, the term "repairs" shall
include replacements or renewals when necessary, and all such
repairs made by the Tenant shall be equal in quality and class to
the original work. The provisions and conditions in Article VIII
applicable to changes or alterations, or, as the case may be, to
changes or alterations involving an estimated cost of more than
$50,000, shall similarly apply to repairs required to be done
under this Article. The Tenant shall keep and maintain all
portions of the demised premises and the sidewalks adjoining same
in a clean and orderly condition, free of accumulation of dirt,
rubbish, snow and ice.
ARTICLE VII
Tenant's Section 1. The Tenant covenants throughout the term of
Compliance this lease, at the Tenant's sole cost and expense, promptly
with Laws and to comply with all laws and ordinances and the orders, rules,
Ordinances regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and
officers thereof, and the orders, rules and regulations of the
Board of Fire Underwriters where the demised premises are
situated, or any other body now or hereafter constituted
exercising similar functions, foreseen or unforeseen, ordinary as
well as extraordinary, and whether or not the same require
structural repairs or alterations, which may be applicable to the
de-
5
<PAGE>
mised premises, the fixtures thereof and the sidewalks. [?] and
vaults, if any, adjoining the demised premises or the use or
manner of use of the demised premises. The Tenant will likewise
observe and comply with the requirements of all policies of
public liability, fire and all other policies of insurance at any
time in force with respect to the buildings and improvements on
the demised premises and the equipment thereof. The provisions
and conditions in Article VIII applicable to changes or
alterations or, as the case may be, to changes or alterations
involving an estimated costs of more than $50,000.00 shall
similarly apply to work required to be done under this Article.
Tenant's Section 2. The Tenant shall have the right to contest by
Right to appropriate legal proceedings, without cost or expense to the
Contest Landlord, the validity of any law, ordinance, order, rule,
Ordinances, regulation or requirement of the nature herein referred to,
etc. and if, by the terms of any such law, ordinance, order, rule,
regulation or requirement, compliance therewith may legally be
held in abeyance without subjecting the Tenant or the Landlord to
any liability of whatsoever nature for failure so to comply
therewith, the Tenant may postpone compliance therewith until the
final determination of any such proceedings, provided that all
such proceedings shall be prosecuted with all due diligence and
dispatch.
ARTICLE VIII
Changes and The Tenant shall have the right at any time and from time
Alterations to time during the initial term of this lease or any renewal term
to make such changes and alterations, structural or otherwise, to
the buildings, improvements and fixtures now or hereafter on the
demised premises as the Tenant shall deem necessary or desirable
in connection with the requirements of its business, which such
changes and alterations (other than changes or alterations of the
Tenant's movable trade fixtures and equipment) shall be made in
all cases subject to the following conditions which the Tenant
covenants to observe and perform:
(a) No change or alteration shall be undertaken until the Tenant
shall have procured and paid for, so far as the same may be
required from time to time, all municipal permits and
authorizations of the various municipal departments having
jurisdiction, and the Landlord agrees to join in the
application for such permits or authorizations whenever such
action is necessary.
(b) No structural change or alteration shall be undertaken until
detailed plans and specifications have first been submitted
to and approved in writing by the Landlord.
(c) No changes or alterations involving an estimated cost of
more than $100,000 shall be undertaken until the Landlord
shall have been furnished by the Tenant, at the Tenant's
expense, with a bond on which the Tenant shall be principal,
and a surety company authorized to do business in the state
in which the demised premises are situate and satisfactory
to the Landlord shall be surety, and in form satisfactory to
the Landlord, conditioned upon the completion of and payment
in full for such changes or alterations within a reasonable
time, subject, however, to delays occasioned by strikes,
lockouts, acts of God, inability to obtain labor or
materials, governmental restrictions, or similar causes
beyond the control of the Tenant, or the Tenant shall have
deposited with the Landlord a sum sufficient to pay the
entire cost of any such change or alteration as estimated by
the architect or engineer under whose supervision the work
is to be conducted, under an agreement whereby the Landlord
shall from time to time pay out sums upon the written
request of the Tenant, which shall be accompanied by a
certificate of the architect or engineer in charge of the
work, stating (1) that the sum requested is justly due to
the contractors, subcontractors, material men, laborers,
engineers, architects or other persons, firms or
corporations rendering services or materials for such
changes or alterations, or is justly required to reimburse
the Tenant for expenditures made by the Tenant in con-
6
<PAGE>
nection with such changes or alterations, and when added to
all sums previously paid out by the Landlord does not exceed
the value of the work done to the date of such certificate;
and (2) that the remaining funds so deposited by the Tenant
with the Landlord will be sufficient upon the completion of
such work to pay for the same in full; and, upon submission
of proof satisfactory to the Landlord that the work has been
paid for in full, turn over to the Tenant the balance of the
funds so deposited by the Tenant with the Landlord. The
Tenant shall also furnish the Landlord at the time of any
such payment with an official search, or other evidence
satisfactory to the Landlord, that there has not been filed
with respect to the demised premises any mechanic's or other
lien which has not been discharged of record, in respect of
any work, labor, services or materials performed, furnished
or supplied, or claimed to have been performed, furnished or
supplied, in connection with any such work. The Landlord
shall not be required to pay out any such sum when the
demised premises shall be encumbered with any such lien.
(d) All changes and alterations involving an estimated cost of
more than $50,000 shall be conducted under the supervision
of an architect or engineer and performed by a contractor or
builder each of whom shall be reasonably satisfactory to the
Landlord.
(e) All changes and alterations when completed shall be of such
a character as not to reduce, or otherwise adversely affect,
the value of the demised premises, nor to reduce the cubic
content of the building, nor change the character of the
building as to use.
(f) All work done in connection with any change or alteration
shall be done promptly and in a good and workmanlike manner
and in compliance with the building and zoning laws of the
place in which the demised premises are located and with all
laws, ordinances, orders, rules, regulations and
requirements of all federal state and municipal governments
and the appropriate departments, commissions, boards and
officers thereof, and in accordance with the orders, rules
and regulations of the Board of Fire Underwriters where the
demised premises are situated or any other body exercising
similar functions; the cost of any such change or alteration
shall be paid in cash so that the demised premises shall at
all times be free of liens for labor and materials supplied
or claimed to have been supplied to the demised premises;
the work of any change or alteration shall be prosecuted
with reasonable dispatch, delays due to strikes, lockouts,
acts of God inability to obtain labor or materials,
governmental restrictions, or similar causes beyond the
control of the Tenant excepted; workmen's compensation
insurance covering all person employed in connection with
the work and with respect to whom death or injury claims
could be asserted against Landlord, the Tenant or the
demised premises, general liability insurance for the mutual
benefit of the Tenant and the Landlord with limits of not
less than $500,000 in the event of injury to one person and
of not less than $2,500,000 in the event of injury to any
number of persons in any one accident, and with limits of
not less than $250,000 for property damage shall be
maintained by the Tenant at the Tenant's sole cost and
expense at all times when any work is in process in
connection with any change or alteration. All such
insurance shall be in a company or companies authorized to
do business in the state in which the demised premises are
situate.
(g) All improvements and alterations (other than the Tenant's
movable trade fixtures and equipment) made or installed by
the Tenant shall immediately upon completion or installation
thereof be and become the property of the Landlord with-
7
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out payment therefor by the Landlord, and shall be
surrendered to the Landlord upon the expiration or sooner
termination of the initial term or any renewal term of this
lease.
ARTICLE IX
Mechanic's The Tenant shall not suffer or permit any mechanic's liens
Liens to be filed against the demised premises or any part thereof by
reason of work, labor, services or materials supplied or claimed
to have been supplied to the Tenant or anyone holding the demised
premises or any part thereof through or under the Tenant. If any
such mechanic's lien shall at any time be filed against the
demised premises, the Tenant shall cause the same to be
discharged of record within twenty (20) days after the date of
filing the same. If the Tenant shall fail to discharge such
mechanic's lien within such period, then in addition to any other
right or remedy of the Landlord, the Landlord may, but shall not
be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by
deposit in court or by giving security or in such other manner
as is, or may be, prescribed by law. Any amount paid by the
Landlord for any of the aforesaid purposes, and all reasonable
legal and other expenses of the Landlord, including reasonable
counsel fees, in or about procuring the discharge of such lien,
with all necessary disbursements in connection therewith, with
interest thereon at the rate of six percent. (6%) per annum
from the date of payment shall be repaid by the Tenant to the
Landlord on demand, and if unpaid may be treated as additional
rent. Nothing herein contained shall imply any consent or
agreement on the part of the Landlord to subject to the
Landlord's estate to liability under any mechanic's lien law.
ARTICLE X
Waste The Tenant covenants not to do or suffer any waste or
damage, disfigurement or injury to any building or improvement
now or hereafter on the demised premises, or the fixtures and
equipment thereof, or permit or suffer any overloading of the
floors thereof.
ARTICLE XI
Landlord's Section 1. The Tenant agrees to permit the Landlord
Right of In- and the authorized representatives of the Landlord to enter
spection the demised premises at all times during usual business hours for
the purpose of inspecting the same and making any necessary
repairs to the demised premises and performing any work therein
that may be necessary to comply with any laws, ordinances, rules
regulations or requirements of any public authority or of the
Board of Fire Underwriters or any similar body or that the
Landlord may deem necessary to prevent waste or deterioration in
connection with the demised premises. Nothing herein shall imply
any duty upon the part of the Landlord to do any such work which,
under any provision of this lease, the Tenant may be required to
perform and the performance thereof by the Landlord shall not
constitute a waiver of the Tenant's default in failing to perform
the same. The Landlord may during the progress of any work in
the demised premises keep and store upon the demised premises all
necessary materials, tools and equipment. the Landlord shall not
in any event be liable for inconvenience, annoyance, disturbance,
loss of business or other damage of the Tenant by reason of
making repairs or the performance of any work in the demised
premises, or on account of bringing materials, supplies and
equipment into or through the demised premised during the course
thereof, and the obligations of the Tenant under this lease shall
not thereby be affected in any manner whatsoever. The Landlord
agrees, however, in connection with the doing of any such work to
cause as little inconvenience, annoyance, disturbance, loss of
business or other damage to the Tenant as may reasonably be
possible in the circumstances. The landlord shall have no right
to make repairs unless Landlord gives ten days notice to tenant
of **.
Signs Section 2. The Landlord is hereby given the right during
usual business hours to enter the demised premises and to exhibit
the same for the purpose of sale or hire,
**[Illegible]
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and during the final eleven months of the initial term or of any
renewal term, the Landlord shall be entitled to display on the
demised premises in such manner as not unreasonably to interfere
with the Tenant's business the usual "For Sale" or "To Let"
signs, and the Tenant agrees that such signs may remain
unmolested upon the demised premises.
ARTICLE XII
Assignment, The Tenant shall not assign this lease, either in whole
Subletting or or in part, nor let, underlet or mortgage the leasehold
Mortgaging interest of the Tenant, or any part or parts thereof, with-
by Tenant out first obtaining, in each and every instance, the Land-
without Con- lord's consent thereto in writing.* No such assignment,
sent letting, underletting or mortgage shall relieve the Tenant from
any of the Tenant's obligations in this lease contained nor shall
any assignment or transfer of this lease be effective unless the
assignee or transferee shall, at the time of such assignment or
transfer, assume all the terms, covenants and conditions of
this lease thereafter to be performed by the Tenant and shall
agree to be bound thereby.
* which consent shall not be unreasonably withheld.
ARTICLE XIII
Excavation or If any excavation or other building operation shall be
Adjacent about to be made or shall be made upon any adjoining
Building premises or streets, the Tenant shall, at its own expense,
Operation shore the foundations and walls of the demised premises and do
any other act or thing necessary for the safety or preservation
of the demised premises, and the Landlord shall not be liable for
any inconvenience, annoyance, disturbance, loss of business or
other damage arising therefrom.
ARTICLE XIV
Light, Heat The Tenant agrees to pay or cause to be paid all charges
and Power for gas, electricity, light, heat or power, telephone or other
communication service used, rendered or supplied upon or in
connection with the demised premises throughout the term of this
lease, and to indemnify the Landlord and save it harmless against
any liability or damages on such account. The Tenant shall also
at its sole cost and expense procure any and all necessary
permits, licenses or other authorizations required for the lawful
and proper installation and maintenance upon the demised premises
of wires, pipes, conduits, tubes and other equipment and
appliances for use in supplying any such service to and upon the
demised premises.
ARTICLE XV
Indemnifi- Section 1. The Tenant agrees to indemnify and save harmless
cation of the Landlord against and from any and all claims by or on behalf
Landlord for of any person or persons, firm or firms, corporation or
Claims corporations, arising from the conduct or management of or
Arising from from any work or thing whatsoever done in or about the demised
Accident, premises, and will further indemnify and save the Landlord
etc. harmless against and from any and all claims arising during the
initial term of this lease or any renewal term from any condition
of the building on the demised premises or any street, curb or
sidewalk adjoining the demised premises, or of any vaults,
passageways or spaces therein or appurtenant thereto, or arising
from any breach or default on the part of the Tenant in the
performance of any covenant or agreement on the part of the
Tenant to be performed, pursuant to the terms of this lease, or
arising from any act of negligence of the Tenant, or any of its
agents, contractors, servants, employees or licensees, or arising
from any accident, injury or damage whatsoever caused to any
person, firm or corporation occurring during the initial term of
this lease or any renewal thereof, in or about the demised
premises, or upon or under the sidewalks and the land adjacent
thereto, and from and against all costs, counsel fees, expenses
and liabilities incurred in or about any such claim or action or
proceeding brought thereon; and in case any action or proceeding
be brought against the Landlord by reason of any such claim, the
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Tenant upon notice from the Landlord covenants to resist or
defend such action or proceeding by counsel reasonably
satisfactory to the Landlord.
Physical Section 2. The Tenant is fully familiar with the physical
Condition condition of the demised premises, the building, improvements,
of Demised fixtures and equipment thereof. The Landlord has made no
Premises representations of whatever nature in connection with the
condition of the demised premises or of the buildings,
improvements, fixtures or equipment thereof and the Landlord
shall not be liable for any latent or patent defects therein.
ARTICLE XVI
Destruction Section 1. The Tenant further covenants and agrees that
and in case of damage to or destruction of any building on the
Restoration demised premises or of the machinery, fixtures and equipment
thereof by fire or otherwise, it will promptly at its sole cost
and expense repair, restore and rebuild the same as nearly as
possible to the condition they were in immediately prior to such
damage or destruction or with such changes or alterations as may
be made in conformity with Article VIII. The provisions and
conditions in Article VIII applicable to changes or alterations,
or, as the case may be, to changes or alterations involving an
estimated cost of more than $100,000 shall similarly apply to
work required to be done under this Article.
Application of Section 2. All insurance money recovered by the Landlord
Insurance on account of such damage or destruction less the cost, if any,
Proceeds to the Landlord of such recovery, shall be applied by the
Landlord to the Payment of the cost of the repairing, restoring
and rebuilding (hereinafter in this Article referred to as the
"work") and shall be paid out from time to time to the Tenant as
such work progresses upon the written request of the Tenant,
which shall be accompanied by a certificate of the architect or
engineer in charge of the work, stating (a) that the sum
requested, is justly due to the contractors, sub-contractors,
material men, laborers, engineers, architects or other persons,
firms or corporations rendering services or materials for such
work, or is justly required to reimburse the Tenant for ex-
penditures made by the Tenant in connection with such work, and
when added to all sums previously paid out by the Landlord does
not exceed the value of the work done to the date of such
certificate; and (b) that the insurance money remaining in the
hands of the Landlord, together with the sums, if any, deposited
by the Tenant with the Landlord pursuant to Article VIII hereof,
will be sufficient upon the completion of such work to pay for
the same in full. The Tenant shall also furnish the Landlord at
the time of any such payment with an official search or other
evidence satisfactory to the Landlord that there has not been
filed with respect to the demised premises any mechanic's or
other lien which has not been discharged of record in respect of
any work, labor, services or materials performed, furnished or
supplied or claimed to have been performed, furnished or supplied
in connection with any such work. The Landlord shall not be
required to pay out any insurance money when the demised premises
shall be encumbered with any such lien. If the insurance money
in the hands of the Landlord and such other sums, if any,
deposited with the Landlord pursuant to Article VIII hereof shall
be insufficient to pay the entire cost of such work, the Tenant
agrees to pay the deficiency. Upon the completion of the work
and payment in full thereof by the Tenant, the Landlord shall
turn to the Tenant, upon submission of proof satisfactory to the
Landlord that the work has been paid for in full, any insurance
money then remaining and such other sums, if any, deposited with
the Landlord pursuant to Article VIII hereof then remaining in
the hands of the Landlord.
Damage Section 3. If, within two (2) years of the expiration of
in Excess of the initial term of this lease, or within the last two (2)
Insurance years of any renewal term, the building on the demised premises
Proceeds shall be destroyed, or damaged to such extent that the
restoration thereof will cost an amount in excess of $350,000
over and above the proceeds of any insurance, and the Tenant
shall be unwilling to expend out of its own funds a sum in excess
of said $350,000 for the purpose of restoring such destruction or
damage, the Tenant shall with reasonable promptness notify the
Landlord of such fact, which notice shall be accom-
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panied by a detailed statement of the nature and extent of such
destruction or damage and detailed estimates of the total amount
required to restore the same. Within sixty (60) days after the
giving of such notice, the Landlord shall notify the Tenant
either (a) that it will furnish at its sole cost and expense any
excess over such $350,000 which is necessarily required in
connection with the restoration, to be disbursed in conformity
with the requirements hereinabove in this Article provided, or
(b) that it is unwilling to expend any sum in excess of such
$350,000 for such purpose. Failure to give such notice within
such sixty (60) day period shall be deemed an election by the
Landlord not to make such expenditure. In the event that the
Landlord elects not to expend any such sum in excess of $350,000
as aforesaid, then the Tenant shall have the option, within ten
(10) days after receipt of such notice or within ten (10) days
after the expiration of said sixty (60) day period if Landlord
fails to give such notice, to terminate this lease and the
initial term or the particular renewal term, as the case may be,
by notice in writing addressed to the Landlord. Upon the giving
of such notice, this lease and the initial term or such renewal
term, as the case may be, shall cease and come to an end on a day
to be specified in said notice, which date shall not be more than
sixty (60) days after the date of delivery of such notice and the
Tenant shall make payment of all basic rent and other charges
payable by the Tenant hereunder, justly apportioned to the date
of such termination.
If this Lease shall be terminated pursuant to this Section 3 of
Article XVI, the Tenant shall have no right, title or interest in
or to any insurance proceeds which may have been paid or be
payable on account of such destruction or damage, and all such
monies shall be the property of and be paid to the Landlord. The
Tenant agrees promptly upon request of the Landlord to endorse
properly and deliver to the Landlord all drafts and checks for
such insurance money which may be payable jointly or otherwise to
the Tenant.
Section 4. The Tenant's obligation to make payment of the
basic rent and all other charges on the part of the Tenant to be
paid and to perform all other covenants and agreements on the
part of the Tenant to be performed shall not be affected by any
such damage to or destruction of any building on the demised
premises by fire or otherwise, except as expressly provided in
this lease, and the Tenant hereby waives the provisions of any
statute or law now or hereafter in effect contrary to such
obligations of the Tenant as herein set forth or which relieve
the Tenant therefrom.
Section 5. To the extent that any insurance money which
would otherwise be payable to the Landlord or the Tenant is paid
to any mortgagee and applied in payment or reduction of the sums
secured by any mortgage made by the Landlord on the demised
premises, the Landlord shall make available for the use of the
Tenant in connection with the repairing, restoring and rebuilding
of any building on the demised premises in the same manner
provided in Section 2 of this Article, a sum equal to any amount
so taken and applied by such mortgagee.
ARTICLE XVII
Eminent Section 1. If, during the term of this lease or any renewal
Domain term, the entire demised premises shall be taken as a result of
the exercise of the power of eminent domain (hereinafter referred
to as the "proceeding"), this lease and all right, title and
interest of the Tenant hereunder shall cease and come to an end
on the date of vesting of title pursuant to such proceeding, and
the Landlord shall be entitled to and shall receive the total
award made in such proceeding, the Tenant hereby assigning any
interest in such award to the Landlord.
Partial Section 2. If, during the term of this lease or any renewal
Taking, term, less than the entire demised premises but more than fifty
Major percent (50%) of the usable floor area of the building on the
demised premises shall be taken in any such proceeding, this
lease shall upon vesting of title in the proceeding terminate as
to the portion of the demised premises so taken, and the Tenant
may terminate this lease as to the remainder of the demised
premises. Such termination as to the remainder of the demised
premises shall be effected by a notice in writing given not more
than sixty (60) days after the date of vesting of title in such
proceeding, and shall specify a date not more than sixty (60)
days after the giving of such notice as the date for such
termination. Upon the date specified in such notice, the term of
this lease and all right, title and interest of the Tenant
hereunder shall cease and come to an end. If this lease is
terminated as in this Section provided, the Landlord shall be
entitled to and shall received the total award made
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in any such proceeding, the Tenant hereby assigning any interest
in such award to the Landlord. The right of the Tenant to
terminate this lease as in this Section provided shall be
exercisable only upon condition that the Tenant is not in default
in the performance of any of the terms, covenants or conditions
of this lease on its part to be performed, and such termination
upon the Tenant's part shall become effective only upon
compliance by the Tenant with all such terms, covenants and
conditions to the date of such termination.
Partial Section 3. If less than fifty per cent (50%) of the usable
Taking, floor area of the building on the demised premises shall be taken
Minor in such proceeding, or if more than such area is taken (but less
than the entire demised premises) and this lease is not
terminated as in Section 2 of this Article provided, this lease
shall, upon vesting of title in the proceeding, terminate as to
the part so taken and the Tenant shall have no claim or interest
in the award, or any part thereof, and the Tenant in such case
covenants and agrees, at the Tenant's sole cost and expense
(subject to reimbursement to the extent hereinafter provided),
promptly to restore that portion of the building on the demised
premises not so taken to a complete architectural unit for the
use and occupancy of the Tenant as in this lease expressed. The
provisions and conditions in Article VIII applicable to changes
for alterations or, as the case may be, to changes or alterations
involving an estimated cost of more than $100,000 shall similarly
apply to work required to be done under this Article. The
Landlord agrees, in connection with such restoration, to apply
the net amount of any award, after deduction of all costs and
expenses including counsel fees, that may be received by the
Landlord in any such proceeding for physical damage to the
building on the demised premises toward the cost of such
restoration, and the said net award for physical damage to the
building to the extent that the same may have been received by
the Landlord shall be paid out from time to time to the Tenant as
such restoration progresses upon the written request of the
Tenant, which shall be accompanied by a certificate of the
architect or engineer in charge of the restoration, stating (a)
that the sum requested is justly due to the contractors, sub-
contractors, material men, laborers, engineers, architects or
other persons, firms or corporations rendering services or
materials for such work of restoration, or is justly required to
reimburse the Tenant for expenditures made by the Tenant in
connection with such work of restoration, and when added to all
sums previously paid out by the Landlord does not exceed the
value of the restoration done to the date of such certificate;
and (b) that the net amount of any such award for physical damage
to the building as aforesaid remaining in the hands of the
Landlord, together with the sums, if any, deposited by the Tenant
with the Landlord pursuant to Article VIII hereof will be
sufficient upon the completion of such restoration to pay for the
same in full. If payment of the award for physical damage to the
building as aforesaid shall not be received by the Landlord in
time to permit payments as the work of restoration progresses,
the Tenant shall nevertheless perform and fully pay for such work
without delay (except such delays as are referred to in Article
VIII), and payment of the amount to which the Tenant may be
entitled shall thereafter be made by the Landlord out of the net
award for physical damage to the building as and when payment of
such award is received by the Landlord. The Tenant shall also
furnish the Landlord with each certificate hereinabove referred
to, an official search or other evidence satisfactory to the
Landlord that there has not been filed with respect to the
demised premises any mechanic's or other lien which has not been
discharged of record in respect of any work, labor, services or
materials performed, furnished or supplied or claimed to have
been performed, furnished or supplied in connection with the
restoration. The Landlord shall not be required to pay out any
funds when the demised premises shall be encumbered by any such
lien. If the funds to be applied by the Landlord as in this
Section provided shall be insufficient to pay the entire cost of
such restoration, the Tenant agrees to pay the deficiency. From
and after the date of vesting of title in such proceeding, a just
and proportionate part of the basic rent, according to the extent
and nature of such taking, shall abate for the remainder of the
initial term and any renewal term of this lease. In the event of
any such taking as in this Section 3 contemplated, or in the
event of any taking as in Section 2 of this Article provided
without a termination of this lease as in such Section 2
provided, the Landlord shall be entitled to and shall receive the
total award made in such proceeding, and the Tenant does hereby
assign to the Landlord such total award and all right, title and
interest of whatsoever nature (except as in Section 4 of this
Article provided) that the Tenant may have in and to the total
award made in any such proceeding.
Section 4. In any taking of the demised premises, or
any part thereof, whether or not this lease is terminated as in
this Article provided, the Tenant shall not be entitled to any
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portion of the award for the land or buildings or for the estate
or interest of the Tenant therein, all such awards being hereby
assigned to the Landlord except that the Tenant shall have,
nevertheless, the right to prove in the proceeding and to receive
any award which may be made for damages for or condemnation of
the Tenant's movable trade fixtures and equipment.
Section 5. If all or any portion of the demised premises
shall be taken by the exercise of the right of eminent domain for
governmental occupancy for a limited period, this lease shall not
terminate and the Tenant shall continue to perform and observe
all of its obligations hereunder as though such taking had not
occurred except only to the extent that it may be prevented from
so doing pursuant to the terms of the order of the authority
which made the taking. In the event of such a taking as in this
Section referred to, the Tenant, upon its paying the rent and
additional rent herein provided and upon its faithfully
performing all the covenants and conditions hereunder except as
prevented as above stated, shall be entitled to receive the
entire amount of any award for use and occupancy (whether in lieu
of rent or otherwise) made for such taking, unless the terms of
the governmental taking shall extend the period of governmental
occupancy beyond the termination of the initial term of this
lease or any renewal term, in which case the award shall be
apportioned between the Landlord and the Tenant as of the date of
such lease termination hereunder. The Tenant covenants that at
the termination of any such governmental occupancy it will, at
its sole cost and expense, restore the building on the demised
premises as nearly as may be reasonably possible to the condition
in which the same was prior to such taking. In the event that,
on the governmental taking, an amount of damages is allocated as
compensation for alteration of the premises or for removal of any
improvements or equipment belonging to the Landlord, such sums
shall be the property of the Landlord and, when and if received
by the Tenant, shall be paid over to the Landlord immediately.
If upon termination of the governmental occupancy, the Tenant
shall have, at its own expense, fully restored the demised
premises hereunder to the Landlord's satisfaction, the Landlord
shall then pay over to the Tenant the amount of the award
allocated to alteration and Landlord's removal as aforesaid, but
such payment shall be without interest and shall be limited to
amount actually expended by the Tenant for said purpose of
restoration.
Section 6. In the event of the termination of this lease or
any part thereof as a result of any such proceeding, the Tenant
shall pay to the Landlord all basic rent and all other charges
payable by the Tenant with respect to that portion of the demised
premises so taken in such proceedings and with respect to which
this lease shall have terminated, justly apportioned to the date
of such termination.
ARTICLE XVIII
Subordina- This lease shall be subject and subordinate to the lien of
tion of any mortgage or mortgages which at any time may be placed upon
Lease to the demised premises by the Landlord, its successors or assigns,
Mortgage and to any replacements, renewals or extensions thereof. The
Tenant agrees, at any time hereafter, on demand, to execute and
deliver any instruments, releases or other documents that may be
required for the purpose of subjecting and subordinating this
lease to the lien of any such mortgage or mortgages. The Tenant
hereby appoints the Landlord the attorney-in-fact of the Tenant,
irrevocable, to execute and deliver such instruments, releases or
other documents for and on behalf of the Tenant.
ARTICLE XIX
Use of It is expressly understood and agreed that all vaults now or
Vaults hereafter built projecting beyond the building line of the
Project- demised premises are not included within the premises demised by
ing Be- this lease, but the Landlord covenants that the Tenant may occupy
yond and use the same during the initial term of this lease and any
Building renewal term, subject only to such laws, rules and regulations as
Lines may be imposed by the appropriate municipal departments with
respect thereto. No revocation on the part of any municipal
department or authority of the license to maintain and use such
vaults shall in any way affect this lease or the amount of the
basic rent or any other charge payable by the Tenant hereunder.
If any such license so to maintain and use such vaults shall be
revoked the Tenant will, at its sole cost and expense, do and
perform all such work as may be necessary to comply with any
order revoking the same.
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ARTICLE XX
Bankruptcy Section 1. If during the initial term of this lease or any
and renewal term (a) the Tenant shall make an assignment for the
Insolvency benefit of creditors, or (b) a voluntary or involuntary petition
be filed by or against the Tenant under any law having for its
purpose the adjudication of the Tenant a bankrupt, or the
extension of the time of payment, composition, adjustment,
modification, settlement or satisfaction of the liabilities of
the Tenant or to which any property of the Tenant may be subject,
or the reorganization or liquidation of the Tenant, or (c) a
receiver be appointed for the property of the Tenant by reason of
the insolvency or alleged insolvency of the Tenant, or (d) any
department of the state or federal government, or any officer
thereof duly authorized, shall take possession of the business or
property of the Tenant by reason of the insolvency or alleged
insolvency of the Tenant, the occurrence of any such contingency
shall be deemed a breach of the lease and this lease shall, ipso
facto upon the happening of any of said contingencies be
terminated and the same shall expire as fully and completely as
if the day of the happening of such contingency were the date
herein specifically fixed for the expiration of the initial term
or any renewal term, and the Tenant will then quite and surrender
the demised premises to the Landlord, but the Tenant shall remain
liable as hereinafter provided.
Default Section 2. If, during the initial term of this lease or any
in renewal term, (a) the Tenant shall make default in fulfilling any
Covenants of the covenants of this lease (other than the covenants for the
payment of basic rent, additional rent or other charges payable
by the Tenant hereunder), or (b) the demised premises shall be
left vacant or unoccupied or be deserted for a period of thirty
(30) days, or (c) this lease, without the prior written consent
of the Landlord, or except as expressly permitted, shall be
assigned or transferred in any manner, or shall by operation of
law pass to or devolve upon any third party (except any personal
representative or distributee of a deceased individual assignee
of this lease), the Landlord may give to the Tenant notice of any
default or of the happening of any contingency in this Section
referred to, and if at the expiration of thirty (30) days after
the service of such notice the default or the contingency upon
which said notice was based shall continue to exist, or in the
case of a default or contingency which cannot with due diligence
be cured within a period of thirty (30) days, if the Tenant fails
to proceed promptly after the service of such notice and with all
due diligence to cure the same and thereafter to prosecute the
curing of such default with all due diligence (it being intended
that in connection with a default not susceptible of being cured
with due diligence within thirty (30) days the time within which
the tenant is to cure the same shall be extended for such period
as may be necessary to complete the same with all due diligence),
the Landlord, at its option may terminate this lease and upon
such termination the Tenant will quit and surrender the demised
premises to the Landlord, but the Tenant shall remain liable as
hereinafter provided.
Default in Section 3. If the Tenant shall make default in the payment
Payment of of the basic rent expressly reserved hereunder, or any part of
Rent or the same, and such default shall continue for fifteen (15) days
Additional after notice thereof by the Landlord, or shall make default in
Rent the payment of any item of additional rent, or any other charge
required to be paid by the Tenant hereunder or any part of the
same and such default shall continue for thirty (30) days after
notice thereof by the Landlord, or if this lease shall expire as
in Section 1 or section 2 of this Article provided, the Landlord
or the Landlord's agents and servants may immediately or at any
time thereafter re-enter the demised premises and remove all
persons and all or any property therefrom, either by summary
dispossess proceedings or by any suitable action or proceeding at
law or by force or otherwise, without being liable to indictment,
prosecution or damages therefor, and repossess and enjoy said
premises together with all additions, alterations and
improvements, without such re-entry and repossession working a
forfeiture or waiver of the rents to be paid and the covenants to
be performed by the Tenant during the full term hereof. Upon the
expiration of the term of this lease by reason of the happening
of any of the events herein-
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above described in Section 1 or Section 2, or in the event of the
termination of this lease by summary dispossess proceedings or
under any provision of law now or at any time hereafter in force
by reason of or based upon or arising out of a default under or
breach of this lease on the part of the Tenant, or upon the
Landlord recovering possession of the demised premises in the
manner or in any of the circumstances hereinbefore mentioned or
in any other manner or circumstances whatsoever, whether with or
without legal proceedings, by reason of or based upon or arising
out of a default under or breach of this lease on the part of the
Tenant, the Landlord may, at its option, at any time and from
time to time relet the demised premises, or any part or parts
thereof, for the account of the Tenant or otherwise, and receive
and collect the rents therefor, applying the same first to the
payment of such expenses as the Landlord may have incurred in
recovering possession of the demised premises, including the
legal expenses and attorneys' fees, and for putting the same into
good order or condition or preparing or altering the same for re-
rental and all other expense, commissions and charges paid,
assumed or incurred by the Landlord in or about reletting the
premises and then to the fulfillment of the covenants of the
Tenant hereunder. Any such reletting herein provided for may be
for the remainder of the initial term or any renewal term of this
lease as originally granted or for a longer or shorter period.
In any such case and whether or not the demised premises, or any
part thereof, be relet, the Tenant shall pay to the Landlord the
basic rent and all other charges required to be paid by the
Tenant up to the time of such termination of this lease, or of
such recovery of possession of the demised premises by the
Landlord, as the case may be, and thereafter, except in a case in
which the liability of the Tenant as hereinafter provided arises
by reason of the happening of any of the contingencies referred
to in Section 1 hereof, the Tenant covenants and agrees, if
required by the Landlord, to pay to the Landlord until the end of
the initial term of this lease or any renewal term, as the case
may be, the equivalent of the amount of all the basic rent
reserved herein and all other charges required to be paid by the
Tenant, less the net avails of reletting, if any, and the same
shall be due and payable by the Tenant to the Landlord on the
several rent days herein specified, that is to say, upon each of
such rent days the Tenant shall pay to the Landlord the amount of
the deficiency then existing. In any of the circumstances
hereinbefore mentioned in which the Landlord shall have the right
to hold the Tenant liable upon the several rent days herein
specified, to pay to the Landlord the equivalent of the amount of
all the basic rent and all other charges required to be paid by
the Tenant less the net avails of reletting, if any, the Landlord
shall have the election in place and instead of holding the
Tenant so liable, forthwith to recover against the Tenant as
damages for loss of the bargain and not as a penalty an aggregate
sum which at the time of such termination of this lease or of
such recovery of possession of the premises by the Landlord, as
the case may be, represents the then present worth of the excess,
if any, of the aggregate of the basic rent and all other charges
payable by the Tenant hereunder that would have accrued for the
balance of the initial term or any renewal term, as the case may
be, over the aggregate rental value of the demised premises for
the balance of such term.
Damages Section 4. If this lease shall terminate by reason of the
occurrence of any contingency mentioned in Section 1 of this
Article, the Landlord shall be entitled, notwithstanding any
other provision of this lease or any present or future law, to
recover from the Tenant or the Tenant's estate (in lieu of the
equivalent of the amount of all basic rent unpaid at the date of
such termination) as damages for loss of the bargain and not as a
penalty an aggregate sum which at the time of such termination of
this lease represents the then present worth of the excess, if
any, of the aggregate of the basic rent and all other charges
payable by the Tenant hereunder that would have accrued for the
balance of the initial term or any renewal term, as the case may
be, over the aggregate rental value of the demised premises for
the balance of such term, unless any statute or rule of law
governing the proceeding in which such damages are to be proved
shall limit the amount of such claim capable of being so proved,
in which case the Landlord shall be entitled to prove as and for
liquidated damages by reason of such breach and termination of
this lease, the maximum amount which may be allowed by or under
any such statute or rule of law. Nothing herein contained shall
limit or prejudice the Landlord's right to prove and obtain as
liquidated damages arising out of such breach or termination the
max-
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imum amount allowed by any such statute or rule of law which may
govern the proceedings in which such damages are to be proved
whether or not such an amount be greater, equal to, or less than
the amount of the excess of the basic rent over the rental value
referred to above.
Re-entry Section 5. The Tenant hereby expressly waives the service
of notice of intention to re-enter as provided for in any
statute, or to institute legal proceedings to that end, and also
waives any and all right of redemption in case the Tenant shall
be dispossessed by a judge. The Tenant also waives and will
waive any and all right to a trial by a jury in the event that
summary proceedings shall be instituted by the Landlord. The
terms "enter", "re-enter", "entry", or "re-entry" as used in this
lease are not restricted to their technical legal meaning.
ARTICLE XXI
Renewal Section 1. The Tenant shall have the right, to be exercised
Terms as hereinafter provided, to extend the term of this lease for (2)
successive period of Ten (10) years each upon the following terms
and conditions:
(a) That the Tenant is not in default in the performance of
any of the terms, covenants and conditions herein
contained in respect to a matter as to which notice of
default has been given hereunder and which has not been
remedied within the time limited in this lease, at the
time of the exercise of such right or at the time of
commencement of the renewal term;
(b) Basic Rent during each renewal period shall be based on
the higher of:
1. Basic rental during initial lease term or
$155,500. annually.
2. 10% of the fair market value as established by a
mutually selected MAI or an averaging of market
value may be obtained by 3 independent MAI's, with
landlord and tenant each selecting one appraiser
and the third appraiser being selected by the
other two. Appraisal fees are to be paid by the
tenant.
(c) All other payments upon the part of the Tenant to be
made as in this lease provided shall continue to be
made during each of such renewal terms, including, but
without limiting the generality of the foregoing,
payment of taxes, assessments, water charges, fire and
other insurance premiums.
Section 2. The Tenant shall exercise its right to the
renewal terms by notifying the Landlord in writing of its
election to exercise the right to renew the term of the lease at
least one year prior to the expiration of the initial term of the
lease and at least one year prior to the expiration of any
renewal term.
Section 3. There shall be no further privilege of renewal
of this lease beyond the last renewal period specified in Section
1 of this Article.
ARTICLE XXII
Notices All notices, demands and requests which may or are required
to be given by either party to the other shall be in writing.
All notices,
16
<PAGE>
demands and requests and requests by the Landlord to the Tenant
shall be sent by United States Registered Mail, postage prepaid,
addressed to the Tenant at the demised premises or at such other
place as the Tenant may from time to time designate in a written
notice to the Landlord. All notices, demands and requests by the
Tenant to the Landlord shall be sent by United States Registered
Mail, postage prepaid, addressed to the Landlord at
or at such other place as the Landlord may from time to time
designate in a written notice to the Tenant. Notices, demands
and requests which shall be served upon the Landlord or the
Tenant in the manner aforesaid shall be deemed sufficiently
served or given for all purposes hereunder at the time such
notice, demand or request shall be mailed.
ARTICLE XXIII
Covenants The Tenant, in the use and occupation of the demised
as to Use premises and in the prosecution or conduct of any business
therein, shall comply with the requirements of all laws, orders,
ordinances, rules and regulations of the Federal, state, county
and municipal authorities. The Tenant covenants that it will not
use or permit to be used any part of the demised premises for any
dangerous, noxious or offensive trade or business and will not
cause or maintain any nuisance in, at or on the demised premises.
Surrender The Tenant shall upon termination of this lease for any
reason whatsoever surrender to the Landlord the buildings,
structures, fixtures and building equipment upon the demised
premises, together with all additions, alterations and
replacements thereof (except the Tenant's movable trade fixtures,
machinery, and equipment), in good order, condition and repair
except for reasonable wear and tear.
ARTICLE XXIV
Quiet The Landlord covenants and agrees that the Tenant, upon
Enjoyment paying the basic rent and all other charges herein provided for
and observing and keeping the covenants, agreements and
conditions of this lease on its part to be kept, shall lawfully
and quietly hold, occupy and enjoy said demised premises during
the term of this lease, without hindrance or molestation of the
Landlord, or any person or persons claiming under the Landlord,
subject, however, to the matters hereinabove set forth
immediately following the description of the demised premises.
ARTICLE XXV
Definition The term "Landlord" as used in this lease so far as
of covenants or obligations on the part of the Landlord are
Landlord concerned shall be limited to mean and include only the owner or
owners at the time in question of the fee of the demised
premises, and in the event of any transfer or transfers of the
title to such fee the Landlord herein named (and in case of any
subsequent transfers or conveyances the then grantor) shall be
automatically freed and relieved from and after the date of such
transfer or conveyance of all personal liability as respects the
performance of any covenants or obligations on the part of the
Landlord contained in this lease thereafter to be performed,
provided
17
<PAGE>
that, any funds in the hands of such Landlord or the then grantor
at the time of such transfer, in which the Tenant has an
interest, shall be turned over to the grantee and any amount then
due and payable to the Tenant by the Landlord or then grantor
under any provision of this lease, shall be paid to the Tenant,
it being intended hereby that the covenants and obligations
contained in this lease on the part of the Landlord shall,
subject as aforesaid, be binding on the Landlord, its successors
and assigns, only during and in respect of their respective
successive periods of ownership.
ARTICLE XXVI
Acknowledgment The Tenant agrees at any time and from time to time upon not
by Tenant less than ten (10) days' prior written request by the Landlord to
that Lease execute, acknowledge and deliver to the Landlord a statement in
is in Full writing certifying that this lease is unmodified and in full
Force and force and effect (or if there have been modifications that the
Effect same is in full force and effect as modified and stating the
modifications), and the dates to which the basic rent and other
charges have been paid in advance, if any, it being intended that
any such statement delivered pursuant to this Article may be
relied upon by any prospective purchaser of the fee or mortgagee
or assignee of any mortgage upon the fee of the demised premises.
ARTICLE XXVII
Landlord's The specified remedies to which the Landlord may resort
Remedies under the terms of this lease are cumulative and are not intended
Cumulative to be exclusive of any other remedies or means of redress to
which the Landlord may be lawfully entitled in case of any breach
or threatened breach by the Tenant of any provision of this
lease. The failure of the Landlord to insist in any one or more
cases upon the strict performance of any of the covenants of this
lease or to exercise any option herein contained shall not be
construed as a waiver or a relinquishment for the future of such
covenant or option. A receipt by the Landlord of rent with
knowledge of the breach of any covenant hereof shall not be
deemed a waiver of such breach, and no waiver by the Landlord of
any provision of this lease shall be deemed to have been made
unless expressed in writing and signed by the Landlord. In
addition to the other remedies in this lease provided, the
Landlord shall be entitled to the restraint by injunction of the
violation, or attempted or threatened violation, of any of the
covenants, conditions or provisions of this lease.
ARTICLE XXVIII
Successors The covenants and agreements herein contained shall bind and
and Assigns enure to the benefit of the Landlord, its successors and assigns,
and the Tenant and its permitted successors and assigns.
ARTICLE XXIX
Marginal The marginal captions are inserted for convenience only and
Captions are not to be construed as part of this lease nor as affecting
the meaning of the text of any paragraph hereof.
18
<PAGE>
ARTICLE XXX
Financial Lessee covenants that (i) it will deliver to the Lessor as
Statements soon as practicable and in any event within 90 days after the end
of each fiscal year, profit and loss and income statements of the
Lessee for such year and a balance sheet of the Lessee as of the
end of such year, all in reasonable detail and certified by
independent certified public accountants of recognized standing;
and (ii) with reasonable promptness, Lessee will furnish such
other financial data as Lessor may reasonably request.
IN WITNESS WHEREOF, the Landlord and the Tenant have
respectively caused their corporate seals to be hereunto affixed
and these presents to be signed by their respective duly
authorized officers, the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Wm. J. Rivers, Jr.
___________________________________________
WITNESS: Wm. J. RIVERS, Jr. Vice President
/s/ Dora Sue Crews
____________________________ ATTEST:
DORA SUE CREWS
/s/ J. F. Kozicki
/s/ Janet W. Still ____________________________________________
____________________________ J.F. Kozicki Assistant Secretary
JANET W. STILL SIMMONS COMPANY
By /s/
____________________________________________
WITNESS: President
/s/
____________________________ ATTEST:
/s/ /s/
____________________________ ____________________________________________
Assistant Secretary
<PAGE>
Simmons Manufacturing Company, Inc.
August 21, 1986
Resources Pension Shares 4
666 Third Avenue
New York, New York 10017
Re: Leased dated June 19, 1973 between The
Prudential [illegible]
and Simmons Co. [illegible]
Tenant having [illegible]
Company, Inc. ([illegible]
December 28, 19[illegible]
Jacksonville, Fl[illegible]
----------------
Gentlemen:
We are the holder of the Ten [illegible] pursuant to which we
lease certain premises (the [illegible] building commonly known as 540
Beautyrest Avenue, Jacksonville, FL[illegible] 5. In order to induce you to
make a mortgage loan to [illegible] Jacksonville Associates we hereby certify
with respect to the Lease as follows:
1. The Lease and the telegram dated November 28, 1973,
constitute the only agreements between Landlord and Tenant with respect to
the Demised Premises except as may be hereinafter set forth.
(a) Rights of others pursuant to that certain Agreement
dated February 1, 1974, between Seaboard Coast Line Railroad Company and
The Prudential Insurance Company of America, and that certain Supplemental
Agreement dated February 2, 1974, between Seaboard Coast Line Railroad
Company, The Prudential Insurance Company of America and Simmons Company,
relating to certain sidetracks serving the Premises.
(b) Waiver of Lien and Consent to Installation dated July
29, 1981, by The Prudential Insurance Company of America in favor of Avco
Financial Services Leasing Company, relating to certain computer equipment
to be located in the Premises.
(c) Consent to Installation and Waiver dated August 24,
1981, by The Prudential Insurance Company of America in favor of General
Electric Credit Corporation, relating to certain telephone equipment to be
located in the Premises.
2. The commencement date of the Lease was July 1, 1973 and the
termination date of the Lease shall be June 30, 2003, with an option on the
part of Tenant to renew the Lease for two periods of 10 years.
<PAGE>
3. The Lease is in full force and effect and Tenant has no
credit, offset or claim against the obligation to pay rent, by reason of
prepayment or otherwise, under the Lease.
4. As of this date, Tenant has no right to any free rental or
any concession in or abatement of rent.
5. All work to be performed by Landlord has been heretofore
completed to satisfaction of Tenant.
6. No default exists under the Lease on the part of either
Landlord or Tenant.
7. (a) The basic minimum annual rental is $155,500.
(b) Tenant is responsible for the payment of all real
estate taxes and other additional charges as set out in the Lease.
8. Tenant has paid the net basic rental to and including the
month of August, 1986.
9. No installment of rent has been paid more than one (1) month
in advance.
10. Tenant has deposited no security with Landlord.
Very truly yours,
Simmons Manufacturing
Company, Inc.
By: /s/ H. B. Smith
--------------------------
-2-
<PAGE>
The Prudential Insurance Company of America
The PRUDENTIAL
July 29, 1986
Simmons Company
Six Executive Park Drive, N. E.
Atlanta, Georgia 30348
Re: 540 Beautyrest Avenue
Jacksonville, Florida
Dear Sirs:
This letter is to confirm that the original lease concerning the
referenced premises dated April 30, 1957, in favor of Simmons Company, was
terminated and superseded by that certain Indenture of Lease dated June 19,
1973, between The Prudential Insurance Company of America as Landlord and
Simmons Company as Tenant (the interest of the Tenant thereunder having
been assigned to Simmons Manufacturing Company, Inc. by instrument dated
December 28, 1979). No person or entity has any further right, title or
interest in the premises by reason of the original April 30, 1957 lease.
Very truly yours,
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ M. E. Hunt
---------------------------
Title: Vice President
---------------------
Agreed and confirmed:
SIMMONS COMPANY
By: /s/ Ken Bransen
----------------------------------
Title: Vice President Fin Services
---------------------------
<PAGE>
SIMMONS U.S.A.
P.O. BOX 105032
SIX EXECUTIVE PARK DRIVE, N.E.
ATLANTA, GA. 30348 404 321-3030
May 23, 1986
E. J. Butler
Peoples Gas System, Inc.
29 East Adams Street - Box 330
Jacksonville, Florida 33201-0330
Re: Security Deposit - 540 Beautyrest Avenue (Simmons)
Enclosed is the surety bond which you requested.
Sincerely,
/s/ Abe J. Schear
Abe J. Schear
Director of Legal Services
AJS/cet
Enclosure
cc: Ms. Jane Holcombe/Jacksonville
<PAGE>
CALIFORNIA
ACKNOWLEDGEMENT BY SURETY
STATE OF CALIFORNIA
} ss.
COUNTY OF Los Angeles
--------------
On this 14th day of May in the year 19 86 , before me Dina
------ --------- --- -------------
Monsalve personally appeared Daniel Ortiz ,
- -------------- ---------------------------------------
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person who executed the within instrument as attorney-
in-fact of THE CONTINENTAL INSURANCE COMPANY
----------------------------------------------------------------
and acknowledged to me that the corporation executed it.
OFFICIAL SEAL
DINA MONSALVE
NOTARY PUBLIC
/s/ Dina Monsalve
--------------------------
MY COMMISSION EXPIRES Notary Public
<PAGE>
LEGAL DESCRIPTION
-----------------
The real property, together with the buildings and improvements thereon
erected, situated, lying and being in Duval County, Florida, and being
bounded and described as follows:
All that certain piece, parcel or tract of land, situate, lying and
being in the County of Duval and State of Florida, known and described
as:
Beginning at an iron pipe in the west line of Story Road in the west
half (W1/2) of the northeast quarter (NE1/4) of Section Nineteen (19),
Township Two (2) South, Range Twenty-six (26) East, distant four
hundred fifty (450) feet south of the southwest corner of said Story
Road and Highway Avenue; thence south eighty-nine (89) degrees five
(05) minutes twenty-three (23) seconds west and parallel to said
Highway Avenue four hundred fifty (450) feet to an iron pipe; thence
south no (0) degrees thirty-eight (38) minutes fifty-two (52) seconds
east nine hundred fifty (950) feet to an iron pipe; thence north
eighty-nine (89) degrees five (05) minutes twenty-three (23) seconds
east four hundred fifty (450) feet to an iron pipe in the west line of
said Story Road; thence north no (0) degrees thirty-eight (38) minutes
fifty-two (52) seconds west along the west line of Story Road nine
hundred fifty (950) feet to the point of beginning, containing nine
and eight tenths (9.8) acres, more or less, and being substantially
located as shown on copy of survey dated October 3, 1955, prepared by
Robert M. Angas and Associates, a copy of which survey is attached to
and a part of the deed to Lessee hereinafter referred to; and being a
portion of Farm Tracts Forty-six (46), Forty-seven (47), Forty-eight
(48), and Forty-nine (49), as shown on plat of Edgewood Farms, as same
appears of record in Plat Book 6, page 58, public records of Duval
County, Florida; together with that portion of a fifteen (15) foot
strip shown on plat of Edgewood Farms as aforementioned lying south of
said Farm Tract Forty-nine (49) and also a portion of the southwest
quarter (SW1/4) of the northeast quarter (NE1/4) of said Section
Nineteen (19).
Excepting therefrom the following described property:
Commence at an iron pipe located in the Westerly line of Beautyrest
Road (formerly Story Road), said iron pipe being located one thousand
four hundred (1,400.0) feet Southerly from the intersection of said
Westerly line of Beautyrest Road with the Southerly line of Highway
Avenue, said point of beginning being the Southeasterly corner of the
Simmons Company tract.
From the point of beginning thus described, run South eighty-nine
degrees, five minutes, twenty-three seconds West (S-89(degrees) 05'23"W),
along the Southerly boundary of said Simmons Company tract, one hundred
seventy-nine and three tenths (179.3) feet to a point; run thence
<PAGE>
North eighty-four degrees, eighteen minutes, thirty-four seconds East
(N-84(degrees) 18'34"E), a distance of one hundred eighty (180.0) feet to a
point in the Westerly line of Beautyrest Road, said point being
distant fifteen (15.0) feet Northerly from the point of beginning; run
thence South zero degrees, thirty-eight minutes, fifty-two seconds
East (S-0(degrees) 38'52"E), along the Westerly line of Beautyrest Road,
fifteen (15.0) feet to the point of beginning, the land thus described
containing 1,347.37 square feet, more or less.
<PAGE>
S I M M O N S C O M P A N Y
EXECUTIVE OFFICE - 280 PARK AVENUE - NEW YORK, NEW YORK 10017
July 9, 1973
Mr. R. E. McWilliams
ATLANTA
Dear Mac:
The Prudential Insurance Company of America owns the Jacksonville, Florida
plant property.
Attached is copy of the new lease agreement which indicates that currently
we are paying a rental of $8,250. per month. As soon as the new warehouse
is completed, and accepted by the Pru, they will pay us $850,000. less
certain expenses and we, in turn, will lease this building with our rental
being increased to $12,958.33 per month. A copy of this letter and the
lease are being forwarded to Jacksonville.
If you have any questions, please do not hesitate to write me.
Yours very truly,
/s/ John
JPP:vs John P. Person
ATTACHMENT
cc Messrs. W. H. Stewart
C. J. Elliott
<PAGE>
WU ISCS
+
SIMMONS CO ATL
008951A332 1020EST
ZCZC 001 ATLANTA GA
ZIP 32201
MR F L SNYDER
FLORIDA REAL ESTATE INVESTMENT OFFICE
PRUDENTIAL INSURANCE COMPANY
DUVAL COUNTY SCHOOL BOARD BLDG
1325 SAN MARCO BOULEVARD
JACKSONVILLE FLORIDA 32201
BT
THE PRUDENTIAL INSURANCE COMPANY IS HEREBY AUTHORIZED TO DISBURSE THE SUM
OF $850,000 TO AMERICAN TITLE INSURANCE COMPANY AS OUR AGENTS UNDER THE
PROVISIONS OF THE INDENTURE OF LEASE DATED JUNE 19 1973 THIS DISBURSEMENT
ACKNOWLEDGES COMPLIANCE WITH REQUIREMENTS 1 2 AND 3 ON PAGE 2 OF THE
LEASE WITH INCREASED BASIC RENTAL BEGINNING DECEMBER 1 1973
SIMMONS CO
JOHN P PERSON
ATLANTA GA
NNNNEND
ACCEPTED
<PAGE>
PEOPLES GAS SYSTEM, INC.
BOND No. BND 222-53-25
ANNUAL PREMIUM: $100.00
SURETY BOND
Surety Bond given by Simmons U.S.A. as Principal, at the
------------------------------
service address of 540 Beautyrest Avenue , and THE CONTINENTAL
--------------------------------- ----------------
INSURANCE COMPANY , as Surety, a corporation duly incorporated under the
- ---------------------
laws of the State of NEW HAMPSHIRE , and duly authorized and licensed
---------------------
to transact a surety business in the State of Florida, to Peoples Gas
System, Inc. as Obligee of Jacksonville Division, 29 E. Adams St.,
------------------------------------------------
Jacksonville, FL 32202
- ---------------------------------------------------------------------------
(address)
Pursuant to its authorized General Rules and Regulations for Gas Service,
Obligee has required Principal to make a deposit in an amount approximately
equivalent to twice its average monthly bill for gas utility services as a
security and guaranty for prompt payment of the monthly utility bills to be
rendered by Obligee.
Obligee accepts this surety bond in lieu of cash as Principal's deposit.
Principal and Surety are bound to Obligee in the sum of -----Five
--------------
Thousand----- Dollars ($ 5,000.00 ) for the payment of which
- ------------------ -----------------
Principal and Surety jointly and severally bind themselves, their
successors, assigns and legal representatives.
The condition of this obligation is such that if Principal shall promptly
pay all amounts which may be due by Principal to Obligee for gas service in
Principal's name at any or all premises, then this obligation shall be null
and void; otherwise, it shall remain in full force and effect, subject only
to the following provisions of this bond:
1. This obligation shall run continuously and shall remain in full force
and effect until and unless the bond is terminated and cancelled as
provided herein or as otherwise provided by law. Surety may terminate this
bond at any time by giving written notice to the Principal and Obligee of
such intention by certified or registered mail, return receipt requested.
The liability of Surety shall cease sixty (60) days after receipt of the
termination notice by Obligee and Principal except as to any liability,
debt, or other obligation incurred or accrued prior to the expiration of
such 60-day period.
2. Obligee may seek recovery under this bond against Surety immediately
upon Principal's failure to pay when due all amounts owing by Principal to
Obligee for gas service in the Principal's name at any or all premises, and
Obligee shall not be required to bring any legal proceedings against
Principal for recovery of such unpaid amounts as a condition precedent to
recovery against Surety under this bond.
3. Surety shall be deemed to consent to any extension or extensions of
time granted to Principal in which to satisfy Principal's obligations to
Obligee, and Surety hereby waives all notice with respect to Principal's
obligations to Obligee including notice of all amounts due and notice of
any extension(s) of time for payment.
4. If any proceedings are brought to enforce the obligations agreed to
herein, Principal and Surety, jointly and severally, agree to pay all costs
of collection, including reasonable attorneys' fees for Obligee's attorneys
whether incurred at trial or on appeal.
<PAGE>
IN WITNESS WHEREOF, Principal and Surety have signed, sealed and dated
this bond on this 14th day of MAY , 19 86 .
-------- ------------- ----
ATTEST: SIMMONS U.S.A.
---------------------------------
PRINCIPAL
/s/ Catherine E. Taylor By /s/ Abe J. Schear
- ------------------------------ ------------------------------
Notary Public, Georgia, State at Large
My Commission Expires Feb. 13, 1987
COUNTERSIGNED:
BY: /s/ Charlotte Smith-Wilkes THE CONTINENTAL INSURANCE COMPANY
-------------------------- ---------------------------------
Charlotte Smith-Wilkes SURETY
JOHNSON & HIGGINS OF FLORIDA, INC.
9300 S. Dadeland Blvd., Miami, FL. 33156
By /s/ Daniel Ortiz
------------------------------
Daniel Ortiz Attorney-in-Fact
<PAGE>
March 25, 1981
TO: Peter I. Reiter
GULF + WESTERN
FROM: C. K. Platt
I have been furnished a copy of your June 11, 1980 letter to the
Manufacturers Hanover Trust Company covering the extension of our lease on
the Columbus, Ohio manufacturing plant.
I would appreciate your returning to me my lease file on this location.
--------------------
CKP:st
<PAGE>
The Prudential Insurance Company of America
No. 763 Broad Street
Newark, New Jersey
RE: Lease dated June 19, 1973 between Simmons Company & The
Prudential Insurance Company of America for premises
540 Beautyrest Avenue, Jacksonville, Florida
--------------------------------------------
Dear Sirs:
In accordance with Article 12 of the above captioned Lease, please be
advised that Simmons Company has assigned its interest in the Lease for the
above captioned premises to Simmons Manufacturing Company, Inc. This
Assignment is pursuant to an internal corporate reorganization.
I would appreciate your consent to this Notice of Assignment by
executing a copy of this letter where provided for below and returning the
copy to my attention.
If you have any questions in regard to same, please do not hesitate
to contact me.
Very truly yours,
/s/ Peter I. Reiter
Peter I. Reiter
Accepted and Agreed to this
10th day of March , 1980.
- ----- --------
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ George C. Delem
------------------------
Vice President
<PAGE>
August 13, 1986
TO: File
RE: Jacksonville - Sale of Plant
The Jacksonville plant is to be sold August 13, 1986 to Simmons
Jacksonville Associates with Financing From Resources Pension Shares 4.
Much of the work is being coordinated by Mary Ellen Hunt of Prudential
(395-8600).
I spoke with Ms. Hunt on August 8 and she requested signed estoppel,
certificates of insurance and copies of insurance. I told her we would
comply and asked for a letter of non-default.
Estoppel certificate was signed August 11, 1986 by H. Smith when Prudential
brought non-default letter. Certificates of insurance were received August
11, 1986, however, the 10 day cancellation provision was not included. I
spoke with M. E. Hunt and Steve Baker (Wickes) and Marsh & McClennan will
handle via phone with Ms. Hunt. Marsh & McClennan's rep handling this is
Marcella Brennan who works for Howard Schilling.
--------------------
AJS/cet
Exhibit 10.33
2/11/74 Draft Revision
LEASE
-----
1. Parties:
-------
1.1 This Lease, dated this 12th day of March,
---- -----
1974, is made by and between OVERTON, MOORE & ASSOCIATES, INC., a
California corporation, hereinafter called "Lessor", DEBU/FLAIR, INC., a
Delaware corporation, hereinafter called "Lessee", and SIMMONS
COMPANY, a Delaware corporation, hereinafter called "Guarantor".
2. Premises:
--------
2.1 The real property which is the subject of this Lease is described
on Exhibit "A" attached hereto and incorporated herein by reference,
which real property is hereinafter called the "Premises".
3. Preliminary Plans:
-----------------
3.1 At the present time, the Premises is a vacant parcel of real
property.
3.2 Lessee desires Lessor to construct on the Premises certain
improvements. The building to be constructed and all improvements to be
constructed by Lessor are hereinafter referred to as the "Work of
Improvement". The Work of Improvement shall generally consist of those
certain improvements set forth in that certain document entitled "Proposal
to Lease" dated December 4, 1973, as amended by a document entitled
"Addendum" dated December 5, 1973, both of said documents being here-
inafter called the "Proposal".
3.3 Within thirty (30) days of the date hereof, Lessor, at its sole
cost and expense, shall have preliminary plans and specifications prepared
for the construction of the Work of Improvement. The preliminary plans
shall be in general accordance with the Proposal.
3.4 For a period of twenty (20) days from the date Lessor delivers the
preliminary plans and specifications to Lessee, Lessee shall have the
INITIALS MAZIROW, SCHNEIDER & FORER, INC. INITIALS
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
right to accept and approve said plans and specifications as delivered or
reject them. Such right of rejection or approval by Lessee must be
exercised reasonably. Acceptance or rejection of said preliminary plans and
specifications shall be signified by Lessee delivering to Lessor, within
said 20 day period, said preliminary plans and specification with each page
marked "approved" or "rejected" as the case may be, signed by an officer of
Lessee.
3.5 If Lessee shall not have delivered said preliminary plans and
specifications marked "approved" or "rejected", as the case may be, to
Lessor within said period of time, it shall be deemed that Lessee shall
have accepted them.
3.6 If Lessee shall reject said preliminary plans and specifications
and if they cannot be modified so as to be acceptable to Lessor and Lessee,
Lessee shall promptly pay to Lessor the sum of $15,000.00 as consideration
for the preparation of the preliminary plans and specifications, and upon
such payment this Lease shall terminate and neither party shall thereafter
be obligated to the other party for any reason whatsoever having to do with
this Lease. The preliminary plans and specifications, when approved by
Lessee and Lessor, shall supersede any prior agreements concerning the Work
of Improvement.
4. Final Plans
-----------
4.1 Within thirty-five (35) days of the date the preliminary plans and
specifications are approved by Lessor and Lessee, Lessor, at its sole cost
and expense, shall have final plans and specifications prepared for the
Work of Improvement.
4.2 The Work of Improvement to be set forth on said final plans and
specifications shall be in general accordance with the approved preliminary
plans and specifications.
2
INITIALS MAZIROW, SCHNEIDER & FORER, INC. INITIALS
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
4.3 For a period of twenty (20) days from the date Lessor delivers the
said final plans and specifications to Lessee, Lessee shall have the right
to accept and approve said plans and specifications as delivered or reject
them. Such right of rejection or approval by Lessee must be exercised
reasonably. Acceptance or rejection of said final plans and specifications
shall be signified by Lessee delivering to Lessor, within said 20 day
period, said plans and specifications with each page marked "approved" or
"rejected", as the case may be, and signed by an officer of Lessee.
4.4 If Lessee shall not have delivered said plans and specifications
marked "approved" or "rejected", as the case may be, to Lessor within said
period of time, it shall be deemed that Lessee shall have accepted them.
4.5 If Lessee shall reject said plans and specifications and if they
cannot be modified so as to be acceptable to Lessor and Lessee, Lessee
shall promptly pay to Lessor the sum of $35,000.00, as consideration for
the preparation of the preliminary and final plans and specifications, and
upon such payment this Lease shall terminate and neither party shall
thereafter be obligated to the other party for any reason whatsoever having
to do with this Lease. The final plans and specifications, when approved by
Lessee and Lessor, shall supersede any prior agreements concerning the
Work of Improvement.
5. Construction:
------------
5.1 If the final plans and specifications are approved by Lessee
and Lessor, then Lessor shall, at its sole cost and expense, construct
the Work of Improvement in accordance with said approved final plans and
specifications and all applicable County and City building construction
ordinances. Lessor shall comply with applicable Federal statutes and
regulations that Lessee shall notify Lessor of, in writing, prior to
the start of construction.
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5.2 Except as otherwise herein stated, Lessee hereby acknowledges that
neither Lessor nor any of its agents have made any representation or
warranty relative to the use of which the Premises may be put and Lessee
assumes all responsibility regarding the Occupational Safety Health Act
(OSHA) regarding the Premises and the Work of Improvement
after Lessor has completed the Work of Improvement.
6. Building Permit:
---------------
6.1 Lessor shall use its best efforts to obtain, as soon as possible
after the final plans and specifications are approved by Lessee, a building
permit from the Building Department of the County of Los Angeles
allowing Lessor to construct the Work of Improvement.
7. Completion:
----------
7.1 The Work of Improvement shall be deemed completed and ready for
occupancy by Lessee when the following events shall have occurred:
(i) The Building Department of the County of Los
Angeles shall have made a final inspection of the Work of Improvement and
authorized a final release of restrictions on the use of public utilities
in connection with the Work of Improvement;
(ii) Lessor shall have recorded a Notice of Completion with the
Los Angeles County Recorder in connection with the Work of Improvement;
(iii) Lessor shall have substantially completed construction
of the Work of Improvement and the Premises are in a broom-clean
condition.
7.1A Within thirty (30) days after the event described in paragraph 7.
1 (i) shall have occurred, Lessor shall deliver to Lessee a certificate of
occupancy issued by the County of Los Angeles pertaining to the Premises.
7.2 Lessor shall use its best efforts to complete construction of
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the proposed Work of Improvement by July 1, 1974, hereinafter referred to
as the "Estimated Completion Date", or within 150 days after Lessor obtains
the building permit referred to in Paragraph 6 hereof, whichever date is
last.
7.3 In the event that the proposed Work of Improvement is not completed
by the Estimated Completion Date, this Lease shall not be invalid but
rather Lessor shall complete as soon thereafter as is possible and Lessor
shall not be liable to Lessee for any damages whatsoever.
7.4 If Lessor shall be delayed at any time in the progress of the
construction of the Work of Improvement by extra work, changes in
construction ordered by Lessee, or by strikes, lockouts, fire, delay in
transportation, unavoidable casualties, rain or weather conditions,
unavailability of material (whether simply unavailable or unavailable at
normal prices) or by any other cause beyond Lessor's control, then, in any
of those events, the time of completion shall be extended by the period of
delay.
7.5 Provided, however, and notwithstanding anything to the contrary
hereinbefore stated, if the proposed Work of Improvement is not completed
within one hundred and fifty (150) days after the Estimated Completion
Date, as defined in paragraph 7.2 hereof, whether or not the delay is
excused or not under paragraph 7.4 hereof, Lessee shall have the option to
cancel and terminate the Lease at any time thereafter prior to completion
of the Work of Improvement. Provided, however, if the reason the Work of
Improvement is not completed within said additional one hundred fifty (150)
days is due to a strike or strikes, then said extra one hundred fifty (150)
days shall be extended by said strike or strikes. If Lessee so cancels and
terminates this Lease, neither party shall be thereafter obligated to the
other party for any reason whatsoever having to do with this Lease.
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8. Warranty re Work of Improvement:
--------------------------------
8.1 In lieu of all other warranties, express or implied, concerning
latent or patent defects in the Work of Improvement, Lessor does hereby
guarantee the Work of Improvement to be free and clear of all defects in
workmanship or materials for a period of one year from the time the monthly
rental commences to accrue under this Lease. If written notice is not
received by Lessor from Lessee on or before one year from the time the
monthly rental commences to accrue under this Lease, stating with
specificity any such defects, it shall be conclusively presumed that no
such defects exist. If any such written notice is received by Lessor within
such time and such defects exist, Lessor shall promptly correct the defects
at its sole cost and expense. At the expiration of said one year period,
Lessor shall not be obligated to make any repairs to the Premises of any
nature whatsoever.
8.2 For the purpose of this paragraph 8.2, the term "Special Latent
Defect" is a defect in the workmanship, material or design in the Work of
Improvement and is hereby defined to mean:
(a) a defect which was not and could not have been
reasonably discovered by the Lessee during the one year period commencing
from the time the monthly rental commenced to accrue under this Lease; and
(b) a defect which is of a serious and substantial
danger to person and does bodily harm; and
(c) the defect does not arise out of the use of said
Premises by Lessee.
8.2A If written notice is received by Lessor from Lessee on or before
five (5) years after the time the monthly rental commences to accrue under
this Lease, stating with specificity any such Special Latent Defect and if
such Special Latent Defect does in fact exist, Lessor shall
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promptly correct said Special Latent Defect, at its sole cost and expense.
8.2B If no such written notice, as specified in paragraph 8.2A hereof,
is received by Lessor within the time specified in said paragraph 8.2A,
then it shall be conclusively presumed no such Special Latent Defect
exists.
9. Letting:
-------
9.1 Commencing from the date the proposed Work of Improvement is
completed, as defined in Paragraph 7.1 hereof, Lessor does hereby lease the
Premises and the Work of Improvement to Lessee, subject to all governmental
regulations and all matters of record, for the term and upon the conditions
hereinafter set forth.
10. Term:
----
10.1 The Term of this Lease shall be for fifteen (15) years. On the day
that the proposed Work of Improvement is completed, as defined in paragraph
7.1 hereof, Lessor and Lessee shall execute an amendment to this Lease
setting forth the date of such completion and hence the commencement term
of this Lease and the termination date, fifteen years later.
11. Rent, Net Lease:
---------------
11.1 The monthly rent for the first twelve full months of the term of
this Lease, as established under Paragraph 10 hereof, shall be $15,000.00
per month.
11.2 The monthly rent for the thirteenth (13th) through one hundred
twentieth (120th) month of the term of this Lease, as established under
Paragraph 10 hereof, shall be $18,200.00.
11.3 The monthly rent for the months one hundred twenty-one
(121) through one hundred eighty (180) of the term of this Lease, as
established under Paragraph 10 hereof, shall be the total of the following:
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(a) $18,200.00 (being the amount set forth in Paragraph 11.2 hereof)
plus any additional rent added during the first one hundred
twenty (120) full months of the term of this Lease by virtue of any
modification of Paragraph 11.1 hereof;
(b) Twenty-five percent (25%) of that amount of money which shall equal
the amount of any decrease, if any, in the value of the United States
Dollar from its value as of December, 1973, as compared to its value as of
July, 1983 based upon the hereinafter set forth formula. On August 1, 1983,
the "Average of All Items" of the Bureau of Labor Statistics of the U.S.
Department of Labor "Consumers Price Index for Urban Wage Earners and
Clerical Workers, Los Angeles, Long Beach, California", (1967 base) for
July, 1983 shall be compared with the "Average of All Items" of such index
(1967 base) for December, 1973 and a percentage of increase, if any,
computed. That percentage shall be multiplied against the amount of the
monthly rental payment set forth in the immediately preceding subparagraph
hereof, and 25% of the sum so calculated shall constitute additional
monthly rental to be paid to Lessor by Lessee. In no event shall the
monthly rent to be paid by Lessee to Lessor be less than the amount set
forth in paragraph 11.2 hereof. In the event the compilation and/or
publication of such index shall be transferred to any other governmental
department or bureau or agency, or shall be discontinued, then the index
most nearly the same as the one heretofore described shall be used to make
such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in Los Angeles, California, in accordance
with the then rules of said association and the decision of the arbitrators
shall be binding upon the parties.
11.4 Rent for any period during the term hereof which is for
less than one month shall be a pro rata portion of the monthly installment.
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Rents shall be payable in lawful money of the United States to Lessor at
the address stated herein or to such other persons or at such other places
as Lessor may designate in writing.
11.5 Additional Rent. This Lease is what is commonly
---------------
called a "net lease", it being understood that Lessor shall receive
the rent set forth in Paragraph 11 free and clear of any and all
other impositions, taxes, liens, charges or expenses of any nature
whatsoever in connection with the ownership and operation of the
Premises. In addition to the rent reserved by Paragraph 11, Lessee
shall pay to the parties respectively entitled thereto, all
impositions, insurance premiums, operating charges, maintenance
charges, construction costs and any other charges, costs and expenses
which arise or may be contemplated under any provisions of this Lease
during the term hereof. All of such charges, costs and expenses shall
constitute additional obligation, and upon the failure of Lessee to
pay any of such costs, charges or expenses, Lessor shall have the
same rights and remedies as otherwise provided in this Lease for the
failure of Lessee to pay rent. It is the intention of the parties
hereto that this Lease shall not be terminable for any reason by the
Lessee, whether the Work of Improvement is destroyed or not, and that
Lessee shall in no event be entitled to any abatement of or reduction
in rent payable hereunder, except as herein expressly provided. Any
present or future law to the contrary shall not alter this agreement
of the parties.
12. Security Deposit.
----------------
12.1 Lessee shall not post any security deposit with Lessor.
13. Use:
---
13.1 The Premises shall be initially used and occupied only for
manufacture, assembly and warehousing and its allied activities, and any
other use so long as said use does not violate applicable laws and
regulations
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and is consistent with the construction of the building and improvements.
13.2 Compliance with Law. Lessee shall, at Lessee's expense, comply
-------------------
promptly with all applicable statutes, ordinances, rules, regulations,
orders and requirements in effect during the term or any part of the term
hereof regulating the use by Lessee of the Premises. Lessee shall not use
or permit the use of the Premises in any manner that will tend to create
waste or a nuisance.
14. Maintenance and Repairs:
-----------------------
14. 1 Lessee's Obligations. Subject to the obligations of Lessor
--------------------
under Paragraph 8 hereof, Lessee shall, during the term of this Lease, keep
in good order, condition and repair the Premises and every part thereof,
structural or non-structural, and all adjacent sidewalks, landscaping,
driveways, parking lots, fences and signs located in the areas which are
adjacent to and included with the Premises. Lessor shall incur no expense
nor have any obligation of any kind whatsoever in connection with the
maintenance or repair of the Premises.
14.2 Surrender. On the last day of the term hereof, or on
---------
any sooner termination, Lessee shall surrender the Premises to Lessor
in the same condition as when received, broom-clean, ordinary wear and tear
excepted. Lessee shall repair any damage to the Premises occasioned by the
removal of Lessee's trade fixtures, furnishings and equipment pursuant to
Paragraph 15.3, which repair shall include the patching and filling of
holes and repair of structural damage.
14.3 Lessor Rights. If Lessee fails to perform
-------------
Lessee's obligations under this Paragraph 14, Lessor may, at its option,
(but shall not be required to) enter upon the Premises, after ten (10) days
prior written notice to Lessee, and put the same in good order, condition
and repair, and the cost thereof shall become due and payable as additional
rental to Lessor, together with Lessee's next rental installment.
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14.4 Subject to the obligations of Lessor under Paragraph 8 hereof,
Lessee covenants that, during the life of this Lease, in the use and
occupation of the leased premises and the buildings, structures, fixtures
and improvements thereon, and the sidewalks, alleys, streets and ways
adjacent thereto, Lessee will comply with all covenants, conditions and
restrictions of record and all applicable laws, ordinances and regulations
of duly constituted public authorities now or hereafter in any manner
affecting the leased premises or the sidewalks, alleys, streets and ways
adjacent thereto or any buildings, structures, fixtures or improvements or
the use thereof, whether or not any such laws, ordinances or regulations
which may be hereafter enacted involve a change of policy on the part of
the governmental body enacting the same and whether or not they involve
structural changes in the building. Lessee agrees to hold Lessor harmless
from the consequences of any violations of such laws, ordinances or
regulations.
14.5 Lessee shall keep the Premises free of Mechanic's Liens
arising out of work performed on behalf of Lessee.
15. Alterations and Additions:
-------------------------
15.1 Lessee shall not, without Lessor's prior written consent, make
any alterations, improvements, additions or utility installations in, on,
or about the Premises, except for non-structural alterations not exceeding
$25,000.00 in cost. As used in this Paragraph 15, the term "utility
installations" shall include bus ducting, power panels, fluorescent
fixtures, space heaters, conduits and wiring. As a condition to giving
such consent, Lessor may require that Lessee agree to remove any such
alterations, improvements, additions or utility installations at the
expiration of the term and to restore the Premises to their prior condition
and Lessor shall advise Lessee, in writing, of such requirement three
months in advance of the termination of this Lease.
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15.2 Lessee shall pay, when due, all claims for labor or
materials furnished to or for Lessee at or for use in the Premises, which
claims are or may be secured by any mechanics' or materialmen's lien
against the Premises or any interest therein. Lessee shall give Lessor not
less than ten (10) days notice prior to the commencement of any work in the
Premises in an amount in excess of $25,000.00 and Lessor shall have the
right to post notices of non-responsibility in or on the Premises as
provided by law.
15.3 Unless Lessor requires their removal, as set forth in Paragraph
15.1, all alterations, improvements, additions and utility installations
(unless such utility installations are an integral part of Lessee's
machinery) which may be made on the Premises shall become the property of
Lessor and remain upon and be surrendered with the Premises at the
expiration of the term. Notwithstanding the provisions of this Paragraph
15.3, Lessee's machinery and equipment, other than that which is affixed to
the Premises so that it cannot be removed without material and permanent
damage to the Premises, shall remain the property of Lessee and may be
removed by Lessee subject to the provisions of Paragraph 14.2.
16. Insurance; Indemnity:
--------------------
16.1 Insuring Party. As used in this Paragraph 16, the term
--------------
"insuring party" shall mean the party who has the obligations to obtain the
insurance required hereunder. The insuring party in this case is the
Lessee. Whether the insuring party is the Lessor or the Lessee, Lessee
shall, as additional rent for the Premises, pay the cost of all insurance
required hereunder. If Lessor is the insuring party, Lessee shall, within
ten (10) days following demand by Lessor, reimburse Lessor for
the cost of the insurance so obtained.
16.2 Liability Insurance. The insuring party shall obtain
-------------------
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and keep in force during the term of this Lease a policy of comprehensive
public liability insurance insuring Lessor and Lessee against any liability
arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be in an amount of
not less than $300,000.00 for injury to or death of one person in any one
accident or occurrence and in an amount of not less than $300,000.00 for
injury to or death of more than one person in any one accident or
occurrence. Such insurance shall further insure Lessor and Lessee against
liability for property damage of at least $300,000.00. The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. If
the insuring party shall fail to procure and maintain said insurance, the
other party may, but shall not be required to, procure and maintain the
same, but at the expense of Lessee.
16.2A In addition to the insurance called for in paragraph 16.2 hereof,
Lessee shall obtain and keep in force during the term of this Lease, an
umbrella comprehensive public liability insurance, insuring Lessor and
Lessee against any liability, to person or property, arising out of the
ownership, use, occupancy or maintenance of the Premises in an amount of
not less than One Million Dollars ($1,000,000.00). Said umbrella policy
shall be on all the terms and conditions set forth in paragraph 16.2
hereof.
16.3 Property Insurance. The insuring party shall obtain and keep
------------------
in force during the term of this Lease a policy or policies of insurance
covering loss or damage to the Premises, in the amount of the full
replacement value thereof as it may exist from time to time providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief and sprinkler leakage.
Said insurance shall provide for payment for loss thereunder to Lessee and
to the holder of any first mortgage or deed of trust on the
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Premises, as their interest may appear. If the insuring party shall fail to
procure and maintain said insurance, the other party may, but shall not be
required to, procure and maintain the same, but at the expense of Lessee.
The insurance proceeds shall all be used to repair and restore the
Premises. Lessor shall in no way hinder Lessee's rebuilding and shall
cooperate with Lessee to the fullest extent.
16.4 Insurance Policies: The insuring party shall deliver
------------------
to the other party copies of policies of such insurance or certificates
evidencing the existence and amounts of such insurance with loss payable
clauses satisfactory to Lessor. No such policy shall be cancellable or
subject to reduction of coverage or other modification except after ten
days prior written notice to Lessor. If Lessee is the insuring party,
Lessee shall furnish Lessor with renewals or "binders" thereof.
16.5 Waiver of Subrogation. Lessee and Lessor each
---------------------
hereby waive any and all rights of recovery against the other, or against
the officers, employees, agents and representatives of the other, for loss
of or damage to such waiving party or its property or the property of
others under its control to the extent that such loss or damage is insured
against under any insurance policy in force at the time of such loss or
damage. The insuring party, shall, upon obtaining the policies of insurance
required hereunder, give notice to the insurance carrier or carriers that
the foregoing mutual waiver of subrogation is contained in this Lease.
16.6 Indemnity. Lessee shall indemnify and hold harmless
---------
Lessor from and against any and all claims arising from Lessee's use of the
Premises or from the conduct of Lessee's business or from any activity,
work or things done, permitted or suffered by Lessee in or about the
Premises and shall further indemnify and hold harmless Lessor from and
against any and all claims arising from any breach or default
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in the performance of any obligation on Lessee's part to be performed under
the terms of this Lease, or arising from any negligence of the Lessee or
any of Lessee's agents, contractors or employees, and from and against all
costs, attorney's fees, expenses and liabilities incurred in the defense of
any such claim or any action or proceeding brought thereon; and in case any
action or proceeding be brought against Lessor by reason of any such claim,
Lessee, upon notice from Lessor, shall defend the same at Lessee's expense.
Lessee, as a material part of the consideration to Lessor, hereby assumes
all risk of damage to property or injury to persons in, upon or about the
Premises, arising from any cause, except as provided in Paragraph 8 hereof,
and Lessee hereby waives all claims in respect thereof against Lessor.
16.7 Exemption of Lessor from Liability. Lessee hereby agrees that
----------------------------------
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers or any other
person in or about the Premises, nor shall Lessor be liable for injury to
the person of Lessee, Lessee's employees, agents or contractors, whether
such damage or injury is caused by or results from fire, steam,
electricity, gas, water or rain, or from the breakage, leakage, obstruction
or other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon
other portions of the building of which the Premises are a part, or from
other sources or places, and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible to Lessee,
except as provided in paragraph 8 hereof.
17. Damage of Destruction; Obligation to Rebuild:
--------------------------------------------
17.1 In the event the improvements on the Premises are
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damaged or destroyed, partially or totally, from any cause whatsoever,
whether or not such damage or destruction is covered by any insurance
required to be maintained under Paragraph 16, then Lessee shall
repair, restore and rebuild the Premises to their condition existing
immediately prior to such damage or destruction and this Lease shall
continue in full force and effect. Such repair, restoration and
rebuilding (all of which are herein called the "repair") shall be
commenced within a reasonable time after such damage or destruction
and shall be diligently prosecuted to completion. There shall be no
abatement of rent or of any other obligation of Lessee hereunder by
reason of such damage or destruction. The proceeds of any insurance
maintained under Paragraph 16.3 shall be paid to Lessee for payment of
the cost and expense of the repair. In the event that the insurance
proceeds are insufficient to cover the cost of the repair, then any
amount in excess thereof required to complete the repair shall be paid
by Lessee.
18. Real Property Taxes:
-------------------
18.1 Payment of Taxes. Lessee shall pay all real property
----------------
taxes applicable to the Premises during the term of this Lease. All
such payments shall be made at least ten (10) days prior to the
delinquency date of such payment. Lessee shall promptly furnish Lessor
with satisfactory evidence that such taxes have been paid. If any such
taxes paid by Lessee shall cover any period of time prior to or after
the expiration of the term hereof, Lessee's share of such taxes shall
be equitably prorated to cover only the period of time within the tax
fiscal year during which this Lease shall be in effect, and Lessor
shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such taxes, Lessor shall have the right to pay the same, in
which case Lessee shall repay such amount to Lessor with Lessee's next
rental installment.
18.2 Definition of "Real Property" Tax. As used herein, the
---------------------------------
term "real property tax" shall include any form of assessment,
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license fee, commercial rental tax, levy, penalty or tax (other than
inheritance or estate taxes) imposed by any authority having the direct or
indirect power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other
improvement district thereof, as against any legal or equitable interest of
Lessor in the Premises or in the real property of which the Premises are a
part, as against Lessor's right to rent or other income therefrom, or as
against Lessor's business of leasing the Premises or concerning the
Premises in any manner whatsoever. Provided, however, Lessee shall not be
liable for any inheritance tax, estate tax or income tax of Lessor.
18.3 Personal Property Taxes. Lessee shall pay prior to delinquency
-----------------------
all taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Lessee contained in the
Premises or elsewhere. When possible, Lessee shall cause said trade
fixtures, furnishings, equipment and all other personal property
to be assessed and billed separately from the real property of Lessor.
19. Utilities:
---------
19.1 Lessee shall pay during the Lease term for all water, gas,
heat, light, power, telephone and other utilities and services supplied
to the Premises, together with any taxes thereon.
20. Assignment and Subletting:
-------------------------
20.1 Lessor's Consent Required. Except as permitted under
-------------------------
Paragraph 20.4 hereof, Lessee shall not voluntarily or by operation of law,
assign, transfer, mortgage, or sublet or otherwise transfer or encumber all
or any part of Lessee's interest in this Lease or in the Premises, without
Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Any attempted assignment, transfer, mortgage, encumberance or
subletting without such consent shall be void and shall constitute a
breach of this Lease.
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20.2 No Release of Lessee. Regardless of Lessor's
--------------------
consent, no subletting or assignment shall release Lessee of Lessee's
obligation or alter the primary liability of Lessee to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any other person shall not be deemed to
be a waiver by Lessor of any provision hereof. Consent to one assignment or
subletting shall not be deemed consent to any subsequent assignment or
subletting.
20.3
THIS PARAGRAPH IS LEFT INTENTIONALLY
BLANK
20.4 Lessee Affiliate: Notwithstanding the provisions of
----------------
Paragraph 20.1 hereof, Lessee may assign or sublet the Premises, or any
portion thereof, without Lessor's consent, to any corporation which
controls, is controlled by or is under common control with Lessee, or to
any corporation resulting from a merger or consolidation with the Lessee,
or to any person or entity which acquires all the assets of Lessee as a
going concern of the business then being conducted on the Premises,
provided that said assignee assumes the obligation of this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Lessee
nor that of the guarantor of Lessee's obligations under this Lease.
21. Defaults; Remedies:
------------------
21.1 Defaults: The occurrence of any one or more of the following
--------
events shall constitute a default and breach of this Lease by Lessee:
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(a) The vacating or abandonment of the Premises by
Lessee;
(b) The failure by Lessee to make any payment of
rent or any other payment required to be made by Lessee hereunder, as and
when due, where such failure shall continue for a period of ten (10) days
after written notice thereof from Lessor to Lessee;
(c) The failure by Lessee to observe or perform any
of the covenants, conditions or provisions of this Lease to be observed or
performed by Lessee, other than described in Paragraph (b) above, where
such failure shall continue for a period of 30 days after written notice
hereof from Lessor to Lessee; provided, however, that if the nature of
Lessee's default is such that more than 30 days are reasonably required for
its cure, then Lessee shall not be deemed to be in default if Lessee
commenced such cure within said 30-day period and thereafter diligently
prosecutes such cure to completion;
(d) (i) The making by Lessee of any general assign-
ment, or general arrangement for the benefit of creditors; (ii) the filing
by or against Lessee of a petition to have Lessee adjudged a bankrupt or a
petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Lessee, the
same is dismissed within 60 days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where possession is
not restored to Lessee within 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where such seizure is
not discharged within 30 days.
21.2 Remedies. In the event of any such default or breach by
--------
Lessee, Lessor may, at any time thereafter, with or without notice or
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demand and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such default or breach;
(a) Terminate Lessee's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event, Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default, including but not limited
to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorney's fees, and any real estate commission actually paid;
the worth, at the time of award by the court having jurisdiction thereof,
of the amount by which the unpaid rent for the balance of the term after
the time of such award exceeds the amount of such rental loss for the same
period that Lessee proves could be reasonably avoided; that portion of the
leasing commission paid by Lessor pursuant to Article 23 applicable to the
unexpired term of this Lease. In the event Lessee shall have abandoned the
Premises, Lessor shall have the option of (i) retaking possession of the
Premises and recovering from Lessee the amount specified in this Paragraph
21.2(a), or (ii) proceeding under Paragraph 21.2(b).
(b) Maintain Lessee's right to possession, in which case this
Lease shall continue in effect whether or not Lessee shall have abandoned
the Premises. In such event, Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder;
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the State of California.
21.3 Default by Lessor. Lessor shall not be in default
-----------------
unless Lessor fails to perform obligations required of Lessor within a
reasonable time, but in no event later than thirty (30) days after written
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notice by Lessee to Lessor and to the holder of any first mortgage or deed
of trust covering the Premises whose name and address shall have there-
tofore been furnished to Lessee in writing, specifying wherein Lessor has
failed to perform such obligation; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are required
for performance, then Lessor shall not be in default if Lessor commences
performance within such 30-days period and thereafter diligently
prosecutes the same to completion.
22. Condemnation
------------
22.1 If the Premises or any portion thereof are taken under the power
of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation") this Lease shall terminate
as to the part so taken as of the date the condemning authority takes title
or possession, whichever first occurs. If more than 10% of the floor area
of the improvements on the Premises, or more than 25% of the land area of
the Premises which is not occupied by any improvements is taken by
condemnation, Lessee may (at Lessee's option, to be exercised in writing
only, within ten (10) days after Lessor shall have given Lessee written
notice of such taking -- or, in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes such possession.
If Lessee does not terminate this Lease in accordance with the foregoing,
this Lease shall remain in full force and effect as to the portion of the
Premises remaining, except that the rent shall be reduced in the proportion
that the floor area taken bears to the total floor area of the building
situated on the Premises. Any award for the taking of all or any part of
the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for
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diminution in value of the leasehold or for the taking of the fee, or
as severance damages; provided, however, that Lessee shall be entitled
to any award for loss of or damage to Lessee's trade fixtures and
removable personal property. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall, to the extent
of severance damages received by Lessor in connection with such con-
demnation, repair any damage to the Premises caused by such condemna-
tion except to the extent that Lessee has been reimbursed therefor by
the condemning authority.
23. Broker's Fee:
------------
23.1 Upon execution of this Lease by both parties, Lessor shall
pay to Crown Associates, a licensed real estate broker, a fee for
brokerage services heretofore rendered. Lessor further agrees that if
Lessee exercises any option granted herein or any option substantially
similar thereto, either to extend the term of this Lease, to renew
this Lease, to purchase said Premises or any part thereof and/or any
adjacent property which Lessor may own or in which Lessor has an
interest, or any other option granted herein, or if said broker is the
procuring cause of any other lease or sale entered into between the
parties pertaining to the Premises and/or any adjacent property in
which Lessor has an interest, then as to any of said transactions,
Lessor shall pay said broker a fee in accordance with the schedule of
said broker, a copy of which is attached hereto, marked Exhibit "B".
Lessor agrees to pay said fee not only on behalf of Lessor but also on
behalf of any person, corporation, association or other entity having
an ownership interest in said real property or any part thereof when
such fee is due hereunder. Any transferee of Lessor's interest in this
Lease, by accepting an assignment of such interest, shall be deemed to
have assumed Lessor's obligation under this Paragraph 23. Said broker
shall be a third party beneficiary of the provisions of this
paragraph.
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24. General Provisions:
------------------
24.1 Estoppel Certificate.
--------------------
(a) Lessee shall, at any time, upon not less than
ten (10) days prior written notice from Lessor, execute, acknowledge and
deliver to Lessor a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified,
is in full force and effect), and the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging that there are
not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrance of the Premises.
(b) Lessee's failure to deliver such statement within
such time shall be conclusive upon Lessee (i) that this Lease is in full
force and effect, without modification except as may be represented by
Lessor, (ii) that there are no uncured defaults in Lessor's performance,
and (iii) that not more than one month's rent has been paid in advance.
(c) From time to time during the term of this Lease,
Lessee will, upon the written request of Lessor, deliver to Lessor the most
recent annual report of the Guarantor (Simmons Company) that the Guarantor
has issued to its stockholders.
24.2 Lessor's Liability. The term "Lessor" as used herein, shall
------------------
mean only the owner or owners at the time in question of the fee title of
the Premises, and except as expressly provided in Paragraph 24, in the
event of any transfer of such title or interest, Lessor herein named (and,
in case of any subsequent transfer, the then grantor) shall be relieved
from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in
the hands of Lessor or the then grantor at the time of such
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transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as aforesaid, be binding on Lessor's successors and assigns,
only during their respective periods of ownership. Provided, however, the
Lessor herein named, OVERTON, MOORE & ASSOCIATES, INC. shall remain liable
for its obligations under Paragraph 8 hereof and no transferee of Lessor
shall be liable for the same.
24.3 Severability. The invalidity of any provision of this Lease, as
------------
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
24.4 THIS PARAGRAPH IS LEFT INTENTIONALLY
BLANK
24.5 Time of Essence. Time is of the essence.
---------------
24.6 Captions. Article and paragraph captions are not a
--------
part hereof.
24.7 Incorporation of Prior Agreements; Amendments. This Lease
---------------------------------------------
contains all agreements of the parties with respect to any matter
mentioned herein. No prior agreement or understanding pertaining to any
such matter shall be effective. This Lease may be modified in writing
only, signed by the parties in interest at the time of modification.
24.8 Waivers. No waiver by Lessor of any provision hereof shall be
-------
deemed a waiver of any other provision hereof or of any subsequent breach
by Lessee of the same or any other provision. Lessor's consent to or
approval of any act shall not be deemed to render unnecessary the obtaining
of Lessor's consent to or approval of any subsequent act by Lessee. The
acceptance of rent hereunder by Lessor shall not be a waiver of any
preceding breach by Lessee of any provision hereof, other than the failure
of Lessee to pay the particular rent so accepted, regardless of Lessor's
knowledge of such preceding breach at the time of acceptance of such rent.
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24.9 Notices. All notices required or permitted here-under
-------
shall be deemed served when delivered personally or when deposited in the
United States mail, registered, return receipt requested, postage prepaid,
addressed to the respective parties as follows:
Lessor: Overton, Moore & Associates, Inc.
Post Office Box 720
16901 South Western Avenue
Garden, California 90247
with a copy to:
Arthur Mazirow, Esq.
Mazirow, Schneider & Forer, Inc.
8500 Wilshire Boulevard, Suite 919
Beverly Hills, California 90211
Lessee: Debu/Flair Inc.
24251 Frampton Avenue
Harbor City, California
Attention: Harold Felix
with a copy to:
Simmons Company
280 Park Avenue
New York, New York 10017
or to such other addresses as the parties respectively may designate from
time to time by notice served in the manner aforesaid.
24.10 Recording. Lessee shall not record this Lease without Lessor's
---------
prior written consent and such recordation shall, at the option of Lessor,
constitute a non-curable default of Lessee hereunder. Either party shall,
upon request of the other, execute, acknowledge and deliver to the other a
"short form" memorandum of this Lease for recording purposes.
24.11 Holding Over. If Lessee remains in possession of the Premises or
------------
any part thereof after the expiration of the term hereof without the
express written consent of Lessor, such occupancy shall be a tenancy from
month to month at a rental in the amount of the last monthly rental, plus
all other charges payable hereunder, and upon all the terms hereof
applicable to a month-to-month tenancy.
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24.12 Cumulative Remedies. No remedy or election here-under shall
-------------------
be deemed exclusive, but shall, wherever possible, be cumulative with all
other remedies at law or in equity.
24.13 Covenants and Conditions. Each provision of this Lease
--------------------------
performable by Lessor or Lessee shall be deemed both a covenant and a
condition.
24.14 Binding Effect; Choice of Law. Subject to any provisions hereof
-----------------------------
restricting assignment or subletting by Lessee, and subject to the
provisions of Paragraph 24.2, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be
governed by the laws of the State of California.
25. Subordination:
-------------
25.1 This Lease, at Lessor's option, shall be subordinate to
mortgage, deed of trust, or any other hypothecation for security now or
hereafter placed upon the real property by Lessor of which the Premises are
a part and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions
thereof. The subordination of this Lease to any such mortgage or deed of
trust (whether now or hereafter created and existing) is conditional upon
such mortgage or deed of trust containing provisions (which may be included
in a separate agreement of the mortgagee or beneficiary) to the effect that
(i) notwithstanding any default under such mortgage or deed of trust, or
any foreclosure or termination thereof, or the enforcement by the
mortgagee, trustee or beneficiary of any rights or remedies thereunder or
otherwise, so long as Lessee is not in default hereunder, this Lease shall
remain in full force and effect and the Lessee shall be permitted to remain
in quiet and peaceful possession of the Premises throughout the term of
this Lease, and (ii) that all sums arising by reason of loss under the
insurance referred to in Paragraph 16.3 of this Lease, or by reason
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of any condemnation award or payment in lieu thereof referred to in
Paragraph 22 of this Lease, shall be applied to the cost of repairing,
restoration and rebuilding of any improvements on the Premises, as provided
in Paragraphs 16.3 and 22, as the case may be, and (iii)
Lessee will attorn to said Lessor, mortgagee or beneficiary under said deed
of trust in the event the rights of Lessor herein are terminated by reason
of a default by Lessor under said security documents. If any mortgagee or
beneficiary under said deed of trust shall elect to have this Lease be
superior and have priority over the lien of its mortgage, or deed of
trust and shall give written notice thereof to Lessee, this Lease shall
be deemed superior and have priority over said mortgage or deed of trust,
whether this Lease is dated prior or subsequent to the date of said
mortgage, or deed of trust, or the date of recording thereof.
25.2 Lessee agrees to execute any documents required
to effectuate such subordination or to make this Lease prior to the lien of
any mortgage or deed of trust, as the case may be, and failing to do so
within ten (10) days after written demand, does hereby make, constitute and
irrevocably appoint Lessor as Lessee's attorney in fact and in
Lessee's name, place and stead, to do so.
26. Attorney's Fees:
----------------
26.1 If either party or the broker named herein brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party
in any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the Court. The
provisions of this paragraph shall inure to the benefit of the broker named
herein who seeks to enforce a right hereunder against Lessor only.
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27. Lessor's Access:
----------------
27.1 Lessor and Lessor's agent shall have the
right to enter the Premises at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers or lenders
and making such alterations, repairs, improvements or additions to the
Premises or to the building of which they are a part as Lessor may deem
necessary or desirable; however, Lessor and Lessor's agents shall not
interfere with Lessee's use and occupancy of the Premises.
27.2 Lessor may, at any time during the last 180
days of the term hereof, place on or about the Premises any ordinary "For
Lease" signs, al1 without rebate of rent or liability to Lessee. Said signs
shall set forth the name and address of the Lessor and its capacity as
Lessor of the Premises.
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28. Signs and Auctions:
-------------------
28.1 Lessee shall not place any sign upon the Premises or conduct any
auction thereon without Lessor's prior written consent. Lessee shall be
permitted to place the customary signs setting forth Lessee's company name
and its products or services, as well as the usual signs with respect to
exits, entrances, shipping, receiving and deliveries. However, such signs
shall be in accordance with other signs on other buildings in the
industrial park where this property is located and subject to the approval
by Lessor, which approval will not be unreasonably withheld.
29. Merger:
------
29.1 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work a merger and shall, at the
option of Lessor, terminate all or any existing subtenancies or may, at the
option of Lessor, operate as an assignment to Lessor of any or all of such
subtenancies.
30. Corporate Authority:
-------------------
30.1 Each individual executing this Lease on behalf of a corporation
represents and warrants that he is duly authorized to execute and deliver
this Lease on behalf of said corporation, in accordance with a duly adopted
resolution of the Board of Directors of said corporation or in accordance
with the By-Laws of said Corporation, and that this Lease is binding upon
said corporation in accordance with its terms. Each party hereof and the
guarantor of Lessee hereunder shall, within thirty (30) days of the
execution of this Lease, deliver to the other a certified copy of a
resolution of its Board of Directors or executive committee of the Board of
Directors authorizing or ratifying the execution of this Lease.
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31. Quiet Enjoyment:
---------------
31.1 Subject to the provisions of this Lease, Lessee's quiet enjoyment
of the Premises shall not be disturbed or interfered with by Lessor or by
anyone claiming by, through, or under Lessor.
32. First Option to Extend:
----------------------
32.1 Lessor hereby grants to Lessee the option to extend the term of
this Lease for the period commencing the day after the termination date, as
established under Paragraph 10 hereof, and continuing for a period of five
(5) years thereafter, upon each and all of the following terms and
conditions:
(a) Lessee gives to Lessor and Lessor receives written notice of the
exercise of the option to extend this Lease for said additional term no
later than July 1, 1988, time being of the essence. If said notification of
the exercise of said option is not so given and received, this option shall
automatically expire;
(b) At the time the said written notification of the exercise of the
option is given and received, Lessee shall not be in default under any of
the material obligations of this Lease to be performed by Lessee;
(c) All of the terms and conditions of this Lease (including the
guarantee) except where specifically modified by this Paragraph 32, shall
apply;
(d) The monthly rent for each month of the option period shall be
the total of the following:
(i) The monthly rent called for under Paragraph 11.2 of
this Lease, plus any additional rent added by Agreement between the parties
other than any increase by virtue of Paragraph 11.3;
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(ii) That amount of money which shall equal
the amount of any decrease, if any, in the value of the United States
Dollar from its value as of December, 1973 as compared to its value
as of July, 1989, based upon the hereinafter set forth formula. On
August 1, 1989, the "Average of All Items" of the Bureau of Labor
Statistics (of the U.S. Department of Labor) "Consumers Price
Index for Urban Wage Earners and Clerical Workers, Los Angeles,
Long Beach, California", (1967 base) for July, 1989, shall be compared
with the "Average of All Items" of such index (1967 base) for
December, 1973, and a percentage of increase, if any, computed. That
percentage shall be multiplied against the amount of the monthly
rental payment set forth in the immediately preceding subparagraph
hereof and the sum so calculated shall constitute additional monthly
rental to be paid to Lessor by Lessee. In no event shall the monthly
rent to be paid by Lessee to Lessor be less than the amount set forth
in Paragraph 32. l(d)(i). In the event the compilation and/or
publication of such index shall be transferred to any other
governmental department or bureau or agency or shall be discontinued,
then the index most nearly the same as the one heretofore described
shall be used to make such calculation. In the event that Lessor and
Lessee cannot agree on such alternative index, then the matter shall
be submitted for decision to the American Arbitration Association in
Los Angeles, California, in accordance with the then rules of said
association and the decision of the arbitrators shall be
binding upon the parties.
33. Second Option to Extend:
-----------------------
33.1 If Lessee exercises its First Option to extend this Lease,
as set forth in Paragraph 32 hereof, then Lessor hereby grants to
Lessee the option to extend the term of this Lease for an additional
five (5) years, commencing when the first option permit terminates,
upon each and all of the following terms and conditions:
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(a) Lessee gives to Lessor and Lessor receives written notice of
the exercise of the option to extend this Lease for said additional term no
later than July 1, 1993, time being of the essence. If said notification of
the exercise of said option is not so given and received, this option shall
automatically expire;
(b) At the time the said written notification of the exercise of the
option is given and received, Lessee shall not be in default under any of
the material obligations of this Lease to be performed by Lessee;
(c) All of the terms and conditions of this Lease (except where
specifically modified by this Paragraph 33) shall apply;
(d) The monthly rent for each month of the option period shall be
the total of the following:
(i) The monthly rent called for under Paragraph 11.2 of this
Lease, plus any additional rent added by agreement between the parties
other than any increase by virtue of Paragraph 11.2 and other than any
increase by virtue of Paragraph 11.3 hereof;
(ii) That amount of money which shall equal the amount of any
decrease, if any, in the value of the United States dollar from its value
as of December, 1973, as compared to its value as of July, 1994, based
upon the hereinafter set forth formula. On August 1, 1994, the "Average
of All Items" of the Bureau of Labor Statistics (of the U.S. Department
of Labor) "Consumers Price Index for Urban Wage Earners and Clerical
Workers, Los Angeles, Long Beach, California" (1967 base) for July, l994,
shall be compared with the "Average of All Items" of such index (1967 base)
for December, 1973, and a percentage of increase, if any, computed. That
percentage shall be multiplied against the amount of the monthly rental
payment set forth in the immediately preceding subparagraph hereof and
the sum so calculated shall constitute additional monthly rental to be paid
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BEVERLY HILLS, CALIFORNIA
<PAGE>
to Lessor by Lessee. In no event shall the monthly rent to be paid by
Lessee to Lessor be less than the amount calculated under Paragraph 32
hereof. In the event the compilation and/or publication of such index shall
be transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the one
heretofore described shall be used to make such calculation. In the event
that Lessor and Lessee cannot agree on such alternative index, then the
matter shal1 be submitted for decision to the American Arbitration
Association in Los Angeles, California, in accordance with the then rules
of said association and the decision of the arbitrators shall be binding
upon the parties.
34. Option to Extend Personal:
-------------------------
34.1 The options to extend this Lease, as set forth in Paragraphs 32
and 33 hereof, are personal to Lessee and may not be exercised or be
assigned, voluntarily or involuntarily, by anyone else, except they may be
exercised by or assigned to any of the entities described in Paragraph
20.4, for whom Lessee does not need the consent of Lessor to assign this
Lease.
35. Option to Buy:
-------------
35.1 Lessor does hereby grant to Lessee an option to purchase the
Premises and the Lessor's interest under this Lease, upon the terms and
conditions herein set forth.
35.2 The option herein granted is personal to Lessee and may not be
exercised or assigned, either voluntarily or by operation of law, by any
other entity, except to the same extent that the options to extend this
Lease may be exercised by others under Paragraph 34 hereof. If any such
invalid
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assignment shall occur. whether voluntarily or involuntarily, this option
shall automatically become null and void.
35.3 Lessee must exercise the option to purchase, if it
is to be exercised at all, during three periods of time only and those
periods of time are:
(i) At any time during the fifty-fourth (54th) month of the term of
this Lease, hereinafter referred to as the "First Option Month"; and
(ii) At any time during the one hundred fourteenth (114th)
month of the term of this Lease, hereinafter referred to as the "Second
Option Month"; and
(iii) At any time during the one hundred sixty-second (162nd) month
of the term of this Lease, hereinafter referred to as the "Third Option
Month".
35.4 In order to exercise the option to purchase herein
granted, Lessee must give written notice of the exercise of the option
to Lessor and Lessor must receive the same during either the First Option
Month or the Second Option Month or the Third Option Month, time being of
the essence, and if not so given and received this option shall
automatically expire. At the same time the option is exercised, Lessee must
deliver to Lessor a cashier's check for $100,000.00, payable to Title
Insurance and Trust Company, to be part of the purchase price.
35.5 At the time said written notification of the exercise
of the option to purchase is given and received, and title to the fee is
transferred to Lessee, Lessee shall not be in default under any material
obligation of this Lease to be performed by Lessee.
35.6 If Lessee shall exercise the option to purchase during
the First Option Month, the transfer of title to Lessee and the payment of
the purchase price to Lessor shall occur on the last day of the 60th month
of the term of this Lease and until that time the term of this Lease shall
remain in full force and effect.
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35.7 If Lessee shall exercise this option to purchase during the
Second Option Month, the transfer of title to Lessee and the payment of the
purchase price to Lessor shall occur on the last day of the 120th month of
the term of this Lease and until that time the terms of this Lease shall
remain in full force and effect.
35.7A If Lessee shall exercise this option to purchase
during the Third Option Month, the transfer of title to Lessee and the
payment of the purchase price to Lessor shall occur on the last day of the
168th month of the term of this Lease and until that time the terms of this
Lease shall remain in full force and effect.
35.8 The purchase price to be paid by Lessee to Lessor
for the Premises, if Lessee exercises its option to purchase, shall be
determined in the following manner:
(i) The purchase price shall be the fair market value of the Premises
at the time the option to purchase is exercised. In determining the fair
market value it shall be assumed that the Premises are in good condition
and repair and are not subject to this Lease.
(ii) Using the above set of assumptions, the fair market value shall be
determined by a qualified M.A.I. appraiser, to be paid for by Lessee. In
the event that Lessor does not agree with that appraiser, Lessor may
appoint a qualified M.A.I. appraiser, to be paid for by Lessor, to appraise
their Premises. If said two appraisers do not agree, then the two
appraisers may choose a third qualified M.A.I. appraiser, to be paid
equally by Lessor and Lessee, to determine the fair market value, whose
decision shall be binding upon all parties. Provided, however, the sale
price shall in no event be less than $2,306,000.00 plus the cost of the
agreed upon extras added to the work and improvement.
35
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
35.9 Within ten days of the date the purchase price of
the Premises shall be established, the Lessor and Lessee shall give
instructions to consummate the sale to Title Insurance and Trust Company,
433 South Spring Street, Los Angeles, California, who shall act as escrow
holder, on the normal and usual escrow forms then used by such escrow
holder, as follows:
(i) Escrow shall close on the date previously called
for;
(ii) Lessee shall deposit the sum of $100,000.00 into escrow upon its
opening and the balance at the close of escrow;
(iii) The sale shall be subject to all easements and restrictions of
record. However, the title shall be subject to any recorded Deeds of Deeds
of Trust against the Premises securing promissory notes or notes which
Lessee does hereby agree to assume, the unpaid balance of which shall be a
credit to Lessee on the purchase price (any cost in connection with the
assumption of said Deeds of Trust shall be that of Lessee);
(iv) Escrow fee shall be shared equally;
(v) Interest and rents will be prorated to the close of
escrow;
(vi) Title policy shall be paid by Lessor:
(vii) All parties agree to execute any additional instructions
as are normal and usual.
36. Guarantee of Lease:
------------------
36.1 In consideration of Lessor entering into the foregoing Lease,
which Lessor would not have done except and only upon the condition that
the same be unconditionally guaranteed by Simmons Company, a corporation
(hereinafter referred to as "Guarantor") said Guarantor does hereby
guarantee to Lessor, its successors and assigns, that if
36
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
a default shall at any time be made by Lessee in the payment of the rent or
any other sums payable, or in the performance of any obligations under the
terms of the covenants and agreements contained in this Lease, or any
amendments hereto or under extensions hereof to be performed or paid by
Lessee, or any assignee of Lessee, then Guarantor will pay the said rent or
any other payments required of Lessee, perform any other defaulted
obligations of Lessee or any assignee of Lessee, and will also pay any
damages which may arise in consequence of the non-performance by Lessee of
its obligations under said Lease. Guarantor does hereby waive notice of any
such default and consent to any assignments, sublets, modification or
amendment of any kind or nature whatsoever of said Lease which may be
agreeable to Lessee or its successor in interest and does further waive any
right to be subrogated to the rights of Lessor against Lessee.
36.2 Guarantor further promises and agrees to pay all
reasonable expenses of Lessor and its successors and assigns in the
collection of said rent or other payments or in the enforcing of any
obligations of this Lease on Lessee's part to be performed, as well as all
expenses in the enforcement of this Guarantee, including reasonable
attorney's fees. Lessor may grant renewals and extensions of time of
payment of any obligation under this Lease and this Guarantee without in
any way affecting the liability of Guarantor. Notice of acceptance of this
guarantee, as well as all demands and notices of every kind or nature, are
hereby waived. Upon any default by Lessee, Lessor may, at its option and
without waiving any rights against Lessee, and without notice or prior
demand, proceed against Guarantor to enforce its rights hereunder, the
Lessor not being obligated to exhaust its remedies against Lessee before
proceeding against Guarantor. This guarantee is assignable with this Lease
and shall inure to the benefit of the successors and assigns of Lessor.
37
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
36.3 Guarantor does hereby warrant that it will, within
thirty (30) days of the date of this Lease, deliver to Lessor a certified
copy of a resolution of the Board of Directors ratifying Guarantor's
execution of this Lease as Guarantor.
Executed on the day and year first appearing on Page 1 hereof.
(Corporate Seal) OVERTON MOORE & ASSOCIATES, INC.
By /s/
----------------------------------
By /s/
----------------------------------
(Corporate Seal) DEBU/FLAIR, INC.
By /s/
----------------------------------
By
----------------------------------
CONSENT OF GUARANTOR
--------------------
The Guarantor herein, SIMMONS COMPANY, a corporation, does hereby
execute this Lease, thereby agreeing to the terms of the Guarantee set
forth in Paragraph 36 of this Lease by and between Overton, Moore &
Associates, Inc. and Debu/Flair, Inc.
(Corporate Seal) SIMMONS COMPANY
By /s/
---------------------------
By
---------------------------
38
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
J.N. 67115-97 2 January, 1974
REV. February 21, 1974
LEGAL DESCRIPTION
(804-97)
______________________
PARCEL A:
- --------
Parcel 3 in the County of Los Angeles, State of California as shown on
Parcel Map No. 2078 filed in Book 50, Page 66 of Parcels Maps in the office of
the County Recorder of said County.
Containing 7.700 acres, more or less.
EXCEPTING all minerals and all mineral and water rights of every kind
and character now known to exist or hereafter discovered, including, without
limiting the generality of the foregoing, oil, gas, water and rights thereto,
together with the sole, exclusive and perpetual right to explore for, remove and
dispose of said minerals by any means or methods suitable to grantor, its
successors and assigns, but without entering upon or using the surface of said
parcel of the lands hereby conveyed or any portion of the subsurface within five
hundred (500) feet of the surface and in such manner as not to damage the
surface of said parcel of said land or to interfere with the use thereof, as
reserved by Carson Estate Company, a corporation, by deed recorded April 19,
1967 in Book D 3617, Page 884, Official Records.
ALSO EXCEPT the airspace above a plane 100 feet vertically above the
surface of the above described land.
RESERVING an easement for storm drain purposes, together with the right to grant
to others, over that portion of said land included within a strip of land 10.00
feet in width, the centerline of which being described as: Beginning at a point
on the easterly line of said land, distant thereon, North 0 DEG. 02' 11"
East 47.58 feet from the southeasterly corner thereof, said point being a point
on a curve concave northwesterly and having a radius of 45.00 feet, a radial
line of said curve to said point bears
South 33 DEG. 42'45" East; thence Westerly along said curve through a central
angle of 33 DEG. 44'56" a distance of 26.31 feet; thence tangent to said curve,
North 89 DEG. 57' 49" West 43.15 feet to the beginning of a tangent curve
concave southeasterly having a radius of 45.00 feet; thence Westerly and
Southerly along said curve through a central angle of 83 DEG. 37' 14" a distance
of 65.68 feet to the southerly line of said land. The sidelines of said strip
of land are to be lengthened or shortened so as to terminate in said easterly
and southerly lines.
PARCEL B:
- --------
AN EASEMENT for railroad spur track over that portion of Parcel 2, in the County
of Los Angeles, State of California as shown on Parcel Map No. 2678 filed in
Book 50, Page 66, of Parcel Maps, in the office of the County Recorder of said
County, lying southerly and easterly of a line described as follows: Beginning
at a point on the westerly line of said Parcel 2, distant thereon, North 0 DEG.
02'11" East 35.00 feet from the southwesterly corner thereof; thence South
80 DEG. 00' 04" East 30.41 feet; thence South 89 DEG. 57' 49" East 46.87 feet to
the beginning of a tangent curve concave northwesterly and having a radius of
367.24 feet; thence Northeasterly along said curve through a central angle of
75 DEG. 00' 00" a distance of 480.72 feet; thence tangent to said curve, North
15 DEG. 02'11" East 92.98 feet to the Easterly line of said Parcel 2.
PARCEL C:
- --------
AN EASEMENT for drainage purposes, over the northerly 22.00 feet of the
southerly 72.00 feet of the westerly 45.00 feet of Parcel 2, in the County
of Los Angeles, State of California as shown on Parcel Map No. 2678 filed in
Book 50, Page 66, of Parcel Maps, in the office of the County Recorder of said
County.
<PAGE>
PARCEL D:
- --------
Parcel 1 in the County of Los Angeles, State of California, as shown on
Parcel Map No. 2678 filed in Book 30, Page 66 of Parcel Maps, in the office of
the County Recorder of said County.
Containing 1.6142 acres, more or less.
EXCEPTING all minerals and all mineral and water rights of every kind and
character now known to exist or hereafter discovered, including, without
limiting the generality of the foregoing, oil, gas, water and rights thereto,
together with the sole, exclusive and perpetual right to explore for, remove and
dispose of said minerals by any means or methods suitable to grantor, its
successors and assigns, but without entering upon or using the surface of said
parcel of the lands hereby conveyed or any portion of the subsurface within five
hundred (500) feet of the surface and in such manner as not to damage the
surface of said parcel of said land or to interfere with the use thereof, as
reserved by Carson Estate Company, a corporation, by deed recorded April 19,
1967 in Book D 3617, Page 864, Official Records.
ALSO EXCEPT the airspace above a plane 100 feet vertically above the
surface of the above described land.
RESERVING an easement for light and air, which easement area shall at all
times be unobstructed from ground to sky by the construction, installation or
maintenance of any building or permanent structure over the westerly 60.00 feet
of said land.
No Quitclaim Deed of the reserved easement for light and air shall be
effective unless and until a consent thereto has been given by the Los Angeles
County Engineer.
ALSO RESERVING an Easement for footing over, across, along and under the
westerly 2.00 feet of said land.
ALSO RESERVING an Easement for drainage purposes over the westerly 35 feet
of said land.
<PAGE>
FEE SCHEDULE
OF
CROWN ASSOCIATES
The following rates of Industrial Real Estate fees have been adopted by this
firm:
I. SALES FEES:
Improved Property - 5% of total purchase price
Unimproved Property - 5% of total purchase price
II. LEASE FEES (5 TO 25 YEARS):
LENGTH OF LEASE
A. Where construction involved 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs.
is less than $5,000 ------ ------- ------- ------- -------
Multiply GROSS monthly rental by: 2.1 3.6 4.5 5.4 6.2
Multiply NET monthly rental by: 2.8 4.8 6.0 7.2 8.3
B. Where the lease negotiation 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs.
causes improvement changes or ------ ------- ------- ------- -------
new structure exceeding $5,000 2.4 3.9 4.8 5.7 6.5
Multiply GROSS monthly rental by 3.2 5.2 6.4 7.6 8.7
Multiply NET monthly rental by
EXAMPLE: 5 year GROSS lease @ $1,000 per month -2.1 x $1,000 = $2,100 fee
5 year NET lease @ $1,000 per month - 2.8 x $1,000 = $2,800 fee
The above table provides a ready reference for calculating fees based on the
following percentage schedule and means of computation applied to gross and net
leases:
GROSS lease for a term of five (5) years or more:
3 1/2% of the total rental for the first five (5) years.
2 1/2% of the total rental for the second five (5) years.
1 1/2% of the total rental for the balance of the term.
Where the negotiation of a lease or leases is the originating cause of a new
structure or requires improvements or changes to the property costing in excess
of $5,000:
4 % of the total rental for the first five (5) years.
2 1/2% of the total rental for the second five (5) years.
1 1/2% of the total rental for the balance of the term.
NET lease:
A net lease is one under which the Lessee agrees to assume certain
obligations of the Lessor, in addition to the cash rental set forth in the
lease, generally the payment of real estate taxes, insurance premiums on the
improvements and the cost of exterior as well as interior maintenance. In the
absence of information with respect to the cash value of these extra items, a
formula has been developed for computation of the real estate fee on a net lease
which basically amounts to the conversion of a net lease rental to a gross
rental under said extra items would be paid directly by the Lessor. For the
purpose of calculating the fee on a net lease of 25 years or less, the annual
net cash rental should be capitalized at 6%, to provide a figure, 2% of which
would represent the estimated taxes, insurance and maintenance. The 2% figure
should be added to the annual net rental, and the combined figure becomes the
adjusted basic rental upon which the fee should be calculated.
III. LEASE FEES (LESS THAN 5 YEARS) based on gross monthly rental:
5 % of the total rental through the first year plus,
4 % of the total rental through the second year, plus
3 % of the total rental through the third year, plus
3 % of the total rental through the fourth year, plus
2 1/2 % of the total rental through the fifth year.
IV. OPTION TO PURCHASE:
Should a Lessee, during the term of occupancy or within ninety days
thereafter purchase all or part of the demised premises, pursuant to a
right conferred in the lease, or a subsequent modification thereof, then
a regular sales fee as computed in this schedule, shall be paid at the
time such right is exercised, deducting, however, that portion of the
then unearned fee paid on rental accruing after date of sale.
V. OPTION TO EXTEND:
Should the lease be extended by virtue of optional rights conferred in
the lease, or through subsequent modification of such optional rights,
then the regular leasing fee as computed from the schedule in effect at
the time the original lease was executed shall be paid at the time such
rights are exercised, using the rate of fee applicable as if the term
covered by the option had been part of the original term of the lease.
Receipt of a copy hereof and acceptance of the agreement to the above fees are
acknowledged by the undersigned. Undersigned further agrees to pay the fee in
full upon delivery of signed lease acceptable to him or in accordance with the
attached agreement.
<PAGE>
Signed_________________________ Date___________________________
MEMBER: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION - NATIONAL ASSOCIATION OF
REAL ESTATE BOARDS
EXHIBIT "B"
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
<PAGE>
EXHIBIT "A"
PARCEL A: Parcel 3 in the County of Los Angeles, State of California,
as shown on Parcel Map. No 2678 filed in Book 50 Page 66, of Parcel
Maps, in the office of the County Recorder of said county.
EXCEPT from a portion of said land all oil, gas and other hydrocarbons
and other minerals in and under said real property, together with the
sole and exclusive right, as hereinafter limited, to drill, redrill,
deepen, complete and maintain wells and well holes, under, through and
beyond and to drill for, produce, extract, take and remove oil, gas
and other hydrocarbons and other minerals from and beyond said real
property, provided, however, the foregoing rights and the exercise
thereof are and shall be subject to the following limitation to wit:
Neither the grantors nor anyone claiming under or through the grantors
shall have or exercise any right of entry upon, through or beyond said
real property except beneath a depth of 200 feet below the present
surface of said real property, nor to in any wise affect the surface
use of said real property by the grantee, its successors or assigns,
as reserved by various deeds of record, among them being deeds
recorded October 16, 1957 in Book 55862 Page 114, Official Records,
and in Book 53862 Page 162, Official Records.
ALSO EXCEPTING from the remainder therefrom all oil, gas or other
hydrocarbon substances in, under and/or that may be produced from a
depth of below 500 feet from the surface of said land or any part
thereof, without any use of or rights in or to any portion of the
surface of the land to a depth of 500 feet, as reserved by George C.
Mindrup and Mathilde C. Mindrup, husband and wife, in deed recorded
April 24, 1957 in Book 34303 Page 96, Official Records, and as
reserved by Don Wilson in deed recorded July 15, 1960 in Book D-879
Page 992, Official Records.
ALSO EXCEPT the airspace above a plane 100 feet vertically above the
surface of the above described land.
RESERVING an easement for storm drain purposes, together with the
right to grant to others, over that portion of said land included
within a strip of land 10.00 feet in width, the centerline of which
being described as: Beginning at a point on the easterly line of said
land, distant thereon, North O DEG. 02' 11" East 47.58 feet from the
southeasterly corner thereof, said point being a point on a curve
concave northwesterly and having a radius of 45.00 feet, a radial line
of said curve to said point bears South 33 DEG. 42' 45" East; thence
Westerly along said curve through a central angle of 33 DEG. 44' 56" a
distance of 26.51 feet; thence tangent to said curve North 89 DEG.
57'49" West 43.15 feet to the beginning of a tangent curve concave
southeasterly having a radius of 45.00 feet; thence westerly and
southerly along said curve through a central angle of 83 DEG. 37' 14"
a distance of 65.68 feet to the southerly line of said land. The
sidelines of said strip of land are to be lengthened or shortened so
as to terminate in said easterly and southerly lines.
PAGE -1-
<PAGE>
PARCEL A-1: An easement for light and air, which easement area shall
at all times be unobstructed from ground to sky by the construction or
installation or maintenance of any building or structure over the
northerly 30 feet of Parcel 3, in the County of Los Angeles, State of
California, as shown on Parcel Map No. 2038, filed in Book 34 Page 20
of Parcel Maps, in the office of the County Recorder of said County.
PARCEL A-2: An easement for underground storm drain purposes over the
easterly 10 feet of Parcels 1 and 3 in the County of Los Angeles,
State of California, as shown on Parcel Map No. 2038, filed in Book 34
Page 20 of Parcel Maps, in the office of the County Recorder of said
County.
PARCEL B: An easement for railroad spur track over that portion of
Parcel 2, in the County of Los Angeles, State of California, as shown
on Parcel Map No. 2678 filed in Book 50 Page 66, of Parcel Maps, in
the office of the County Recorder of said County, lying southerly and
easterly of a line described as follows:
Beginning at a point on the westerly line of said Parcel 2, distant
thereon, North 0 DEG. 02' 11" East 35.00 feet from the southwesterly
corner thereof; thence South 80 DEG. 30' 04" East 30.41 feet; thence
South 89 DEG. 57' 49" East 46.87 feet to the beginning of a tangent
curve concave northwesterly and having a radius of 367.24 feet; thence
northeasterly along said curve through central angle of 75 DEG.
00' 00" a distance of 480.72 feet; thence tangent to said curve, North
15 DEG. 02'11" East 92.98 feet to the easterly line of said Parcel 2.
PARCEL C: An easement for drainage purposes, over the northerly 22.00
feet of the southerly 72.00 feet of the westerly 45.00 feet of Parcel
2, in the County of Los Angeles, State of California, as shown on
Parcel Map No. 2678 filed in Book 50 Page 66 of Parcel Maps, in the
office of the County Recorder of said County.
PARCEL D: Parcel 1, in the County of Los Angeles, State of
California, as shown on Parcel Map No. 2678 filed in Book 50 Page 66,
of Parcel Maps, in the office of the County Recorder of said County.
EXCEPT from a portion of said land all oil, gas and other hydrocarbons
and other minerals in and under said real property, together with the
sole and exclusive right, as hereinafter limited, to drill, redrill,
deepen, complete and maintain wells and well holes, under, through,
and beyond and to drill for, produce, extract, take and remove oil,
gas and other hydrocarbons and other minerals from and beyond said
real property, provided, however, the foregoing rights and the
exercise thereof are and shall be subject to the following limitations
to wit;
Neither the grantors nor anyone claiming under or through the grantors
shall have or exercise any right of entry upon, through or beyond said
real property except beneath a depth of 200 feet below the present
surface of said real property, nor to in any wise affect the surface
use of said real property by the grantee, its successors or assigns,
as reserved by various deeds of record, among them being deeds
recorded October 16, 1957 in Book 55862 Page 114, Official Records,
and in Book 53862 Page 162, Official Records.
ALSO EXCEPTING from the remainder therefrom, all oil, gas or other
PAGE -2-
<PAGE>
hydrocarbon substances in, under and/or that may be produced from a
depth of below 500 feet from the surface of said land or any part
thereof, without any use of or rights in or to any portion of the
surface of the land to a depth of 500 feet, as reserved by George C.
Mindrup and Mathilde C. Mindrup, husband and wife, in deed recorded
April 24, 1957 in Book 34303 Page 96, Official Records and as reserved
by Don Wilson in deed recorded June 15, 1960 in Book D-879 Page 992,
Official Records.
ALSO EXCEPT the airspace above a plan 100 feet vertically above the
surface of the above described land.
RESERVING an easement for light and air, which easement area shall at
all times be unobstructed from ground to sky by the construction,
installation or maintenance of any building or permanent structure
over the westerly 60.00 feet of said land.
No Quitclaim Deed of the reserved easement for light and air shall be
effective unless and until a consent thereto has been given by the Los
Angeles County Engineer.
ALSO RESERVING an easement for footing over, across, along and under
the westerly 2.00 feet of said land.
ALSO RESERVING an easement for drainage purposes over the westerly
35.00 feet of said land.
PAGE -3-
<PAGE>
IMPERIAL BANK
9920 La Cienega Blvd.
Inglewood, California 90301
ATT: Note Center
RE: THE BLOOM FAMILY TRUST #14
_______________________________________________________________________________
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Non-Disturbance and Attornment Agreement
("Agreement") is made as of the date indicated below, by and between IMPERIAL
BANK a California Banking Corporation ("Lender") and SIMMONS MANUFACTURING
COMPANY, INC. ("Tenant").
A. Tenant entered into that certain lease dated 3/12/74 and amended
10/2/74 & 9/17/84 & 9/14/89 ("Lease") with 20100 S. Alamdeda Property Co., a
California General Partnership ("Landlord") for the real property legally
described in Exhibit "A", attached hereto and by this reference made a part
hereof ("Premises").
B. Lender has made or intends to make a loan ("Loan") to Landlord in
the original principal sum of $3,500,000.00 evidenced by a promissory note in
the principal face amount of the amount of the Loan ("Note"). The Note is
secured by a Deed of Trust of even date therewith ("Deed of Trust"), which
encumbers or shall encumber the real property of which the Premises are a part.
C. Tenant wishes to induce Lander to make the Loan, but Tenant
desires to be assured of continued occupancy of the Premises under the terms of
the Lease and subject to the terms of the Deed of Trust.
NOW, THEREFORE, for full and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The Lease is and shall be subject and subordinate to the lien of
the Deed of Trust and to any and all renewals, modifications, consolidations,
replacements and extensions of the Deeds of Trust, to the full extent of all
sums secured thereby, including, without limitation, all principal, interest and
charges thereon, and any additional advances made by Lender to Landlord which
are evidenced by a note which states that it is secured by the Deed of Trust.
2. Lender agrees that, so long as Tenant is not in default under the
Lease, in the event Lender takes title to the Premises pursuant to a judicial
foreclosure, non-judicial foreclosure, or deed in lieu of foreclosure the Lease
shall not be terminated, nor shall Tenant's use, possession or enjoyment of the
Premises be disturbed, nor shall the leasehold estate granted by the Lease be
affected in any other manner in such foreclosure or any action or proceeding
instituted under or in connection with the Deed of Trust.
3. Tenant shall in the event any proceeding is brought to
foreclose the Deed of Trust: (i) attorn to the Lender upon any foreclosure
sale, if requested to do so by Lender; (ii) recognize such Lender as the
Landlord under the Lease; and (iii) be bound to Lender under all of the terms,
covenants and conditions under the Lease for the balance of the term thereof and
any extensions and renewals thereof.
<PAGE>
4. In the event Lender shall, in accordance with the foregoing,
succeed to the interest of the Landlord under the Lease, Lender shall be
entitled to all of the rights of the Landlord under the Lease; provided,
however, that Lender shall not be:
4.1 Liable for any act or omission of any prior landlord under the
Lease, including without limitation, the Landlord;
4.2 Subject to any offsets or defenses which the Tenant might have
against any prior landlord under the Lease, including, without limitation, the
Landlord;
4.3 Bound by any rent or additional rent which the Tenant might have
paid for more than the current month to any prior landlord under the Lease
including, without limitation, the Landlord; or
4.4 Bound by any amendment or modification of the Lease entered into
after the date hereof without Lender's prior written consent.
5. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto.
IN WITNESS WHEREOF, this Agreement is dated as of the 19th day of May,
1992.
Lender Tenant
IMPERIAL BANK,
SIMMONS COMPANY
A CALIFORNIA BANKING CORPORATION
(Formerly SIMMONS MANUFACTURING
COMPANY, INC.)
By: By: /s/ Jeffrey J. Lewis
______________________________ ______________________________
Jeffrey J. Lewis
Sr. V.P.
By: By:
______________________________ ______________________________
<PAGE>
THE BLOOM FAMILY TRUST
DATED MAY 19, 1992
EXHIBIT "A"
(LEGAL DESCRIPTION)
PARCEL A: PARCEL 3, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN
ON PARCEL MAP NO. 2678 FILED IN BOOK 50 PAGE 66 OF PARCEL MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM A PORTION OF SAID LAND ALL OIL, GAS AND OTHER HYDROCARBONS AND OTHER
MINERALS IN AND UNDER SAID REAL PROPERTY, TOGETHER WITH THE SOLE AND EXCLUSIVE
RIGHT, AS HEREINAFTER LIMITED, TO DRILL, REDRILL, DEEPEN, COMPETE AND MAINTAIN
WELLS AND WELL HOLES, UNDER, THROUGH AND BEYOND AND TO DRILL FOR, PRODUCE,
EXTRACT, TAKE AND REMOVE OIL, GAS AND OTHER HYDROCARBONS AND OTHER MINERALS FROM
AND BEYOND SAID REAL PROPERTY, PROVIDED, HOWEVER, THE FOREGOING RIGHTS AND THE
EXERCISE THEREOF ARE AND SHALL BE SUBJECT TO THE FOLLOWING LIMITATION TO WIT:
NEITHER THE GRANTORS NOR ANYONE CLAIMING UNDER OR THROUGH THE GRANTORS SHALL
HAVE OR EXERCISE ANY RIGHT OF ENTRY UPON, THROUGH OR BEYOND SAID REAL PROPERTY
EXCEPT BENEATH A DEPTH OF 200 FEET BELOW THE PRESENT SURFACE OF SAID REAL
PROPERTY, NOR TO IN ANY WISE AFFECT THE SURFACE USE OF SAID VARIOUS DEEDS OF
RECORD, AMONG THEM BEING DEEDS RECORDED DECEMBER 16, 1957, IN BOOK 55862 PAGE
114, OFFICIAL RECORDS, AND IN BOOK 53862 PAGE 162, OFFICIAL RECORDS.
ALSO EXCEPT FROM THE REMAINDER THEREFROM ALL OIL, GAS OR OTHER HYDROCARBON
SUBSTANCES IN, UNDER AND/OR THAT MAY BE PRODUCED FROM A DEPTH OF BELOW 500 FEET
FROM THE SURFACE OF SAID LAND OR ANY PART THEREOF, WITHOUT ANY USE OF OR RIGHTS
IN OR TO ANY PORTION OF THE SURFACE OF THE LAND TO A DEPTH OF 500 FEET, AS
RESERVED BY GEORGE C. MINDRUP AND MATHILDE C. MINDRUP, HUSBAND AND WIFE, IN
DEED RECORDED APRIL 24, 1957, IN BOOK 34303 PAGE 96, OFFICIAL RECORDS, AND AS
RESERVED BY DON WILSON IN DEED RECORDED JULY 15, 1960 IN BOOK D879 PAGE 992,
OFFICIAL RECORDS.
PARCEL A-1: AN EASEMENT FOR LIGHT AND AIR, WHICH EASEMENT AREA SHALL AT ALL
TIMES BE UNOBSTRUCTED FROM GROUND TO SKY BY THE CONSTRUCTION OR INSTALLATION OR
MAINTENANCE OF ANY BUILDING OR STRUCTURE OVER THE NORTHERLY 30 FEET OF PARCEL 3,
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO.
2038, FILED IN BOOK 34 PAGE 20 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.
<PAGE>
THE BLOOM FAMILY TRUST
DATED MAY 19, 1992
Page 2 of 3
PARCEL A-2: AN EASEMENT FOR UNDERGROUND STORM DRAIN PURPOSES OVER THE EASTERLY
10 FEET OF PARCELS 1 AND 3 IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS
SHOWN ON PARCEL MAP NO. 2038, FILED IN BOOK 34 PAGE 20 OF PARCEL MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL B: AN EASEMENT FOR RAILROADS SPUR TRACK OVER THAT PORTION OF PARCEL 2,
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO.
2678 FILED IN BOOK 50 PAGE 66, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, LYING SOUTHERLY AND EASTERLY OF A LINE DESCRIBED AS
FOLLOWS:
BEGINNING AT A POINT ON THE WESTERLY LINE OF SAID PARCEL 2, DISTANT THEREON,
NORTH 0 DEG. 02' 11" EAST 35.00 FEET FROM THE SOUTHWESTERLY CORNER THEREOF;
THENCE SOUTH 80 DEG. 30' 04" EAST 30.41 FEET; THENCE SOUTH 89 DEG. 57' 49", EAST
46.87 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE NORTHWESTERLY AND HAVING
A RADIUS OF 367.24 FEET; THENCE NORTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL
ANGLE OF 75 DEG. 00' 00", A DISTANCE OF 480.72 FEET; TANGENT TO SAID CURVE,
NORTH 15 DEG. 02' 11" EAST 92.98 FEET TO THE EASTERLY LINE OF SAID PARCEL 2.
PARCEL C: AN EASEMENT FOR DRAINAGE PURPOSES, OVER THE NORTHERLY 22.00 FEET OF
THE SOUTHERLY 72.00 FEET TO THE WESTERLY 45.00 FEET OF PARCEL 2, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON PARCEL MAP NO. 2678 FILED IN
BOOK 50 PAGE 66 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
PARCEL D: PARCEL 1, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS
SHOWN ON PARCEL MAP NO. 2678 FILED IN BOOK 50 PAGE 66, OF PARCEL MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM A PORTION OF SAID LAND ALL OIL, GAS AND OTHER HYDROCARBONS AND OTHER
MINERALS IN AND UNDER SAID REAL PROPERTY, TOGETHER WITH THE SOLE AND EXCLUSIVE
RIGHT, AS HEREINAFTER LIMITED, TO DRILL, REDRILL, DEEPEN, COMPLETE AND MAINTAIN
WELLS AND WELL HOLES, UNDER, THROUGH AND BEYOND AND TO DRILL FOR, PRODUCE,
EXTRACT, TAKE AND REMOVE OIL, GAS AND OTHER HYDROCARBONS AND OTHER MINERALS
FROM AND BEYOND SAID REAL PROPERTY, PROVIDED, HOWEVER, THE FOREGOING RIGHTS AND
THE EXERCISE THEREOF ARE AND SHALL BE SUBJECT TO THE FOLLOWING LIMITATIONS TO
WIT: NEITHER THE GRANTORS NOR ANYONE CLAIMING UNDER OR THROUGH THE GRANTORS
SHALL HAVE OR EXERCISE ANY RIGHT OF ENTRY UPON, THROUGH OR BEYOND SAID REAL
PROPERTY EXCEPT BENEATH A DEPTH OF 200 FEET BELOW THE PRESENT SURFACE OF SAID
REAL PROPERTY, NOR TO IN ANY WISE AFFECT THE SURFACE USE OF SAID REAL PROPERTY
BY THE GRANTEE, ITS SUCCESSORS OR ASSIGNS, AS RESERVED BY VARIOUS DEEDS OF
RECORD, AMONG THEM BEING DEEDS RECORDED OCTOBER 16, 1957, IN BOOK 55862 PAGE 14,
OFFICIAL RECORDS, AND IN BOOK 53862 PAGE 162, OFFICIAL RECORDS.
<PAGE>
THE BLOOM FAMILY TRUST
DATED MAY 19, 1992
Page 2 of 3
ALSO EXCEPT FROM THE REMAINDER THEREFROM, ALL OIL, GAS OTHER HYDROCARBON
SUBSTANCES IN, UNDER AND/OR THAT MAY BE PRODUCED FROM A DEPTH OF BELOW 500 FEET
FROM THE SURFACE OF SAID LAND OR ANY PART THEREOF, WITHOUT ANY USE OF OR RIGHTS
IN OR TO ANY PORTION OF THE SURFACE OF THE LAND TO A DEPTH OF 500 FEET, AS
RESERVED BY GEORGE C. MINDRUP AND MATHILDE C. MINDRUP, HUSBAND AND WIFE, IN DEED
RECORDED APRIL 24, 1957, IN BOOK 34303 PAGE 96, OFFICIAL RECORDS, AND AS
RESERVED BY DON WILSON IN DEED RECORDED JUNE 15, 1960, IN BOOK D879 PAGE 992,
OFFICIAL RECORDS.
<PAGE>
CORPORATE ACKNOWLEDGMENT On this 19th day of May 1992, before me,
State of Georgia ) /s/ Debora A. DeCoster
_________________________________________
) ss. the undersigned Notary Public, personally
County of Dekalb ) appeared
/s/ Jeffrey J. Lewis
_________________________________________
[X] personally known to me
[ ] proved to me on the basis of satisfactory
evidence to be the person(s) who executed the
within instrument as Senior Vice President
or on behalf of the corporation therein named,
and acknowledged to me that the corporation
executed it.
WITNESS my hand and official seal.
[SEAL]
/s/ Debora A. DeCoster
___________________________________________
Notary's Signature
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
(15 Year)
That certain Lease dated March 12, 1974 by and between OVERTON,
MOORE & ASSOCIATES, INC., a California corporation, hereinafter called
"Lessor", as lessor, and DEBU/FLAIR INC., a Delaware corporation,
hereinafter called "Lessee", as lessee, is hereby amended and it is
declared as follows:
1. Lessor has completed construction of the building and
improvements contemplated in said Lease as of October 2, 1974 and
Lessee does hereby accept possession of the premises as of said date;
2. Pursuant to Paragraph 10.1 of said Lease, the term of said
Lease is hereby fixed as commencing on October 2, 1974 and terminating
on October 1, 1989.
3. The monthly rental called for under Paragraph 11 of said
Lease shall be paid on the second day of each month, commencing
October 2, 1974. Lessor does hereby acknowledge that it has received
the rent of $15,000, falling due on October 2, 1974.
4. For identification purposes only, the street address of the
Premises shall be known as 20100 South Alameda Street, Compton,
California.
5. Except as amended by this document, said Lease is hereby
confirmed.
DATED as of October 2, 1974.
(Corporate Seal) OVERTON,MOORE & ASSOCIATES, INC.
By /s/
-----------------------------
By /s/
-----------------------------
INITIALS INITIALS
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
Page 1 of 2 pages
<PAGE>
SIMMONS COMPANY
---------------
CERTIFIED COPY OF RESOLUTION
----------------------------
"On motion duly made and seconded, it was
RESOLVED: That the Chairman, President and/or any Vice President be and is
hereby authorized to execute a form of guarantee on behalf of Simmons
Company with respect to the lease between Debu/Flair, Inc. and
Overton, Moore & Associates, Inc. covering the manufacturing facility
to be constructed at 20096 South Alameda Street, Los Angeles,
California."
*********************
I hereby certify that all of the above is a full, true and correct copy
of the resolution adopted by the Executive Committee of the Board of
Directors of Simmons Company at their Meeting held on April 2, 1974.
/s/
-----------------------
April 3, 1974 Secretary
New York, N.Y.
<PAGE>
ASSIGNMENT OF LEASE
-------------------
OVERTON, MOORE & ASSOCIATES, INC., a California corporation,
hereinafter referred to as "OMA", does hereby transfer and assign unto
20100 S. ALAMEDA PROPERTY CO., a general partnership, hereinafter referred
to as "Buyer", all of the interest of "OMA", as Lessor, in:
A. That certain Lease dated March 12, 1974 by and between OMA, as
Lessor, and Debu/Flair, Inc., a Delaware corporation, as Lessee, concerning
the real property commonly known as 20100 South Alameda Street, Compton,
California.
B. That certain document entitled "First Amendment to Lease" dated
October 2, 1974, executed by O.MA and Debu/Flair Inc.
C. The sum of $15,000 given to OMA by Debu/Flair Inc. as the first
month's rent under said Lease.
Executed at Los Angeles, California as of October 2, 1974.
(Corporate Seal) OVERTON, MOORE & ASSOCIATES, INC.
By /s/
-------------------------------
By /s/
-------------------------------
INITIALS INITIALS
AM/UW/10/1/74(1)
MAZIROW, SCHNEIDER & FORER, INC.
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
(Corporate Seal) DEBU/FLAIR INC.
By /s/
---------------------------
<PAGE>
(Corporate Seal) DEBU/FLAIR INC.
By ___________
INITIALS MAZIROW, SCHNEIDER & FORER, INC. INITIALS
ATTORNEYS AT LAW
BEVERLY HILLS, CALIFORNIA
Page 2 of 2 pages
<PAGE>
SUBLEASE AND ASSIGNMENT OF LEASE
--------------------------------
This Sublease and Assignment of Lease is executed and delivered as of
March 15, 1982 between Debu/Flair, Inc., a Delaware corporation ("D/F") and
Simmons Manufacturing Company, Inc., a Delaware corporation ("S/M").
Reference is hereby made to that certain Lease dated March 12, 1974 by
and between Overton, Moore & Associates, Inc., a California corporation,
predecessor in interest to 20100 South Alameda Property Co., a General
Partnership, as Lessor and Debu/Flair, Inc., a Delaware corporation, as
Lessee, for premises known as 20100 South Alameda Street, Compton,
California.
D/F hereby assigns and subleases the Lease and transfers all of the
rights of the Lessee thereunder to S/M, a wholly owned subsidiary of Gulf +
Western Industries, Inc., and S/M hereby agrees to assume, discharge and be
bound by each and all of the Lessee's obligations under the Lease.
D/F hereby agrees to remain liable for its obligations as Lessee under
the Lease.
IN WITNESS WHEREOF, D/F and S/M have executed and delivered this
Assignment as of the date first above written.
ATTEST: DEBU/FLAIR, INC., a Delaware
corporation
By: /s/Rudolph J. Sanson Jr. By: /s/ John Bulzacchelli
------------------------ --------------------------
Rudolph J. Sanson Jr., John Bulzacchelli,
Secretary Vice President
ATTEST: SIMMONS MANUFACTURING
COMPANY, INC., a Delaware
corporation
By: /s/ Rudolph J. Sanson Jr. By: /s/ Peter I. Reiter
-------------------------- --------------------------
Rudolph J. Sanson Jr., Peter I. Reiter,
Secretary Vice President
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
This SECOND AMENDMENT TO LEASE is entered into and effective as of
September 17, 1984, by and between 20100 S. ALAMEDA PROPERTY CO., a
California general partnership, hereinafter referred to as "Lessor", and
DEBU/FLAIR, INC., a Delaware corporation, hereinafter called "Lessee" and
SIMMONS COMPANY, a Delaware corporation, hereinafter called "Guarantor",
and is made with reference to the following facts:
A. On March 12, 1974, Overton, Moore & Associates, Inc., a California
corporation, hereinafter referred to as "OMA", did execute and deliver a
document entitled "Lease", whereby OMA did lease to Lessee, that certain
real property commonly known as 20100 South Alameda Street, Compton,
California. Said document is hereinafter referred to as the "Lease".
B. Said Lease was amended by a document entitled "FIRST AMENDMENT TO
------------------
LEASE", dated October 2, 1974. Said Lease and said first amendment are
-----
hereinafter referred to as the "Lease".
C. On October 2, 1974, OMA did assign its interest in the Lease to
20100 S. Alameda Property Co., a California general partnership.
D. By a Letter Agreement dated February 9, 1982, Debu/Flair, Inc. did
sublease to SIMMONS MANUFACTURING COMPANY, INC., a Delaware corporation,
hereinafter referred to as "Sublessee". Sublessee assumed all of the
obligations of Debu/Flair, Inc. under the Lease.
E. Under the terms of the Lease, the term thereof expires on October 1,
1989.
F. Under paragraph 11.3 of the Lease, there is to be a rental
adjustment for the period October 2, 1984, through October 1, 1989.
G. The Parties have calculated the rental adjustment and desire to
memorialize said adjustment.
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN
CONTAINED, THE PARTIES DO HEREBY AGREE AS FOLLOWS:
<PAGE>
1. Monthly Rent.
---------------
1.1 The monthly rent, pursuant to paragraph 11.3 of the Lease,
for the period October 2, 1984, through October 1, 1989, shall be
$23,598.25.
Executed as of the date heretofore mentioned.
20100 S. Alameda Property Co., a California
general partnership.
/s/ Ronald H. Bloom
--------------------------------------
RONALD H. BLOOM, representative duly
authorized to sign this amendment,
pursuant to the partnership agreement.
Debu/Flair, Inc., a Delaware corporation.
Corporate Seal /s/ Rudolph J. Sanson, Jr.
-------------------------------------
/s/ By: Rudolph J. Sanson, Jr.
--------------------------- -------------------------------------
Patricia A. Murphy Its: Vice President
Assistant Secretary -------------------------------------
Simmons Manufacturing Company, Inc.,
a Delaware corporation.
Corporate Seal
/s/ Rudolph J. Sanson, Jr.
--------------------------------------
BY: /s/ By: Rudolph J. Sanson, Jr.
____________________ ______________________________________
Patricia A. Murphy Its:Vice President
Assistant Secretary --------------------------------------
Simmons Company, a Delaware corporation.
Corporate Seal
/s/ Rudolph J. Sanson, Jr.
------------------------------------
By : Rudolph J Sanson Jr.
------------------------------------
BY: /s/ Its: Vice President
_____________________ ____________________________________
Patricia A. Murphy
Assistant Secretary
<PAGE>
EXHIBIT "A" CONSISTING OF
51 PAGES
THIRD AMENDMENT TO LEASE
-------------------------
This THIRD AMENDMENT TO LEASE is entered into and effective as of
September 14, 1989, by and between 20100 S. ALAMEDA PROPERTY CO., a
California general partnership, hereinafter referred to as "Lessor", and
DEBU/FLAIR, INC., a Delaware corporation, hereinafter called "Lessee" and
SIMMONS COMPANY, a Delaware corporation, hereinafter called "Lessee" and
SIMMONS COMPANY, a Delaware corporation hereinafter called "Guarantor",
and is made with reference to the following facts:
A. On March 12, 1974, Overton, Moore & Associates, Inc., a California
corporation, hereinafter referred to as "OMA", did execute and deliver a
document entitled, "Lease", whereby OMA did lease to Lessee, that certain
real property commonly known as 20100 South Alameda Street, Compton,
California. Said document is hereinafter referred to as the "Lease".
B. Said Lease was amended by a document entitled "FIRST AMENDMENT TO
LEASE", dated October 2, 1974. Said Lease and said First Amendment are
hereinafter referred to as the "Lease."
C. On October 2, 1974, OMA did assign its interest in the Lease to
20100S. Alameda Property Co., a California general partnership.
D. By a Letter Agreement dated February 9, 1982, Debu/Flair, Inc., did
sublease to SIMMONS MANUFACTURING COMPANY, INC., a Delaware corporation,
hereinafter referred to as "Sublessee". Sublessee assumed all of the
obligations of Debu/Flair, Inc., under the Lease.
E. Under the terms of the Lease, the term thereof expires on
October 1, 1989.
F. Under paragraph 32 of the Lease, Lessee has the option to extend
the term of the Lease for the period October 2, 1989, to October 1, 1994,
upon the terms and conditions therein specified.
G. Lessee has exercised said option to extend the term of the Lease.
NOW THEREFOR IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN CONTAINED,
THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. Term of Lease.
--------------
1.1 The term of the Lease is hereby extended commencing
October 2, 1989, and ending October 1, 1994.
2. Monthly Rent.
------------
2.1 The monthly rent, pursuant to paragraph 32.1, (d), (i),
and (ii), for the period October 2, 1984, through October 1, 1994, shall be
$50,406.26.
<PAGE>
3. Affirmation
-----------
3.1 Except as amended by this document the Lease is hereby reaffirmed.
Executed as of the date heretofore mentioned.
20100 S. Alameda Property Co., a California
general partnership.
/s/ Ronald H. Bloom
-------------------------------------------
RONALD H. BLOOM, representative duly
authorized to sign this amendment pursuant to
the partnership agreement.
Debu/Flair, Inc., a Delaware corporation.
By:
Corporate Seal ----------------------------------------
Its:
----------------------------------------
Simmons Manufacturing Company, Inc., a
Delaware corporation.
By:
Corporate Seal ---------------------------------------
Its:
---------------------------------------
Simmons Company, a Delaware corporation.
Corporate Seal ------------------------------------
By: /s/
------------------------------------
Its:
-----------------------------------
<PAGE>
FOURTH AMENDMENT TO LEASE
This FOURTH AMENDMENT TO LEASE is entered into and effective as of June
28, 1993, by and between 20100 S. ALAMEDA PROPERTY CO., a California
general partnership, as Lessor, and SIMMONS COMPANY, a Delaware
corporation, as Lessee, and is made with reference to the following facts:
A. On March 12, 1974, Overton, Moore & Associates, Inc., a
California corporation, hereinafter referred to as "OMA", did execute and
deliver a document entitled, "Lease", whereby OMA did lease to Debu/Flair,
Inc. a Delaware corporation, that certain real property commonly known as
20100 South Alameda Street, Compton, California. Said document is
hereinafter referred to as the "Lease".
B. Said Lease was amended by a document entitled "FIRST AMENDMENT TO
LEASE", dated October 2, 1974.
C. On October 2, 1974, OMA did assign its interest in the Lease to
20100 S. Alameda Property Co., a California general partnership.
D. By a Letter Agreement dated February 9, 1982, Debu/Flair, Inc.,
did sublease to SIMMONS MANUFACTURING COMPANY, INC., a Delaware
Corporation, hereinafter referred to as "Sublessee". Sublessee assumed all
of the obligations of Debu/Flair, Inc., under the Lease.
E. Said Lease was amended by a document entitled "SECOND AMENDMENT
TO LEASE", dated September 17, 1984.
F. Said Lease was amended by a document entitled "THIRD AMENDMENT TO
LEASE", dated September 14, 1989. Said Lease, First Amendment to Lease,
Second Amendment to Lease, and Third Amendment to Lease are hereinafter
referred to as the "Lease".
G. Lessee has exercised its First Option To Extend pursuant to
Paragraph 32 of the Lease which First Option term expires on October 1,
1994.
H. Under Paragraph 33 of the Lease, Lessee has the option to extend
the term of the Lease for the period October 2, 1994, to October 1, 1999,
upon the terms and conditions therein specified.
I. Lessee hereby exercises its Second Option to Extend the Lease
per Paragraph 33 of the Lease except that Lessor and Lessee agree to modify
the rent.
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN
CONTAINED, THE PARTIES DO HEREBY AGREE AS FOLLOWS:
<PAGE>
01/92 rev. FORM A
(Non-Major Tenants)
Loan No.
Notice of Assignment of Lease
-----------------------------
and
---
Acknowledgement Letter
-----------------------
November 15 , 1992
-----------------
To: Mr. Jeffrey Lewis
Senior Vice President & General Counsel
Simmons USA
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Re: Landlord: 20100 S. Alameda Property Co.
Lease Date: March 12, 1974
Amended: October 2, 1974, September 17, 1984, September 14, 1989
Mortgage Date:
Property located at or known as: 20100 South Alameda Street
Rancho Dominguez, CA 90221
Gentlemen:
The undersigned, Mortgagor/Landlord, intends to assign by a mortgage or
deed of trust (the "Mortgage") dated as shown above or by separate
assignment to Lincoln National Investment Management Co. on behalf of
Lincoln National Life Insurance Co. ("Lender") (which Lender has a mailing
address c/o Lincoln National Investment Management Company, 1300 South
Clinton Street, P.O. Box 1110, Fort Wayne, Indiana 46801) all its estate,
right, title and interest in, to and under the Lease between you and the
undersigned dated as set forth above, as said Lease has been
previously modified or amended (the "Lease"), together with all right,
title and interest of the undersigned as Landlord thereunder, including,
without limitation, the right upon the occurrence of an event of Default
(as defined in the Mortgage) to collect and receive all earnings, revenues,
rents, issues, profits and income of the property subject to the Mortgage.
Said assignment shall not impair or diminish any of our obligations
to you under the provisions of the Lease, nor are any such obligations
imposed upon the Lender, its successors or assigns.
You are hereby notified that in the event of a demand on you by
the Lender or its successors and assigns for the payment to it of the rents
due under the Lease, you may, and are hereby authorized and directed to,
pay said rent to the Lender and we hereby agree that the receipt by you of
such a demand shall be conclusive evidence of the right of the Lender to
the receipt thereof and that the payment of the rents by you to the Lender
pursuant to such demand shall constitute performance in full, to the extent
such payment, of your obligation under the Lease for the payment
of rent to the undersigned.
<PAGE>
Page 2
Kindly indicate your receipt of this letter and your agreement to the
effect set forth below by signing the enclosed copy thereof and mailing it
to:
Lincoln National Corporation
1300 South Clinton Street
P. O. Box 1110
Fort Wayne, Indiana 46801
Attention: ,
-------------------- --
Investment Section, Law Division -2R
Sincerely,
By: /s/
----------------------------
The undersigned, Tenant, acknowledges receipt of the original of this
letter and of the fact that Landlord intends to assign its interest under
the Lease to the Lender and agrees to act in accordance with Landlord's
instructions above, including, but not limited to, our payment of rent to
the Lender if notified to do so by the lender. The undersigned further
agrees for the benefit of the Lender that it shall notify the Lender of
any default on the part of the Landlord under the Lease which would
entitle the undersigned to cancel the Lease or to abate the rent
payable thereunder, and further agrees that, notwithstanding any
provision of the Lease, no notice of cancellation thereof shall be
effective unless the Lender has received the notice aforesaid and
has failed within 30 days of the date thereof to cure or if the default
cannot be cured within 30 days has failed to commence and to diligently
prosecute the cure of Landlord's default which gave rise to the
right to cancel. This agreement is conditioned on the termination of an
Estoppel Certificate and a Subordination, Non-Disturbance and
Attornment Agreement executed in favor of Imperial Bank by Simmons Company,
each dated May 19, 1992.
ACKNOWLEDGED AND ACCEPTED:
By: /s/ Jeffrey J. Lewis
--------------------------
(authorized official)
Jeffrey J. Lewis
Sr. Vice-President
DATE: November 10, 1992
-----------
U90693/jlk
<PAGE>
01/92 rev. FORM B
(for Major or Credit Tenants)
Loan No.
Notice of Assignment of Lease
-----------------------------
and
---
Estoppel Certificate
--------------------
November 15, 1992
-----------
TO: Mr. Jeffrey Lewis
Senior Vice President & General Counsel
Simmons USA
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Re: Landlord: 20100 S. Alameda Property Co.
Lease Date: March 12, 1974
Amended: October 2, 1974, September 17, 1984, September 14, 1989
Mortgage Date:
Property located at or known as: 20100 South Alameda Street
Rancho Dominguez, CA 90221
Gentlemen:
The undersigned, Mortgagor/Landlord, intends to assign by a mortgage or
deed of trust (the "Mortgage") dated as shown above or by separate
assignment to Lincoln National Investment Management Co. on behalf of
Lincoln National Life Insurance Co. ("Lender") (which Lender has a mailing
address c/o Lincoln National Investment Management Company, 1300 South
Clinton Street, P.O. Box 1110, Fort Wayne, Indiana 46801) all its estate,
right, title and interest in, to and under the Lease between you and the
undersigned dated as set forth above, as said Lease has been previously
modified or amended (the "Lease"), together with all right, title and
interest of the undersigned as Landlord thereunder, including, without
limitation, the right upon the occurrence of an event of Default (as
defined in the Mortgage) to collect and receive all earnings,
revenues, rents, issues, profits and income of the property subject to the
Mortgage.
Said assignment shall not impair or diminish any of our obligations to
you under the provisions of the Lease, nor are any such obligations imposed
upon the Lender, its successors or assigns.
You are hereby notified that in the event of a demand on you by the Lender
or its successors and assigns for the payment to it of the rents due under
the Lease, you may, and are hereby authorized and directed to, pay said
rent to the Lender and we hereby agree that the receipt by you of such a
demand shall be conclusive evidence of the right of the Lender to the
receipt thereof and that the payment of the rents by you to the Lender
pursuant to such demand shall constitute performance in full, to the extent
of
<PAGE>
such payment, of your obligation under the Lease for the payment of
rent to the undersigned.
Kindly indicate your receipt of this letter and your agreement to the
effect set forth below by signing the enclosed copy thereof and mailing it
to:
Sincerely,
By: /s/
-----------------------------
The undersigned, Lessee, acknowledges receipt of the original of this
letter and of the fact that Landlord intends to assign its interest under
the lease to Lender and agrees to act in accordance with Landlord's
instructions above, including, but not limited to our payment of rent to
the Lender if notified to do so by the Lender. The undersigned hereby
acknowledges that it has been asked to execute this acknowledgement and
estoppel certificate as an inducement to the Lender to make its loan to
the Landlord, secured by the Mortgage, and the undersigned acknowledges
that the Lender's willingness to advance funds pursuant to said loan to
the Landlord is based upon Lender's reliance on the truth and accuracy
of the undersigned's statements made herein. The undersigned
agrees for the benefit of the Lender that it shall notify the Lender of any
default on the part of the Landlord under the Lease which would entitle the
undersigned to cancel the Lease or to abate the rent payable thereunder,
and further agrees that, notwithstanding any provision of the Lease, no
notice of cancellation thereof shall be effective unless the Lender has
received the notice aforesaid and has failed within 30 days of the date
thereof to cure or, if the default cannot be cured within 30 days, has
failed to commence and to diligently prosecute the cure of Landlord's
default which gave rise to the right to cancel.
The undersigned certifies that it is in possession and in full occupancy of
the premises of 222,000 sq. ft. to which it is entitled under the
Lease, possession having been accepted as of October 2, 1974;
for a lease term of twenty years, which commenced as of October 2,
1974; and terminates on October 1, 1994, with one more 5-year option
to extend. Rental began to accrue when possession was accepted (or as
of October 2, 1974). The undersigned has accepted the premises without
exception, except for any undisclosed defects, and all requirements for
the commencement and validity of the Lease, including all construction
work, if any, required of the Landlord under the term of the Lease have
been satisfied. Our minimum annual rent is $ 604,875.12.
<PAGE>
The Lease has not been amended or modified except as indicated in
the caption hereof; there is to the undersigned's knowledge
no present default on the part of the Landlord; rent has not been paid
more than one month in advance; Lessee has no notice of any sale, transfer
or assignment of the Lease or of the rentals except the aforementioned
assignment to Lender, and to the undersigned's knowledge it holds no
present defenses or claims against Landlord which might be offset against
accruing rentals. This agreement is conditioned upon the termination of
an Estoppel Certificate and a Subordination, Non-Disturbance and Attornment
Agreement executed in favor of Imperial Bank by Simmons Company, each dated
May 19, 1992.
ACKNOWLEDGED AND CERTIFIED:
By: /s/ Jeffrey J. Lewis
---------------------------
(authorized official)
Jeffrey J. Lewis
Sr. Vice-President
Date: November 10, 1992
-----------
U97678/jlk
<PAGE>
IMPERIAL BANK
California's Business Bank(SM)
Member FDIC
ESTOPPEL CERTIFICATE BY TENANT
To: IMPERIAL BANK
9777 Wilshire Blvd.
Beverly Hills, California 90212
Attention: Richard Myers
You are hereby advised that the undersigned, Simmons Manufacturing
Company, Inc. ("Tenant") is the Lessee of a portion of the real property
located in the City of ________________, County of Los Angeles, State of
California, located at 20100 S. Alameda Street, Gardena, Ca. ("Property").
The undersigned warrants that:
1. The lease agreement dated 3/12/74 and amended on/10/2/74 & 9/17/84
& 9/14/89, a true and correct copy of which is attached hereto as Exhibit
"A", and by this reference made a part hereof ("Lease"), constitutes the
entire understanding of the undersigned and 20100 S. Alameda Property
Co., a California General Partnership ("Landlord"), concerning the
Property.
2. Tenant hereby certifies to Imperial Bank, a California corporation,
the holder of a promissory note or other obligation secured or to be
secured by an assignment of rents under the Lease, that the Lease is
presently in full force and effect, and that the Lease is unmodified.
3. No rent under the Lease has been paid more than thirty (30) days
in advance of its due date, and the undersigned agrees not to pay any such
rent more than thirty (30) days in advance of its due date.
4. The undersigned, as of the date hereof, has no knowledge of any
facts which would give rise to any claim of breach, counterclaim, lien or
right of set-off under the Lease against rents or other charges due or to
become due thereunder.
The undersigned makes this statement for the benefit and protection of
Imperial Bank, with the understanding that Imperial Bank intends to rely
upon this statement.
Dated May 19, 1992
TENANT:
SIMMONS COMPANY
(FORMERLY SIMMONS MANUFACTURING COMPANY, INC.)
By: /s/ Jeffrey J. Lewis
----------------------------------------------
Its: Sr. Vice-President
----------------------------------------------
EXHIBIT 10.34
[LOGO]
COLDWELL
BANKER
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.
Section 1.01. Date of Lease:
------------------------------------------
Section 1.02. Landlord: RUDEL DEVELOPMENT
-----------------------------------------------
- -----------------------------------------------------------------------------
Address of Landlord: 2141 East Highland Avenue #240
--------------------------------------------------------
Phoenix, Arizona 85016
- -----------------------------------------------------------------------------
Section 1.03. Tenant: SIMMONS USA COPY TO: In-House Counsel
- -----------------------------------------------------------------------------
Simmons USA Corp.
- -----------------------------------------------------------------------------
Address of Tenant: 20100 South Alameda 6 Executive Park Drive
---------------------------------------------------------
Compton, California 90220 Atlanta, GA 30329
- -----------------------------------------------------------------------------
Section 1.04. Property (Include street address, approximate square
footage and description)
The premises is located in the building known as 4441 West Polk Street
- -----------------------------------------------------------------------------
at the southeast corner of 45th Avenue and Polk Street in Phoenix, Arizona.
- -----------------------------------------------------------------------------
The space consists of approximately 36,000 sq. ft. as highlighted in blue on
- -----------------------------------------------------------------------------
Exhibit "A".
- -----------------------------------------------------------------------------
Section 1.05. Lease Term: Ten (10) years beginning on September 1, 1987
--------------- -----------------
and ending on August 31, 1997
---------------------------------------------------------------
Section 1.06. Permitted Uses: (See Section 5.01) Manufacture and storage
-----------------------
of mattresses and other related products. Tenant may utilize premises for
- -----------------------------------------------------------------------------
any other purpose subject to Landlord's right of approval however such
- -----------------------------------------------------------------------------
approval shall not be unreasonably withheld.
- -----------------------------------------------------------------------------
Section 1.07. Tenant's Guarantor: (If none, so state) N/A
-----------------
Section 1.08. Landlord's Broker: (If none, so state) Coldwell Banker
- -----------------------------------------------------------------------------
Section 1.09. Tenant's Broker: (If none, so state) Coldwell Banker
- -----------------------------------------------------------------------------
Section 1.10. Commission Payable to Landlord's Broker: (See Article
Fourteen) $ By separate agreement
-----------------------------------------------------------------
Section 1.11. Initial Security Deposit: (See Paragraphs 3.03 and
13.03(c)) $6,000.00
------------------------------------------------------------------
Once Tenant moves into Premises, said $6000 shall be applied toward and shall
constitute the first 1-1/3 months rent and no Security Deposit will remain.
Section 1.12. Vehicle Parking Spaces Allocated to Tenant:
up to 32 parking spaces.
- -----------------------------------------------------------------------------
Section 1.13. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: SEE ATTACHED ADDENDUM
---------------------------------------------------------
(b) OTHER PERIODIC PAYMENTS (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03) (iii) Insurance Premiums (See Section 4.04);
(iv) Common Area Charges (See Section 4.05). The initial monthly common area
charge is $385.00. (v) (See Section 4.05) Insurance Premiums and Property
------
Taxes (See Section 4.08); (vi) Maintenance, Repairs and Alterations (See
Section Six).
Section 1.14. Riders: The following Riders are attached to and made a
part of this Lease:(If none, so state)
LEASE ADDENDUM, EXHIBIT "A", EXHIBIT "B"
----------------------------------------
Initials /s/ G.R.
------------
------------
(copyright) 1984 Southern Coldwell Banker Commerical
California Chapter of the Real Estate Services is a
Society of Industrial (Net Form) division of Coldwell Bankers
Realtors Inc. Reprinted Under Commercial Group, Inc., a
license Delaware Corp.
1
<PAGE>
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is for the period stated in Section 1.05 above and
shall begin and end on the dates specified in Section 1.05 above. The
"Commencement Date" shall be the date specified in Section 1.05 above for the
beginning of the Lease Term.
Section 2.02. Delay in Commencement. Landlord shall not be liable to
Tenant if Landlord does not deliver possession of the Property to Tenant on
the first date specified in Section 1.05 above. Landlord's non-delivery of
the Property to Tenant on that date shall not affect this Lease or the
obligations of Tenant under this Lease. If Landlord does not deliver
possession of the Property to Tenant within sixty (60) days after the first
date specified in Section 1.05 above, Tenant may elect to cancel this Lease by
giving written notice to Landlord within ten (10) days after the 60-day
period ends. If Tenant gives such notice, the Lease shall be cancelled and
neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior
to the Commencement Date, Tenant's occupancy of the Property shall be
subject to all of the provisions of this Lease. Early occupancy of the
Property shall not advance the expiration date of this Lease. Tenant shall
pay no rent or other charges specified in this Lease for the early occupancy
period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify Landlord against all damages incurred by Landlord
from any delay by Tenant in vacating the Property. If Tenant does not vacate
the Property upon the expiration or earlier termination of the Lease and
Landlord thereafter accepts rent from Tenant, Tenant's occupancy of the
Property shall be a "month-to-month" tenancy, subject to all of the terms of
this Lease applicable to a month-to-month tenancy, except that the Base Rent
then in effect shall be increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant shall pay Landlord the Base Rent in the amount stated in Paragraph
1.13(a) above for the first month of the Lease Term. On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rent shall be payable at Landlord's address or at such other place
as Landlord may designate in writing.
Section 3.04. Termination: Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default and after Tenant
has vacated the Property in the manner required by this Lease, an equitable
adjustment shall be made concerning advance rent, any other advance payments
made by Tenant to Landlord, and accrued real property Landlord shall refund
the unused portion of the Security Deposit to Tenant or Tenant's successors.
(copyright) 1984 Southern -2- Initials /s/ G.R.
California Chapter of the -----------
Society of Industrial Net Form
Realtors Inc. Reprinted under
license
<PAGE>
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other
than Base Rent are called "Additional Rent." Unless this Lease provides
otherwise, all Additional Rent shall be paid with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.
Section 4.02 Real Property Taxes.
(a) Payment of Taxes. Tenant shall pay all real property taxes on the
Property during the Lease Term according to Paragraph 4.02(c) and Section 4.08
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Tenant shall promptly furnish Landlord with
satisfactory evidence that the real property taxes have been paid. Landlord
shall reimburse Tenant for any real property taxes paid by Tenant during any
period of time prior to or after the Lease Term. If Tenant fails to pay the
real property taxes when due landlord may pay the taxes and Tenant shall
reimburse Landlord for the amount of such tax payment as Additional Rent.
(b) Definition of "Real Property Tax." "Real property tax" means: (i)
any fee, license fee, [illegible], business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property or land upon which the Property is located; (ii) any tax on the
Landlord's right to receive income, receipt of, rent or income from the Property
or against Landlord's business of leasing the Property; (iii) any tax or
charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the Property by any governmental agency; (v) any
charge or fee replacing any tax previously included within the definition of
real property tax. "Real property tax" does not, however, include Landlord's
federal or state income, franchise, inheritance or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed,
Tenant's share of the real property tax payable by Tenant under Paragraph
4.02(a) shall be determined from the assessor's worksheets or other
reasonably available information. Landlord shall make a reasonable
determination of Tenant's proportionate share of such real property tax and
Tenant shall pay such share to Landlord within fifteen (15) days after
receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures,
furnishings, equipment or any other personal property belonging to Tenant.
Tenant shall try to have personal property taxed separately from the
Property.
(ii) If any of Tenant's personal property is taxed with the
Property, Tenant shall pay Landlord the taxes for the personal property
within fifteen (15) days after Tenant receives a written statement from
Landlord for such personal property taxes.
(e) Tenant's Right to Contest Taxes. Tenant may attempt to have the
assessed valuation of the Property reduced or may initiate proceedings to
contest the real property taxes. If required by law, Landlord shall join in
the proceedings brought by Tenant. However, Tenant shall pay all costs of
the proceedings, including any costs or fees incurred by Landlord. Upon the
final determination of any proceeding or contest, Tenant shall immediately
pay the real property taxes due, together with all costs, charges, interest
and penalties incidental to the proceedings. If Tenant does not pay the real
property taxes when due and contests such taxes, Tenant shall not be in default
under this Lease for nonpayment of such taxes if Tenant deposits funds with
Landlord or opens an interest bearing account reasonably acceptable to Landlord
in the joint names of Landlord and Tenant. The amount of such deposit shall be
sufficient to pay the real property taxes plus a reasonable estimate of the
interest, costs, charges and penalties which may accrue if Tenant's action is
unsuccessful, less any applicable tax impounds previously paid by Tenant to
Landlord. The deposit shall be applied to the real property taxes due, as
determined at such proceedings. The real property taxes shall be paid under
protest from such deposit if such payment under protest is necessary to keep the
Property from being sold under a "tax sale" or similar enforcement proceeding.
Landlord will upon Tenant's written request, join Tenant in any proceedings to
contest the real estate taxes.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied
to the Property. However, if any service or utilities are jointly metered
with other property, Landlord shall make reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and shall pay
such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Premiums.
(a) Liability Insurance. During the Lease Term, Landlord shall maintain
a policy of comprehensive [illegible] liability insurance at Tenant's expense,
insuring Landlord against liability arising out of the ownership use or
maintenance of the Property. The initial amount of such insurance shall be
at least $1,000,000, and shall reflect the periodic increase based upon
inflation, increased liability awards, recommendation of professional
insurance agents and other relevant factors. However, the amount of such
insurance shall not limit Tenant's liability nor release from any obligation
hereunder. The policy shall contain cross-liability endorsements, if
applicable, and shall [illegible] performance of the indemnity provisions of
Paragraphs 5.04(a), (b), and (e). Tenant shall, at Tenant's expense obtain such
other liability insurance as Tenant deems necessary to protect Tenant.
Note: Landlord will not rent to another Tenant whose business is in a more
expensive insurance category rating than Tenant unless Landlord or other
Tenant shall agree to pay any extra insurance costs which might be incurred
by Tenant by this subsequent renting.
(copyright) 1984 Southern -3- Initials
California Chapter of the -----------
Society of Industrial Net Form
Realtors Inc. Reprinted under
license
<PAGE>
(b) Hazard and Rental Income Insurance. During the Lease Term, Landlord
shall maintain policies of insurance at Tenant's expense, covering loss of or
damage to the Property in the full amount of its replacement value. Such
policies shall be maintained only if commercially and reasonably available
and shall provide protection against all perils included within the
classification of fire extending coverage, vandalism, malicious mischief,
special extended perils (all risk), sprinkler leakage, earthquake sprinkler
leakage and Inflation Guard endorsement, and any other perils (except flood
and earthquake, unless required by any lender holding a security interest in
the Property) which Landlord deems necessary. Landlord may obtain insurance
coverage for Tenant's fixtures, equipment or building improvements installed
by Tenant in or on the Property. Tenant shall, at Tenant's expense, maintain
such primary or additional insurance on its fixtures, equipment and building
improvements as Tenant deems necessary to protect its interest. During the
Lease Term, Landlord shall also maintain a rental income insurance policy at
Tenant's expense, with loss payable to Landlord in an amount equal to one
year's Base Rent, estimated real property taxes and insurance premiums.
Tenant shall not do or permit to be done anything which invalidates any such
insurance policies.
(c) Payment of Premiums: Insurance Policies. Subject to Section 4.05
and any Multi-Tenant Facility Lease Rider attached to this Lease. Tenant
shall pay all premiums for the insurance policies covering the Property
described in Paragraphs 4.04 (a) and (b) within fifteen (15) days after
receipt by Tenant of a copy of the premium statement or other evidence of the
amount due. If the insurance policies maintained by Landlord cover
improvements or real property other than the Property, Landlord shall also
deliver to Tenant a statement of the amount of the premiums applicable to
the Property, showing, in reasonable detail, how such amount was computed.
If the Lease Term expires before the expiration of the insurance policy
period, Tenant's liability for insurance premiums shall be prorated on an
annual basis. All insurance shall be maintained with companies holding a
"General Policyholder's Rating" of B- or better as set forth in the most
current issue of "Best's Insurance Guide." Tenant shall be liable for the
payment of any deductible amount under Landlord's insurance policies.
Section 4.05. Multiple Tenant Buildings: Rules and Regulations. If the
Property is part of a larger building or group of buildings. Tenant shall
pay monthly, in advance, its pro rata share of common area maintenance and
repair costs as reasonably determined by Landlord. Tenant shall also comply
with Landlord's rules and regulations respecting the management, care and
safety of the common areas of such buildings and grounds, including parking
areas, landscaped areas, walkways, hallways and other facilities provided for
the common use and convenience of other occupants. Notice of such rules and
regulations will be posted or given to Tenant. Tenant shall pay for any
increase in the property insurance premiums for such buildings caused by
Tenant's acts, omissions, use or occupancy of the Property. Landlord
acknowledges that as of 6/29/87 no rules exist on this building and that
Landlord shall only institute rules which are reasonable and practical.
Section 4.06. Late Charges. Tenant's failure to pay rent promptly may
cause Landlord to incur unanticipated costs. The exact amount of such costs
are impractical or extremely difficult to ascertain. Such costs may include,
but are not limited to, processing and accounting charges and late charges
which may be imposed on Landlord by any guaranty lease, mortgage or trust deed
encumbering the Property. Therefore, if Landlord does not receive any rent
payment within ten (10) days after it becomes due and after either Abe Schear
or Harlan Smith has received oral notice, Tenant shall pay Landlord five days
after oral notice a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
Section 4.07. Interest on Past Due Obligations. Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate
of fifteen percent (15%) per annum from the due date of such amount ???
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest as such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this
amount is higher than the rate permitted by law, the interest rate is hereby
decreased to the maximum legal interest rate permitted by law.
Section 4.08. Impounds for Insurance Premiums and Real Property Taxes.
If requested by any [illegible] to whom Landlord has granted a security interest
in the Property, or if Tenant is more than ten (10) [illegible] in the payment
of rent more than once in any consecutive twelve (12) month period, Tenant shall
pay Landlord a sum equal to one-twelfth [illegible] of the annual real property
taxes and or insurance premiums payable to [illegible] this Lease, together with
each payment of Base Rent. Such payments shall be held by [illegible] interest
bearing impound account. The amount of real property taxes and insurance
premiums [illegible] reasonably estimated by Landlord Funds in the impound
account shall be applied [illegible] real property taxes and insurance premiums
when due. Any deficiency of [illegible] by Tenant to Landlord upon written
request. If Tenant defaults under this [illegible] impound account [illegible]
obligation then due under this Lease.
(copyright) 1984 Southern -4- Initials /s/ G.R.
California Chapter of the -----------
Society of Industrial Net Form
Realtors Reprinted under
license
<PAGE>
Section 5.02. Manner of Use. Tenant shall not cause or permit the
Property to be used in any way which constitutes a violation of any law,
ordinance, or governmental regulation or order, which annoys or interferes
with the rights of tenants of the development which the Property is part, or
which constitutes a nuisance or waste Tenant shall obtain and pay for all
permits, including a Certificate of Occupancy, required for Tenant's
occupancy at the Property and shall promptly take all substantial and non-
substantial actions necessary to comply with all applicable statutes,
ordinances, rules, regulations, orders and requirements regulating the use by
Tenant of the Property, including the Occupational Safety and Health Act.
Section 5.03. Signs and Auctions. Tenant shall not place any signs on
the Property without Landlords prior written consent, however, such consent
shall not be unreasonably withheld. Tenant shall not conduct or permit any
auctions or sheriff's sales at the Property.
Section 5.04. Indemnity. Tenant shall indemnify Landlord against and
hold Landlord harmless from any and all costs, claims or liability arising
from: (a) Tenant's use of the Property; (b) the conduct of Tenant's business
or anything else done or permitted by Tenant to be done in or about the
Property; (c) any breach or default in the performance of Tenant's obligations
under this Lease; (d) any misrepresentation or breach of warranty by Tenant
under this Lease; or (e) other acts or omissions of Tenant. Tenant shall
defend Landlord against any such costs [illegible] or liability at Tenant's
expense. Tenant shall reimburse Landlord for any legal fees or costs incurred
by Landlord in connection with any such claim. As a material part of the
consideration to Landlord, Tenant hereby assumes all risk of damage to
property or injury to persons in or about the Property arising from any cause,
and Tenant hereby waives all claims in respect thereof against Landlord,
except for any claim arising out of Landlord's gross negligence or willful
misconduct.
Section 5.05. Landlord's Access. Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties, or for any other purpose Landlord
deems necessary. Landlord shall give Tenant prior notice of such entry,
except in the case of an emergency. Landlord may place customary "For Sale"
or "For Lease" signs on the Property.
Section 5.06. Quiet Possession. If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property
for the full Lease Term, subject to the provisions of this Lease. Landlord
shall make every reasonable effort to see to it that Tenant can utilize the
property to fullest extent. Further, Landlord recognizes Tenant's use of
common areas and shall do nothing to minimize such use.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.01. Existing Conditions. Except as set forth in any rider
requiring Landlord to perform work on the Property prior to the Commencement
Date. Tenant accepts the Property in its condition as of the execution of
the Lease, subject to all recorded matters, laws, ordinances and governmental
regulations and orders. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation as to the condition of the
Property or the suitability of the Property for Tenant's intended use.
Section 6.02. Exemption of Landlord from Liability. Landlord shall not
be liable for any damage or injury to the person, business (or any loss of
income therefrom), goods, wares, merchandise or other property of Tenant,
Tenant's employees, invitees, customers or any other person in or about the
Property, whether such damage or injury is caused by or results from: (a)
fire, steam, electricity, water, gas or rain; (b) the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures or any other cause; (c)
conditions arising in or about the Property or upon other portions of any
building of which the Property is a part, or from other sources or places; or
(d) any act or omission of any other tenant of any building of which the
Property is a part. The provisions of this Section 6.02 shall not, however,
exempt Landlord from liability for the negligence of Landlord or Landlord's
agent(s).
Section 6.03. Tenant's Obligations.
(a) Tenant shall keep the Property (including all structural,
nonstructural, interior, exterior, and landscaped areas, portions, systems
and equipment) in good order, condition and repair during the Lease Term.
Tenant shall promptly replace any portion of the Property or system or
equipment in the Property which cannot be fully repaired regardless of
whether the benefit of such replacement extends beyond the Lease Term.
Tenant shall also maintain preventive maintenance contract providing for the
regular inspection and maintenance of the heating and air conditioning system
by a licensed heating and air conditioning contractor. However, Landlord
shall have the [illegible] upon written notice to Tenant, to undertake the
responsibility for preventive maintenance of the heating and air conditioning
system at Tenant's expense. It is the intention of Landlord and Tenant
that at all times [illegible] Lease Term, Tenant shall maintain the Property in
an attractive, first-class and fully operative condition. Notwithstanding the
foregoing, should Tenant be required under 6.03(a) to make a repair in excess
of $10,000 in the last two years of this lease (or any option) period and
should Tenant notify Landlord that it will leave upon the expiration of the
respective lease term such repair will be amortized over its useful life and
Tenant shall only pay that portion which falls within the remaining lease term.
(b) Tenant shall provide annual maintenance to the roof of leased
premises with the cost to be capped at $1000/year. Should maintenance cost
in excess of $1000 during any calender year, Landlord and Tenant shall pro-
rate such additional costs on a 50-50 basis. Should during the term of this
lease (or any option period) the premises need a new roof, Tenant and
Landlord shall share the cost on a 50-50 basis, however, section 6.?? above
shall apply during the last two years of the lease or any option where Tenant
has notified Landlord of its intent to leave the premises at the end of the
respective lease term.
(copyright) 1984 Southern -5- Initials /s/ G.R.
California Chapter of the -----------
Society of Industrial Net Form
Realtors Inc. Reprinted under
license
<PAGE>
(c) All of Tenant's obligations to maintain and repair shall be
accomplished at Tenant's sole expense. If Tenant fails to maintain and
repair the Property, Landlord may, on ten (10) days' prior notice (except that
no notice shall be required in case of emergency) enter the Property and
perform such repair and maintenance on behalf of Tenant. In such case,
Tenant shall reimburse Landlord for all costs so incurred immediately upon
demand.
Section 6.04. Landlord's Obligations. Subject to the provisions of
Article Seven (Damage and Destruction) and Article Eight (Condemnation),
Landlord shall have absolutely no responsibility to repair, maintain or
replace any portion of the Property at any time. Tenant waives the benefit
of any present or future law which might give Tenant the right to repair the
Property at Landlord's expense or to terminate the Lease due to the condition
of the Property.
Section 6.05. Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements to
the Property without Landlord's prior written consent, except for non-
structural alterations which do not exceed Fifteen Thousand Dollars ($15,000)
in cost individually and which are not visible from the outside of any
building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, and improvements constructed in violation of this Paragraph
6.05(a) upon Landlord's written request. All alterations, additions, and
improvements will be accomplished in a good and workmanlike manner, in
conformity with all applicable laws and regulations, and by a contractor
approved by Landlord. Upon completion of any such work, Tenant shall provide
Landlord with "as built" plans, copies of all construction contracts, and
proof of payment for all labor and materials.
(b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least ten (10) days'
prior written notice of the commencement of any work on the Property.
Landlord may elect to record and post notices of non-responsibility on the
Property.
Section 6.06. Condition upon Termination. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in
the same condition as received except for ordinary wear and tear which Tenant
was not otherwise obligated to remedy under any provision of this Lease.
However, Tenant shall not be obligated to repair any damage which Landlord is
required to repair under Article Seven (Damage and Destruction). In
addition, Landlord may require Tenant to remove any alterations, additions or
improvements (whether or not made with Landlord's consent) prior to the
termination of the Lease and to restore the Property to its prior condition,
all at Tenant's expense. All alterations, additions and improvements which
Landlord has not required Tenant to remove shall become Landlord's property
and shall be surrendered to Landlord upon the termination of the Lease,
except that Tenant may remove any of Tenant's machinery or equipment which
can be removed without material damage to the Property. Tenant shall repair,
at Tenant's expense, any damage to the Property caused by the removal of any
such machinery or equipment. In no event, however, shall Tenant remove any
of the following materials or equipment without the Landlord's prior written
consent: any power wiring or power panels; lighting or lighting fixtures;
wall coverings; drapes, blinds or other window coverings; carpets or other
floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property. Tenant shall notify Landlord
in writing immediately upon the occurrence of an event of damage to the
Property in excess of $10,000. If the Property is only partially damaged and
if the proceeds received by Landlord from the insurance policies described in
Paragraph 4.04(b) are sufficient to pay for the necessary repairs, this Lease
shall remain in effect and Landlord shall repair the damage as soon as
reasonably possible. Landlord may elect to repair any damage to Tenant's
fixtures, equipment, or improvements. If the insurance proceeds received by
Landlord are not sufficient to pay the entire cost of repair, or if the cause
of the damage is not covered by the insurance policies which the Landlord
maintains under Paragraph 4.04(b), Landlord may elect either to (a) repair
the damage as soon as reasonably possible, in which case this Lease shall
remain in full force and effect, or (b) terminate this Lease as of the date
the damage occurred. Landlord shall notify Tenant within thirty (30) days
after receipt of notice of the occurrence of the damage, whether
Landlord elects to repair the damage or terminate the Lease. If Landlord
elects to repair the damage, Tenant shall pay Landlord the "deductible amount"
(if any) under Landlord's insurance policies, and, if the damage was due to
an act or omission of Tenant, the difference between the actual cost of
repair and any insurance proceeds received by Landlord. If Landlord elects
to terminate this Lease, Tenant may elect to continue this Lease in full force
and effect, in which case Tenant shall repair any damage to the Property and
any building in which the Property is located. Tenant shall pay the cost of
such repairs, except that, upon satisfactory completion of such repairs,
Landlord shall deliver to Tenant any insurance proceeds received by Landlord
for the damage repaired by Tenant. Tenant shall give Landlord written notice
of such election within ten (10) days after receiving Landlord's termination
notice. If the damage to the Property occurs during the last six (6) months
of the Lease Term, Landlord may elect to terminate this Lease as of the date
the damage occcured, regardless of the sufficiency of any insurance
proceeds. In such event, Landlord shall not be obligated to repair or
restore the Property and Tenant shall have no right to continue this Lease.
Landlord shall notify Tenant of its election within thirty (30) days after
receipt of notice of the occurrence of the damage.
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Section 7.02. Total or Substantial Destruction. If the Property is
totally or substantially destroyed by any cause whatsoever, or if the
Property is in a building which is substantially destroyed (even though the
Property is not totally or substantially destroyed), this Lease shall
terminate as of the date the destruction occurred regardless of whether
Landlord receives any insurance proceeds. However, if the Property can be
rebuilt within six (6) months after the date of destruction, Landlord may
elect to rebuild the Property at Landlord's own expense, in which case this
Lease shall remain in full force and effect. Landlord shall notify Tenant of
such election within thirty (30) days after the occurrence of total or
substantial destruction. If the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed
or damaged and Landlord or Tenant repairs or restores the Property pursuant
to the provisions of this Article Seven, any rent payable during the period
of such damage, repair and/or restoration shall be reduced according to the
degree, if any, to which Tenant's use of the Property is impaired. However,
the reduction shall not exceed the sum of one year's payment of Base Rent,
insurance premiums and real property taxes. Except for such possible reduction
in Base Rent, insurance premiums and real property taxes, Tenant shall not be
entitled to any compensation, reduction, or reimbursement from Landlord as a
result of any damage, destruction, repair, or restoration of or to the Property.
Section 7.04. Waiver. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in
the event of the substantial destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of
eminent domain or sold under the threat of that power (all of which are
called "Condemnation"), this Lease shall terminate as to the part taken or
sold on the date the condemning authority takes title or possession,
whichever occurs first. If more than twenty percent (20%) of the floor area
of the building in which the Property is located, or which is located on the
Property, is taken, either Landlord or Tenant may terminate this Lease as of
the date the condemning authority takes title or possession, by delivering
written notice to the other within ten (10) days after receipt of written
notice of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority takes possession.) if neither Landlord nor
Tenant terminates this Lease, this Lease shall remain in effect as to the
portion of the Property not taken, except that the Base Rent shall be reduced
in proportion to the reduction in the floor area of the Property. Any
Condemnation award or payment shall be distributed in the following order:
(a) first, to any ground lessor, mortgagee or beneficiary under a deed of
trust encumbering the Property, the amount of its interest in the Property;
(b) second, to Tenant, only the amount of any award specifically designated
for loss of or damage to Tenant's trade fixtures or removable personal
property; and (c) third, to Landlord, the remainder of such award, whether as
compensation for reduction in the value of the Leasehold, the taking of the
fee, or otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Property caused by the Condemnation, except that the
Landlord shall not be obligated to repair any damage for which the Tenant has
been reimbursed by the condemning authority. If the severance damages
received by Landlord are not sufficient to pay for such repair, Landlord
shall have the right to either terminate this Lease or make such repair at
Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property
or of Tenant's interest in this Lease may be acquired by any other person or
entity, whether by assignment, mortgage, subLease, transfer, operation of
law, or act of Tenant, without Landlord's prior written consent, except as
provided in Section 9.02 below. Landlord shall grant or withhold its consent
as provided in Section 9.04 below. Any attempted transfer without consent
shall be void and shall constitute a non-curable breach of this Lease. If
Tenant is a partnership, any cumulative transfer of more than 20% of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any change in a controlling interest of the voting stock of the
corporation shall require Landlord's consent.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or
subLease the Property without Landlord's consent to any corporation which
controls, is controlled by or is under common control with Tenant or to any
corporation resulting from the merger of or consolidation with Tenant
("Tenant's Affiliate"). In such case any Tenant's Affiliate shall assume in
writing all of Tenant's obligations under this Lease.
Section 9.03. No ReLease of Tenant. No transfer permitted by this
Article Nine whether with or without Landlord's consent, shall reLease Tenant
or change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant's under this Lease. Landlord's acceptance of rent from
any other person is not a waiver of any provision of this Article Nine.
Consent to one transfer is not a consent to any subsequent transfer if
Tenant's
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transferee defaults under this Lease. Landlord may proceed directly against
Tenant without pursuing remedies against the transferee. Landlord may
consent to subsequent assignments or modifications of this Lease by Tenant's
transferee without notifying Tenant or obtaining its consent. Such action
shall not relieve Tenant's liability under this Lease.
Section 9.04. Landlord's Election. Tenant's request for consent to any
transfer described in Section 9.01 above shall be accompanied by a written
statement setting forth the details of the proposed transfer, including the
name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g. the term of and rent and
security deposit payable under any assignment or subLease), and any other
information Landlord deems relevant. Landlord shall have the right (a) to
withhold consent, if reasonable; (b) to grant consent; or (c) if the transfer
is a subLease of the property or an assignment of this Lease, to terminate
this Lease as of the effective date of such subLease or assignment, in which
case Landlord may elect to enter into a direct Lease with the proposed
assignee or subtenant.
Section 9.05. No Merger. No merger shall result from Tenant's subLease
of the Property under this Article Nine. Tenant's surrender of this
Lease or the termination of this Lease in any other manner. In any such
event, Landlord may terminate any or all subtenancies or succeed to the
interest of Tenant as sublandlord thereunder.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each
of Tenant's obligations under this Lease is a condition as well as a
covenant. Tenant's right to continue in possession of the Property is
conditioned upon such performance. Time is of the essence in the performance
of all covenants and conditions.
Section 10.02. Defaults. Tenant shall be in material default under this
Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section
4.04;
(b) If Tenant fails to pay rent or any other charge required to be paid
by Tenant, as and when due;
(c) If Tenant fails to perform any of Tenant's non-monetary obligations
under this Lease for a period of thirty (30) days after written notice from
Landlord; provided that if more than thirty (30) days are required to
complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30) day period and thereafter diligently
pursues its completion. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of
this Lease. The notice required by this Paragraph is intended to satisfy any
and all notice requirements imposed by law on Landlord and is not in addition
to any such requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for
the benefit of creditors; (ii) if a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is
not dismissed within thirty (30) days; (iii) if a trustee or receiver is
appointed to take possession of substantially all of Tenant's assets located
at the Property or of Tenant's interest in this Lease and possession is not
restored to Tenant within thirty (30) days; or (iv) if substantially all of
Tenant's assets located at the Property or of Tenant's interest in this Lease
is subjected to attachment, execution or other judicial seizure which is not
discharged within thirty (30) days. If a court of competent jurisdiction
determines that any of the acts described in this subparagraph (d) is not a
default under this Lease, and a trustee is appointed to take possession (or
if Tenant remains a debtor in possession) and such trustee or Tenant
transfers Tenant's interest hereunder, then Landlord shall receive, as
Additional Rent, the difference between the rent (or any other consideration)
paid in connection with such assignment or subLease and the rent payable by
the Tenant hereunder.
Section 10.03. Remedies. On the occurrence of any material default by
Tenant, Landlord may at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:
(a) Terminate Tenant's right to possession of the Property by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Property to Landlord. In such event Landlord
shall be entitled to recover from Tenant all damages incurred by Landlord by
reason of Tenant's default, including (i) the worth at the time of the award
of the unpaid Base Rent. Additional Rent and other charges which had been
earned at the time of the termination; (ii)the worth at the time of the award
of the amount by which the Unpaid Base Rent, Additional Rent and other
charges which would have been earned after termination until the time of the
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; (iii) the worth at the time of the award of the
amount by which the Unpaid Base Rent, Additional Rent and other charges which
would have been paid for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for [illegible] detriment proximately caused by Tenant's failure to perform its
obligations under the Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, any costs or expenses
assumed by Landlord in maintaining or preserving the Property after such
default, the cost of recovering possession [illegible]
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Property, expenses of reletting, including necessary renovation or alteration
of the Property, Landlord's, reasonable attorneys' fees incurred in connection
therewith, and any real estate commission paid or payable. As used in subparts
(i) and (ii) above, the "worth at the time of the award" is computed by allowing
interest on unpaid amounts at the rate of fifteen percent (15%) per annum, or
such lesser amount as may then be the maximum lawful rate. As used in
subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award, plus 1%. If Tenant shall have
abandoned the Property, Landlord shall have the option of (i) retaking
possession of the Property and recovering from Tenant the amount specified in
this Paragraph 10.03(a), or (ii) proceeding under Paragraph 10.03(b).
(b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Property. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decisions of the state in which the Property is located.
Section 10.04. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination. Landlord shall have the right to
subordinate this Lease to any ground Lease, deed of trust or mortgage
encumbering the Property, any advances made on the security thereof and any
renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. However, Tenant's right to quiet possession of
the Property during the Lease shall not be disturbed if Tenant pays the rent
and performs all of Tenant's obligations under this Lease and is not
otherwise in default. If any ground lessor, beneficiary, or mortgagee elects
to have this Lease prior to the lien of its ground Lease, deed of trust or
mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground Lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust or
mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the
transferee of or successor to Landlord's interest in the Property and recognize
such transferee or successor as Landlord under this Lease. Tenant waives the
protection of any statute or rule of law which gives or purports to give
Tenant any right to terminate this Lease or surrender possession of the
Property upon the transfer of Landlord's interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such
attornment or subordination or agreement to do so. Such subordination and
attornment documents may contain such provisions as are customarily required
by any ground lessor, beneficiary under a deed of trust or mortgagee. If
Tenant fails to do so within ten (10) days after written request, Tenant
hereby makes, constitutes and irrevocably appoints Landlord, or any
transferee or successor of Landlord, the attorney-in-fact of Tenant to
execute and deliver any such instrument or document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver to Landlord a written statement certifying: (i)that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not
been cancelled or terminated; (iii) that the last date of payment of the Base
Rent and other charges and the time period covered by such payment; (iv)
that Landlord is not in default under this Lease (or, if Landlord is claimed
to be in default, stating why); and (v) such other matters as may be
reasonably required by Landlord or the holder of a mortgage, deed of trust or
lien to which the Property is or becomes subject. Tenant shall deliver such
statement to Landlord within ten (10) days after written Landlord's request.
Any such statement by Tenant may be given by Landlord to any prospective
purchaser or encumbrancer of the Property. Such purchaser or encumbrancer may
rely conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such
ten (10) day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the
terms and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that this Lease has not been cancelled or
terminated except as otherwise represented by Landlord; (iii) that not more
than one month's Base Rent or other charges have been paid in advance; and
(iv) that Landlord is not in default under the Lease. In such event, Tenant
shall be estopped from denying the truth of such facts.
Section 11.05. Tenant's Financial Condition. Within ten (10) days after
written request from Landlord that Landlord is in the process of selling or
refinancing the subject property, Tenant shall deliver to Landlord such
financial statements as are reasonably required by Landlord to verify the net
worth of Tenant, or any assignee, subtenant or guarantor of Tenant. In
addition, Tenant shall deliver to any lender designated by Landlord any
financial statements required by such lender to facilitate the financing or
refinancing of the Property. Tenant represents and warrants to Landlord that
each such financial statement is a true and accurate statement of the date
of such statement. All financial statements shall be confidential and shall
be used only for the purposes set forth herein.
(copyright) 1984 Southern -9- Initials /s/ G.R.
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Realtors, Inc. Reprinted under
license
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ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. Tenant shall reimburse Landlord,
upon demand, for any costs or expenses incurred by Landlord in connection
with any breach or default of Tenant under this Lease, whether or not suit is
commenced or judgement entered. Such costs shall include legal fees and
costs incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the
provisions of this Lease is commenced, the court in such action shall award
to the party in whose favor a judgement is entered a reasonable sum as
attorneys' fees and costs. Such attorneys' fees and costs shall be paid by
the losing party in such action. Tenant shall also indemnify Landlord
against and hold Landlord harmless from all costs , expenses, demands and
liability incurred by Landlord if Landlord becomes or is made a party to any
claim or action (a) instituted by Tenant, or by any third party against
Tenant, or by or against any person holding any interest under or using the
Property by license of or agreement with Tenant; (b) for foreclosure of any
lien for labor or material furnished to or for Tenant or such other person;
(c) otherwise arising out of or resulting from any act or transaction of
Tenant or such other person; or (d) necessary to protect Landlord's interest
under this Lease in a bankruptcy proceeding, or other proceeding under Title
11 of the United States Code, as amended. Tenant shall defend Landlord
against any such claim or action at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election,. Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in any such claim
or action.
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's
reasonable attorneys' fees incurred in connection with Tenants request for
Landlord's consent under Article Nine (Assignment and Subletting), or in
connection with any other act which Tenant proposes to do and which requires
Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a
condition to the continuance of this Lease, that there will be no
discrimination against, or segregation of, any person or group of persons on
the basis of race, color, sex, creed, national origin or ancestry in the
leasing , subleasing, transferring, occupancy, tenure or use of the Property
or any portion thereof.
Section 13.02. Waiver of Subrogation. Landlord and Tenant each hereby
waive any and all rights of recovery against the other, or against the
officers, employees, agents or representatives of the other, for loss of or
damage to its property or the property of others under its control, if such
loss or damage is covered by any insurance policy in force (whether or not
described in this Lease) at the time of such loss or damage. Upon obtaining
the policies of insurance described herein, Landlord and Tenant shall give
notice to the insurance carrier or carriers of the foregoing mutual waiver of
subrogation.
Section 13.03. Landlord's Liability; Certain Duties.
(a) As used in this Lease the term "Landlord" means only the current
owner or owners of the fee title to the Property or the Leasehold estate
under a ground Lease of the Property at the time in question. Each Landlord
is obligated to perform the obligations of Landlord under this Lease only
during the time such Landlord owns such interest or title. Any Landlord who
transfers its title or interest is relieved of all liability with respect to
the obligations of Landlord under this Lease to be performed on or after the
date of transfer. However, each Landlord shall deliver to its transferee all
funds previously paid by Tenant if such funds have not yet been applied under
the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any
ground lessor, mortgagee or beneficiary under any deed of trust encumbering
the Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, if such
non-performance reasonably requires more than thirty (30) days to cure,
Landlord shall not be in default if such cure is commenced within such thirty
(30) day period and thereafter diligently pursued to completion.
(c) Upon the execution of the Lease, Tenant shall deposit with Landlord
a cash Security Deposit in the amount set forth in Section 1.11 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord
shall not be required to keep the Security Deposit separate from its other
accounts and no trust relationship is created with respect to the Security
Deposit.
Section 13.04. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal
or unenforceable shall not cancel or invalidate the remainder of such
provision of this Lease, which shall remain in full force and effect.
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license
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Section 13.05. Interpretation. The captions of the Articles or
Sections of this Lease are to assist the parties in reading this Lease and
are not a part of the terms or provisions of this Lease. Whenever required
by the context of this Lease, the singular shall include the plural and the
plural shall include the singular. The masculine, feminine and neuter
genders shall each include the other. In any provision relating to the
conduct, acts or omissions of Tenant, the term "Tenant" shall include Tenant's
agents, employees, contractors, invitees, successors or others using the
Property with Tenant's expressed or implied permission.
Section 13.06. Incorporation of Prior Agreements; Modifications. This
Lease is the only agreement between the parties pertaining to the Lease of
the Property and no other agreements are effective. All amendments to this
Lease shall be in writing and signed by all parties. Any other attempted
amendment shall be void.
Section 13.07. Notices. All notices required or permitted under this
Lease shall be in writing and shall be personally delivered or sent by
certified mail, return receipt requested, postage prepaid. Notices to Tenant
shall be delivered to the address specified in Section 1.03 above, except
that upon Tenant's taking possession of the Property, the Property shall be
Tenant's address for notice purposes. Notices to Landlord shall be delivered
to the address specified in Section 1.02 above. All notices shall be
effective upon delivery or attempted delivery in accordance with this Section
13.07. Either party may change its notice address upon written notice to the
other party.
Section 13.08. Waivers. All waivers must be in writing and signed by the
waiving party. Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord
from enforcing that provision or any other provision of this Lease in the
future. No statement on a payment check from Tenant or in a letter
accompanying a payment check shall be binding on Landlord. Landlord may, with
or without notice to Tenant, negotiate such check without being bound to the
conditions of such statements.
Section 13.09. No Recordation. Tenant shall not record this Lease
without prior written consent from Landlord. However, either Landlord or
Tenant may require that a "Short Form" memorandum of this Lease executed by
both parties be recorded.
Section 13.10. Binding Effect; Choice of Law. This Lease binds any
party who legally acquires any rights or interest in this Lease from Landlord
or Tenant. However, Landlord shall have no obligation to Tenant's successor
unless the rights or interests of Tenant's successor are acquired in
accordance with the terms of this Lease. The laws of the state in which the
Property is located shall govern this Lease.
Section 13.11. Corporate Authority; Partnership Authority. If Tenant is
a corporation, each person signing this Lease on behalf of Tenant represents
and warrants that he has full authority to do so and that this Lease binds
the corporation. Within thirty (30) days after this Lease is signed, Tenant
shall deliver to Landlord a certified copy of a resolution of Tenant's Board
of Directors authorizing the execution of this Lease or other evidence of
such authority reasonably acceptable to Landlord. If Tenant is a
partnership, each person signing this Lease for Tenant represents and
warrants that he is a general partner of the partnership, that he has full
authority to sign for the partnership and that this Lease binds the
partnership and all general partners of the partnership. Tenant shall give
written notice to Landlord of any general partner's withdrawal or addition.
Within thirty (30) days after this Lease is signed, Tenant shall deliver to
Landlord a copy of Tenant's recorded statement of partnership or certificate
of limited partnership.
Section 13.12. Joint and Several Liability. All parties signing this
Lease as Tenant shall be jointly and severally liable for all obligations of
Tenant.
Section 13.13. Force Majeure. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to
the duration of such events. Events beyond Landlord's control include, but
are not limited to, acts of God, war, civil commotion, labor disputes,
strikes, fire, flood or other casualty, shortages of labor or material,
government regulation or restriction and weather conditions.
Section 13.14. Execution of Lease. This Lease may be executed in
counterparts, and, when all counterpart documents are executed, the
counterparts shall constitute a single binding instrument. The delivery of
this Lease by Landlord to Tenant shall not be deemed to be an offer and shall
not be binding upon either party until executed and delivered by both
parties.
ARTICLES FOURTEEN: BROKERS By separate agreement
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Section 14.03. No Other Brokers. Tenant represents and warrants to
Landlord that the brokers named in Sections 1.08 and 1.09 above are the only
agents, brokers, finders or other parties with whom Tenant has dealt who are
or may be entitled to any commission or fee with respect to this Lease or the
Property.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED
HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE
INSERTED, PLease DRAW A LINE THROUGH THE SPACE BELOW.
SEE ATTACHED ADDENDUMS AND EXHIBITS
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders
which are attached to or incorporated by reference in this Lease.
Signed on 19 RUDEL DEVELOPMENT
-------------, ------ ------------------------------------
at
------------------------------- ------------------------------------
By: /s/ Glenn Rudel
---------------------------------
GLENN RUDEL
Its:
--------------------------------
By:
---------------------------------
Its:
--------------------------------
"LANDLORD"
Signed on 19 SIMMONS USA
-------------, ------ --------------------------------------
at
------------------------------- --------------------------------------
By: /s/ Ken Bart
--------------------------------------
Its:
--------------------------------------
By:
--------------------------------------
Its:
--------------------------------------
"TENANT"
CONSULT YOUR ATTORNEY--This document has been prepared for approval by
your attorney. No representation or recommendation is made by Coldwell Banker
Commercial Real Estate Services or the Southern California Chapter of the
Society of Industrial Realtors, Inc., or the agents or employees of either
of them as to the legal sufficiency, legal effect, or tax consequences of this
document or the transaction to which it relates. These are questions for your
attorney.
(copyright) 1984 Southern -12-
California Chapter of the
Society of Industrial (Net Form)
Realtors Inc. Reprinted under
license
<PAGE>
ADDENDUM TO INDUSTRIAL REAL ESTATE Lease
THIS ADDENDUM is made and entered into this 18th day of June, 1987, by
and between RUDEL DEVELOPMENT (hereinafter "Landlord"), and SIMMONS USA
(hereinafter "Tenant"), and shall constitute an Addendum to the Industrial
Real Estate Lease Agreement executed concurrently herewith between said
parties (hereinafter "Lease"). The terms and provisions of the Lease are
hereby ratified and confirmed except to the extent inconsistent or in
conflict with the provisions of this Addendum, in which case the provisions
of this Addendum shall prevail.
1. Possession. Tenant shall be granted possession of the leased
premises upon execution of the Lease and Addendum and delivery of the
security deposit and certificate of insurance, and subject to the concurrent
right to possession by Landlord and Landlord's agents and representatives for
purposes of installing the tenant improvements as are outlined in Exhibit
"B".
2. Completion of Leasehold Improvements. Every attempt will be made
by the Landlord to complete the tenant improvements within 45 to 60 days of
signature of the Lease, however, in the event that certain finishes are not
fully completed in that time the Landlord shall not be liable to the Tenant
and Base Rent will commence on September 1, 1987. As earlier pointed out the
Tenant shall have the right to store equipment in the warehouse space during
July and August as long as it does not interfere with the construction of the
tenant improvements. Tenant and Landlord shall agree to the improvements and
shall sign off on same no later than July 20, 1987. Should Landlord not
complete such improvement list by October 1, 1987 and notwithstanding any
other provision of this Lease, Tenant may upon written notice to Landlord
commence completion of such named improvements and offset any costs incurred
against rent owed by Tenant to Landlord.
3. Rental Schedule. The following schedule of Base Rental payments
will be due during the ten year Lease term:
7/1/87 thru 8/31/87 No Base Rent Due
9/1/87 thru 8/31/88 $4,500.00 per month plus sales tax
9/1/88 thru 8/31/89 $6,840.00 per month plus sales tax
9/1/89 thru 8/31/90 $7,200.00 per month plus sales tax
9/1/90 thru 8/31/92 $7,560.00 per month plus sales tax
9/1/92 thru 2/28/95 $8,640.00 per month plus sales tax
3/1/95 thru 8/31/97 $9,360.00 per month plus sales tax
All of the OTHER CHARGES PAYABLE BY TENANT as set forth in Article Four will
be prorated for 1987 from the date of full possession and occupancy by the
Tenant.
<PAGE>
IN WITNESS WHEREOF, this Addendum is executed on the day and date first
above written.
LANDLORD: TENANT:
RUDEL DEVELOPMENT SIMMONS USA
By: /s/ Glenn Rudel By: /s/ Ken Barton
------------------------ ----------------------------
Glenn Rudel, Owner
Its:
----------------------------
<PAGE>
EXHIBIT 'A'
[STREET MAP]
<PAGE>
EXHIBIT 'B'
LANDLORD'S TENANT IMPROVEMENTS FOR SIMMONS USA
Office Area: Approximately 3000 square feet with arrangement as shown on
Simmons USA drawing No. FNXOFFC2
dated 7/8/87 and approved revisions dated 7/13/87.
The office area will be stud wall with sheetrock that will be taped,
sealed, and textured with two coats of paint. Paint colors to be chosen by
Simmons USA. Either carpet or tile will be installed in the office area as
an allowance of $11.50 per square yard, installed. The office layout will be
mutually agreed upon by landlord and tenant, but will include the following:
- --One private office
- --Two restrooms with equipment as follows:
Mens One sink in a built-in counter top with a three foot square mirror
----
centered on the wall behind the sink. One wall mounted urinal, two
water closets each with a two-roll paper dispenser and a coat hook
on the partition door.
Womens One sink in a built-in counter top with a three foot square
------
mirror centered on the wall above the sink. Two water closets each
with a two-roll paper dispenser and a coat hook on the partition
door.
- --Break Room with a five foot counter unit with cabinets beneath and a wet
bar sink.
- --Ceiling will be 2'X4' acoustical tile with flush mounted fluorescent
fixtures to provide 75 foot candles at 3' desk height.
- --Electrical outlets will be installed in wall where needed with an allowance
of one outlet per each 10 lineal feet of wall.
- --Telephone outlets will be installed in walls with a pull string for telephone
company.
- --Doors to be paint grade.
- --Office area to be heated and air-conditioned to maintain 75 degrees F
inside temperature with the outside temperature varying at any point within
the 10 year maximum or minimum for the area.
Warehouse Area
- --------------
- --Electrical lighting in the main warehouse area will be standard high bay
high pressure sodium fixtures to provide 15 foot candles in all areas of
approximately 24,600 square feet. The sewing and assembly area of
approximately 8,400 square feet shall provide 75 foot candles at bench height
or 36" from the floor. This lighting arrangement is shown on Simmons USA
drawing No. FNXLITE dated 7/8/87 and approved revisions dated 7/13/87.
<PAGE>
[OFFICE MAP]
<PAGE>
- --Evaporative coolers will be installed with 4' drops. Nine 21,000 CFM units
will be installed.
- --600 amp 480/277 volt "Y" service will be brought into the building to
panels located at the first overhead door to the east side of the main entry
door utilizing three separate meters.
- --A glass door entry for employees only will be relocated to the area shown
on Simmons USA drawing NO. FNXOFFC2 and approved revisions dated 7/13/87.
Hallway will be added to provide direct access to warehouse.
- --Any code required emergency or exit lighting shall be provided by landlord.
<PAGE>
[OFFFICE MAP]
<PAGE>
[OFFICE LIGHTING MAP]
<PAGE>
EXHIBIT "A"
SECOND ADDENDUM TO INDUSTRIAL Lease AGREEMENT
---------------------------------------------
THIS SECOND ADDENDUM is made and entered in this 28th day of March,
1989, by and between RUDEL DEVELOPMENT (hereinafter "Landlord"), and SIMMONS
COMPANY (hereinafter "Tenant"), and shall constitute a Second Addendum to the
Industrial Real Estate Lease and Addendum (hereinafter "Master Lease") dated
June 18, 1987. The terms and conditions of the Master Lease shall remain in
effect except as herein modified.
1. Effective January 9, 1989, an additional 18,000 square feet shall be
added to the Master Lease as outlined on the attached floor plan.
2. The Base Rent for this additional space shall be as follows:
1/9/89 thru 2/28/89 $2,427.10 per month plus sales tax
3/1/89 thru 3/31/89 $3,420.00 per month plus sales tax
4/1/89 thru 8/31/89 $3,690.00 per month plus sales tax
9/1/89 thru 8/31/90 $3,870.00 per month plus sales tax
9/1/90 thru 8/31/92 $4,050.00 per month plus sales tax
9/1/92 thru 2/28/95 $4,590.00 per month plus sales tax
3/1/95 thru 8/31/97 $4,950.00 per month plus sales tax
3. The attached Exhibit "A" indicates the allowances for each of the
categories of tenant improvements to be added to this additional 18,000
square feet. The tenant improvements as budgeted in Exhibit "A" are included
in the Base Rent amounts in Paragraph 2 above. The existing electrical
service in the original space will be utilized to feed the electrical needs
of this expansion space. If Tenant requests additional tenant improvements
over the budgeted allowances, Tenant shall reimburse Landlord for said
amounts.
4. All references in the Master Lease regarding additional charges for
maintenance, insurance, property taxes and utilities shall apply to this
expansion space in a prorated manner.
5. Thirteen parking spaces shall be added to the original parking allotment
for a total of 48 spaces.
6. This additional space shall be subject to all of the terms and
provisions of the Master Lease and will be coterminous with the Master Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Addendum as of the day and year first above written.
LANDLORD: TENANT:
RUDEL DEVELOPMENT SIMMONS COMPANY
/s/ Glenn Rudel
- ------------------------ By: /s/ Thomas J. Clark
By: Glenn Rudel, Owner ---------------------------
4/5/89 Its: V.P. Finance
---------------------------
<PAGE>
EXHIBIT "A"
-----------
TENANT IMPROVEMENT ALLOWANCES COST BREAKDOWN
EVAPORATIVE COOLING $ 7,500.00
-THREE (3) - 21,000 CFM UNITS
LIGHTING
-400 WATT HIGH BAY LIGHTING BUDGET 10,000.00
FIRE RATED DOORS
-(1) - 10 X 12 ROLL UP DOORS 2,166.00
SAW CUT WALLS 700.00
HAUL OFF CONCRETE 1,000.00
ROOF PATCHING AROUND NEW COOLERS 700.00
ARCHITECT FEES 500.00
ENGINEERING FEES 500.00
PERMIT 2,000.00
CONTINGENCY 2,000.00
CLEAN UP BY SIMMONS 0.00
SALES TAX 1,150.00
CONTRACTOR'S PROFIT & OVERHEAD 2,700.00
---------
TOTAL COST OF TENANT IMPROVEMENTS $30,916.00
==========
If Simmons Company requests any additional improvements over the above
budgeted allowances, Simmons Company will pay for those amounts directly to
Rudel Development.
<PAGE>
[STREET MAP]
EXHIBIT 10.36
LEASE AGREEMENT
CONCOURSE
ATLANTA, GEORGIA
LANDLORD: CONCOURSE I, LTD.
-------------------------------------------------
TENANT: SIMMONS COMPANY
-------------------------------------------------
BUILDING: CONCOURSE CORPORATE CENTER ONE
-------------------------------------------------
SUITE: 600
-------------------------------------------------
SQ. FT.: 37,500 RENTABLE SQUARE FEET (34,404 USABLE SQUARE FEET)
-------------------------------------------------------
TERM: TEN (10) YEARS EIGHT (8) MONTHS (AUGUST 1, 1992 - MARCH 31, 2003)
-------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Item Page Item Page
<S> <C> <C> <C> <C>
1. Premises and Term . . . . . . . . . . . . 1 23. Attorney's Fees . . . . . . . . . . . . 8
2. Rent. . . . . . . . . . . . . . . . . . . 1 24. Time of Essence . . . . . . . . . . . . 8
3. Reimbursement for Increases in Operating 25. No Estate in Land . . . . . . . . . . . 8
Expenses and Taxes . . . . . . . . . . . 2 26. Security Deposit . . . . . . . . . . . 8
4. Delivery of the Premises . . . . . . . . . 3 27. Completion of the Premises . . . . . . 9
5. Acceptance of the Premises . . . . . . . . 3 28. Parking Arrangements . . . . . . . . . 9
6. Use . . . . . . . . . . . . . . . . . . . 3 29. Rules and Regulations . . . . . . . . . 9
7. Tenant's Care of the Premises . . . . . . 3 30. Right to Relocate . . . . . . . . . . . 9
8. Services . . . . . . . . . . . . . . . . . 4 31. Late Payments . . . . . . . . . . . . . 9
9. Destruction or Damage to Premises . . . . 5 32. Estoppel Certificate . . . . . . . . . 9
10. Default by Tenant: Landlord's Remedies . . 5 33. Severability and Interpretation . . . . 9
11. Assignment and Subletting . . . . . . . . 6 34. Multiple Tenants . . . . . . . . . . . 9
12. Condemnation . . . . . . . . . . . . . . . 7 35. Force Majeure . . . . . . . . . . . . . 9
13. Inspections . . . . . . . . . . . . . . . 7 36. Quiet Enjoyment . . . . . . . . . . . . 9
14. Subordination . . . . . . . . . . . . . . 7 37. Brokerage Commission; Indemnity . . . . 9
15. Indemnification and Hold Harmless . . . . 7 38. Exculpation of Landlord . . . . . . . . 9
16. Tenant's Insurance . . . . . . . . . . . . 7 39. Original Instrument . . . . . . . . . . 10
17. Remedies Cumulative . . . . . . . . . . . 8 40. Georgia Law . . . . . . . . . . . . . . 10
18. Entire Agreement - No Waiver . . . . . . 8 41. No Recordation of Lease . . . . . . . . 10
19. Holding Over . . . . . . . . . . . . . . . 8 42. Hazardous Wastes . . . . . . . . . . . 10
20. Headings . . . . . . . . . . . . . . . . . 8 43. Lease Binding Upon Delivery . . . . . . 10
21. Notices . . . . . . . . . . . . . . . . . 8 44. Special Stipulations . . . . . . . . . 10
22. Heirs, Successors and Assigns - Parties . 8 Signature Page . . . . . . . . . . . . 10
</TABLE>
EXHIBIT "A" - Location of Premises Within Building
EXHIBIT "B" - Space Plan of Premises
EXHIBIT "C" - Work Letter
EXHIBIT "D" - Rules and Regulations
EXHIBIT "E" Description of the Property
EXHIBIT "F" Right of First Refusal/Subject Space
EXHIBIT "G" Equipment List
<PAGE>
LEASE AGREEMENT
CONCOURSE AT LANDMARK CENTER
THIS LEASE AGREEMENT (the "Lease") made this 7th day of February, 1992
by and between CONCOURSE I, LTD. ("LANDLORD"), a Georgia limited
partnership which has as its address for all purposes hereunder as follows:
c/o The Landmarks Group General Corporation
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328-5346
and SIMMONS COMPANY ("Tenant"), a corporation of the State of Delaware
which has as its address:
6 Executive Park Drive
Atlanta, Georgia 30329 until the Commencement Date, and thereafter,
at the Premises
WITNESSETH:
-----------
PREMISES AND TERM
*Such figures to
be confirmed and
if appropriate,
adjusted, by
Wakefield/Beasley
Architects, Inc.
1. (a) Landlord hereby rents and leases to Tenant, and Tenant hereby
rents and leases from Landlord, the following described space (the
"Premises"):
Floor: 6th Suite: 600 Square Feet: 37,500#/rentable square
---- --- -----------------------
feet (34,404*usable) located at the herein called "Building":
--------------------
Building: Corporate Center One Address: One Concourse Parkway
-------------------- ---
Fulton County, Georgia
Total Building Rentable Area: 287,929
--------------------------------------
(b) The Premises are more particularly shown and outlined on the
space plans attached hereto as Exhibit "B", and made a part hereof, and are
-----------
located in that portion of the Building shown on Exhibit "A", attached
-----------
hereto and by this reference incorporated herein. The term of this Lease
(the "Term") shall commence, subject to the provisions of Paragraph 4,
herein, on the 1st day of August, 1992 (the "Commencement Date"), and end
at midnight on the 31 day of March 2003 unless sooner terminated as
herein provided. This Lease shall be effective and enforceable between
Landlord and Tenant upon its execution and delivery, whether such execution
and delivery occurs on, prior to, or after the Commencement Date.
(c) "Lease Year" as used herein shall mean (i) each and every
twelve (12) month period during the Term of this Lease, or (ii) in the event
of Lease expiration or termination, the period between the last twelve (12)
month period and said expiration or termination. The first such twelve
(12) month period shall commence on the Commencement Date.
(d) The Building and the land upon which said Building is
located, more particularly described on Exhibit "E", attached hereto and by
-----------
this reference incorporated herein, is herein referred to as the "Property".
(e) The Premises shall include the appurtenant right to use, in
common with others, public lobbies, entrances, stairs, corridors,
elevators, and other public portions of the Building. All the windows and
outside walls of the Premises, and any space in the Premises used for
shafts, pipes, conduits, ducts, telephone ducts and equipment, electric or
other utilities, sinks or other Building facilities, and the use thereof
and access thereto through the Premises for the purposes of operation,
maintenance, inspection, display and repairs are hereby reserved to
Landlord. No easement for light, air or view, is granted or implied
hereunder, and the reduction or elimination of Tenant's light, air or view
will not affect Tenant's liability under this Lease.
<PAGE>
RENT
**See Special
Stipulations
2. (a) Tenant shall pay to Landlord at the address of Landlord
indicated herein, or at such other place as Landlord may designate in
writing, without demand, deduction or setoff, an annual rental for the
first year of the Term in the amount of $ ** due and payable
-----
in equal monthly installments (the "Monthly Rental") in advance on the
first (1st) day of each calendar month during the Term. The Monthly Rental
for the first Lease Year is $ ** (the "Initial Monthly Rental").
----------
The term "Rent", as used herein, shall mean Monthly Rental, "Adjusted
Monthly Rental" (as that term is herein defined), "Additional Rent" (as
that term is herein defined) and any additional amounts or charges due of
Tenant hereunder.
(b) Definitions as used in this Paragraph 2:
(i) The "Consumer Price Index" shall be the revised
Consumer Price Index for All Urban Consumers, All Items for the United
States (1982-1984=100), issued by the U.S. Department of Labor, Bureau of
Labor Statistics. If the Consumer Price Index published by the U.S. Bureau
of Labor Statistics is discontinued, another index recognized as
authoritative shall in good faith be substituted.
(ii) "Increase Multiplier" shall mean a fraction:
The Numerator: The Consumer Price Index, as herein
defined, published for the month which is the later of
fifteen (15) months prior to the end of the then expiring
Lease Year or three (3) months prior to the Commencement
Date, increased or decreased (whichever shall be
appropriate) by 55% of the amount by which the Consumer
Price Index published for the month which is three (3)
months prior to the end of the then expiring Lease Year
exceeds such Consumer Price Index.
The Denominator: The Consumer Price Index published
for the month which is the later of fifteen (15) months
prior to the end of the then expiring Lease Year or three
(3) months prior to the Commencement Date.
(c) Tenant shall pay to Landlord, without demand, deduction or
set-off, for each month during each Lease Year subsequent to the first Lease
Year, an Adjusted Monthly Rental determined as a product of (i) the Monthly
Rental or Adjusted Monthly Rental, as the case may be, and (ii) the Increase
Multiplier; provided, however, in no event shall
[Please Initial]
1
<PAGE>
(d) If the Monthly Rental for any given Lease Year cannot be
calculated by the end of the then expiring Lease Year because of the
unavailability of the above-mentioned figures, then Tenant shall continue
to pay the existing Monthly Rental, and Landlord shall prepare as soon as
is practical a statement reflecting the Monthly Rental for the Lease Year
in which Tenant is then occupying the Premises. Within thirty (30) days
following receipt of Landlord's statement, Tenant shall also pay any
amounts due from Tenant because of such adjustments for months in which
Tenant would have paid a greater Monthly Rental had such figure been
calculated earlier. In the event Tenant's payments have been in excess of the
Monthly Rental actually due, Tenant shall be given a credit for such amount
from the payment of Monthly Rental next due of Tenant.
(e) Should this Lease commence or terminate at any time other
than the last day of a calendar month, the amount of Rent due from Tenant
shall be proportionately adjusted based on that portion of the month that
this Lease is in effect.
REIMBURSEMENT
FOR INCREASES
IN OPERATING
EXPENSES AND
TAXES
3. (a) The Initial Monthly Rental provided for herein is based, in
part, upon Landlord's estimate of "Operating Costs," as hereinafter
defined, of repairing, maintaining, and operating the Building and Property
during each calendar year of the Term. The "Initial Operating Costs" are
stipulated to be $6.50 multiplied by the number of square feet in the Total
-----
Building Rentable Area.
(b) The term "Operating Costs" shall mean all operating expenses
of the Property and Building which shall be computed on an accrual basis
and which shall include all expenses, costs, and disbursements of every
kind and nature which Landlord (i) shall pay; and/or (ii) become obligated
to pay, including, but not limited to, the following:
(i) Wages and salaries of all employees engaged in the operation and
maintenance of the Property and Building, including, but not limited to,
taxes, insurance and benefits relating thereto;
(ii) All supplies and materials used in the operation and maintenance of
the Property and Building;
(iii) Cost of water, sewage, electricity and other utilities furnished in
connection with the operation of the Building;
(iv) Cost of all service agreements and maintenance for the Property and
Building and the equipment therein, including, but not limited to, trash
removal, security services, alarm services, window cleaning, janitorial
service, HVAC maintenance, elevator maintenance, and grounds maintenance;
(v) Cost of all insurance relating to the Property and Building
including, but not limited to, the cost of casualty and liability
insurance applicable to the Property and Building and Landlord's
personal property used in connection therewith;
(vi) All taxes (ad valorem and otherwise), assessments, and governmental
charges whether federal, state, county, or municipal, and whether by
taxing districts or authorities presently taxing the Property and Building
or by others, subsequently created or otherwise, and any taxes (other than
federal and state income taxes), and assessments attributable to the
Property and Building or its operation and any reasonable consultants
fees incurred with respect to issues or concerns involving the taxes or
the Building, the Property, or both;
(vii) Cost of repairs and general maintenance of the interior and
exterior of the Property and Building (including, but not limited to,
glass breakage), parking areas, and landscaping;
(viii) A management fee for general operation and management of the
Property and Building, such management fee to be consistent with the
management fee paid for the management of other first-class office
buildings in the area of the Building;
(ix) An amortization cost due to any capital expenditures incurred (i)
which have the effect of reducing or limiting Operating Costs of the
Property and Building, if such reduction or limitation inures to Tenant's
benefit (but only to the extent and in the amount that such Operating Costs
of the Property and Building are reduced), or (ii) which may be required by
governmental authority or by Landlord's insurance carrier;
(x) all assessments made, charged, levied, assessed or accrued
against Landlord by The Concourse Office Park Association,
Inc.
Expressly excluded from the definition of the term "Operating Costs" are:
(i) Replacement of capital investment items (excepting those
expenditures relating to above);
(ii) Landlord's home office expense;
(iii) Leasing commissions;
(iv) Specific costs billed to and paid by specific tenants or
other third parties;
(v) Depreciation;
(vi) Principal, interest, and other costs directly related to
financing the Building;
(vii) The cost of any repairs or general maintenance paid by the
proceeds of insurance policies carried by Landlord on the
Property and Building;
(viii) The wages and salaries of any supervisory or management
employee of Landlord not involved in the day-to-day
operation and maintenance of the Property and Building.
(c) The term "Tenant's Share" shall mean the proportion that the
Square Feet in the Premises, as shown in Paragraph 1 herein, bears to
ninety-five percent (95%) of the Total Building Rentable Area, or the
average percentage of the Total Building Rentable Area actually leased in
the Building for any calendar year, if such average is greater than ninety-
five percent (95%) of the Total Building Rentable Area. The average shall be
determined by adding together the total leased space on the last day of each
month during the calendar year in question and dividing by twelve (12).
Notwithstanding anything to the contrary contained herein, in the event the
Building is not fully occupied during any calendar year, appropriate adjustments
shall be made to the greater of (i) the actual operating expenses for 1993, on a
per square foot per annum basis adjusted in accordance with this Lease, or (ii)
those Operating Costs which vary with occupancy, such as, by way of illustration
but not limitation, janitorial and electric costs, determine Operating Costs as
though the Building had been fully occupied in such calendar year, but in no
event shall Tenant ever be required to pay more than Tenant's Share of Operating
Costs.
[Please Initial]
2
<PAGE>
See Special
Stipulations
(d) In the event that the actual Operating Costs for the
calendar year (projected for a full calender year in the event the
Commencement Date occurs in the year that the Building is completed and first
ready for occupancy) in which this Lease commences ("Initial Calendar Year")
exceeds the Initial Operating Costs set out in Paragraph 3(a) above. Tenant
shall pay Tenant's Share of the Initial Calendar Year's increase in the
Operating Costs over the Initial Operating Costs as set forth above
proportionately to the extent that Tenant's Lease was in effect during the
Initial Calendar Year. Any increase payable by Tenant under this provision
shall be deemed "Additional Rent." Landlord shall within the period of one
hundred twenty (120) days (or as soon thereafter as practical) after the
close of the Initial Calendar Year, give Tenant an unaudited statement of such
year's actual Operating Costs ("Actual Operating Costs"), and a comparison with
the Initial Operating Costs, and if Additional Rent is due. Tenant shall pay
such Additional Rent to Landlord within thirty (30) days of statement receipt.
(e) Landlord shall provide Tenant with a comparison of the
Initial Operating Costs and the projected Operating Costs for such current
calendar year, and Tenant shall thereafter pay, as Additional Rent Tenant's
Share of any projected increase in Landlord's projected Operating Costs for
operating the Property and Building over the Initial Operating Costs. Such
projected increase in Operating Costs shall be payable in advance on a
monthly basis by paying one-twelfth (1/12th) of such projected increase
during each month of such respective calendar year. If Landlord has not
furnished Tenant such comparison by January 1, Tenant shall continue to pay
on the basis of the prior year's estimate until the month after such
comparison is given. Landlord shall, within a period of one hundred twenty
(120) days (or as soon thereafter as practical) after the close of each
such respective calendar year following the Initial Calendar Year of
occupancy provide Tenant an unaudited statement of such year's Actual Operating
Costs compared to the Initial Operating Costs. If the Actual Operating Costs
are greater than the projected Operating Costs, Tenant shall pay Landlord,
within thirty (30) days of such statement's receipt, Tenant's Share of the
difference thereof. If such year's projected Operating Costs are greater than
the Actual Operating Costs, Landlord shall credit Tenant, within thirty (30)
days of such statement issuance. Tenant's Share of the difference between the
projected Operating Costs and the greater of Actual Operating Costs or Initial
Operating Costs.
(f) Anything herein to the contrary notwithstanding, in no event
shall the Initial Monthly Rental as set forth in Paragraph 2(a) ever be
reduced.
(g) Should this Lease commence or terminate at any time other
than the first day of a calendar year the amount of additional rent due
from Tenant shall be proportionately adjusted based on that portion of the
year that this Lease was in effect.
(h) Within thirty (30) days of its receipt of the operating
statement, Tenant at its sole cost and expense shall have the right to
review in Landlord's offices and during normal business hours Landlord's
records of Operating Costs. If within such thirty (30) day period. Tenant does
not give written notice stating in detail reasonable objections to such
Additional Rent calculations, Tenant shall be deemed to have given approval of
such calculations.
(i) Tenant's payments of Additional Rent shall not be deemed
payments of base rental as that term is construed relative to governmental
wage and price controls or analogous governmental actions affecting the
amount of Rent which Landlord may charge Tenant for the Premises.
DELIVERY OF THE
PREMISES
4. [SECTION DELETED]
ACCEPTANCE OF
THE PREMISES
5. The taking of possession of Premises by Tenant shall be
conclusive evidence that Tenant accepts the same "as is" and that said
Premises and the Building were in good and satisfactory condition for the
use intended at the time such possession was taken, subject to any "punch-
list" items agreed upon by Landlord and Tenant which must be remedied after
Tenant's acceptance of the Premises.
USE
6. Tenant shall use the Premises only for professional, executive
office purposes, generally in accordance with the manner of use by other
tenants in the Building. Tenant's use of the Premises shall not violate
any ordinance, law or regulation of any governmental body or the "Rules and
Regulations" of Landlord (the "Rules") as set forth in Exhibit "D" attached
-----------
hereto and made a part hereof, or cause an unreasonable amount of use of
any of the services provided in the Building. Tenant agrees to conduct its
business in the manner and according to the generally accepted business
principles of the business or profession in which Tenant is engaged.
TENANT'S CARE
OF THE
PREMISES
7. (a) Tenant will take good care of the Premises and the fixtures
and appurtenances therein, and will neither commit nor suffer any active or
permissive waste or injury thereof. Tenant's responsibilities in
conjunction therewith shall maintain the Premises in a first-class
condition and state of repair. All such repair work, maintenance and any
alterations permitted by Landlord (i) shall be done at Tenant's sole costs
and expense; (ii) shall be done by Landlord's employees or agents or, with
Landlord's express written consent, by persons requested by Tenant; and
(iii) shall first be consented to in writing by Landlord. Tenant shall, at
Tenant's expense, but under the direction of Landlord and performed by
Landlord's employees or agents, or with Landlord's express written consent,
by persons requested by Tenant and consented to in writing by Landlord,
promptly repair any injury or damage to the Premises or Building caused by
the misuse or neglect thereof by Tenant, by Tenant's contractors,
subcontractors, customers, employees, licensees, agents, or invitees
permitted or invited (whether by express or implied invitation) on the
Premises by Tenant, or by Tenant moving in or out of the Premises.
(b) Tenant will not, without Landlord's prior written consent,
make alterations, additions or improvements (including, but not limited to,
structural alterations, additions or improvements) in or about Premises and
will not do anything to or on the Premises which will increase the rate of
fire or other insurance on the Building or the Property. Beginning on January
1, 1994 and on or about January 1 thereafter during the Term,; provided, this
provision shall not mean that Landlord shall require Tenant to acquire
Landlord's consent to hang pictures and other normal wall hangings. All
alterations, additions or improvements of a permanent nature made or installed
by Tenant to the Premises shall become the property of Landlord at the
expiration or early termination of this Lease. Landlord reserves the right to
require Tenant to remove any improvements or additions made to the Premises by
Tenant and to repair and restore the Premises to their condition prior to such
alteration, addition or improvement, reasonable wear and tear, unrepaired
casualty not caused by
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Tenant and condemnation excepted, unless Landlord has agreed in writing at
or prior to the time Tenant requests the right to make such alteration,
addition or improvement, that such item need not be removed by Tenant at
the expiration or early termination of the Term.
(c) No later than the last day of the Term, Tenant will remove all
Tenant's personal property and repair all injury done by or in connection
with installation or removal of said property and surrender the Premises
(together with all keys, access cards or entrance passes to the Premises
and/or the Building) in as good a condition as they were at the beginning
of the Term, reasonable wear and tear, unrepaired casualty not caused by
Tenant* and condemnation excepted. All property of Tenant remaining in the
Premises after expiration of the Term shall be deemed conclusively
abandoned and may be removed by Landlord, and Tenant shall reimburse
Landlord for the cost of removing the same, subject however, to Landlord's
right to require Tenant to remove any improvements or additions made to the
Premises by Tenant pursuant to the preceding Paragraph.
(d) In doing any work related to the installation of Tenant's
furnishings, fixtures or equipment in the Premises, Tenant will use only
contractors or workmen consented to by Landlord in writing prior to the
time such work is commenced. Landlord may condition its consent upon its
receipt from such contractors or workers of acceptable (i) lien waivers;
and (ii) evidence of liability and personal property insurance coverage in
such amounts and with such insurance carriers as shall be reasonably
satisfactory to Landlord. Tenant shall promptly remove any lien or claim
of lien for material or labor claimed against the Premises or Building, or
both, by such contractors or workmen if such claim should arise, and hereby
indemnifies and holds Landlord harmless from and against any and all loss,
cost, damage, expense or liabilities including, but not limited to
reasonable attorney's fees, incurred by Landlord, as a result of or in any
way related to such claims or such liens.
(e) Tenant agrees that all personal property brought into the
Premises by Tenant, its employees, licensees and invitees shall be at the
sole risk of Tenant, and Landlord shall not be liable for theft thereof or
of money deposited therein or for any damages thereto unless caused by
gross negligence or willful misconduct of Landlord.
SERVICES
8. (a) Provided Tenant is in compliance with the terms and
conditions of this Lease. Landlord shall furnish the following services
(the cost of which services shall be reimbursed to Landlord in accordance
with Paragraph 3 herein):
(i) Elevator service for passenger and delivery needs.
(ii) Air conditioning during summer operations and heat during
winter operations at temperature levels similar to other first class
office buildings in the Atlanta area, but consistent with and subject
to all Federal and local energy conservation regulations.
(iii) Public restrooms, including the furnishing of soap, paper
towels, and toilet tissue.
(iv) Either hot and cold or tempered running water for all
restrooms and lavatories.
(v) Janitorial service, include sanitizing, dusting, cleaning,
mopping, vacuuming and trash removal each Monday through Friday, and
floor waxing and polishing, window washing, smudge removal and
venetian blind cleaning as appropriate.
(vi) The replacement of building standard fluorescent lamps and
ballasts as needed.
(vii) Repairs and maintenance, for maintaining in good order at
all times the exterior walls, exterior windows, exterior doors and roof
of the Building, public corridors, stairs, elevators, storage rooms,
restrooms, the heating, ventilating and air conditioning systems,
electrical and plumbing systems of the Building, and the walks,
paving and landscaping surrounding the Building.
(viii) Grounds care, including the sweeping of walks and parking
areas and the maintenance of landscaping in an attractive manner.
(ix) General management, including supervision, inspections and
management functions.
(x) Electricity to operate the Building and Property.
(b) The services provided for in Paragraph 8(a) herein are predicated
on and are in anticipation of certain usage of the Premises by Tenant as
follows:
(i) Services shall be provided for the Building during normal
business hours as described in the Rules.
(ii) HVAC design is based on sustained outside temperatures being
no higher than 95 degrees Fahrenheit and no lower than 14 degrees
Fahrenheit with sustained occupancy of the Premises by no more than one
person per 150 square feet of floor area and heat generated by electrical
lighting and fixtures not to exceed 3.0 watts per square foot.
(iii) Electric power usage and consumption for the Premises shall
be based on lighting of the Premises during normal business hours on a
level suitable for normal office use and power for small desk-top
machines and devices using no more than 110 volt, 20 amp circuits
(allowable load of 15 amps). Heavier use items shall not be used or
installed, unless expressly permitted elsewhere herein or by separate
written consent of Landlord.
(iv) Should Tenant's total rated electrical design load per
square foot in the Premises exceed the Building standard rated
electrical design load, on a per square foot basis, as determined by
Landlord from time to time, for either low or high voltage electrical
consumption, or if Tenant's electrical design requires low voltage
or high voltage circuits in excess of Tenant's share of the Building
standard circuits, as such share is determined by Landlord
in Landlord's reasonable judgment, Landlord may (at Tenant's
expense), if reasonably possible, install within the Building one
(1) additional high voltage panel and/or one (1) additional low
voltage panel with associated transformer (the "Additional Electrical
Equipment") as necessary to accommodate the aforesaid requirements.
If the Additional Electrical Equipment is installed because Tenant's
low or high voltage rated electrical design load exceeds the applicable
Building standard rated electrical design load (on a per square foot
basis), then a meter may also be added by Landlord (at Tenant's expense)
to measure the electricity provided through the Additional Electrical
Equipment.
(c) If Tenant uses any services in an amount or for a period in
excess of that provided for herein, Landlord also reserves the right to
charge Tenant as Additional Rent reimbursement for the direct cost of such
added services. Landlord further reserves the right to install separate
metering devices for the purpose of determining such excessive periods
and/or amounts at Tenant's sole cost and expense. In the event of
disagreement as to such additional charge, the opinion of the appropriate
local utility company or an independent professional engineering firm shall
prevail.
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(d)* Landlord shall not be liable for any damages directly or
indirectly, and Tenant shall have no right of set-off or reduction in Rent,
resulting from the installation, use malfunction, or interruption or use of
any equipment in connection with the furnishing of services referred to
herein, including, but not limited to, any interruption in services by any
cause beyond the immediate control of the Landlord: provided however,
Landlord shall exercise due care in furnishing adequate and uninterrupted
services. Without limitation on the foregoing, under no circumstances*
shall Landlord incur liability for damages caused directly or indirectly by
any malfunction of Tenant's computer systems resulting from or arising out
of the failure or malfunction of any electrical, air conditioning or other
system serving the Building, and Tenant hereby expressly waives the right
to make any such claim against Landlord.
(e) There shall be available to tenants in the Building a Fairchild
Communications Systems Service (the "Fairchild Service"), upon terms,
conditions and fees to be agreed upon by Tenant and the party providing
such Fairchild Service. Neither Landlord nor any manager of the Building
shall be liable to Tenant under this Lease for any damages should the
furnishing of any or all of such Fairchild Service be disrupted, terminated
or diminished in any manner, nor shall any disruption, diminution, or
cessation relieve Tenant from the performance of any of Tenant's covenants,
conditions and agreements under this Lease, nor shall any disruption,
diminution or cessation constitute constructive eviction or entitle Tenant
to an abatement of Rent or other charges. Tenant agrees to hold Landlord
and any such manager harmless from any claims Tenant may have arising out
of or connected with such cessation or interruption. If Tenant elects not
to use or be a part of the Fairchild Service as herein described, and
Tenant has telephone or other such equipment installed at Tenant's own
direction, then such other system shall not (i) cause the Building not to
be in compliance with any municipal safety codes or ordinances, including,
but not limited to, fire safety codes; (ii) cause damage to the Building;
(iii) require an amount of electrical or other services unreasonably in
excess of the requirements for customary business-telephone systems; or
(iv) impact upon the normal use, function and operation of the Fairchild
Service. If Tenant elects not to use or be a part of the Fairchild
Service, Tenant shall not use any wiring or other equipment which is a part
of the Fairchild Service without the prior, written consent of the provider of
such services. If Tenant shall use any such wiring or equipment without such
consent. Tenant shall be liable for, and shall pay to the provider of such
services on demand, (i) the cost of such use; (ii) the cost of repairing or
replacing any writing or equipment damaged or altered by such use; and (iii)
any and all other damages caused by such use.
DESTRUCTION OR
DAMAGE TO
PREMISES
9. (a) If the Premises or the Building are totally destroyed (or so
substantially damaged as to be untenantable in the determination of the
Architect of the Building) by storm, fire, earthquake or other casualty,
Landlord shall have the option to:
(i) Terminate this Lease as of the date of the occurrence of the
storm, earthquake, fire or other casualty by giving written
notice to Tenant within sixty (60) days from the date of
such damage or destruction; or
(ii) Commence the process of restoration of the Premises to a
tenantable condition within sixty (60) days from the date of
such casualty, and proceed with due diligence to complete
said restoration of the Premises. In the event Landlord
chooses to restore the Premises, Rent shall abate with
respect to the untenantable portion of the Premises from the
date of such casualty until the date of substantial
restoration thereof or any restoration after a partial
damage or destruction.
In the event Landlord fails to complete such restoration with reasonable
diligence within one hundred eighty (180) days of the date of such
casualty, as described above, this Lease may be terminated as of the date of
such casualty, as described above, upon written notice from either party to the
other given not more than ten (10) days following the expiration of said one
hundred eighty (180) day period. In the event such notice is not given,
then this Lease shall remain in force and effect and Rent shall commence
upon delivery of the Premises to Tenant in a tenantable condition
(evidenced by notice to Tenant that the Premises are in Landlord's
judgment substantially repaired). In the event such damage or destruction
occurs within six (6) months of the expiration of the Term, Tenant may, at
its option on written notice to Landlord within thirty (30) days of such
destruction or damage, terminate this Lease as of the date of such
destruction or damage.
(b) If the Premises are damaged but not rendered wholly
untenantable by any of the events set forth in Paragraph 9(a) above, Rent
shall abate in such proportion as the Premises have been made untenantable.
Landlord shall restore the Premises expeditiously, and upon the date of
restoration, full Rent shall commence.
DEFAULT BY
TENANT;
LANDLORD'S
REMEDIES
10. (a) The occurrence of any of the following shall constitute an
event of default hereunder by Tenant:
(i) The Rent or any other sum of money due of Tenant hereunder
is not paid within (10) days of the date when due:
(ii) The Premises are deserted or vacated for in excess of
ninety (90) consecutive days;
(iii) Any petition is filed by or against Tenant under any
section or chapter of the National or Federal Bankruptcy Act or
any other applicable Federal or State bankruptcy, insolvency or
other similar law, and, in the case of a petition filed against
Tenant, such petition is not dismissed within thirty (30) days
after the date of such filing; if Tenant shall become insolvent
or transfer property to defraud creditors; if Tenant shall make
an assignment for the benefit of creditors; or if receiver is
appointed for more than eighty-five percent (85%) of Tenant's
assets;
(iv) Tenant fails to bond off or otherwise remove any lien
filed against the Premises or the Building by reason of Tenant's
actions, within ten (10) days after Tenant has notice of the
filing of such lien;
(v) Tenant fails to observe, perform and keep the
covenants, agreements, provisions, stipulations, conditions and
Rules herein contained to be observed, performed and kept by
Tenant (other than the failure to pay when due any Rent or any
other sum of money becoming due Landlord hereunder, which under
all circumstances is governed by and subject to Paragraph 10(a)(i)
herein), and persists in such failure after ten (10) days
written notice by Landlord requiring that Tenant remedy, correct,
desist or comply (or if any such failure to comply on the part of
Tenant would reasonably require more than ten (10) days to
rectify, unless Tenant commences rectification within the ten
(10) day notice period and thereafter promptly, effectively and
continuously proceeds with the rectification of the failure to
comply on the part of Tenant and, in all such events, cures such
failure to comply on the part of Tenant no later than ninety (90)
days after such notice).
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(b) Upon the occurrence of an event of default. Landlord shall
have the option to do and perform any one or more of the following.
(i) Terminate this Lease in which event Tenant shall immediately
surrender the Premises to Landlord. If Tenant shall fail to do so,
Landlord may, without further notice and without prejudice to any
other remedy, Landlord may have, lawfully enter upon the Premises without
the requirement of resorting to the dispossessory procedures set forth in
O.C.G.A. (Sections)44-7-50 et seq. and expel or remove Tenant and Tenant's
effects without being liable for any claim for trespass or damages
therefor. Upon any such termination, Tenant shall remain liable to
Landlord for damages, due and payable monthly on the day Rent would
have been payable hereunder, in an amount equal to the Rent and any
other amounts which would have been owing by Tenant for the balance of
the Term, had this Lease not been terminated, less the net proceeds, if
any, of reletting of the Premises by Landlord, after deducting all of
Landlord's costs and expenses (including, without limitation,
advertising expenses and professional fees) incurred in connection
with or in any way related to the termination of this Lease, eviction
of Tenant and such reletting; and/or
(ii) [SECTION DELETED]
(iii) Lawfully enter the Premises as the agent of Tenant without
the requirement of resorting to the dispossessory procedures set forth
in O.C.G.A. (Sections)44-7-50 et seq. and without being liable for any
claim for trespass or damages therefor, and, in connection therewith,
rekey the Premises, remove Tenant's effects therefrom and store the
same at Tenant's expense, without being liable for any damage thereto,
and relet the Premises as the agent of Tenant, without advertisement,
by private negotiations, for any term Landlord deems proper, and
receive the rent therefor. Tenant shall pay Landlord on demand any
deficiency that may arise by reason of such reletting, but Tenant
shall not entitled to any surplus so arising. Tenant shall reimburse
Landlord for all reasonable costs and expenses (including, without
limitation, advertising expenses and reasonable professional fees)
incurred in connection with or in any way related to the eviction of
Tenant and reletting of the Premises. Landlord, in addition to but
not in lieu of or in limitation of any other right or remedy provided
to Landlord under the terms of this Lease or otherwise (but only to
the extent such sum is not reimbursed to Landlord in conjunction with
any other payment made by Tenant to Landlord), shall have the right to
be immediately repaid by Tenant the amount of all sums expended by
Landlord and not repaid by Tenant in connection with preparing or
improving the Premises to Tenant's specifications and any and all
costs and expenses incurred in renovating or altering the Premises to
make it suitable for reletting; and/or
(iv) As agent of Tenant, do whatever Tenant is obligated to do by
the provisions of this Lease, including, but not limited to, lawfully
entering the Premises, without being liable to prosecution or any claims
for damages, in order to accomplish this purpose. Tenant agrees to
reimburse Landlord immediately upon demand for any expenses which Landlord may
incur in thus effecting compliance with this Lease on behalf of Tenant, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action, unless caused by the gross negligence or
willful misconduct of Landlord.
(c) Pursuit by Landlord of any of the foregoing remedies shall
not preclude the pursuit of general or special damages incurred, or of any
of the other remedies provided herein, at law or in equity.
(d) No act or thing done by Landlord or Landlord's employees or
agents during the Term shall be deemed an acceptance of a surrender of the
Premises. Neither the mention in this Lease of any particular remedy, nor
the exercise by Landlord of any particular remedy hereunder, at law or in
equity, shall preclude Landlord from any other remedy Landlord might have
under this Lease, at law or in equity. Any waiver of or redress for any
violation of any covenant or condition contained in this Lease or any of
the Rules now or hereafter adopted by Landlord, shall not prevent a
subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation. The receipt by
Landlord of Rent with knowledge of the breach of any covenant in this Lease
shall not be deemed a waiver of such breach.
ASSIGNMENT AND SUBLETTING
11. (a) Tenant shall not sublet any part of the Premises, nor assign
this Lease or any interest herein, without the prior written consent of
Landlord.* Additionally, neither Tenant nor any other person having an
interest in the possession, use, occupancy or utilization of the Premises
shall enter into any lease, sublease, license, concession, assignment or
<PAGE>
other agreement for use, occupancy or utilization of space in the Premises
which provides for rental or other payment for such use, occupancy or
utilization based, in whole or in part, on the net income or profits
derived by any person or entity from the Premises leased, used, occupied or
utilized. Any such purported lease, sublease, license, concession,
assignment or other agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use, occupancy or
utilization of any part of the Premises; if such a sublease is entered into,
neither the rent payable thereunder nor the amount thereof passed on to any
person or entity shall have deducted therefrom any expenses or costs related in
any way to the subleasing of such space.
(b) Consent by Landlord to one assignment or sublease shall not
destroy or waive this provision, and all later assignments and subleases
shall likewise be made only upon prior written consent of Landlord, which
consent shall not be unreasonably withheld or delayed by Landlord. In
the event a sublease or assignment is consented to by Landlord, any
sublessees or assignees shall become liable directly to Landlord for all
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obligations of Tenant hereunder without relieving or in any way modifying
Tenant's liability hereunder. In the event Tenant notifies Landlord of
Tenant's intent to sublease or assign this Lease, Landlord shall within
twenty (20) days from receipt of such notice (a) consent to such proposed
subletting; (b) deny such consent, giving its reasons for denying such
consent at the time of the denial. In the event Landlord gives its consent
to any such assignment or sublease, any rent or other cost to the assignee
or subtenant for all or any portion of the Premises over and above the Rent
payable by Tenant for such space shall be due and payable, and shall be
paid, to Landlord. In the event a sublease or assignment is made as herein
provided, Tenant shall pay Landlord a charge equal to the actual costs
incurred by Landlord, in Landlord's reasonable judgment (including, but not
limited to, the use and time of Landlord's personnel), for all of the
necessary and legal and accounting services required to accomplish such
assignment or subletting, as the case may be, up to, but not in excess of,
$750.00 per request.
(c) The sale or transfer of Tenant's voting stock (if a
corporation) or partnership interest (if a partnership) resulting in the
transfer of control of a majority of such stock or interest, or the
occupancy of the Premises by any successor firm of Tenant or by any firm
into which or with which Tenant may become merged or consolidated, shall
not be deemed an assignment of this Lease which would otherwise require the
prior written consent of Landlord.
CONDEMNATION
12. (a) In all of the Premises, or a part of such Premises such that
the Premises in the judgment of the Architect for the Building are
untenantable, are taken, by virtue of eminent domain or other similar
proceeding or are conveyed in lieu of such taking, this Lease shall expire
on the date when title or right of possession shall vest, and any Rent paid
for any period beyond said date shall be repaid to the Tenant. In the
event of a partial taking where this Lease is not terminated, the Rent
shall be adjusted in proportion to the square feet of the Premises taken,
as determined by the Architect for the Building. In either event, Landlord
shall be entitled to, and Tenant shall not have any right to claim, any
award made in any condemnation proceeding, action or ruling relating to the
Building or the Property; provided however, Tenant shall be entitled to
make a claim in any condemnation proceeding, action or ruling relating to
the Building for Tenant's moving expenses, loss of goodwill and the
unamortized value of leasehold improvements in the Premises actually paid
for by Tenant, to the extent such claim does not in any manner impact upon
or reduce Landlord's claim or award in such condemnation proceeding, action
or ruling.
INSPECTIONS
13. Landlord, its agents or employees may enter the Premises at
reasonable hours and upon reasonable prior notice (except in the event of
an emergency, for which no notice shall be required) to (a) exhibit the
Premises to prospective purchasers or tenants of the Premises or the
Building; (b) inspect the Premises to see that Tenant is complying with its
obligations hereunder; and (c) make repairs (i) required of Landlord under
the terms hereof; (ii) to any adjoining space in the Building; or (iii) to
any systems serving the Building which run through the Premises.
SUBORDINATION
14. (a) This Lease shall be subject and subordinate to any underlying
land leases or first priority deed to secure debt which may now or
hereafter affect this Lease, the Building or the Property and also to all
renewals, modifications, extensions, consolidations, and replacements of
such underlying land leases and such deeds to secure debt. In confirmation
of the subordination set forth in this Paragraph 14, Tenant shall, at
Landlord's request, execute and deliver such further instruments, in a
reasonable form, as may be desired by any holder of a first priority deed
to secure debt (a "Mortgagee") or by any lessor under any such underlying
land leases. Notwithstanding the foregoing, Landlord or such Mortgagee
shall have the right to subordinate or cause to be subordinated, in whole
or in part, any such underlying land leases or first priority deed to
secure debt to this Lease (but not in respect to priority of entitlement of
insurance or condemnation proceeds). In the event that any such underlying
land leases or first priority deed to secure debt terminates for any reason
or any such first deed to secure debt is foreclosed or a conveyance in lieu
of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, deliver to Mortgagee within ten (10) days of written request
an attornment agreement, providing that such Tenant shall continue to abide
by and comply with the terms and conditions of this Lease.
(b) In the event any proceedings are brought for the foreclosure
of, or in the event of exercise of the power of sale of conveyance in lieu
of foreclosure under any deed to secure debt, Tenant shall at the option of
the purchaser at such foreclosure or other sale, attorn to such purchaser
and recognize such person as Landlord under this Lease. Tenant agrees that
the institution of any suit, action or other proceeding by a Mortgagee or a
sale of the Property pursuant to the powers granted to a Mortgagee under
its deed to secure debt, shall not, by operation of law or otherwise,
result in the cancellation or the termination of this Lease or of the
obligations of the Tenant hereunder.
(c) In the event that such purchaser requests and accepts such
attornment, from and after the time of such attornment, Tenant shall have
the same remedies against such purchaser for the breach of an agreement
contained in this Lease that Tenant might have had against the Landlord if
the deed to secure debt had not been terminated or foreclosed, except that
such purchaser shall not be (i) liable for any act or omission of the prior
Landlord; (ii) subject to any offsets of defenses which tenant might have
against the prior Landlord; or (iii) bound by any Rent or security deposit
which Tenant might have paid in advance to the prior Landlord.
INDEMNIFICATION AND HOLD HARMLESS
15. (a) Tenant hereby indemnifies and holds Landlord harmless from
and against any injury, expense, damage, liability or claim, imposed on
Landlord by any person whomsoever, whether due to damage to the Premises,
claims for injuries to the person or property of any other tenant of the
Building or of any other person in or about the Building for any purpose
whatsoever, or administrative or criminal action by a governmental
authority, if such injury, expense, damage, liability or claim results
either directly or indirectly from the gross negligence or willful misconduct
by Tenant, the agents, servants, or employees of Tenant, or any other person
entering upon the Premises under express or implied invitation or consent
of Tenant. Tenant further agrees to reimburse Landlord for any costs or
expenses, including, but not limited to, court costs and reasonable
attorney's fees, which Landlord may incur in investigating, handling or
litigating any such claim or any such action by a governmental authority.
(b) Tenant agrees to report in writing to Landlord any
materially defective condition in or about the Premises known to Tenant,
and further agrees to attempt to contact Landlord by telephone immediately
in such instance.
TENANT'S INSURANCE
16. Tenant shall carry (at its sole expense during the Term) (i) fire
and extended coverage insurance insuring Tenant's interest in its
improvements to the Premises and any and all furniture, equipment,
supplies, contents and other
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property owned, leased, held or possessed by it and contained therein, such
insurance coverage to be in an amount equal to the full insurable value of
such improvements and property, as such may increase from time to time,
and (ii) worker's compensation insurance as required by applicable law.
Tenant shall also procure and maintain throughout the Term a policy or
policies of insurance, insuring Tenant, Landlord and any other person
designated by Landlord, against any and all liability for injury to or
death of a person or persons and for damage to property occasioned by or
arising out of any construction work being done on the Premises, or arising
out of the condition, use, or occupancy of the Premises, or other portions
of the Building or Property, such policy to have a combined single limit of
not less than Five Million and No/100 Dollars ($5,000,000) for any bodily
injury or property damage occurring as a result of or in conjunction with
the above. Landlord and Tenant shall have included in all policies of
insurance respectively obtained by them with respect to the Building or the
Premises a waiver by the insurer of all right of subrogation against the
other in connection with any loss or damage thereby insured against. To
the full extent permitted by law, Landlord and Tenant each waives all right
of recovery against the other for, and agrees to release the other from
liability for, loss or damage to the extent such loss or damage is covered
by valid and collectible insurance in effect at the time of such loss or
damage; provided however, that the foregoing release by each party is
conditioned upon the other party's carrying insurance with the above
described waiver of subrogation, and if such coverage is not obtained or
maintained by either party, then the other party's foregoing release shall
be deemed to be rescinded until such waiver is either obtained or
reinstated. All said insurance policies shall be carried with companies
licensed to do business in the State of Georgia reasonably satisfactory to
Landlord and shall be noncancellable except after twenty (20) days' written
notice to Landlord. At Landlord's request, duly executed certificates of
such insurance shall be delivered to Landlord prior to the Commencement
Date and at least thirty (30) days prior to the expiration of each
respective policy term.
REMEDIES CUMULATIVE
17. The rights given to Landlord and Tenant herein are in addition to
any rights that may be given to Landlord or Tenant by any statute or under
law.
ENTIRE AGREEMENT - NO WAIVER
18. This Lease contains the entire agreement of the parties hereto and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein shall be of any force and effect.
The failure of either party to insist in any instance on strict performance
of any covenant or condition hereof, or to exercise any option herein
contained, shall not be construed as a waiver of such covenant, condition
or option in any other instance. This Lease cannot be changed or terminated
orally, and can be modified only in writing, executed by each party hereto.
HOLDING OVER
19. If Tenant remains in possession of the Premises after expiration
of the Term, or after any permitted termination of the Lease by Landlord,
with Landlord's acquiescence and without any written agreement between the
parties, Tenant shall be a tenant at sufferance and such tenancy shall be
subject to all the provisions hereof, except that the Adjusted Monthly
Rental for said holdover period shall be one hundred fifty percent (150%)
of the amount of Rent due in the last month of the Term. There shall be no
renewal of this Lease by operation of Law. Nothing in this Paragraph shall
be construed as a consent by Landlord to the possession of the Premises by
Tenant after the expiration of the Term or any permitted termination of the
Lease by Landlord.
HEADINGS
20. The headings in this Lease are included for convenience only and
shall not be taken into consideration in any construction or interpretation
of any part of this Lease.
NOTICES
21. (a) Any notice by either party to the other shall be valid only
in writing and shall be deemed to be duly given only if delivered
personally or sent by certified mail addressed (i) if to Tenant, at the
Premises and (ii) if to Landlord, at Landlord's address set forth above, or
at such other address for either party as that party may designate by
notice to the other. Notice shall be deemed given, if delivered
personally, upon delivery thereof, and if mailed, upon the mailing thereof,
(b) Tenant hereby appoints as its agent to receive service of all
dispossessory or distraint proceedings, Tenant's general counsel, in the
Premises.
HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES
22. (a) The provisions of this Lease shall bind and inure to the
benefit of Landlord and Tenant, and their respective successors, heirs,
legal representatives and assigns, it being understood that the term
"Landlord" as used in this Lease means only the owner (or the ground lessee)
for the time being of the Property and Building of which the Premises are a
part, so that in the event of any sale or sales of said Property (or of any
lease thereof). Landlord named herein shall be and hereby is entirely
released of all covenants and obligations of Landlord hereunder accruing
thereafter, and it shall be deemed without further agreement that the
purchaser, or the lessee, as the case may be, has assumed and agreed to
carry out any and all covenants and obligations of Landlord hereunder
during the period such party has possession of the Property and Building.
Should the Property and the entire Building be severed as to ownership by
sale and/or lease, then the owner of the entire Building or lessee of the
entire Building that has the right to lease space in the Building to
tenants shall be deemed "Landlord." Tenant shall be bound to any such
succeeding party for performance by Tenant of all the terms, covenants and
conditions of this Lease and agrees to execute any attornment agreement not
in conflict with the terms and provisions of this Lease at the request of
any such party.
(b) The parties "Landlord" and "Tenant" and pronouns relating
thereto, as used herein, shall include male, female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.
ATTORNEY'S FEES
23. In the event of any law suit or court action between Landlord and
Tenant arising out of or under this Lease or the terms and conditions
stated herein, the prevailing party in such law suit or court action shall
be entitled to and shall collect from the non-prevailing party the
reasonable attorney's fees and court costs actually incurred by the
prevailing party with respect to said lawsuit or court action.
TIME OF ESSENCE
24. TIME IS OF THE ESSENCE OF THIS LEASE.
NO ESTATE IN LAND
25. Tenant has only a usufruct under this Lease, not subject to levy
or sale. No estate shall pass out of Landlord by this Lease.
SECURITY DEPOSIT
26. Tenant has this day deposited with Landlord $ -0- as a security
-------
deposit for the performance by Tenant of all the terms, covenants,
conditions of this Lease upon Tenant's part to be performed. Landlord
shall have no obligation to segregate such security deposit from any other
funds of Landlord, and interest earned on such security deposit, if any,
shall belong to the Landlord. The security deposit shall be returned to
Tenant within thirty (30) days after the expiration of the Term hereof,
provided Tenant has fully performed its obligations hereunder. Landlord
shall have the right to apply any part of said security deposit to cure any
default of Tenant, and if Landlord does so, Tenant shall upon demand
deposit with Landlord the amount so applied so that Landlord shall have the
full security deposit on hand at all times during the Term of this Lease.
In the event of a sale or lease of the Building subject to this Lease,
Landlord shall transfer the security deposit to the vendee or lessee, and
Landlord shall thereupon be released from all liability for the return of
such security deposit. Tenant shall look solely to the successor Landlord
for the return of said security deposit. This provision shall apply to
every transfer or assignment made of the security deposit to a successor
Landlord. The
8
<PAGE>
security deposit shall not be assigned or encumbered by Tenant without the
prior written consent of Landlord and any such unapproved assignment or
encumbrance shall be void.
COMPLETION OF THE PREMISES
27. Landlord shall supervise completion of the work described in
Exhibit "C", subject to payments which may be required of Tenant
- -----------
thereunder. Any work required by Tenant as provided for in said Exhibit
-------
"C" shall be performed within the provisions and according to all standards
- ---
of said Exhibit "C".
-----------
PARKING ARRANGEMENTS
28. Landlord shall maintain unreserved parking facilities for the
purpose of accommodating Tenant. Tenant's invitees and employees, and other
tenants, their invitees and employees, subject to such limitations and
conditions from time to time imposed by Landlord. Said parking shall be
maintained on the Property or on areas located in the vicinity of the
Property. Said parking shall be provided in quantities which are in
accordance with the zoning regulations or variances then in effect for the
Concourse Project in which the Building is located.
RULES AND REGULATIONS
29. The Rules set forth on Exhibit "D" are a part of this Lease.
-----------
Landlord may from time to time amend, modify, delete or add new and
additional reasonable Rules for the use,operation, safety, cleanliness and
care of the Premises and the Building. Such new or modified Rules shall be
effective upon thirty (30) days notice thereof to Tenant. Tenant will
cause its employees and agents, or any others permitted by Tenant to occupy
or enter the Premises to at all times abide by the Rules. In the event of
any breach of any Rules, Landlord shall have all remedies in this Lease
provided for in the event of default by Tenant and shall, in addition, have
any remedies available at law or in equity, including but not limited to,
the right to enjoin any breach of such Rules. Landlord shall not be
responsible to Tenant for the nonobservance by any other Tenant or person
of any such Rules.
RIGHT TO RELOCATE
30. If the size of the Premises described herein is less than Five
Thousand (5,000) rentable square feet, Landlord reserves the right to
relocate Tenant during the Term of this Lease or any renewal thereof, to
similar or higher quality office space within the project currently
referred to as "Concourse". If Landlord exercises this right to relocate
Tenant, then any and all costs incident to said relocation shall be the
responsibility of Landlord, said costs to be determined prior to relocation
of Tenant.
LATE PAYMENTS
31. Any payment due of Tenant hereunder not received by Landlord
within five (5) days of the date when due shall be assessed a five percent
(5%) charge for Landlord's administrative and other costs in processing and
pursuing the payment of such late payment, and shall be assessed an
additional five percent (5%) charge for the aforesaid costs of Landlord for
each month thereafter until paid in full. Acceptance by the Landlord of a
payment, and the cashing of a check, in an amount less than that which is
currently due, shall in no way affect Landlord's rights under this Lease
and in no way be an accord and satisfaction. This provision does not
prevent Landlord from declaring the non-payment of Rent when due, an event
of default hereunder.
ESTOPPEL CERTIFICATE
32. At any time during the period beginning with the execution of
this Lease and ending with the termination of this Lease, Tenant shall,
within ten (10) days of the request by Landlord, execute, acknowledge and
deliver to Landlord, any Mortgagee, prospective Mortgagee or any
prospective purchaser of the Property, the Building, or both (as designated
by Landlord), or any prospective purchaser or transferee of the Building an
Estoppel Certificate in recordable form, or in such other form as Landlord
may from time to time require, evidencing whether or not (a) this Lease is
in full force and effect; (b) this Lease has been amended in any way; (c)
Tenant has accepted and is occupying the Premises;(d) there are any
existing defaults on the part of Landlord hereunder or defenses or offsets
against the enforcement of this Lease to the knowledge of Tenant
(specifying the nature of such defaults, defenses or offsets, if any); (e)
the date to which Rent and other amounts due hereunder, if any, have been
paid, and (f) any such other information as may be reasonably requested by
Landlord. Each certificate delivered pursuant to this Paragraph may be
relied on by Landlord, any prospective purchase or transferee of Landlord's
interest hereunder, or any Mortgagee or prospective Mortgagee.
SEVERABILITY AND INTERPRETATION
33. (a) If any clause or provision of this Lease shall be deemed
illegal, invalid or unenforceable under present or future laws effective
during the Term, the remainder of this Lease shall not be affected by such
illegality, invalidity or unenforceability, and in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there
shall be added as a part of this Lease a clause or provision as similar in
terms to such illegal, invalid or unenforceable clause or provision as may
be possible and be legal, valid and enforceable.
(b) Should any provisions of this Lease require judicial
interpretation, it is agreed that the court interpreting or construing the
same shall not apply a presumption that the terms of any such provision
shall be more strictly construed against one party or the other by reason
of the rule of construction that a document is to be construed most
strictly against the party who itself or through its agent prepared the
same, it being agreed that the agents of all parties hereto have
participated in the preparation of this Lease.
MULTIPLE TENANTS
34. [DELETED]
FORCED MAJEURE:
35. Landlord shall be excused for the period of any delay and shall
not be deemed in default with respect to the performance of any of the
terms, covenants, and conditions of this Lease when prevented from so doing
by causes beyond Landlord's control, which shall include, all labor
disputes, governmental regulations or controls, fire or other casualty,
inability to obtain any material or services, or acts of God or similar
events.
QUIET ENJOYMENT
36. So long as Tenant is in full compliance with the terms and
conditions of this Lease, Landlord shall warrant and defend Tenant in the
quiet enjoyment and possession of the Premises during the Term against any
and all claims made by, through or under Landlord, subject to the terms of
this Lease.
BROKERAGE COMMISSION; INDEMNITY
37. THE LANDMARKS GROUP SERVICES CORPORATION OF GEORGIA ("SERVICES")
HAS ACTED AS AGENT FOR LANDLORD IN THIS TRANSACTION AND CUSHMAN & WAKEFIELD
-------------------
OF GEORGIA, INC. ("CUSHMAN") HAS ACTED AS AGENT FOR TENANT IN THIS
- ----------------------------
TRANSACTION. BOTH SERVICES AND CUSHMAN ARE TO BE PAID A COMMISSION BY
-------
LANDLORD. Tenant warrants that there are no other claims for broker's
commissions or finder's fees in connection with its execution of this
Lease. Tenant hereby indemnifies Landlord and holds Landlord harmless from
and against all loss, cost, damage or expense, including but not limited
to, attorney's fees and court costs, incurred by Landlord as a result of or
in conjunction with a claim of any real estate agent or broker, if made by,
through or under Tenant. Landlord hereby indemnifies Tenant and holds
Tenant harmless from and against all loss, cost, damage or expense,
including, but not limited to, attorney's fees and court costs, incurred by
Tenant as a result of or in conjunction with a claim of any real estate
agent or broker, if made by, through or under Landlord.
EXCULPATION OF LANDLORD
38. Landlord's liability to Tenant with respect to this Lease shall be
limited solely to Landlord's interest in the Building. Neither Landlord,
any of the partners of Landlord, any officer, director, or shareholder of
Landlord nor any of the partners of Landlord shall have any personal
liability whatsoever with respect to this Lease.
9
<PAGE>
ORIGINAL INSTRUMENT
39. Any number of counterparts of this Lease may be executed, and
each such counterpart shall be deemed to be an original instrument.
GEORGIA LAW
40. This Lease has been made under and shall be construed and
interpreted under and in accordance with the laws of the State of Georgia.
NO RECORDATION OF LEASE
41. Without the prior written consent of Landlord, neither this Lease
nor any memorandum hereof shall be recorded or placed on public record.
HAZARDOUS WASTES:
42. [SECTION DELETED]
SEE SPECIAL STIPULATIONS
LEASE BINDING UPON DELIVERY
43. This Lease shall not be binding until and unless all parties have
duly executed said Lease and a fully executed counterpart of said Lease has
been delivered to Tenant.
SPECIAL STIPULATIONS
44. The special stipulations attached hereto and made a part hereof,
if any, shall control if in conflict with any of the foregoing provisions
of this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed under seal, on the day and year first above written.
TENANT: SIMMONS COMPANY, a Delaware corporation
/s/
_____________________________________________(SEAL)
Authorized Signature
/s/
___________________________________________________
Type Name of Signatory
/s/
_____________________________________________(SEAL)
Authorized Signature
/s/
___________________________________________________
Type Name of Signatory
*Note: If Tenant is a corporation, two authorized
corporate officers must execute this Lease in
their appropriate capacities for Tenant,
affixing the corporate seal.
(CORPORATE SEAL)
(Tenant's federal employer identification
number:_____________________)
"LANDLORD"
CONCOURSE I. LTD., a Georgia limited partnership
-----------------
(See attached signature page for Landlord)
10
<PAGE>
"LANDLORD"
CONCOURSE I, LTD., a Georgia limited
partnership
By: State of California Public Employees'
Retirement System, as general partner
of Concourse I, Ltd.
BY: Alex. Brown Kleinwort Benson
Realty Advisors Corp.
(formely FIA Associates,
Inc.), investment manager and
duly authorized agent of
Californea Public Employees'
Retirement System
BY: /s/
------------------------------------
Its: Managing Director
BY: /s/ Leslie Ann Brown
------------------------------------
Its: Assistant Vice President
(CORPORATE SEAL)
<PAGE>
excess shall be paid by Tenant to Landlord on demand. Any Expansion Space
Allowance granted to Tenant in the circumstances where Tenant has elected
to lease the Expansion Space in the last five (5) years of the Lease Term
shall be a part of the Market Rate of Rent established, and there shall be
no obligation on the part of Landlord to funds such amounts, except to the
extent it is found to be a part of the Market Rate of Rent.
(e) Except as expressly set forth to the contrary herein, all
other terms and conditions of this Lease shall apply to the Expansion
Space, and from and after the date Tenant elects to lease the Expansion
Space, the Expansion Space shall be and shall be deemed to be a part of the
Premises.
(f) If, at the time of exercise of rights hereunder, Tenant is
prohibited from doing so because there is an event which has occurred, but
which is not yet a default because the cure period for the event in
question has not passed, Tenant shall be entitled to exercise the right in
question if Tenant cures the circumstance which would with the passage of
time be a default within the applicable cure period.
(g) Attached hereto as Exhibit "F", and by this reference
-----------
incorporated herein, is a drawing of the space leased by the tenant (Mobil
Land Corporation ["Mobil"]) on the 7th floor of the Building with rights to
the Expansion Space, and the date the lease rights of such tenant terminate
as to such space. For the purposes of this Special Stipulation No.2, space
is unencumbered when no tenant has any rights to such space (including
rights arising out of expansion or lease term extension options or rights).
The lease with Mobil expires on October 31, 1993 and Landlord shall not
permit an extension or a renewal of that lease without giving the
opportunity for Tenant to lease this space in accordance with this
Paragraph.
(h) Tenant shall have rights to lease Expansion Space which is
available and unencumbered. Landlord shall use reasonable efforts to give
notice to Tenant of such availability. If Tenant desires to lease such
Expansion Space at such time, then Tenant shall have the right to lease
such space by giving notice to Landlord of Tenant's desire to do so. Upon
such notice, it shall be deemed that Paragraph 2(b), 2(c), 2(d), 2(e) and
2(f) are in force and effect, and Tenant shall lease such Expansion Space
in accordance with said provisions.
(i) In addition to the rights granted above, Tenant shall have a
general right to lease any available and unencumbered space on the 7th
floor of the Building which is not a part of the Expansion Space at the
Market Rate of Rent, as described in Special Stipulation 2(b)(ii) herein.
Tenant may initiate the procedure for determining the Market Rate of Rent
for such space by notice to Landlord.
3. Renewal of Lease. (a) Provided this Lease is then in full force
-----------------
and effect and there is no default on the part of Tenant or event for
which notice of a default has been given by Landlord, Landlord hereby
grants to Tenant an option to renew this Lease for two (2) periods of five
(5) years each (a "Renewal Term", or collectively the "Renewal Terms"), at
a rental rate equal to the rental rate then being offered by Landlord to
tenants desiring to lease comparable space in the Building or in other
buildings comparable to the Building, as such rate is established by
Landlord in its reasonable judgment. Tenant shall notify Landlord no more
than fourteen (14) months and no less than twelve (12) months prior to the
end of the Term if Tenant desires to renew this Lease under the terms of
this Special Stipulation No. 3. If Tenant does give such notice, Landlord
shall indicate to Tenant at least nine (9) months prior to the end of the
Term the rental rate which shall be in effect for the Term as extended, on
the basis as above-described. Tenant shall have thirty (30) days from the
date Landlord makes such offer to either accept or reject such offer. If
Tenant rejects such offer or fails to respond within such thirty (30) day
period, then this Lease shall terminate as of the end of the Term as
established herein; provided, however, that as long as Landlord and Tenant
are having, in each of their respective reasonable judgment, bona-fide good
faith discussions with one another on the terms and conditions of a Renewal
Term, then tenant shall continue to have a right to a Renewal Term, up to
and until the end of the Term or Renewal Term, as the case may be. Either
Landlord or Tenant may terminate said discussions (and said rights of
Tenant) at any time such party believes that no agreement on the Renewal Term
satisfactory to said party shall be reached. If Tenant accepts such
offer, then the Term shall be extended by said five (5) year period, upon
such commercially reasonable Lease terms and conditions as Landlord and
Tenant agree upon with respect to such Renewal Term, and the Rent for such
Renewal Term shall be the rent as offered by Landlord and accepted by
<PAGE>
Tenant pursuant to the terms and conditions of this Special Stipulation
No. 3.
(b) If, at the time of exercise of rights hereunder, Tenant is
prohibited from doing so because there is an event which has occurred, but
which is not yet a default because the cure period for the event in
question has not passed, Tenant shall be entitled to exercise the right in
question if Tenant cures the circumstance which would with the passage of
time be a default within the applicable cure period.
-3-
<PAGE>
4. Tenant Improvement Allowance. Tenant shall cause the tenant fit-
----------------------------
up and finish work in the Premises to be completed in accordance with plans
and specifications to be agreed upon by Landlord and Tenant, in their
respective reasonable judgment. Landlord shall provide an allowance for
the tenant fit-up and finish work in the Premises of Twelve and No/100
Dollars ($12.00) per usable square foot within the Premises (the
"Allowance").
5. Moving Allowance. If Tenant is not in default under this Lease,
----------------
upon Tenant's acceptance of the Premises, as evidenced by an Acceptance of
Premises Letter duly executed and delivered by Tenant, Landlord shall pay
to Tenant, by Landlord's check, an amount equal to $47,875.00 (the "Moving
Allowance").
6. Hazardous Materials. (a) Tenant shall not (either with or
-------------------
without negligence) cause or permit the escape, disposal or release of any
biologically or chemically active or other hazardous substances or
materials from the Premises. Tenant shall not allow the storage or use of
such substances or materials in any manner not sanctioned by law or by the
highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Building, the Premises
or the Property, any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, as amended, 42, U.S.C. Section 6901 et seq., any applicable state
or local laws and the regulations adopted under these acts. If any lender or
governmental agency shall ever require testing to ascertain whether or not there
has been any release of hazardous materials, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand as additional charges if
such requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Premises. In all events, Tenants shall
indemnify Landlord in the manner elsewhere provided in this Lease from any
release of hazardous materials on the Premises if caused by Tenant or persons
acting under Tenant occurring while Tenant is in possession, or elsewhere if
caused by Tenant or persons acting under Tenant. The within covenants shall
survive the expiration or earlier termination of the Lease Term.
(b) Landlord shall not knowingly permit the introduction of any
hazardous substances or materials in the Building (except for ordinary or
customary office supplies or cleaning materials), and Landlord shall not
hold Tenant responsible for any clean-up or other costs associated with the
introduction of any hazardous substances or materials, if not caused by
Tenant or persons acting under Tenant.
7. Parking. (a) Tenant shall have, as part of and not in addition
-------
to, the parking rights given under Paragraph 28 of the Lease, six (6)
reserved parking spaces in the Concourse I parking facilities (as such reserved
parking spaces may be relocated from time to time). These reserved parking
spaces shall be available to Tenant without additional charge to Tenant
during the first (1st) Lease Year. Thereafter, such parking spaces shall
be available to Tenant at a cost of Thirty-Five and No/100 Dollars ($35.00)
per parking space per month, due and payable from Tenant on the first day
of each month during the Term thereafter. Any failure by Tenant to make
such payments shall allow Landlord to terminate all of Tenant's rights to
use said parking spaces, but Tenant's failure to pay amounts due for such
parking spaces shall not, in and of itself, be a default or an event of
default under the Lease.
(b) The parking deck and parking facilities associated with
the Building provide for a ratio of 3.25 parking spaces per 1000 usable
square feet of space.
(c) Unreserved parking (exclusive of the parking provided in
Paragraph 7(a) above) shall be available to Tenant without additional
charge to Tenant during the one hundred twenty-eight (128) month initial
Term.
8. Signage. Tenant shall have a right to a strip on the existing
-------
pylon sign for the Buiding. Such strip shall identify Tenant by name. The
cost of said strip shall be charged against the Allowance, to the extent
available.
9. Use. Notwithstanding the use limitations given in Paragraph
---
6 herein, Tenant may have (subject to the provisions of Paragraph 8(b)(iv))
a computer room and a show room for Tenant's products in its Premises;
provided, however, that retail sales to third-parties shall not be
permitted from the Premises.
10. Equipment in the Premises. Attached hereto as Exhibit "G", by
------------------------- -----------
this reference incorporated herein, is a list of the equipment Tenant
intends to bring in to the Premises (the "Equipment"). This Equipment,
used in a commercially reasonably manner, shall not cause any additional
charges to be due from Tenant under Paragraph 8(b)(iv) of the Lease, or
cause
-4-
<PAGE>
Landlord to submeter for electrical consumption in the Premises, as
contemplated in Paragraph 8(c) of the Lease.
11. Landlord's Gross Negligence. Landlord shall be liable to Tenant
---------------------------
for and hereby indemnifies Tenant and holds Tenant harmless against any and
all loss, cost, damage or expense, including, but not limited to, court
costs and reasonable attorney's fees, incurred by Tenant in connection with
Landlord's gross negligence or willful misconduct.
12. Mortgages: Non-Disturbance. Landlord owns the Building, as of
--------------------------
the date hereof, free and clear of all mortgages deed to secure debt and
other like instruments. Notwithstanding the terms and conditions of
Paragraph 14 of the Lease, Tenant shall not be required to execute a
subordination or attornment agreement with respect to any new financing or
new owner, unless the party to which such agreement is being given grants
to Tenant a corresponding non-disturbance agreement, providing that as long
as Tenant complies with Tenant's obligations under the Lease, Tenant's
tenancy shall not be disturbed.
13. Landlord's Entry Into the Premises. Landlord's entry into the
----------------------------------
Premises under Paragraph 1(e) and 13 of the Lease shall be done in a manner
so as to not cause any material disruption of Tenant's operations in the
Premises, to the extent possible.
14. Rules and Regulations. (a) Any Rules promulgated by Landlord
---------------------
after the date hereof shall only be effective as to Tenant if such Rules do
not materially affect Tenant's ability to operate in the Premises.
(b) Landlord shall use reasonable efforts to enforce Rules
uniformly against similarly situated tenants.
15. Late Payments. Notwithstanding the terms and conditions of
-------------
paragraph 10(a)(i) of the Lease, it shall not be a default under the Lease
if Tenant does not make a payment of a sum due hereunder unless Tenant
fails to make such payment to Landlord within ten (10) days after Tenant's
receipt of notice from Landlord to Tenant specifying Tenant's failure to
make such payment. Landlord shall not be required to give notice to Tenant
of any failure to make any such payments more than two (2) times in any
calendar year. After Landlord has given Tenant the second notice with
respect to Tenant's failing in the payment of such amounts in any calendar
year, thereafter the failure to pay any such payment during the remainder
of the same calendar year shall be a default if such payment is not made by
the tenth (10th) day after the date when the same shall become due and
payable.
16. Construction Work Within the Premises. (a) For the purposes of
-------------------------------------
this Lease any limitations on Tenant's rights to improve the Premises shall
not apply to Tenant's general office furniture in the Premises, or to any
of Tenant's products in the display area for Tenant's goods in the Premises,
which Tenant may bring into the Premises or remove, at Tenant's option.
(a) Notwithstanding the terms and conditions of Paragraph 7
of the Lease, Tenant shall be entitled to perform work within the Premises,
with notice to, but not the consent of, Landlord as long as (i) the cost of
such work does not exceed, in the aggregate, $5,000.00; (b) such work does
not adversely affect the structural components of the Building or the
Building's systems; (c) the terms and conditions of Paragraph 7(d) of the
Lease are complied with; and (d) Tenant delivers to Landlord, upon the
completion of such work, complete, any as-built plans and specifications
for the work performed.
(b) Tenant shall not be required to remove any items from
the Premises at the end of the Term unless Landlord, as a part of any
consent required of Landlord for work being performed by Tenant in the
Premises, gives notice to Tenant, as a part of such consent, that such work
will have to be removed by Tenant at the end of the Term.
17. Concourse Office Park Association Costs. The costs chargeable to
---------------------------------------
Tenant under Paragraph 3(a)(x) of the Lease shall include the following
(and other similar costs):
(i) the maintenance, upkeep and repair of the grounds,
landscaping, irrigation facilities and improvements on the Concourse
Office Park (the "Office Park") (which shall include, but shall not be
limited to, the regular, ordinary maintenance and care of grass,
bushes, shrubs, trees and other landscape items);
(ii) trash and garbage pickup;
(iii) maintenance, upkeep and repair of any jogging, bicycle
or pedestrian paths or walkways on the Office Park;
(iv) pest and insect control with respect to the Office
Park;
(v) the repair, maintenance and upkeep of any lakes and
dams and impoundments on the Office Park (which shall include,
but not limited to, the regular, ordinary cleaning
-5-
<PAGE>
of any such lakes and the clearing of debris from any conduits which serve
to direct water into or out of said lakes);
(vi) the cleaning and maintaining of any drainage or water
run-off facilities on the Office Park;
(vii) the repair and maintenance of any sanitary sewer,
water, telephone and power lines serving the Property to the
extent that the repair of such lines is not the responsibility of
Fulton County or any other governmental authority or the utility
providing such utility service;
(viii) the maintenance, upkeep and repair of any roads on the
Office Park (which shall include, but not be limited to, the
periodic lining and painting of lines of such roads, the periodic
asphalting and recovering of such roads, and the periodic
graveling and clearing of any shoulders of said roads);
(ix) maintenance, upkeep and repair of lighting facilities
on the Office Park;
(x) the administration, governing and operation of the
Association;
(xi) accounting, tax and financial reporting services of the
Association; and
(xii) any costs associated with a special assessment.
18. Damage and Destruction. For the purposes of Paragraph 9 of
----------------------
the Lease, if more than twenty-five percent (25%) of the usable square feet
within the Premises are damaged or destroyed by a casualty, the restoration
or rebuilding of such can be completed within one hundred eighty (180) days
of the damage or destruction, and Landlord elects to restore or rebuild
said Premises, then Tenant shall have the right to vacate the entire
Premises for the period of restoration of the Premises and Rent shall abate as
to all of said Premises for said period. If Tenant so elects such right, such
election shall be made within five (5) days of the date Landlord notifies Tenant
of Landlord's election to restore or repair said Premises.
19. Reletting. For the purposes of Paragraph 11 of the Lease,
---------
if Landlord is renting the Premises for or on behalf of Tenant after a
default by Tenant, reletting by Landlord, if any, shall not be to an
affiliate or subsidiary of Landlord, unless the Rent received under such
lease is comparable to the rent Landlord, would have received from a third-
party independent of Landlord on an arms-length transaction.
20. Operating Costs: Audit. If the results of any audit
-----------------------
performed by Tenant under Paragraph 3 of the Lease conclude that Landlord
has overcharged Tenant on the amount of Operating Costs by in excess of
five percent (5%), and such results are unchallenged or, after any such
challenge, the audit is found to be accurate, then Landlord shall pay for
the actual and reasonable costs of the audit.
21. Assignment and Subletting. Notwithstanding the terms and
-------------------------
conditions of Paragraph 11 of the lease, if Tenant proposes an assignee of
the Lease or a sublessee of all or any portion of the Premises, which
assignee or sublessee has a creditworthiness and financial condition which
is, in Landlord's reasonable judgment, equal to or greater than the
financial condition of Tenant at the time the Lease was originally
executed, and if the proposed assignment or sublease is at such a rental
rate or other consideration as would provide a sum of monetary payments and
all other consideration from the sublessee or assignee in question which is
in excess of the amount due from Tenant to Landlord under the terms of the
Lease for the space and period of time in question (the "Excess Proceeds"),
then such sublessee or assignee shall expressly assume the obligations of
Tenant under the Lease, and Landlord shall have the option of either (i)
accepting such sublease or assignment, and taking all of the Excess
Proceeds therefrom, in which event Tenant shall be, in the event of an
assignment, released from liability under the Lease from and after the date
that the assignee assumes the liability under the Lease, and, in the event
of a sublease, Landlord shall covenant not to sue Tenant for that portion
of the Lease and for that portion of time which the sublessee expressly
assumes to be obligated to pay for, or (ii) accepting such sublease or
assignment, and permitting Tenant to accept and retain such Excess
Proceeds, in which event Tenant shall not be released from the liability of
"Tenant" under the Lease. In no other circumstances shall Tenant be released
or relieved from liability under the Lease, or shall Tenant be entitled to
Excess Proceeds.
<PAGE>
22. Club Memberships. (a) Landlord shall provide on behalf of
----------------
Tenant the initiation fees and the regular monthly dues payments for one
hundred ten (110) individual, athletic memberships at the Concourse Athletic
Club (the "Club"), for one (1) year, as long as Tenant occupies the Premises
in accordance with the terms and conditions of the Lease. These
memberships shall be used as Tenant determines, and Tenant shall direct
Landlord to pay the Club the amounts necessary to maintain such memberships
in good standing for such one (1) year period. The determination of which
individuals of Tenant shall be entitled to use such
-6-
<PAGE>
memberships shall be made, and such direction shall be given to the Club by
Tenant, on or before July 1, 1992.
(b) Tenant shall pay to Landlord or Landlord's designee a processing fee
of $25.00 per new membership for each and every membership which is
utilized, after the first fifty (50) memberships are used by Tenant. There
shall be no such processing fee charged to Tenant for the first fifty (50)
memberships used by Tenant. Landlord or Landlord's designee may proscribe
such other reasonable conditions or terms on such memberships as Landlord
or Landlord's designee determines, as long as such conditions or terms do
not create additional costs to Tenant for such initial one hundred ten (110)
memberships.
(c) Nothing required herein shall mean or be deemed to mean that
Landlord shall be obligated to pay any additional charges which Tenant
might incur in or with respect to the Club which are not included as a part
of the customary memberships at the Club, and all such charges shall be the
responsibility of the individuals of Tenant incurring such charges.
(d) Nothing contained herein shall mean or be construed to mean that
Landlord guarantees that the Club shall remain open for business, or that
Landlord would have an obligation or requirement to provide access or
membership to another athletic or health club facility if the Club ceases
to operate or changes its method of operations, and Landlord has not made
and does not make any such agreement.
-7-
<PAGE>
Addendum 1
----------
Assume: Consumer Price Index ("C.P.I.") as follows:
April 1992 - 100
April 1993 - 105
April 1994 - 110
April 1995 - 115
April 1996 - 120
April 1997 - 125
April 1998 - 130
April 1999 - 135
April 2001 - 145
The Adjusted Monthly Rental for the sixth (6th) Lease Year shall be
determined as follows:
$16.50 x [.55] X (125 - 100)
---------------------
13.75
-----
100 = $16.50 X 100 =
$ 2.27
The increase for the sixth (6th) Lease Year shall be $2.27, and the
Adjusted Monthly Rental for the sixth (6th) Lease Year shall be $18.77 per
rentable square foot per annum.
The Adjusted Monthly Rental for the Seventh (7th) Lease Year shall be
determined as follows:
$16.50 x [.55] X (130 - 100)
---------------------
16.55
-----
100 = $16.50 X 100 =
$ 2.72
The increase for the seventh (7th) Lease Year shall be $2.72, and the
Adjusted Monthly Rental for the seventh (7th) Lease Year shall be $19.22
per rentable square foot per annum.
The Adjusted Monthly Rental for the eighth (8th) Lease Year shall be
determined as follows:
$16.50 x [.55] X (135 - 100)
---------------------
19.25
-----
100 = $16.50 X 100 =
$ 3.18
The increase for the eighth (8th) Lease Year shall be $3.18, and the
Adjusted Monthly Rental for the eighth (8th) Lease Year shall be $19.68 per
square foot per annum.
The Adjusted Monthly Rental for the ninth (9th) Lease Year shall be
determined as follows:
$16.50 x [.55] X (140 - 100) 22
--------------------- --
100 = $16.50 X 100 =
$ 3.65
The increase in Adjusted Monthly Rental for the ninth (9th) Lease Year
shall be $3.65, and the Adjusted Monthly Rental for the ninth (9th) Lease
Year shall be $20.13 per rentable square foot per annum.
<PAGE>
EXHIBIT "A"
LOCATION OF PREMISES WITHIN BUILDING
CORPORATE CENTER ONE
[BLUEPRINT DIAGRAM]
Concourse 1 - 6th Floor
1 Concourse Parkway
Atlanta, Georgia
THE LANDMARKS GROUP
<PAGE>
EXHIBIT "B"
SPACE PLAN OF THE PREMISES
CORPORATE CENTER ONE
REFERENCED TO PLANS BY WAKEFIELD BEASLEY
JOB # 9116
DATED 8/12/91
<PAGE>
EXHIBIT "C'
-----------
WORK AGREEMENT FOR
COMPLETION OF THE PREMISES
FOR OCCUPANCY BY TENANT
-------------
Landlord and Tenant executed a Lease for Premises on the sixth (6th) floor of
the Building and hereby attach this Work Agreement to said Lease as Exhibit
-------
"C" thereto.
- ---
In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference) and in consideration of the mutual covenants
herein contained, Landlord and Tenant agree as follows:
I. GENERAL
A. All work required for the construction of the Premises shall be
carried out by Contractor in accordance with Working Drawings and
Specifications, on the basis of a contract entered into by
Landlord and such Contractor.
B. Tenant hereby appoints Jeff Lewis to act for Tenant in all
matters covered by this Exhibit C.
---------
C. Definitions:
1. "Usable Square Feet" shall be 34, 404 for the purpose of the
--------------------
Lease. Usable Square Feet shall be determined in accordance
with and defined by the Building Owners and Managers
Association (BOMA) Standard Method of Floor Area
Calculations, latest edition.
2. "Space Plan" means the graphic presentation of the Premises,
------------
indicating partitions, doors, electrical and telephone
outlets and furniture arrangements.
3. "Working Drawings and Specifications" (Contract Documents)
-------------------------------------
means the plans and specifications of completion of the
Premises including, but not limited to, architectural,
mechanical and electrical working drawings. The working
drawings and specifications shall be in detail required
for construction of the Premises, and shall be in
compliance with all applicable law.
4. "Architect" means that architect or designer appointed by
-----------
Tenant, with Landlord's consent (such consent of Landlord
not to be unreasonably withheld or delayed), to provide
design services for the Premises.
5. "Contractor" means the Contractor appointed by Landlord,
------------
with Tenant's consent (such consent of Tenant not to be
unreasonably withheld or delayed), to construct the Work
required by the Contract Documents.
6. "Completion of the Premises" means the substantial
----------------------------
completion of the Premises required by the Contract
Documents.
7. "Tenant Fit-Up Work" means any tenant fit-up and finish work
--------------------
in the Premises.
<PAGE>
II. THE WORK
--------
(i) Turnover of Premises. (a) The Premises shall be unoccupied and
--------------------
in broom-clean condition, on or before April 30, 1992 (the "Turnover
Date"), and Completion of the Premises shall occur, subject to any "Tenant
Delay", on or before August 1, 1992. Such Premises shall be turned over on
an "as is" basis, with no representations or warranties by Landlord as to
the fitness of the Premises, but Landlord shall insure that the tenant
occupying the Premises prior to Tenant shall take due care in vacating said
Premises.
(b) Landlord's failure to achieve Completion of the Premises on
or before August 1, 1992 (as such date is extended by any Tenant Delays)
shall not make the Lease void or voidable, but the Commencement Date shall
be delayed by one (1) day for each and every day past August 1, 1992 that
the Premises are so turned over to Tenant.
(c) The Tenant Fit-Up Work for the Premises shall be bid to
three (3) tenant fit-up and finish work contractors which are mutually
acceptable to Landlord and Tenant, in their respective reasonable judgment.
Form such bids, Landlord and Tenant shall select the lowest qualified
bidder as the Contractor for the Premises.
(ii) Tenant Fit-Up Work. (a) Contractor, through Landlord, shall be
------------------
responsible for the construction and installation of the Tenant Fit-Up
Work. Contractor, through Landlord, shall cause the Tenant Fit-Up Work to
be performed and completed with first class materials in a good and
workmanlike manner and in compliance with plans and specifications
delivered to Landlord. When Tenant's plans and specifications are
delivered to Landlord, (which plans shall comply with all applicable laws)
Landlord shall promptly review the same and notify Tenant in writing of any
comments thereon, or proposed revisions thereto, which comments shall be
given by Landlord to Tenant within ten (10) business days after the receipt
by Landlord of such plans and specifications. Representatives of both
parties shall promptly make themselves available to discuss and resolve any
such comments or revisions, and such plans and specifications shall
promptly be revised by Tenant to incorporate any agreed upon changes, and
Landlord and Tenant shall negotiate in good faith until all questions are
finally resolved.
(iii) Tenant's Allowance. (a) Tenant shall be granted the allowance
------------------
for the completion of the tenant fit-up and finish work in the Premises of
Twelve and No/00 Dollars ($12.00) per usable square foot (the "Allowance").
All of the Allowance shall be set aside for Tenant's purposes. Tenant shall
promptly pay when due all costs incurred by Tenant in connection with
Tenant's Work, in excess of the Allowance.
(b) The Allowance shall be disbursed by Landlord in accordance
with the contract with Contractor. Within sixty (60) days after Landlord
determines that the work in the Premises has been completed in a
satisfactory and lien free basis, Landlord shall fund any portion of the
Allowance not previously funded to Tenant.
(c) Landlord shall not charge to Tenant a supervisory or other
like fee in connection with the Tenant Fit-Up Work.
-2-
<PAGE>
III. COMPLETION AND COMMENCEMENT DATE
--------------------------------
Tenant's obligation to pay Rent shall not commence until Completion of
the Premises; provided, however, if Landlord is delayed in achieving
Completion of the Premises as a result of or in connection with:
A. Tenant's failure to furnish all information so that Working
Drawings and Specifications can be completed by April 15, 1992;
or
B. Tenant's request for materials, finishes, or installations other
than Landlord's "Building Standard Materials"; or
C Tenant's changes in the Space Plan after approval by Tenant; or
D. Tenant's failure to respond within any of the time periods
specified in this Work Letter;
(Collectively a "Tenant Delay") then the commencement of Rent will
occur on the date Completion of the Premises would have occurred, were
it not for the days of Tenant Delay.
-3-
<PAGE>
EXHIBIT "D"
RULES AND REGULATIONS
The rules and regulations set forth in this Exhibit shall be and hereby are
made a part of the Lease to which they are attached. Whenever the term
"Tenant" is used in these rules and regulations, it shall be deemed to
include Tenant, its employees or agents and any other persons permitted by
Tenant to occupy or enter the Premises. The following rules and
regulations may from time to time be modified by Landlord in the manner set
forth in Section 29 of the Lease.
1. Obstruction: The sidewalks, entries, passages, corridors, halls,
-----------
lobbies, stairways, elevators and other common facilities of the Building
shall be controlled by Landlord and shall not be obstructed by Tenant or
used for any purposes other than ingress or egress to and from the
Premises. Tenant shall not place any item in any of such locations,
whether or not any such item constitutes an obstruction, without the prior
written consent of the Landlord. Landlord shall have the right to remove
any obstruction or any such item without notice to Tenant and at the
expense of Tenant. The floors, skylights and windows that reflect or admit
light into any place in said Building shall not be covered or obstructed by
Tenant.
2. Ordinary Business Hours: Whenever used in the Lease or in these rules
-----------------------
and regulations, the ordinary business hours of the Building shall be from
8:00 A.M. to 6:00 P.M. Monday through Friday and 8:00 A.M. to 1:00 P.M.
Saturday of each week, excluding the legal holidays of New Year's Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
3. Deliveries: Tenant shall insure that all deliveries of supplies to
----------
the Premises shall be made only upon the elevator designated by Landlord for
deliveries and only during the ordinary business hours of the Building. If
any person delivering supplies to Tenant damages the elevator or any other
part of the Building, Tenant shall pay to Landlord upon demand the amount
required to repair such damage.
4. Moving: Furniture and equipment shall be moved in or out of the
------
Building only upon the elevator designated by Landlord for deliveries and
then only during such hours and in such manner as may be prescribed by
Landlord. Landlord shall have the right to approve or disapprove the
movers or moving company employed by Tenant and Tenant shall cause such
movers to use only the loading facilities and elevator designated by
Landlord. If Tenant's movers damage the elevator or any other part of the
Building, Tenant shall pay to Landlord upon demand the amount required to
repair such damage.
5. Heavy Articles: No safe or article the weight of which may, in the
--------------
reasonable opinion of Landlord, constitute a hazard or damage to the
Building or its equipment, shall be moved into the Premises. Safes and
other heavy equipment, the weight of which will not constitute a hazard or
damage the Building or its equipment shall be moved into, from or about the
Building only during such hours and in such manner as shall be prescribed
by Landlord and Landlord shall have the right to designate the location of
such articles in the Premises.
6. Nuisance: Tenant shall not do or permit anything to be done in the
--------
Premises, or bring or keep anything therein which would in any way
constitute a nuisance or waste, or obstruct or interfere with the rights of
other tenants of the Building, or in any way injure or annoy them, or
conflict with the laws relating to fire, or with any regulations of the
fire department or with any insurance policy upon the Building or any part
thereof, or conflict with any of the rules or ordinances of any
governmental authority having jurisdiction over the Building.
7. Building Security: Landlord may restrict access to and from the
-----------------
Premises and the Building outside of the ordinary business hours of the
Building for reasons of Building Security. Landlord may require
identification of persons entering and leaving the Building during this
period and, for this purpose, may issue Building passes to tenants of the
Building.
<PAGE>
8. Pass Key: The janitor of the Building may at all times keep a pass
--------
key to the Premises, and he and other agents of Landlord shall at all times
be allowed admittance to the premises.
9. Locks and keys for Premises: No additional lock or locks shall be
---------------------------
placed by Tenant on any door in the Building and no existing lock shall be
changed unless the written consent of Landlord shall first have been
obtained. A reasonable number of keys to the Premises and to the toilet
rooms, if locked by Landlord, will be furnished by Landlord, and Tenant
shall not have any duplicate key made. At the termination of this tenancy
Tenant shall promptly return to Landlord all keys to the Building, offices,
toilet rooms and parking facilities.
10. Signs: Signs on Tenant's entrance door will be provided for Tenant
-----
by Landlord. No advertisement, sign or other notice shall be inscribed,
painted or affixed on any part of the outside or inside of the Building,
except upon the interior doors as permitted by Landlord, which
advertisement, signs, or other notices shall be of Building standard order,
size and style, and at such places as shall be designed by Landlord.
11. Use of Water Fixtures: Water closets and other water fixtures shall
---------------------
not be used for any purpose other than that for which the same are
intended, and any damage resulting to the same from misuse on the part of
Tenant shall be paid for by Tenant. No person shall waste water by tying
back or wedging the faucets or in any other manner.
12. No Animals, Excessive Noise: No animals shall be allowed in the
---------------------------
offices, halls, corridors and elevators in the Building. No person shall
disturb the tenants of this or adjoining buildings or space by the use of
any radio or musical instrument or by the making of loud or improper noises.
13. Bicycles: Bicycles or other vehicles shall not be permitted anywhere
--------
inside or on the sidewalks outside of the Building, except in those areas
designated by Landlord for bicycle parking.
14. Trash: Tenant shall not allow anything to be placed on the outside of
-----
the Building, nor shall anything be thrown by Tenant out of the windows or
doors, or down the corridors, elevator shafts, or ventilating ducts or
shafts of the Building. All trash shall be placed in receptacles provided
by Tenant on the Premises or in any receptacles provided by Landlord for
the Building.
15. Windows and Entrance Doors: Window shades, blinds or curtains of a
--------------------------
uniform Building Standard color and pattern only shall be provided for the
exterior glass of the Building to give uniform color exposure through
exterior windows. Exterior blinds shall remain in the lowered position at all
times to provide uniform exposure from the outside. Tenant entrance doors
should be kept closed at all times in accordance with the fire code.
16. Hazardous Operations and Items: Tenant shall not install or operate
------------------------------
any steam or gas engine or boiler, or carry on any mechanical business in
the Premises without Landlord's prior written consent, which consent may be
withheld in Landlord's absolute discretion. the use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly
prohibited. Explosives or other articles deemed extra hazardous shall not
be brought into the Building.
17. Hours for Repairs, Maintenance and Alterations: Any repairs,
----------------------------------------------
maintenance and alterations required or permitted to be done by Tenant
under the Lease shall be done only during the ordinary business hours of
the Building unless Landlord shall have first consented in writing to such
work being done outside of such times. If Tenant desires to have such work
done by Landlord's employees on Saturdays, Sundays, holidays or weekdays
outside of ordinary business hours, Tenant shall pay the extra cost of such
labor.
18. No Defacing of Premises: Except as permitted by Landlord, Tenant
-----------------------
shall not mark upon, cut, drill into, drive nails or screws into, or in any
way deface the doors, walls, ceilings, or floors of the Premises or of the
Building, nor shall any connection be made to the electric wires or
electric fixtures without the consent in writing on each occasion of
Landlord or its agents and any defacement, damage or injury caused by
Tenant shall be paid for by Tenant.
<PAGE>
19. Limit on Equipment: Tenant shall not, without Landlord's prior
------------------
written consent, install or operate any computer using more than ten (10)
AMPS, duplicating or other large business machines or equipment, upon the
Premises, or carry on any mechanical business thereon. If Tenant requires
any interior wiring such as for a business machine, intercom, printing
equipment or copying equipment, such wiring shall be done by the
electrician of the Building only at Tenant's expense, and no outside wiring
persons shall be allowed to do work of this kind unless by the written
consent of Landlord or its representatives. If telegraphic or telephonic
service is desired, the wiring for same shall be done as directed by the
electrician of the building or by some other employee of Landlord who may
be instructed by the superintendent of the Building to supervise same, and
no boring or cutting for wiring shall be done unless approved by Landlord
or its representatives, as stated.
20. Solicitation, Food and Beverages: Landlord reserves the right to
--------------------------------
restrict, control or prohibit canvassing, soliciting and peddling within
the Building. Tenant shall not grant any concessions, licenses or
permission for the sale or taking of orders for food or services or
merchandise in the Premises, nor install or permit the installation or use
of any machine or equipment for dispensing goods or foods or beverages in
the Building, nor permit machine or equipment for dispensing goods or foods
or beverages in the Building, nor permit the preparation, serving,
distribution or delivery of food or beverages in the Premises without the
approval of Landlord and in compliance with arrangements prescribed by
Landlord. Only persons approved in writing by Landlord shall be permitted
to serve, distribute, or deliver food and beverages within the Building, or
to use the elevators or public areas of the Building for that purpose.
21. Captions: The caption for each of these rules and regulations is
--------
added as a matter of convenience only and shall be considered of no effect in
the construction of any provision or provisions of these rules and
regulations.
<PAGE>
EXHIBIT "E"
DESCRIPTION OF THE PROPERTY
---------------------------
LEGAL DESCRIPTION - CORPORATE CENTER I
--------------------------------------
All that tract or parcel of land lying and being in Land Lot 17, 17th
District, Fulton County, Georgia (also lying in Parcel I and II on a plat
titled "Survey for the Landmarks Group Properties Corporation and
Republicbank Dallas, National Association", dated February 13, 1982, last
revised June 10, 1983 by H. E. Harper) and being more particularly
described as follows:
To reach the TRUE POINT OF BEGINNING commence at the intersection of the
former Southern Right-of-Way of Hammond Drive if extended (which Right-of-
Way varies, but was 47.9 Feet from the centerline) and the former Western
Right-of-Way of Peachtree Dunwoody Road if extended (which Right-of-Way
varies, but was 41.7 Feet from the centerline); thence along the former
Western Right-of-Way of Peachtree Dunwoody Road South 02(degrees) 14 Feet 39"
East a distance of 301.51 Feet to a point; thence continuing along
said former Right-of-Way South 00(degrees) 04 Feet 42" West a distance
of 128.30 Feet to a point; thence continuing along said former Right-of-Way
South 02(degrees) 51 Feet 09" West a distance of 257.51 Feet to a point;
thence leaving said former Western Right-of-Way of Peachtree Dunwoody Road
North 77(degrees) 53 Feet 10" West a distance of 10.61 Feet to a point
on the existing Western Right-of-Way of Peachtree Dunwoody Road, which point
marks the TRUE POINT OF BEGINNING; thence continuing along said Right-of-
Way South 02(degrees) 44 Feet 14" West a distance of 151.23 Feet to a
point; thence continuing along said Right-of-Way South 07(degrees) 31 Feet
24" West a distance of 221.06 Feet to a point; thence continuing
along said Right-of-Way South 04(degrees) 28 Feet 01" West a distance of
118.92 Feet to a point; thence continuing along said Right-of-Way South 19
degrees 17 Feet 25" West a distance of 285.24 Feet to a point at its
intersection with the Northwestern Right-of-Way of Interstate Highway 285
(variable Right-of-Way); thence along the Northwestern Right-of-Way of
Interstate Highway 285 South 60(degrees) 30 Feet 32" West a distance
of 147.38 Feet to a point; thence leaving said Right-of-Way North 05
(degrees) 24 Feet 46" West a distance of 376.07 Feet to a point; thence
North 42(degrees) 24 Feet 02" West a distance of 290.00 Feet to a
point; thence North 87(degrees) 17 Feet 14" West a distance of 67.30
feet to a point; thence South 02(degrees) 39 Feet 32" West a distance
of 76.13 Feet to a point; thence South 41(degrees) 31 Feet 43" East a
distance of 15.32 Feet to a point; thence South 02(degrees) 41 Feet 25
inches West a distance of 42.42 Feet to a point; thence South 42(degrees)
11 Feet 23" East a distance of 15.25 Feet to a point; thence South 02
degrees 39 Feet 32" West a distance of 146.02 Feet to a point; thence
South 47(degrees) 35 Feet 58" West a distance of 32.58 Feet to a point;
thence North 87(degrees) 18 Feet 03" West a distance of 157.13 Feet to a
point; thence South 02(degrees) 42 Feet 14" West a distance of 71.88
feet to a point; thence North 42(degrees) 17 Feet 47" West a distance of
203.28 Feet to a point; thence North 02(degrees) 41 Feet 57" East a
distance of 372.38 Feet to a point; thence South 88(degrees) 54 Feet 38"
East a distance of 49.13 Feet to a point; thence North 02(degrees) 33 Feet
01" East a distance of 113.39 Feet to a point; thence South 87
(degrees) 18 Feet 46" East a distance of 0.27 Feet to a point; thence North
02(degrees) 42 Feet 10" East a distance of 424.58 Feet to a point; thence
South 87(degrees) 56 Feet 37" East a distance of 68.50 Feet to a
point; thence North 02(degrees) 01 Feet 32" East a distance of 256.17 Feet
to a point on the existing Southern Right-of-Way of Hammond Drive;
thence along the Southern Right-of-Way of Hammond Drive South 87(degrees) 58
Feet 03" East a distance of 61.05 Feet to a point; thence South 02
(degrees) 06 Feet 51" West a distance of 33.08 Feet to a point; thence
along a curve to the left an arc distance of 140.82 Feet (said curve having
a radius of 197.50 Feet, a chord distance of 137.85 Feet and a chord
bearing South 18(degrees) 18 Feet 41" East) to a point; thence South
38(degrees) 44 Feet 13" East a distance of 11.29 Feet to a point;
thence along a curve to the right an arc distance of 131.62 Feet (said
curve having a radius of 182.00 Feet, a chord distance of 128.77 Feet and a
chord bearing South 18(degrees) 01 Feet 09" East) to a point; thence
South 02(degrees) 41 Feet 56" West a distance 345.47 Feet to a point;
thence along a curve to the left an arc distance of 78.54 Feet (said curve
<PAGE>
having a radius of 100.00 Feet, a chord distance of 76.54 Feet and a chord
bearing South 19(degrees) 48 Feet and 05" East) to a point; thence
South 42(degrees) 18 Feet 06" East a distance of 88.44 Feet to a
point; thence along a curve to the left an arc distance of 154.72 Feet (said
curve having a radius of 197.00 Feet, a chord distance of 150.77 Feet and a
chord bearing South 64(degrees) 48 Feet 03" East) to a point; thence
South 87(degrees) 17 Feet 59" East a distance of 13.11 Feet to a point;
thence along a curve to the right an arc distance of 73.79 Feet (said curve
having a radius of 201.00 Feet, a chord distance of 73.38 Feet and a chord
bearing South 76(degrees) 46 Feet 59" East) to a point; thence North 09
(degrees) 38 Feet 55" East a distance of 74.44 Feet to a point; thence
South 87(degrees) 17 Feet 14" East a distance of 86.84 Feet to a
point; thence along a curve to the left an arc distance of 179.36 Feet
(said curve having a radius of 127.50 Feet, a chord distance of 164.93 Feet
and a chord bearing North 52(degrees) 24 Feet 48" East) to a point;
thence South 77(degrees) 53 Feet 10" East a distance of 40.66 Feet to
the TRUE POINT OF BEGINNING, said tract containing 11.898 acres.
The legal description as contained herein is based on the property as
shown on that certain survey titled'As-Built Survey of Concourse Corporate
Center I for Concourse I, Ltd. and Lawyers Title Insurance and Chicago
Title Insurance Company', dated September 21, 1984, last revised September
17, 1986, prepared by Benchmark Engineering Corporation, bearing the
certification of Thomas A. Kohn, Georgia Registered Land Surveyor No. 2208.
-2-
<PAGE>
EXHIBIT "F"
[BLUEPRINT DIAGRAM]
Concourse - 7th Floor
1 Concourse Parkway
Atlanta, Georgia
THE LANDMARKS GROUP
<PAGE>
EXHIBIT G
---------
LIST OF EQUIPMENT TO BE
LOCATED ON PREMISES
70-100 Personal Computer
D-45 IBM As-400 Computer with 40-60 Terminals
Possibly Telephone Switch Required - 240v
Mail Room Equipment requiring 115v/120v
3 Copiers
Miscellaneous Office Equipment
EXHIBIT 10.38
FIRST LEASE AMENDMENT AGREEMENT
THIS FIRST LEASE AMENDMENT AGREEMENT, made and entered into this
day of , 1996, by and between CK-CHILDRESS KLEIN #8 LIMITED
- ---- --------
PARTNERSHIP (hereinafter called "Landlord") and SIMMONS COMPANY (hereinafter
called "Tenant").
W I T N E S S E T H:
WHEREAS, by Lease Agreement dated May 5, 1993, (the "Lease"),
Landlord leased to Tenant approximately 113,400 square feet at
5100 West W.T. Harris Boulevard, Charlotte, North Carolina (the
"Premises"); and
WHEREAS, Tenant is desirous of expanding into approximately
30,780 square feet at 5100 West W.T. Harris Boulevard ("First Expansion
Premises") for a term commencing December 1, 1995, and terminating April
30, 2003.
NOW THEREFORE, in consideration of the mutual promises given one
to the other, the parties hereto intending to be legally bound, do hereby
covenant and agree as follows:
1. The lease term for the First Expansion Premises (the "Lease
Term") shall commence on December 1, 1995, and extend
through April 30, 2003.
2. The base monthly rental amount for the First Expansion
Premises (the "Base Rent") shall be Seven Thousand Four
Hundred and No/100 Dollars ($7,400.00).
3. As part of this agreement, Landlord shall erect a fence
representing approximately 30,780 square feet as outlined in
red on Exhibit "A" until such time as a new tenant leases
the adjacent 30,780 square feet.
4. The Premises as defined in the Lease shall include the First
Expansion Premises.
5. CPI ADJUSTMENT
a. As of May 1, 1998, Tenant's Base Rent will be adjusted
by taking sixty percent (60%) of the percentage increase in
the Consumer Price Index over the first twenty nine (29)
months of the Lease Term. The adjustment shall be at least
equal to the Base Rent, or at most a twenty percent (20%)
increase in the Base Rent. The adjustment shall be
calculated in the manner set forth below.
b. The Consumer Price Index (the "Index") is defined as the
Consumer Price Index for all urban consumers for the Atlanta
metropolitan Area (All Items) as published by the United
States Department of Labor Bureau of Labor Statistics. The
percentage of any increase in the Index shall be determined
by subtracting the Index for the most recent date prior to
December 1, 1995, from the Index for the most recent date
prior to May 1,1998, and then dividing that difference by
the Index for the most recent date prior to December 1,
1995. That percentage increase shall then be multiplied by
sixty percent (60%) to arrive at the percentage increase in
the rental rate for the remaining term. Notwithstanding the
above, in no event shall the monthly rent after this
adjustment be less than the Base Rent. Notwithstanding the
foregoing, the Base Rent for the remaining term, as adjusted
pursuant hereto, shall not exceed the result obtained by
increasing the Base Rent by twenty percent (20%). In the
event said Index is discontinued or revised during the Lease
Term such other comparable governmental Index or computation
as determined by the parties with which it is replaced shall
be deemed the basis for computation.
6. RIGHT OF FIRST REFUSAL
a. Landlord is the owner of the 30,780 square foot space
outlined in blue on Exhibit "A" ("Second Expansion
Premises"). Tenant shall have the right to match any bona
<PAGE>
fide offer that Landlord will accept on all, or any portion,
of the Second Expansion Premises ("Right of First Refusal").
Tenant shall have five (5) business days after receiving
written notice from Landlord that Landlord has received a
bona fide offer on all, or any portion, of the Second
Expansion Premises in which to exercise Tenant's Right of
First Refusal.
b. If Tenant exercises its Right of First Refusal, than the
lease of the Second Expansion Space will be consummated
according to the terms set forth in the bona fide offer.
Tenant's written acceptance shall be binding and Tenant
shall have ten (10) days in which to execute a Lease
Agreement on the Second Expansion Premises. In the event
Tenant fails to give Landlord written notice of Tenant's
election to lease the Second Expansion Premises within five
(5) business days from notification, then Tenant's rights
under this Paragraph 5 to lease the Second Expansion
Premises shall terminate and expire.
<PAGE>
c. If Tenant does not exercise the Right of First Refusal as
referenced above, then Tenant's Base Rent shall increase by
$1,200 per month at the commencement date of the lease to a third
party on the Second Expansion Space.
7. RENEWAL OPTIONS
This renewal option pertains to the First Expansion Premises or
the First Expansion Premises and Second Expansion Premises
combined, depending upon Tenant's occupancy at the time they
exercise this renewal option. So long as the Tenant is not in
default of the terms hereunder Tenant shall have the option to
renew this lease on the appropriate expansion premises for four
(4) consecutive terms of five (5) years each at the then fair
market rates for comparable facilities by notifying Landlord of
its intent not less than one hundred eighty (180) days prior to
the expiration of the primary term. These terms shall be
consecutive, that is, should Tenant fail to exercise a renewal
option in accordance with this paragraph 6, then the option so
failed and any subsequent options shall be null and void. If
Tenant exercises such option as provided for above, the lease
extension shall be at the same terms as contained herein with the
exception of the new rental rate. In no event shall the rent for
the second or any subsequent renewal period be less than the rent
for the previous renewal period. The renewal option on the
appropriate expansion premises shall be independent of the
renewal option for the Premises; that is, Tenant may exercise the
renewal option on the Premises and decline the renewal option on
the appropriate expansion premises.
8. All of the terms and conditions of the Lease unless expressly
modified in this First Lease Amendment Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the said parties have executed this First Lease
Amendment Agreement in triplicate, the day and year first above written.
EXECUTED BY LANDLORD this day of , 19 .
---- -------- --
ATTEST/WITNESS: LANDLORD:
CK-CHILDRESS KLEIN #8 LIMITED PARTNERSHIP,
a Texas limited partnership
By: Childress Klein Industrial-Charlotte #3, Inc.,
its general partner
By: By:
------------- --------------------------------------------
[Seal] Landon R. Wyatt, III
President
EXECUTED BY TENANT this 6 day of February , 1996.
--- -------------- --
ATTEST/WITNESS: TENANT:
SIMMONS COMPANY
By: /s/ Deborah Y. Negley By: /s/ George Franklin
---------------------- ---------------------------------------------
[Seal]
Its: Vice President - Finance, Treasurer
------------------------------------
EXHIBIT 10.39
INDUSTRIAL LEASE AGREEMENT
--------------------------
STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
THIS LEASE AGREEMENT is made and entered into effective as of February 5,
1993, by and between the Landlord and the Tenant hereinafter named.
W I T N E S S E T H:
- - - - - - - - - -
1. DEFINITIONS AND BASIC PROVISIONS. The following definitions and basic
provisions shall be used in conjunction with and limited by the reference
thereto in the provisions of this Lease:
(a) "Landlord": ST. PAUL PROPERTIES, INC., a Delaware corporation.
(b) "Tenant": SIMMONS COMPANY, a Delaware corporation.
(c) "Premises": The building or buildings (hereinafter the
"Building") and those improvements generally described on Exhibit "B" attached
hereto, which Building is located on the real property described on Exhibit "A"
attached hereto and made a part hereof (the "Property").
(d) "Lease Term": A period of one hundred two (102) months, commencing on
the earlier of the date specified in that certain Agreement Regarding Leased
Real Property (the "Sublease") between Landlord, Tenant and Motorola, Inc.
("Sublessor"), or October 1, 1994 (the "Commencement Date") and ending March 31,
2003 (the "Expiration Date"). See Rider #1 - Renewal Option.
(e) "Basic Rental" (1) $22,113.00 per month, for the period October
1, 1994 through March 31, 1998.
(2) $26,535.00 per month for the period of April
1, 1998 through March 31, 2003.
(f) "Security Deposit": $25,000.00.
(g) "Permitted Use": Manufacture, assembly, storage, and
distribution of Simmons bedding products and related office use, and any other
related use, subject to compliance by Tenant with all applicable laws, rules and
ordinances, and subject further to the provisions of Rider #4.
(h) "Maximum Rate": The lesser of (i) the annual rate of interest
determined by adding four percent (4%) to the prime lending rate as announced
from time to time by Bank One, Texas, N.A., or (ii) the maximum rate of interest
permitted by applicable law, including as to Article 5069-1.04, Vernon's Texas
Civil Statutes (and as the same may be incorporated by reference in other Texas
statutes) but otherwise without limitation, that rate based on the "indicated
rate ceiling".
(1) "Additional Rent": All sums of money, other than Basic Rental, which
become due under this Lease. Basic Rental and Additional Rent shall
collectively constitute the "Rent" or "Rentals" due or to become due under this
Lease and are herein so called.
2. LEASE GRANT. Landlord, in consideration of the Basic Rental to be
paid and the other covenants and agreements to be performed by Tenant and upon
the terms and conditions hereinafter stated, does hereby lease, demise and let
unto Tenant the Premises commencing on the Commencement Date hereof and ending
on the Termination Date, unless extended or sooner terminated as herein
provided.
<PAGE>
By occupying the Premises, Tenant shall be deemed to have
accepted the same as suitable for the purposes herein intended and to have
acknowledged that the same comply fully with Landlord's covenants and
obligations. After the Commencement Date of this Lease, Tenant shall, upon
request from Landlord, execute and deliver to Landlord a letter of acceptance of
delivery of the Premises, which letter shall also state the Commencement Date
and Expiration Date. See Rider #2 - Current Occupancy by Tenant.
3. RENT.
(a) In consideration of this Lease, commencing on the Commencement
Date, Tenant promises and agrees to pay Landlord the Basic Rental, without
deduction or set off, for each and every month of the Lease Term and
further promises and agrees to pay all Additional Rent which becomes due
hereunder. The nonpayment of any Additional Rent shall afford Landlord all
the rights and remedies as are herein provided in the case of nonpayment of
the Basic Rental.
(b) The Security Deposit shall be payable by Tenant to Landlord
contemporaneously with the execution hereof, A monthly installment of Basic
Rental shall be due and payable without demand commencing on the
Commencement Date, and on or before the first day of each succeeding
calendar month during the term hereof. Basic Rental for any fractional
month at the beginning or end of the Lease Term shall be prorated.
(c) The Security Deposit shall be held by Landlord, and shall bear
interest for Tenant's account (unless Tenant defaults) at passbook savings
rates in effect from time to time, and as security for the performance by
Tenant of Tenant's covenants and obligations under this Lease, it being
expressly understood that such deposit shall not be considered an advance
payment of Rent or a measure of Landlord's damages in case of default by
Tenant. Upon the occurrence of any event of default by Tenant, Landlord
may, from time to time, without prejudice to any other remedy, use the
Security Deposit to the extent necessary to make good any arrearages of
Basic Rental and any other damage, injury, expense or liability caused to
Landlord by such event of default. Following any such application of the
Security Deposit, Tenant shall pay to Landlord on demand the amount so
applied in order to restore the Security Deposit to its original amount.
If Tenant is not then in default hereunder, any remaining balance of the
Security Deposit and accrued interest shall be returned by Landlord to
Tenant upon expiration or earlier termination of this Lease. If Landlord
transfers its interest in the Premises during the Lease Term, Landlord may
assign the Security Deposit to the transferee and shall have no further
liability for the return of the Security Deposit. upon transferee's
assumption of such obligation.
(d) Notwithstanding any expiration or earlier termination of this
Lease, Tenant's obligation to pay any and all Additional Rent under this
Lease shall continue and shall cover all periods up to the date this Lease
expires or is terminated. Tenant's obligation to pay any and all
Additional Rent under this Lease and Landlord's and Tenant's obligation to
make the adjustments referred to in this Lease shall survive any expiration
or termination of this Lease.
(e) If any Basic Rental payment required to be paid or which becomes
due under this Lease is not paid by the tenth (10th) day following the day
on which it is due, a service charge of five percent (5%) of such amounts
due shall become
-2-
<PAGE>
due and payable in addition to the amounts due. Said service charge is for
the purpose of reimbursing Landlord for the extra costs and expenses in
connection with the handling and processing of late payments. In addition
to such service charge, if any Basic Rental payment is not paid by the
tenth (10th) day following the day on which it becomes due, Tenant shall
pay to Landlord, in addition to such Basic Rental payment and the service
charge, interest on such Basic Rental payment calculated at the Maximum
Rate from the date such Basic Rental payment was due until paid by Tenant.
(f) If any Additional Rent required to be paid or which becomes due
under this Lease is not paid when due, Tenant shall pay to Landlord, in
addition to such amounts, interest on such amounts at the Maximum Rate from
the date such amounts were due until paid by Tenant.
4. TAXES AND OTHER ASSESSMENTS; OPERATING EXPENSES.
(a) Tenant shall pay to Landlord as Additional Rent an amount equal
to all taxes, assessments and governmental charges of any kind and nature
whatsoever (hereinafter collectively referred to as "taxes") lawfully
levied or assessed against the real property described on Exhibit "A" and
the improvements located thereon. Such amount shall be paid within twenty
(20) days after receipt of Landlord's invoice to Tenant for same (which
invoice shall be accompanied by copies of tax bills and the due dates
thereof) and in the event any such amount is not paid within twenty (20)
days after the date of Landlord's invoice to Tenant, the unpaid amount
shall bear interest at the Maximum Rate from the date of the invoice until
payment by Tenant.
(b) If at any time during the term of this Lease, the present method
of taxation shall be changed so that in lieu of the whole or any part of
any taxes, assessments or governmental charges levied, assessed or imposed
on real estate and the improvements thereon, there shall be levied,
assessed or imposed on Landlord a capital levy or other tax directly on the
Basic Rentals received therefrom and/or a franchise tax assessment, levy or
charge measured by or based, in whole or in part, upon such Basic Rentals
for the present or any future building or buildings on the real property
described on Exhibit "A", then all such taxes, assessments, levies or
charges (excluding state or other federal taxes levied on landlord's
income), or the part thereof so measured or based, shall be deemed to be
included within the term "taxes" for the purposes hereof.
(c) As provided in and subject to Rider 3, Landlord shall have the
right to employ a tax consulting firm to attempt to assure a fair tax
burden on the Building within the applicable taxing jurisdiction. Tenant
shall pay to Landlord upon demand from time to time, as Additional Rent,
the cost of such service.
(d) Any payment to be made pursuant to this Lease with respect to the
real estate tax year or the calendar year (in the case of Operating
Expenses) in which this Lease commences or terminates shall be prorated.
(e) Tenant shall pay to Landlord as Additional Rent
-3-
<PAGE>
any assessments made against the real property described on Exhibit "A" and
the improvements located thereon, pursuant to any deed restrictions or
development standards to which such property is subject. Such amount shall
be paid within twenty (20) days after receipt of Landlord's invoice to
Tenant for same and in the event any such amount is not paid within twenty
(20) days after the receipt of Landlord's invoice to Tenant, the unpaid
amount shall bear interest at the Maximum Rate from the date of the invoice
until payment by Tenant. See Rider #3 - Operating Expenses
6. UTILITIES. Landlord agrees to provide connections for water, gas,
sewer, electricity, and telephone service to the Premises; but Tenant shall pay
for all water, gas, heat, light, power, telephone, sewer, fire sprinkler, lawn
sprinkler charges and other utilities and services used on or from the Premises,
together with any taxes, penalties, surcharges or the like pertaining thereto
and any maintenance charges for utilities and shall furnish all electric light
bulbs and tubes. Landlord shall in no event be liable for any interruption or
failure of utility services on the Premises, except for an interruption or
failure resulting from Landlord's gross negligence or willful misconduct.
7. USE. Tenant shall use the Premises only for the Permitted Use (as
defined in paragraph 1(g) hereof). Tenant will not, subject to Tenant's
compliance with Rider #4, without Landlord's prior written consent, not to be
unreasonably withheld, occupy or use the Premises, or permit any portion of the
Premises to be occupied or used, for any business or purpose other than the
Permitted Use or for any use or purpose which is unlawful in part or in whole or
deemed to be disreputable in any manner or extrahazardous on account of fire,
nor permit anything to be done which will in any way increase the rate of fire
insurance on the Building or contents; and in the event that, by reason of acts
of Tenant, there shall be any increase in rate of insurance on the Building or
contents created by Tenant's acts or conduct of business then Tenant shall pay
to Landlord the amount of such increase on demand. Tenant will conduct its
business and control its agents, employees and invitees in such a manner as not
to create any nuisance, nor interfere with, annoy or disturb other tenants or
Landlord in management of the project of which the Premises form a part. Tenant
will maintain the Premises in a clean healthful and safe condition and will
comply with all laws, ordinances, orders, rules and regulations (state, federal,
municipal and other agencies or bodies having any jurisdiction thereof) with
reference to use, condition or occupancy of the Premises. Tenant will not,
without the prior written consent of Landlord, not to be unreasonably withheld,
paint, install lighting or
-4-
<PAGE>
decoration, or install any signs, window or door lettering or advertising media
of any type on or about the Premises or any part thereof. Should Landlord agree
in writing to any of the foregoing items in the preceding sentence, Tenant will
maintain such permitted item in good condition and repair at all times. Outside
storage, including but not limited to trucks or other vehicles, is also
prohibited without Landlord's prior written consent, not to be unreasonably
withheld. Tenant, its employees, customers and licensees shall have the
exclusive right to use the parking areas on the Property. Landlord shall not be
responsible for enforcing Tenant's exclusive parking rights against any third
party. See Rider #4 - Further Use Provisions.
8. REPAIRS AND MAINTENANCE.
(a) By Landlord: Landlord shall at its expense maintain only the
roof, foundation and the structural soundness of the exterior walls
(excluding all windows, window glass, plate glass, and all doors) of the
Building in good repair and condition, except for reasonable wear and tear.
After becoming aware of such need, Tenant shall give immediate written
notice to Landlord of the need for repairs or corrections and Landlord
shall proceed diligently within a reasonable time after receiving such
notice to make such repairs or corrections. Landlord's liability hereunder
shall be limited to the cost of such repairs or corrections. Tenant shall
repair and pay for any damage caused by the negligence or default hereunder
of or by Tenant, its employees, agents or invitees; the cost of any such
damage which is paid by Landlord shall be deemed Additional Rent which is
immediately due and owing from Tenant. In the event Landlord fails to make
repairs required hereunder, Tenant may make such repairs, in which case
Landlord shall reimburse Tenant for the actual, reasonable cost of such
repairs, evidenced by invoices. Finally, Landlord shall be liable for
actual damages incurred by Tenant as a result of the negligence or willful
misconduct of Landlord or its employees or agents in performing required
repairs.
(b) By Tenant:
(1) Tenant shall at its own cost and expense keep and maintain
all parts of the Premises (except those for which Landlord is
expressly responsible under the terms of this Lease) in good condition
(normal wear and tear accepted), promptly making all necessary repairs
and replacements, including but not limited to, windows, glass and
plate glass, door, and special office entry, interior walls and finish
work, floors and floor covering, downspouts, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers,
irrigation system, paving, plumbing work and fixtures, pest
extermination, exterior lighting fixtures, regular removal of trash
and debris, regular mowing of any grass, trimming, weed removal,
landscape replacement, general landscape maintenance, including rail
spur areas, keeping the parking areas, driveways, alleys and the whole
of the Premises in a clean and sanitary condition, and maintaining any
spur track serving the Premises (Tenant agrees to sign a joint
maintenance agreement with railroad company servicing the Premises,
if requested by the railroad company). Tenant shall not be obligated
to repair any damage caused by fire, tornado or other casualty covered
by the insurance to be maintained by Landlord pursuant to the
provisions of this Lease, except that Tenant shall be obligated to
repair all wind damage to glass except with respect to tornado or
hurricane damage. Landlord shall deliver to Tenant all guarantees or
warranties, if any, received by Landlord in connection with the
foregoing.
(2) As provided in Rider #3, Landlord reserves the right to
perform or have performed the paving and landscape maintenance,
landscape replacement, exterior painting, maintenance of exterior
lighting fixtures, and the maintenance of the irrigation systems and
common sewerage line plumbing which are otherwise Tenant's obligations
under
-5-
<PAGE>
paragraph (b)(1) above and in such event, Tenant shall, in lieu of the
obligations set forth under paragraph (b)(1) above with respect to
such items in accordance with Rider #3, be liable to Landlord for the
cost and expense of same, including but not limited to, the cost for
mowing of grass, care of shrubs, landscape replacement, general
landscaping, maintenance of parking areas, driveways and alleys,
exterior repainting, maintenance of the exterior lighting fixtures and
the maintenance of the irrigation systems and common sewerage line
plumbing; provided, however, that Landlord shall have the right to
require Tenant to pay such other reasonable costs of said mowing,
shrub care and general landscaping costs as may be determined by
Landlord in its sole discretion. If Tenant is clearly identified as
being solely responsible for obstructions or stoppage of the common
sanitary sewerage line, then Tenant shall pay the entire cost of
repairing same, upon demand by Landlord. In the event Landlord elects
to perform or cause to be performed such work, Tenant shall pay when
due such costs and expenses in accordance with Rider #3.
(3) Landlord shall have the right to coordinate any repairs and
other maintenance of any rail tracks serving or to serve the Building,
and if Tenant uses such rail tracks, Tenant shall reimburse Landlord
from time to time upon demand, as Additional Rent, for the costs of
such repairs and maintenance and any other sums specified in any
agreement to which Landlord is a party respecting such tracks.
(5) Tenant shall, at its own cost and expense, enter into a
regularly scheduled preventive maintenance/service contract with a
maintenance contractor for servicing all hot water, heating and air
conditioning systems and equipment within or serving the Premises.
The maintenance contractor and the contract must be approved by
Landlord, not to be unreasonably withheld. The service
contract must include all services suggested by the equipment
manufacturer within the operation/maintenance manual and must become
effective (and a copy thereof delivered to Landlord) within thirty
(30) days of the date Tenant takes possession of the Premises.
(6) If Tenant should fail to perform any of its obligations
hereunder with respect to repairs and maintenance, then Landlord
may, if it so elects, in addition to any other remedies provided
herein, effect such repairs and maintenance. Any sums expended by
Landlord in effecting such repairs and maintenance shall be due and
payable, on or before twenty (20) days after Tenant receives a claim
and accompanied by an invoice therefor, together with interest thereon
at the Maximum Rate from the date of each such expenditure by Landlord
to the date of repayment by Tenant.
-6-
<PAGE>
9. ALTERATIONS AND IMPROVEMENTS. At the expiration or earlier
termination of this Lease, Tenant shall deliver up the Premises with all
improvements located thereon (except as otherwise herein provided) in good
repair and condition, reasonable wear and tear excepted, and shall deliver to
Landlord all keys to the Premises. The cost and expense of any repairs
necessary to restore the condition of the Premises to the condition in which
they are to be delivered to Landlord shall be borne by Tenant. Tenant will not
make or allow to be made any alterations or physical additions in or to the
Premises without the prior written consent of Landlord, which consent shall not
be unreasonably withheld as to non-structural alterations. All alterations,
additions or improvements (whether temporary or permanent in character) made in
or upon the Premises, either by Landlord or Tenant, shall be Landlord's property
on expiration or earlier termination of this Lease and shall remain on the
Premises without compensation to Tenant. All furniture, movable trade fixtures
and equipment installed by Tenant may be removed by Tenant at the expiration or
earlier termination of this Lease if Tenant so elects, and shall be so removed
if required by Landlord, or if not so removed within five (5) days after
termination, and on or before the expiration of the Lease Term, shall, at the
option of Landlord, become the property of Landlord. All such installations,
removals and restoration shall be accomplished in a good workmanlike manner so
as not to damage the Premises or the primary structure or structural qualities
of the Building, the other improvements or the plumbing, electrical lines or
other utilities.
10. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to assign
this Lease or to sublet the whole or any part of the Premises without the prior
written consent of Landlord, such consent not to be unreasonably withheld or
delayed. Notwithstanding any permitted assignment or subletting, Tenant shall
at all times remain directly, primarily and fully responsible and liable for the
payment of the Rent herein specified and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. Upon the
occurrence of an "event of default" as hereinafter defined, if the Premises or
any part thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, or provided by law, may at its option collect directly
from such assignee or subtenant all rents becoming due to Tenant under such
assignment or sublease and apply such rents against any sums due to Landlord
from Tenant hereunder, and no such collection shall be construed to constitute
a novation or a release of Tenant from the further performance of Tenant's
obligations hereunder. In the event of the transfer and assignment by Landlord
of its interest in this Lease and the Premises, Landlord shall thereby be
released from any further obligations hereunder, and Tenant agrees to look
solely to such successor in interest of the Landlord for performance of such
obligations. Tenant shall not mortgage, pledge or otherwise encumber its
interest in this Lease or in the Premises without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion. See
Rider #5 - Subletting Provisions.
11. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the Premises, resulting
from and/or caused in part or whole by the negligence or misconduct of Tenant,
its agents, servants or employees, or of any other person entering upon the
Premises, or caused by the Buildings and improvements becoming out of repair, or
caused by leakage of gas, oil, water or steam or by electricity emanating from
the Premises, or due to any cause whatsoever, and Tenant hereby covenants and
agrees that it will at all times indemnify and hold safe and harmless the
Premises, the Landlord, Landlord's agents and employees from any loss,
liability, claims, suits, costs, expenses, including without limitation
attorney's fees and damages, both real and alleged, arising out of any such
damage or injury, except injury to persons or damage to property to the extent
caused by a default by Landlord resulting from the gross negligence or willful
misconduct of Landlord. Tenant shall
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<PAGE>
procure and maintain throughout the term of this Lease a policy or policies of
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with:
(i) the Premises; (ii) the condition of the Premises; (iii) Tenant's operations
in and maintenance and use of the Premises; and (iv) Tenant's liability assumed
under this Lease, the limits of such policy or policies to be in the amount of
not less than $500,000.00 per occurrence in respect of injury to persons
(including death), and in the amount of not less than $100,000.00 per occurrence
in respect of property damage or destruction, including loss of use thereof.
All such policies shall be procured by Tenant from responsible insurance
companies satisfactory to Landlord. Certified copies of such policies, together
with receipt evidencing payment of premiums therefor, shall be delivered to
Landlord prior to the Commencement Date of this Lease. Not less than fifteen
(15) days prior to the expiration date of any such policies, certified copies of
the renewals thereof (bearing notations evidencing the payment of renewal
premiums) shall be delivered to Landlord. Such policies shall further provide
that not less than thirty (30) days written notice shall be given to Landlord
before such policy may be cancelled or changed to reduce insurance provided
thereby.
12. MORTGAGES. Tenant accepts this Lease subject to any deeds of trust,
security interests or mortgages which might now or hereafter constitute a lien
upon the Premises and to deed restrictions, zoning ordinances and other building
and fire ordinances and governmental regulations relating to the use of the
Premises. Tenant shall at any time hereafter, on demand, execute any
instruments, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such deed of trust, security interest or mortgage. With respect to any deed of
trust, security interest or mortgage hereafter constituting a lien on the
Premises, Landlord, at its sole option, shall have the right to waive the
applicability of this paragraph so that this Lease will not be subject and
subordinate to any such deed of trust, security interest or mortgage. Tenant
shall upon request by Landlord, execute and deliver from time to time, one or
more instruments certifying that this lease is in full force and unmodified (or,
if modified stating the date and nature of each modification), the date through
which the Basic Rental has been paid, the unexpired term of this Lease, and
such other matters pertaining to this Lease as may be reasonably requested by
Landlord. Landlord represents that as of the date of execution hereof, there is
no deed of trust lien affecting the Property. In the event Landlord in the
future causes a deed of trust lien to be placed on the Property, Landlord shall
use its best efforts to obtain from the holder of the deed of trust lien (the
"Holder") a non-disturbance agreement. It is understood that Tenant may not
enter into any attornment agreement without a non-disturbance agreement being
obtained from the Holder. In addition, Landlord will use its best efforts to
obtain from Holder the right to use insurance proceeds to rebuild in the event
of a casualty.
13. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter upon and inspect the Premises at any reasonable time
during business hours, for the purpose of ascertaining the condition of the
Premises or in order to make such repairs as may be required or permitted to be
made by Landlord and, during the six (6) month period prior to the expiration of
this Lease, or immediately upon a default by Tenant hereunder, Landlord and
Landlord's agents and representatives shall have the right to enter upon the
Premises at any reasonable time during business hours for the purpose of showing
the Premises and shall have the right to erect on the Premises a suitable sign
indicating the Premises are available for lease or for sale. Except in the case
of an emergency, Landlord shall use its best efforts to notify Tenant in advance
of any entry in or on the Premises for the above-stated purposes.
14. CONDEMNATION. If the whole or any substantial part of the Premises
should be taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by right of eminent domain, or by private purchase
in lieu thereof and the taking would prevent or materially interfere with the
use of the Premises for the purposes contemplated by the Permitted Use, this
Lease shall terminate and the Basic Rental shall be abated during the unexpired
portion of this Lease, effective when the physical taking of said Premises shall
occur.
If part of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or by right of eminent domain, or by
private purchase in lieu thereof,
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and this Lease is not terminated as provided in the paragraph above, this Lease
shall not terminate but the Basic Rental payable hereunder during the unexpired
portion of this Lease shall be reduced to such extent as may be fair and
reasonable under all of the circumstances.
In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings.
15. INSURANCE, FIRE OR OTHER CASUALTY. Landlord agrees to maintain
standard fire and extended coverage insurance covering the Building in an amount
not less than 80% (or such greater percentage as may be necessary to comply with
the provisions of any co-insurance clauses of the policy) of the "replacement
cost" thereof as such term is defined in the Replacement Cost Endorsement to be
attached thereto, insuring against the perils of fire, lightning, vandalism,
malicious mischief and loss of rent, extended by Special Extended Coverage
Endorsement to insure against all other risks of direct physical loss, such
coverages and endorsements to be as defined, provided and limited in the
standard bureau forms prescribed by the insurance regulatory authority for the
State in which the Premises are situated for use by insurance companies admitted
in such state for the writing of such insurance or risks located within such
state. Subject to the provisions of this paragraph, such insurance shall be for
the sole benefit of Landlord and under its sole control. Tenant agrees to pay
to Landlord, as Additional Rent, an amount equal to the Landlord's cost of
maintaining such insurance. Said payments shall be made to Landlord immediately
upon presentation to Tenant of Landlord's statement setting forth the amount
due, together with such documentation as is reasonably necessary to evidence
the costs of such insurance. In the event any such amount is not paid within
twenty (20) days after the presentation to Tenant of the amount so due, the
unpaid amount shall bear interest at the Maximum Rate from the date of such
presentation until paid by Tenant. Any payment to be made pursuant to this
paragraph with respect to the year in which this Lease expires or otherwise
terminates shall bear the same ratio to the payment which would be required
to be made for the full year as the part of such year covered by the term of
this Lease bears to a full year.
If the Building should be damaged or destroyed by fire, tornado or
other casualty, Tenant shall give immediate written notice thereof to Landlord.
If the Building should be totally destroyed by fire, tornado or other
casualty, or if it should be so damaged thereby that rebuilding or repairs
cannot in Landlord's reasonable estimation be completed within one hundred fifty
(150) days after the date upon which Landlord is notified by Tenant of such
damage, this Lease shall terminate and the Rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.
If the Building should be damaged by any peril covered by the
insurance to be provided by Landlord pursuant to the provisions of this
paragraph, but only to such extent that rebuilding or repairs can in Landlord's
reasonable estimation be completed within one hundred fifty (150) days after the
date upon which Landlord is notified by Tenant of such damage, this Lease shall
not terminate, and Landlord shall at its sole cost and expense thereupon proceed
with reasonable diligence to rebuild and repair the Building to substantially
the condition in which it existed prior to such damage, except that Landlord
shall not be required
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to rebuild, repair or replace any part of the partitions, fixtures, additions
and other improvements which may have been placed in, on or about the Premises
by Tenant. If the Premises are untenantable in whole or in part following such
damage, the Rent payable hereunder during the period in which they are
untenantable shall be reduced to such extent as may be fair and reasonable under
all of the circumstances. In the event that Landlord should fail to complete
such repairs and rebuilding within one hundred fifty (150) days after the date
upon which Landlord is notified by Tenant of such damage, Tenant may at its
option terminate this Lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
Building or the Premises requires that the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this Lease by
delivering written notice of termination to Tenant within forty five (45) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
16. HOLDING OVER. Should Tenant, or any of its successor in interest,
hold over the Premises, or any part thereof, after the expiration of the term of
this Lease, unless otherwise agreed in writing, such holding over shall
constitute and be construed as tenancy from month to month only, at a Basic
Rental equal to the Basic Rental payable for the last month of the term of this
Lease plus twenty five percent (25%) of such amount. The holding over by Tenant
for any part of a month shall entitle Landlord to collect the Rent called for
under this paragraph for the entirety of such month. The provisions of this
paragraph shall not be construed as Landlord's consent for the Tenant to hold
over.
17. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for all taxes
levied or assessed against personal property, furniture or fixtures placed by
Tenant in the Premises. If any such taxes for which Tenant is liable are levied
or assessed against Landlord or Landlord's property and if Landlord elects to
pay the same or if the assessed value of Landlord's property is increased
by inclusion of personal property, furniture or fixtures placed by Tenant in
the Premises, and Landlord elects to pay the taxes based on such increase,
Tenant shall pay to Landlord upon demand that part of such taxes for which
Tenant is primarily liable hereunder.
18. EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this Lease.
(a) Tenant shall fail to pay any of the Basic Rental or Additional
Rent hereby reserved and such failure shall continue for a period of five
(5) days after written notice (which Landlord shall only be obligated to
give one (1) time during each calendar year during the Lease Term).
(b) Tenant shall fail to comply with any term, provision or covenant
of this Lease, other than the payment of Rent, and shall not cure such
failure within twenty (20) days after written notice thereof to Tenant.
If, however, such failure is not capable of being cured within such 20-day
period, so long as Tenant has commenced and is diligently pursuing a cure
within the 20-day period, Tenant shall have a period not to exceed forty
five (45) days from the notice of default within which to effect a cure.
(c) Tenant shall make an assignment for the benefit of creditors.
(d) Tenant shall file a petition under any section or chapter of the
United States Bankruptcy Code, as amended, or under any similar law or
statute of the United States or any State thereof; or Tenant shall be
adjudged bankrupt or insolvent in proceedings filed against Tenant
thereunder and such adjudication shall not be vacated or set aside within
thirty (30) days.
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<PAGE>
(e) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant and such receivership shall not be terminated
or stayed within thirty (30) days.
(f) Tenant shall desert or vacate any substantial portion of the
Premises for a period of five (5) or more days.
19. REMEDIES. Upon the occurrence of any event of default specified in
paragraph 18 hereof, Landlord shall have the option to pursue any one or more of
the following remedies without any notice or demand whatsoever:
(a) Terminate this Lease, in which Event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord
may, without prejudice to any other remedy which it may have for possession
or arrearages in Rent, enter upon and take possession and expel or remove
Tenant and any other person who may be occupying said Premises or any part
thereof, without being liable for prosecution or any claim of damages
thereof (except for damages resulting from the gross negligence or willful
misconduct of Landlord); and Tenant agrees to pay to Landlord on demand the
amount of all loss and damage which Landlord may suffer by reason of such
termination, whether through inability to relet the Premises on
satisfactory terms or otherwise, including the loss of Rent for the
remainder of the Lease Term.
(b) Enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any
part thereof, without being liable for prosecution or any claim for damages
therefor (except for damages resulting from the gross negligence or willful
misconduct of Landlord), and if Landlord so elects, relet the Premises on
such terms as Landlord shall deem advisable and receive the Basic Rental
thereof; and Tenant agrees to pay to Landlord on demand any deficiency that
may arise by reason of such reletting for the remainder of the Lease Term.
(c) Enter upon the Premises, without being liable for prosecution or
any claim for damages therefor (except for damages resulting from the gross
negligence or willful misconduct of Landlord), and do whatever Tenant is
obligated to do under the terms of this Lease; and Tenant agrees to
reimburse Landlord on demand for any expenses which Landlord may incur in
thus effecting compliance with Tenant's obligations under this Lease, and
Tenant further agrees that Landlord shall not be liable for any damages
resulting to the Tenant from such action (except for damages resulting from
the gross negligence or willful misconduct of Landlord).
(d) Pursue the statutory Landlord's lien for Rent which is not waived
by anything contained herein.
No re-entry or taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention be given to Tenant. Notwithstanding any such reletting
or re-entry or taking possession, Landlord may at any time thereafter elect to
terminate this Lease for a previous default. Pursuit of any of the foregoing
remedies shall not preclude pursuit of any of the other remedies herein provided
or any other remedies provided by law, nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any Rent due to Landlord hereunder
or of any damages accruing to Landlord by reason of the violation of any of the
terms, provisions and covenants herein contained. Landlord's acceptance of Rent
following an event of default hereunder shall not be construed as Landlord's
waiver of such event of default. No waiver by Landlord of any violation or
breach of any of the terms, provisions, and covenants herein contained shall be
deemed or construed or constitute a waiver of any other violation or breach of
any of the terms, provisions, and covenants herein contained. Forbearance by
Landlord to
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enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of any other violation
of default. The loss or damage that Landlord may suffer by reason of
termination of this Lease or the deficiency from any reletting as provided for
above shall include the expense of repossession and any repairs or remodeling
undertaken by Landlord following possession. Should Landlord at any time
terminate this Lease for any default, in addition to any other remedy
Landlord may have, Landlord may recover from Tenant all damages Landlord may
incur by reason of such default, including the cost of recovering the Premises
and the loss of Rent for the remainder of the Lease Term.
20. SURRENDER OF PREMISES. No act or thing done by the Landlord or its
agents during the term hereby granted shall be deemed an acceptance of a
surrender of the Premises, and no agreement to accept a surrender of the
Premises shall be valid unless the same be made in writing and subscribed by the
Landlord.
21. ATTORNEYS' FEES. If on account of any breach or default by Tenant in
Tenant's obligations under this Lease it should be necessary or appropriate for
Landlord to bring any action under this Lease or to enforce or defend any of
Landlord's rights hereunder, then Tenant agrees in each and any such case to pay
to Landlord a reasonable attorneys' fee. Landlord agrees this provision shall be
applicable against it in the event of Landord's default hereunder.
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23. MECHANIC'S LIEN. Tenant shall have no authority, express or implied,
to create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the Premises or to
charge the Rent payable hereunder for any claim in favor of any person dealing
with Tenant, including those who may furnish materials or perform labor for any
construction or repairs, and each such claim shall attach to, if at all, only
the leasehold interest granted to Tenant by this instrument. Tenant covenants
and agrees that it will pay or cause to be paid all sums legally due and payable
by it on account of any labor performed or materials furnished in connection
with any work performed on the Premises on which any lien is or can be validly
and legally asserted against its leasehold interest in the Premises or the
improvements thereon and that it will save and hold Landlord harmless from any
and all loss, cost or expense based on or arising out of asserted claims or
liens against the leasehold estate or against the right, title and interest of
the Landlord in the Premises or under the terms of this Lease.
24. WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, the parties hereto waive any and all rights of recovery, claim,
action or cause of action, against each other, their agents, officers and
employees, for any loss or damage that may occur to the Premises hereby demised,
or any improvements thereto, the Building or any improvements thereto, by reason
of fire, the elements, or any other cause which could be insured against under
the terms of standard fire and extended coverage insurance policies, regardless
of cause or origin, including negligence of the parties hereto, their agents,
officers, and employees.
25. SIGNS. Tenant shall have the right to install signs upon the Premises
only when first approved in writing by Landlord (such approval not to be
unreasonably withheld) and subject to any applicable governmental laws,
ordinances, restrictions, regulations and other requirements. Tenant shall
remove all such signs upon the expiration or other termination of this Lease.
Such installations and removals shall be made in such manner as to avoid injury
to or defacement of any buildings or other improvements on the Premises, and
Tenant shall repair any injury or defacement, including without limitation
discoloration, caused by such installation or removal.
26. NOTICES. Each provision of this Lease, or of any applicable
governmental laws, ordinances, regulations, and other requirements with
reference to the sending, mailing or delivery of any notice, or with reference
to the making of any payment by Tenant to Landlord, shall be deemed to be
complied with when and if the following steps are taken:
(a) All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord in Dallas County, Texas, at
the address hereinbelow set forth, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith.
(b) Except as otherwise specifically set forth herein, any notice or
document required to be delivered hereunder shall be in writing and shall
be deemed effective when delivered and shall be deemed delivered when
actually received, or, if earlier and whether or not received, two (2) days
after being deposited in the United States mail, postage prepaid, certified
or registered mail, return receipt requested,
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addressed to the parties hereto at the respective addresses set out
opposite their names below, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith:
LANDLORD: St. Paul Properties, Inc.
--------------------------------
12720 Hillcrest Road, Suite 100
--------------------------------
Dallas, Texas 75230
--------------------------------
TENANT: Simmons Company
--------------------------------
1625 Diplomat
--------------------------------
Carrollton, Texas 75006
--------------------------------
27. FORCE MAJEURE. Whenever a period of time is herein prescribed for
action to be taken by Landlord, the Landlord shall not be liable or responsible
for, and there shall be excluded from the computation for any such period of
time, any delays due to strikes, riots, acts of God, shortages of labor or
materials, war, governmental laws, regulations or restrictions or any other
causes of any kind whatsoever which are beyond the control of Landlord. Landlord
agrees that this provision shall also apply to actions to be taken by Tenant;
provided, this provision shall not apply to the payment of any amounts due
- --------
hereunder by Tenant.
28. SEPARABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby, and it is also the intention of the parties to this
Lease that in lieu of each clause or provision of this Lease that is illegal,
invalid, or unenforceable, there be added as a part of this Lease a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and be legal, valid and enforceable.
29. ENTIRE AGREEMENT; AMENDMENTS; BINDING EFFECT. Neither party to this
Lease has made or relied on any representations, warranties, covenants or
agreements with respect to the Premises or any other matters affecting or
related to this Lease except as contained herein and this Lease supersedes and
replaces any prior representations, warranties, covenants or agreements, whether
written or oral, which may have been made by either party with respect to the
Premises or other matters contained in this Lease. This Lease contains the
entire agreement between the parties hereto with respect to the Premises and all
other matters contained in this Lease and this Lease may not be altered, changed
or amended, except by instrument in writing signed by both parties hereto. No
provision of this Lease shall be deemed to have been waived by Landlord unless
such waiver be in writing signed by Landlord and addressed to Tenant, nor shall
any custom or practice which may grow up between the parties in the
administration of the terms hereof be construed to waive or lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance with the
terms hereof. The terms, provisions, covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon the parties
hereto, and upon their respective successors in interest and legal
representatives, except as otherwise herein expressly provided.
30. QUIET ENJOYMENT. Provided Tenant has performed all of the terms,
covenants, agreements and conditions of this Lease, including the payment of
Rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereof, without hindrance from Landlord, subject
to the terms and conditions of this Lease.
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31. EXISTENCE OF BROKER. Tenant represents and warrants that it has not
contacted or dealt with any real estate broker or agent in connection with the
execution of this Lease, except as listed below:
BROKER: Cushman & Wakefield of Texas, Inc.
----------------------------------
5430 LBJ Freeway, Suite 100
----------------------------------
Dallas, Texas 75240
----------------------------------
Tenant agrees to indemnify and hold harmless Landlord against all
liabilities and costs (including but not limited to attorney's fees) incurred by
Landlord as a result of Tenant's breach of the warranties and representations
contained herein.
32. GENDER. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires.
33. JOINT AND SEVERAL LIABILITY. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several. If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be the joint and several obligations of Tenant and
such guarantor and Landlord need not first proceed against the Tenant hereunder
before proceeding against such guarantor, nor shall any such guarantor be
released from its guaranty for any reason whatsoever, including without
limitation, in case of any amendments hereto, waivers hereof or failure to give
such guarantor any notices hereunder.
34. CAPTIONS. The captions contained in this Lease are for convenience of
reference only, and in no way limit or enlarge the terms and conditions of this
Lease.
35. GOVERNING LAW AND PLACE OF PERFORMANCE. This Lease shall be governed
by the laws of the State of Texas. Tenant shall perform all covenants,
conditions and agreements contained herein, including but not limited to payment
of Rent, in Dallas County, Texas. Any suit arising from or relating to this
Lease shall be brought in Dallas County, Texas, and the parties hereto waive the
right to be sued elsewhere.
36. SPECIAL PROVISIONS. Riders #1-#5 attached hereto are incorporated
herein for all purposes. In the event of a conflict between the terms of the
Riders and the printed terms of this Lease, the terms of the Riders shall
control.
Executed by Landlord this 10th day of February, 1993.
---- --------
LANDLORD:
ST. PAUL PROPERTIES, INC.
By: /s/
---------------------
Title:
--------------
Executed by Tenant this 5th day of February, 1993.
--- --------
TENANT:
ATTEST: SIMMONS COMPANY
_____________________ By: /s/
---------------------
Title: ______________ Title: President
---------
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EXHIBIT "A"
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The description of Parcel 4, a 4.557 acre tract of land situated in the W. M.
Pulliam Survey, Abstract No. 1171, City of Carrollton, Dallas County, Texas.
Said tract being a part of Luna Business Park, a 67.821 acre tract of land. Said
Parcel 4 being more particularly described as follows:
BEGINNING at a point in the south right-of-way line of Diplomat Drive (60 foot
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R.O.W.), said point being N 89 DEG. 01' 49" E a distance of 545.23 feet from the
east right-of-way line of Luna Road (100 foot R.O.W.);
THENCE N 89 DEG. 01' 49" E along said south line of Diplomat Drive for a
- ------
distance of 356.25 feet to a point for corner in the west line of a 96 foot
drainage R.O.W. to Carrollton, Farmers Branch Levee District.
THENCE S 00 DEG. 58' 11" E along said west line of drainage R.O.W. for a
- ------
distance of 541.98 feet to a point for corner in the north right-of-way line of
Cooks Branch;
THENCE S 84 DEG. 09' 05" W along said north line of Cooks Branch for a distance
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of 357.55 feet to a point for corner;
THENCE N 00 DEG. 58' 11" W for a distance of 570.28 feet to the POINT OF
- ------ --------
BEGINNING: CONTAINING 198,496.10 square feet or 4.557 acres of land.
- ---------------------
EXHIBIT "A"
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<PAGE>
EXHIBIT "B"
-----------
Floor Plan of:
1625 Diplomat Drive
Carrollton, Texas
106,140 Square Feet
EXHIBIT "B"
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<PAGE>
RIDER #1 RENEWAL OPTION
-----------------------
If, at the end of the Lease Term, as it may be extended, Tenant is not in
default of any of the terms, conditions or covenants of this Lease, Tenant, but
not any assignee or subtenant of Tenant, is hereby granted two (2) options to
renew this Lease for two (2) additional terms of sixty (60) months each upon
the same terms and conditions contained herein, with the following exceptions:
(a) The renewal term will contain no further renewal options unless
granted by Landlord in writing; and
(b) Rental for the first renewal term shall be at ninety five percent (95%)
of the then prevailing market rate for properties of equivalent quality, size,
utility and location, with the length of the lease term and credit standing of
the Tenant to be taken into account. If Tenant desires to renew this Lease,
Tenant will notify Landlord of its intention to renew no later than one hundred
eighty (180) days prior to the expiration date of the then current term of this
Lease. Landlord shall, within the next fifteen (15) days, notify Tenant in
writing of the proposed renewal rate and Tenant shall, within the next fifteen
(15) days following receipt of the proposed rate rental rate, notify Landlord in
writing of its acceptance or rejection of the proposed rental rate. In the event
Tenant and Landlord cannot agree on the proposed rate, this Lease shall
terminate at end of the primary term, unless terminated earlier pursuant to the
terms hereof.
(c) Rental for the second renewal term shall be at the then prevailing
market rates for properties of equivalent quality, size, utility and location,
with the length of the lease term and credit standing of the Tenant to be taken
into account. If Tenant desires to renew this Lease, Tenant will notify Landlord
of its intention to renew no later than one hundred eighty (180) days prior to
the expiration date of the then current term of this Lease. Landlord shall,
within the next fifteen (15) days, notify Tenant in writing of the proposed
renewal rate and Tenant shall, within the next fifteen (15) days following
receipt of the proposed rate, notify Landlord in writing of its acceptance or
rejection of the proposed rental rate. In the event Tenant and Landlord cannot
agree on the proposed rate, this Lease shall terminate at end of the then
current term, unless terminated earlier pursuant to the terms hereof.
<PAGE>
RIDER #2 - CURRENT OCCUPANCY BY TENANT
--------------------------------------
It is understood and agreed that as of the date of the execution of this
Lease, Tenant has agreed to sublease the Premises from Sublessor, pursuant to
the Sublease. Therefore, Tenant will be occupying the Premises pursuant to the
Sublease from the date hereof until the Commencement Date. In this regard, it is
hereby agreed that:
(a) No change in (i) the condition of the Premises, (ii) the use of the
Premises permitted by applicable governmental authorities, or (iii) any
fact or circumstances whatsoever, between the date hereof and the
Commencement Date (except as specifically provided otherwise in this
Lease), shall operate to in any way relieve, alter or amend Tenant's
obligations under this Lease.
(b) A default by Tenant under the Sublease shall constitute a default under
this Lease, and entitle Landlord to exercise any and all remedies provided
herein for a default by Tenant.
(c) IT IS UNDERSTOOD AND AGREED THAT LANDLORD IS NOT MAKING AND
SPECIFICALLY DISCLAIMS ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OR REPRESENTATIONS AS TO ZONING, TAX
CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITIONS, AVAILABILITY OF ACCESS
(SPECIFICALLY MAKING NO WARRANTY OF COMPLIANCE WITH THE REQUIREMENTS
OF THE AMERICAN WITH DISABILITIES ACT OF 1990), INGRESS OR EGRESS,
OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS,
GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR
AFFECTING THE PREMISES INCLUDING, WITHOUT LIMITATION: (i) THE VALUE,
CONDITION, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSES OF THE
PREMISES, (ii) THE MANNER OR QUALITY OF THE CONSTRUCTION OR
MATERIALS INCORPORATED INTO ANY OF THE PREMISES AND (iii) THE MANNER,
QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PREMISES, TENANT AGREES
THAT WITH RESPECT TO THE PREMISES, TENANT HAS NOT RELIED UPON AND WILL NOT
RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF
LANDLORD OR ANY AGENT OF LANDLORD. TENANT REPRESENTS THAT IT IS A
KNOWLEDGEABLE LESSEE OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS
OWN EXPERTISE AND THAT OF TENANT'S CONSULTANTS, AND THAT TENANT WILL
CONDUCT SUCH INSPECTIONS AND INVESTIGATIONS OF THE PREMISES, INCLUDING,
BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AND
SHALL RELY UPON SAME, AND EXCEPT AS PROVIDED IN THIS LEASE, SHALL ASSUME
THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE
PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY
TENANT'S INSPECTIONS AND INVESTIGATION. LANDLORD IS NOT LIABLE OR BOUND IN
ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR
INFORMATION PERTAINING TO THE PREMISES FURNISHED BY ANY REAL ESTATE BROKER,
AGENT, EMPLOYEE, SERVANT OR OTHER PERSON, UNLESS THE SAME ARE SPECIFICALLY
SET FORTH OR REFERRED TO HEREIN. NOTWITHSTANDING THE FOREGOING, LANDLORD
SHALL BE BOUND BY ITS INDEMNIFICATION OF TENANT CONTAINED IN PARAGRAPH 6
OF THE SUBLEASE.
<PAGE>
RIDER # 3 - ADDITIONAL RENTAL; OPERATING EXPENSES
-------------------------------------------------
(a) Tenant agrees to pay the Operating Expenses, as set forth below, to
the Landlord as ADDITIONAL RENT. The term "Operating Expenses" as used in this
Lease includes all expenses incurred by Landlord directly related to the
repairs, maintenance, and management of the Building, including, but not limited
to, maintenance and repair costs, wages and benefits payable to employees of
Landlord whose duties are directly related to the operation and maintenance of
the Building, amounts to be paid to contractors and subcontractors for the work
or service performed in connection with the operation and maintenance of the
Building, legal and accounting fees, and all services, supplies, repairs,
replacements or other expenses for maintaining and operating the Building
including common areas and parking areas pursuant to paragraph 8 hereof. The
term "Operating Expenses" shall include all taxes and assessments and
governmental charges whether federal, state, county or municipal, and whether
they be by taxing districts or authorities presently taxing the Building or by
others, subsequently created or otherwise, and any other taxes and assessments
attributable to the Building and its operation excluding, however, federal and
state taxes on income, pursuant to paragraph 4 hereof. In connection with the
taxes, there may be included as an Operating Expense the reasonable expenses of
employing a tax consulting firm to attempt to assure a fair tax burden on the
Building and grounds within the applicable taxing jurisdiction (in which case
Tenant shall have the right to consult with and participate with such consultant
in its tax reduction efforts). The term "Operating Expenses" shall also include
all insurance premiums Landlord is required to pay or deems necessary to pay for
public liability insurance and fire and extended insurance coverage with respect
to the Building pursuant to paragraph 15 hereof. The term "Operating Expenses"
shall not include utilities, or any capital improvement to the Building not
required by governmental authorities or not designed to effect cost savings, nor
shall it include any repairs, restoration or other work occasioned by fire,
windstorm or other casualty, income and franchise taxes of the Landlord,
expenses incurred in leasing to or procuring of tenants, leasing commissions,
advertising expenses or the renovating of space of new tenants, interest or
principal payments on any mortgage or other indebtedness of Landlord, or
depreciation allowance or expense or any other cost or expense not generally or
specifically described above or in this Lease.
(b) Landlord shall, within 150 days after the close of each calendar year,
give Tenant an invoice to include in reasonable detail, all computations of
actual Operating Expenses (the "Operating Expenses Computation"). Tenant will
cause payment of said invoice within thirty (30) days of receipt, unless paid in
monthly installments as provided below. An equitable adjustment shall be made
for in any partial calendar year of the Lease Term. Tenant shall have the
right, within such thirty (30) day period with ten (10) days advance written
notice to Landlord, and during Landlord's normal business hours, to review
Landlord's books relevant to the ADDITIONAL RENT and any item relevant to the
Computation of Operating Expenses, Estimated Operating Expenses and Operating
Expenses Computation for that calendar year.
(c) As an alternative to the annual payments of Operating Expenses
provided in subparagraph b above, upon Landlord's notice, Tenant shall pay to
Landlord an estimate of the Operating Expenses for the forthcoming calendar year
or portion thereof remaining in the applicable portion of the Lease Term at the
time of Landlord's notice given on or before fifteen (15) days prior to the
commencement of such calendar year (the "Estimated Operating Expenses"), which
payment Tenant shall pay to Landlord monthly in an amount equal to one-twelfth
(1/12) of the Estimated Operating Expenses, with an adjustment to be made
between the parties at a later date as hereinafter provided. In the Operating
Expenses Computation, Landlord shall notify Tenant of the difference, if any,
between the Operating Expenses and the Estimated Operating
<PAGE>
Expenses (which was paid in accordance with this paragraph) for such year. To
the extent that the Operating Expenses for any period covered by such statement
are greater than the Estimated Operating Expenses which Tenant previously paid,
Tenant shall pay to Landlord the difference in cash within thirty (30) days
following receipt of said statement from Landlord. To the extent that the
Operating Expenses for the period covered by the Statement are less than the
Estimated Operating Expenses which Tenant previously paid, Landlord shall, at
Tenant's option, refund such difference within thirty (30) days after the
Statement, or credit the difference against the Estimated Operating Expenses for
the new calendar year and such credit will be applied to the next payment or
payments of Estimated Operating Expenses due from Tenant to Landlord. In
addition, until Tenant receives such statement, Tenant's monthly reimbursement
for the new calendar year shall continue to be paid at the rate for the previous
calendar year, but Tenant shall commence payment to Landlord of the monthly
installments of reimbursement on the basis of the new statement beginning on the
first day of the month following the month in which Tenant receives such
statement. If the statement reflects a change in the monthly reimbursement
amount, such difference shall be adjusted by increasing or decreasing the first
monthly reimbursement payment after the statement is given in order to bring the
reimbursement amount for the new calendar year current as of such date.
(d) Notwithstanding anything herein to the contrary, Tenant's obligation
to pay Operating Expenses (excluding the cost of taxes and insurance in such
calendar year) shall not increase by more than six percent (6%) in any one
calendar year over the Operating Expenses (excluding the cost of taxes and
insurance in such calendar year) paid in the immediately preceding calendar
year. In other words, there will be no six percent (6%) "cap" on any annual
increase in the taxes and insurance components of Operating Expenses.
(e) The provisions of this Rider #3 are in addition the other provisions
of the remainder of this Lease, and are not intended to limit, derogate, amend
or replace any of such other provisions, included but not limited to the
provisions of paragraphs 4, 6, 8, and 15 of this Lease. To the extent that
there is any conflict between the provisions contained in those paragraphs and
this Rider #3, Rider #3 shall prevail.
(f) For any tax year for which Tenant shall be obligated to pay real
property taxes hereunder, Tenant shall have the right to review or contest in
good faith by legal proceedings, or in such other manner as it may deem suitable
(which, if instituted, Tenant shall conduct at its own expense, free of any
expense to Landlord), any taxes, assessments, rate or charge or other
governmental imposition or charge aforementioned. Tenant shall notify Landlord
of any such contest and Landlord shall be entitled to participate in and/or
review all such proceedings. If there shall be any reduction, cancellation or
discharge of any imposition, Landlord shall reimburse or, as the case may be,
credit Tenant with the amount of such reduction, cancellation or discharge.
Finally, in no event shall Tenant permit any lien to attach to the Property, and
shall provide a bond or other security reasonably acceptable to Landlord to
engage in any such contest.
<PAGE>
RIDER #4 - FURTHER USE PROVISIONS
---------------------------------
(a) Hazardous Material.
------------------
1. Tenant shall not cause (other than in compliance with all applicable
laws or regulations) or permit any Hazardous Material to be brought upon,
kept, or used in or about the Premises by Tenant, its agents, employees,
contractors, or invitees, without the prior written consent of Landlord
(which Landlord shall not reasonably withhold as long as Tenant
demonstrates to Landlord's reasonable satisfaction that such Hazardous
Material is necessary or useful to Tenant's business and will be used, kept
and stored in a manner that complies with all laws regulating any such
Hazardous Material so brought upon or used or kept in or about the
Premises). If Tenant breaches the obligations stated in the preceding
sentence, or if the presence of Hazardous Materials on the Premises caused
or permitted by Tenant results in contamination of the Premises or if
contamination of the Premises by Hazardous Material otherwise occurs for
which Tenant is legally liable to Landlord for damage resulting therefrom,
then Tenant shall indemnify, defend and hold Landlord harmless from any and
all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including, without limitation, diminution in value of the Premises,
damages for the loss or restriction on use of rentable or usable space or
of an amenity of the Premises, damages arising from any adverse impact on
marketing of the Building and sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) which arise during or after the
Lease Term as a result of such contamination. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in
connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state, or
local governmental agency or political subdivision because of Hazardous
Material present in the air, soil or ground water around on or under the
Premises. Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises caused or permitted by Tenant results in any
contamination of the Premises, Tenant shall promptly take all actions at
its sole expense as are necessary to return the Premises to the condition
existing prior to the introduction of any such Hazardous Material to the
Premises; provided that Landlord's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-
term effect on the Premises.
2. "Hazardous Material" is used in this Rider #4 in its broadest sense
and shall mean any petroleum base products, pesticides, paints and
solvents, polychlorinated biphenyl, lead, cyanide, DDT, acids, ammonium
compounds and other chemical products and any substance or material defined
or designated as hazardous or toxic substance, or other similar term by any
federal, state or local environmental statute, regulation, or ordinance
affecting the Premises presently in effect or that may be promulgated in
the future, as such statutes, regulations or ordinances may be amended from
time to time, including, but not limited to the statutes listed below:
Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901 et seq.
------
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, 40 U.S.C. 1801 et seq.
------
Clean Air Act, 42 U.S.C. 7401-7626.
<PAGE>
Water Pollution Control Act (Clean Water Act of 1977) 33 U.S.C. 1251
et seq.
------
Insecticide, Fungicide, and Rodenticide Act (Pesticide Act of 1987), 7
U.S.C. 135 et seq.
------
Toxic Substances Control Act, 15 U.S.C. 2601 et seq.
------
Safe Drinking Water Act, 42 U.S.C. 300(f) et seq.
------
National Environmental Policy Act et seq.
------
Refuse Act of 1899, 33 U.S.C. 407 et seq.
------
(b) Suitability of Premises.
-----------------------
1. Tenant acknowledges and agrees that neither Landlord nor its managing
agent ("Agent") has made any investigation whatsoever as to, and
neither Landlord nor Agent makes any representation or warranty of any
kind, express or implied, concerning the habitability and suitability
of the Premises for Tenant's intended use, including but not limited
to the adequacy of the following in relation to Tenant's use:
(i) the existing or future zoning classification of the
Premises;
(ii) compliance of the Premises with applicable laws, rules,
regulations, restrictions, ordinances or policies; and
(iii) the structural, non-structural, mechanical, environmental,
foundational, sub-foundational and other physical aspects of
the Premises.
2. The responsibility for determining the suitability of the Premises, as
well as obtaining and/or maintaining all necessary permits (including
but not limited to special use permits), certificates, variances and
licenses, shall be the sole responsibility, and at the sole expense of
Tenant. The fact that Landlord or Agent may pay for any or all of the
tenant finish-out shall not alter responsibility and expense described
in this Section B.
<PAGE>
RIDER #5 - SUBLETTING PROVISIONS
--------------------------------
(a) Subleases to any subsidiaries or affiliates of Tenant shall not
require Landlord's consent; provided, Tenant shall remain fully liable
under this Lease notwithstanding any such sublease. In any event,
however, Tenant shall provide thirty (30) days advance written notice
of such sublease to Landlord and each such sublessee shall expressly
assume and agree to perform all of Tenant's obligations under this
Lease.
(b) If Tenant desires at any time to enter into an Assignment or a
Sublease of the Premises or any portion thereof, Tenant shall request
in writing, at lease sixty (60) days prior to the effective date of
the Assignment or Sublease, Landlord's consent to the Assignment or
Sublease, and provide the following:
(i) The name of the proposed assignee, sub-tenant or occupant;
(ii) The nature of the proposed assignee's, subtenant's or
occupant's business to be carried on in the Premises;
(iii) The terms and provisions of the proposed Assignment or
Sublease; and
(iv) Such financial information concerning the proposed assignee,
subtenant or occupant which Landlord shall have reasonably
requested following its receipt of Tenant's request for
consent.
(c) Tenant agrees (by way of example and without limitation) that it shall
be reasonable for Landlord to withhold its consent if any of the
following situations exist or may exist:
(i) The proposed transferee's use of the Premises conflicts with
the Permitted Use under this Lease;
(ii) In Landlord's reasonable business judgment, the proposed
transferee lacks sufficient business reputation or
experience to operate a successful business of the type and
quality permitted under this Lease, or of another type
which, in Landlord's reasonable judgment, is suitable for
the Premises;
(iii) Tenant is in default pursuant to this Lease;
(iv) The proposed transferee's financial condition as reflected
by its net worth is less favorable than Tenant's financial
condition as of the Commencement Date of this Lease.
(d) If Landlord consents to the Sublease of Assignment, Tenant may enter
into such Assignment or Sublease of the Premises or portion thereof,
but only upon the terms and conditions set forth in the notice
furnished by Tenant to Landlord pursuant to Subsection b; provided;
however, that in connection with such Assignment or Sublease, as a
condition to Landlord's consent, Tenant shall enter into an agreement
with Landlord to pay to Landlord fifty percent (50%) of the excess, if
any, of (i) in the case of an Assignment, the rental and other payment
obligations of the proposed assignee under the terms of the proposed
Assignment over the rental and other payment obligations of Tenant
under the terms of this Lease, or (ii) in the case of a Sublease, the
amount proposed to be paid by the sublessee over the proportionate
amount of rental and other payment obligations required to be paid by
Tenant to Landlord under the terms of this Lease applicable to the
portion of the Premises so subleased.
<PAGE>
(e) No consent by Landlord to any Assignment or Sublease by Tenant shall
relieve Tenant of any obligation to be performed by Tenant under this
Lease, whether arising before or after the Assignment or Sublease.
The consent by Landlord to any Assignment or Sublease shall not
relieve Tenant of the obligation to obtain Landlord's express written
consent to any other Assignment or Sublease. Any Assignment or
Sublease that is not in compliance with this shall be void and, at the
option of Landlord, shall constitute a material default by Tenant
under this Lease. The acceptance of rent or payment of any other
monetary obligation by Landlord from a proposed assignee or sublessee
shall not constitute the consent by Landlord to such Assignment or
Sublease.
(f) Each assignee, or transferee, other than Landlord, shall assume, as
provided in this Subsection f, all obligations of Tenant under this
lease and shall be and remain liable jointly and severally with Tenant
for the payment of Rental and all other monetary obligations
hereunder, and for the performance of all terms, covenants, conditions
and agreements herein contained on Tenant's part to be performed for
the Lease Term; provided however, that the assignee, sublessee, or
other transferee shall be liable to Landlord for rent only in the
amount set forth in the Assignment or Sublease. No Assignment shall
be binding on Landlord unless the assignee or Tenant shall deliver to
Landlord a counter part of the Assignment and an instrument in
recordable form that contains a covenant of assumption by the assignee
satisfactory in substance and form to Landlord, consistent with the
requirements of this Subsection f, but the failure or refusal of the
assignee to execute such instrument of assumption shall not release or
discharge the assignee from its liability as set forth above.
(g) Tenant shall pay Landlord's reasonable expenses for each such proposed
transfer to cover the legal review and processing expenses of
Landlord, whether or not Landlord shall grant its consent to such
proposed transfers.
<PAGE>
February 5, 1993
-
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
Re: Agreement Regarding Leased Property
Dated February 5, 1993
-
Gentlemen:
In connection with the above-referenced Agreement (the "Agreement"), St.
Paul Properties, Inc., a Delaware corporation (the "Landlord") and Simmons
Company, a Delaware corporation (the "Sublessee") hereby agree as follows
(defined terms used herein shall have the meanings ascribed to such terms
contained in the Agreement):
1. In the event of (i) a default by Simmons in its obligations and
undertakings to Landlord under the Agreement which results in a termination of
the Lease and the Simmons Lease, and only for the term of the Agreement Landlord
shall have the right, in addition to all other remedies available at law, to
payment by Simmons of any sums advanced by Landlord pursuant to Paragraph 10(c)
of the Agreement, up to $100,000 and/or (ii) a termination of the Agreement and
the Simmons Lease by Sublessee pursuant to Paragraph 21 of the Agreement,
Landlord shall have the right, in addition to all other remedies available at
law, to payment by Simmons of all out-of-pocket expenses actually and reasonably
incurred by Landlord in connection with the negotiation and execution of the
Simmons Lease and the Agreement, including but not limited to attorney's fees
and brokerage commissions (collectively, the "Obligations").
2. During the term of the Agreement, and until the Simmons Lease shall go
into effect, Sublessee shall grant to Landlord a security interest in such of
Sublessee's goods, equipment, fixtures, furniture, improvements, and other
personal property of Sublessee presently or hereafter situated on the Premises
(collectively, the "Personal Property"), and all proceeds therefrom, as may be
necessary in order to secure the payment by Sublessee to Landlord of the
Obligations in the event of a default by Sublessee of the Agreement. Upon the
occurrence of an event of default by Sublessee under the Agreement, and the
failure by Sublessee to pay the Obligations, Landlord may, in addition to any
other remedies provided in the Agreement, enter upon the Premises and take
possession of such Personal Property, and dispose of the same in accordance with
Article 9 of the Uniform Commercial Code as in effect in the State of Texas at
the time of such default. Upon request by Landlord, Sublessee agrees to execute
and deliver to Landlord a financing statement in form sufficient to perfect the
security interest of Landlord the Personal Property.
<PAGE>
Upon commencement of the term of the Simmons Lease, and provided that
Sublessee is not then in default under the terms of the Agreement, Landlord
shall release the security interest given herein, and shall execute such
termination statements as are required in order to evidence the release of its
security interest in the Personal Property.
3. In addition to compliance with the terms of Paragraph 3 of the
Agreement regarding use of the Premises, Sublessee shall comply with the terms
of Rider 4 of the Simmons Lease during the term of the Agreement.
4. In the event Sublessee enters into a Lease agreement with Southern
Pacific Lines concerning certain property adjacent to the Premises, Sublessee
shall indemnify and hold harmless Landlord, its agents, officers, directors and
successors from and against any loss, claim cost or expense arising or resulting
from the performance by Sublessee of such agreement or the use by Sublessee of
such property.
5. On or before the Commencement Date of the Simmons Lease Sublessee
shall deliver to Landlord a copy of its most recently available financial
statements.
6. Notwithstanding Paragraph 15 of the Agreement, this letter, when
executed by both parties, shall constitute the agreement of the parties as to
the matters contained herein.
If the foregoing is in accordance with your understanding, please execute a
copy of this letter in the space provided and return the same to the undersigned
at the address set forth in Paragraph 13 of the Agreement.
Sincerely,
ST. PAUL PROPERTIES, INC.
By: /s/
--------------------------
Title: V.P.
-----------------------
Agreed to and acknowledged this
5th day of February, 1993.
- --- --------
SIMMONS COMPANY
By:/s/
-----------------------
Title: President
--------------------
Exhibit 10.41
STANDARD INDUSTRIAL LEASE - NET
In consideration of the rental and of the covenants and agreements
hereinafter set forth to be kept and performed by the Tenant, Landlord agreed to
Tenant and Tenant hereby leases from Landlord the Premises herein described
for the Term, at the Rent and subject to and upon for the terms, severance and
agreements hereinafter set forth.
ARTICLE 1. FUNDAMENTAL LEASE PROVISIONS
This lease is made and entered into by Landlord and Tenant this ________ day of
September, 1992.
Landlord: 1700 Fairway Drive
Tenant: Simmons Company
Premises (Article 2): A portion of Fairway Manufacturing Center located at 1700
Fairway Dr., San Leandro, CA, [illegible] approximately 246,500 square feet of
floor area as outlined in red on Exhibit A in Building #1
Lease Term (Article 3): also as shown in Exhibit A attached hereto
Commencing: July 1, 1992 ("Commencement Date")
and Ending: June 30, 2007
Rent Monthly: See Exhibit C
------------------------------------------------------------
(Article 4)
- --------------------------------------------------------------------------------
Prepaid Rent: NONE
-----------------------------------------------------------------
(Article 4)
For the Period:
----------------------------------------------------------------
Security Deposit: NONE
-------------------------------------------------------------
(Article 5)
Use (Article 7): Manufacturing of mattresses, furniture and related
[illegible]
Tenant's Pro Rata Share of Project: 47%
(Taxes, Insurance and General ---
Common Area Expenses)
Tenant's Pro Rata Share of Building: 68%
(Building Common Area Expenses) ---
Address for Notices (Article 21.20):
Landlord: c/o Orbit Property Management
1475 Powell Street, Suite 201 Telephone: (510) 852-0500
Emeryville, CA 94608
Tenant to the Premises
and: Simmons Company
6 Executive Park Drive N.E.
Atlanta, Georgia 30328
References in this Article 1 to the other Articles are for convenience and
designates other Articles where references to the particular Fundamental Lease
Provisions appear. Each reference in this Lease to any of the Fundamental Lease
Provisions contained in this Article 1 shall be construed to incorporate all of
the terms provided under each such Fundamental Lease Provision. In the event of
any conflict between a Fundamental Lease Provisions and the Provisions of the
Lease the latter shall control.
THE FOREGOING FUNDAMENTAL LEASE PROVISIONS ARE HEREBY APPROVED.
LANDLORD: /s/ TENANT: SIMMONS COMPANY
By /s/ Moses L. Libitzky By /s/ Jeffrey J. Lewis
-------------------------------- -----------------------------------
Orbit Property Corporation, Jeffrey J. Lewis
Authorized Agent for Landlord Sr. Vice President
Moses L. Libitzky, President
<PAGE>
STANDARD INDUSTRIAL LEASE - NET
Article 1 Fundamental Lease Provisions
Article 2 Premises
Article 3 Term
3.1 Term
3.2 Delay in Commencement
3.3 Early Possession
3.4 Construction
3.5 Acknowledgement of Commencement Date
Article 4 Rent
4.1 Rent
4.2 Returned Checks
4.3 Date of Receipt of Tenant's Payment
Article 5 Security Deposit
Article 6 Taxes
6.1 Real Property Taxes
a. Payment
b. Definition
c. Improvements to the Premises
6.2 Personal Property Taxes
6.3 Proration: Joint Assessment
Article 7 Use
7.1 Use
7.2 Condition of Premises
7.3 Compliance with Law
7.4 Toxic and Hazardous Materials
Article 8 Common Areas
8.1 Definition
8.2 Maintenance
8.3 Tenant's Rights and Obligations
8.4 Common Area Expenses: Tenant's Share
a. Common Area Expenses
b. Tenant's Share
Article 9 Repairs and Maintenance
9.1 Landlord's Obligations
9.2 Tenant's Obligations
9.3 Surrender
9.4 Landlord's Rights
Article 10 Alterations and Additions
Article 11 Utilities
Article 12 Liens
Article 13 Landlord's Access
13.1 Access
13.2 Easements
Article 14 Indemnity: Exemption of Landlord from Liability
14.1 Indemnity
14.2 Exemption of Landlord from Liability
Article 15 Insurance
15.1 Liability Insurance
15.2 Fire and Extended Coverage
15.3 Waiver of Subrogation
Article 16 Damage or Destruction
16.1 Partial Damage
16.2 Total Destruction
16.3 Damage Near End of Term
16.4 Partial Destruction of the Project
16.5 Abatement of Rent; Tenant's Remedies;
Advance Payments
a. Abatement of Rent
b. Tenant's Remedies
c. Advance Payments
Article 17 Condemnation
Article 18 Assignment and Subletting
18.1 Landlord's Consent Required
18.2 Reasonable Consent
18.3 No Release of Tenant
<PAGE>
Article 19 Default: Remedies
19.1 Default of Tenant: Remedies
a. Remedies
b. Bankruptcy-Insolvency of Tenant; Landlord's Remedies
c. Late Charges
d. Additional Rights of Landlord
19.2 Default by Landlord
Article 20 Cancellation and Relocation
Article 21 Additional Provisions
21.1 Payment of Tenant's Pro Rata Share of Real Property Taxes,
Common Area Expenses, and/or Insurance
21.2 Subordination
21.3 Quiet Enjoyment
21.4 Attornment
21.5 Estoppel Certificate
21.6 Transfer of Landlord's Interest
21.7 Captions, Attachments, Defined Terms
21.8 Entire Agreement
21.9 Severability
21.10 Costs of Suit and/or Enforcement of Lease
21.11 Time, Joint and Several Liability
21.12 Binding Effect: Choice of Law
21.13 Waiver
21.14 Surrender of Premises
21.15 Holding Over
21.16 Signs
21.17 Reasonable Consent
21.18 Interest on Past Due Obligations
21.19 Recording
21.20 Notices
21.21 No Reservation
21.22 Corporate Authority
21.23 Security Measures
21.24 Additional Rent
21.25 Pets
21.26 Rules and Regulations
<PAGE>
ARTICLE 2. PREMISES
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
for the Lease Term, at the Rent, and upon the covenants and conditions
hereinafter set forth, these certain Premises, described in Article 1
hereof, including the underlying realty and the Improvements thereon or so
much thereof as Tenant is entitled to occupy or use hereunder (hereinafter
collectively the "Premises").
ARTICLE 3. TERM
3.1 Term. The term of this Lease shall continue during the Lease Term
----
specified in Article 1 hereof, unless sooner terminated as hereinafter
provided in this Lease.
3.2 Delay in Commencement. Tenant agrees that in the event of the
---------------------
inability of Landlord for any reason to deliver possession of the Premises
to Tenant on the commencement date set forth in Article 1, Landlord shall
not be liable for any damage thereby nor shall such inability affect the
validity of this Lease but in such case Tenant shall not be obligated to
pay Rent or other monetary sums until possession of the Premises is
tendered to Tenant; provided that if the delay in delivery of possession
exceeds sixty (60) days, then Tenant at its option, to be exercised within
ten (10) days after the end of said sixty (60) day period may terminate
this Lease. If Landlord shall not have delivered possession of the
Premises within one (1) year from said commencement date, Landlord may, by
notice in writing to Tenant within ten (10) days thereafter, cancel the
Lease. If either party cancels as herein above provided, Landlord shall
return any monies previously deposited by Tenant and the parties shall be
discharged from all obligations hereunder. Any delay in delivery shall not
automatically extend the termination date of this Lease.
3.3 Early Possession. If Tenant occupies the Premises prior to stated
----------------
commencement date, such occupancy shall not advance the termination date,
and Tenant shall pay Rent for such period at the initial monthly rates as
set forth below.
3.4 Construction. The obligations of Landlord and Tenant to perform work,
------------
supply labor and materials and prepare the Premises for occupancy are set
forth in detail in Exhibit B. Landlord and Tenant shall expend all funds
and do all acts required of them in Exhibit B and shall have the work
performed promptly and diligently and in a first-class, workmanlike manner.
3.5 Acknowledgement of Commencement Date. In the event the commencement
------------------------------------
date of the term of the Lease is delayed beyond the sixty (60) days
described in Article 3.2 or if the commencement date is to be determined
pursuant to Article 3.3 or Article 3.4, then Landlord and Tenant shall
[illegible] a written acknowledgement of the dates of commencement and
termination of the Lease and shall attach it to the Lease as an Exhibit.
*See below
ARTICLE 4. RENT
4.1 Rent. Tenant shall pay the sum set forth in Article 1 as Rent for the
----
Premises in advance on the first (1st) day of each calendar month of the
year of this Lease; said sum to be paid without deduction, offset, prior
notice or demand, in lawful money of the United States. If the
commencement date is not the first (1st) day of a month, or if the Lease
termination date is not the last day of a month, a prorated monthly
installment shall be paid at the then current rate for the fractional month
during which the Lease commences and/or terminates. Tenant hereby
acknowledges that Landlord will not be required to send monthly statements
and invoices as a condition to Tenant paying any Rent due under this Lease.
(SEE EXHIBIT C)
4.2 Returned Checks. In the event that Tenant's check is returned for
---------------
non-payment of funds Tenants shall replace said check with only the following:
a) cashier's check, b) cash, or c) certified money order. In addition
Landlord shall have the right to assess a returned check handling fee, in an
amount to be determined by Landlord in his sole and absolute discretion,
which shall be tendered with replacement payment. Said returned check
handling fee shall in no way void Landlord's right to assess and collect
late charges.
4.3 Date of Receipt of Tenant's Payment. The date of delivery of payment
-----------------------------------
to Landlord's office as specified in Article 1 hereof or other address
designated in writing by Landlord shall be considered the bona fide date of
receipt of payment. The date of post mark, posting date, or mailing
machine date shall not be considered date of payment. Tenant accepts full
responsibility for delivery of payments to Landlord's office.
*3.6 Early Termination. Landlord shall have the right to terminate this
-----------------
Lease by giving twelve (12) months' advance written notice of same to
<PAGE>
Tenant, which notice may be given at any time within twenty-four (24)
months after the commencement date of this Lease.
<PAGE>
ARTICLE 5. SECURITY DEPOSIT
ARTICLE 6. TAXES
6.1 Real Property Taxes
-------------------
a. Payment. Landlord shall pay all real property taxes levied or
-------
assessed against the Project of which the Premises constitutes a part,
provided, however, that Tenant shall pay to Landlord its pro rata share (as
specified in Article 1 hereof) of the real property taxes levied or
assessed against the Project. Such payment shall be made by Tenant within
twenty (20) days after receipt of Landlord's written statement setting
forth the amount of the pro rata share and the reasonable computation
thereof.
b. Definition. As used in this Lease, the term "real property tax"
----------
shall include any form of assessment, license fee, rent tax, levy, penalty,
or tax (other than estate, inheritance, net income or franchise taxes),
imposed by any authority having the direct or indirect power to tax
including without limitation the EPA, any city, county, state or federal
government or any improvement or other district or division thereof,
whether such [illegible] (i) determined by the area of the Project or the
Premises or the Rent or other sums payable hereunder or by other means
including without [illegible] any gross income or excise tax levied by any
of the foregoing authorities with respect to receipt of such Rent of other
sums, or (ii) upon or with respect to any legal or equitable interest of
Landlord in the Project or the Premises or any part thereof, or (iii) upon
this transaction or any document to which Tenant is a party creating or
transferring any interest in the Project or the Premises, or (iv) now
customary or within the contemplation of the parties.
c. Improvements to the Premises. Notwithstanding anything to the contrary
----------------------------
contained herein, Tenant shall pay any increases in real property taxes
levied or assessed against the Project resulting from any and all
improvements of any kind whatsoever placed on or in the Premises for the
benefit of or at the request of Tenant regardless of whether said
improvements were installed or constructed either by Landlord or Tenant.
6.2 Personal Property Taxes. Tenant shall pay prior to delinquency all
-----------------------
taxes assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Tenant contained in the
Premises or elsewhere. When possible, Tenant shall cause said trade
fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real or personal property of
Landlord.
6.3 Proration: Joint Assessment. Tenant's liability to pay any real
----------------------------
property taxes pursuant to Article 6.1 shall be pro-rated on the basis of a
365 day year to account for any fractional portion of a tax fiscal year
included at the commencement or expiration of the term of the Lease. With
respect to any assessments which may be levied against or upon the
Premises, or which under the laws then in force may be evidenced by
improvement or other bonds or may be paid in annual installments, only the
amount of such annual installment (with appropriate proration for any
partial year) and interest due thereon shall be included within the
computation of the annual taxes and assessments levied against the
Premises. In the event the Tenant's personal property and/or the
improvements to the Premises are not separately assessed, Tenant's share
thereof shall be an equitable proportion to be determined by Landlord from
the valuations assigned in the Tax assessor's worksheets or such other
information as may be reasonably available to Landlord, with Landlord's
reasonable determination thereof in good faith to be conclusive. Tenant
shall pay to Landlord its share thereof within ten (10) days after receipt
of a written statement from Landlord setting forth the amount due and
Landlord's reasonable computation thereof.
ARTICLE 7. USE
7.1 Use. The Premises shall be used and occupied by Tenant only for the
---
purposes set forth in Article 1 hereof and for no other purposes whatsoever
without obtaining the prior written consent of Landlord, which shall not be
unreasonably withheld.
7.2 Condition of Premises. Tenant hereby accepts the Premises in their
---------------------
condition existing as of the date of the execution hereof, subject to all
applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use of the Premises, and accepts
this Lease subject thereto and to all matters disclosed thereby and by any
<PAGE>
exhibits attached hereto. Tenant acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty with respect to
the condition of the Premises or the suitability thereof for the conduct
<PAGE>
of Tenant's business, nor has Landlord agreed to undertake any
modification, alteration or improvement to the Premises except as provided
in this Lease. The taking of possession of the Premises by Tenant shall
conclusively establish that the Premises were at such time in satisfactory
condition [illegible] within fifteen (15) days after such date Tenant shall
give Landlord written notice specifying in reasonable detail the respects
in which the Premises were not in satisfactory condition.
7.3 Compliance with Law. Tenant shall not use the Premises or permit
-------------------
anything to be done in or about the Premises which will in any way conflict
with any law, statute, zoning restriction, ordinance or governmental rule
or regulation or requirements of duly constituted public authorities now in
force or which may hereafter be in force relating to or affecting the
condition, use, or occupancy of the Premises. The judgment of any court of
competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated
any law, statute, ordinance, or governmental rule, regulation or
requirement, shall be conclusive of that fact as between Landlord and
Tenant. Tenant shall not do or permit anything to be done in or about the
Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of the Project or injure or annoy them, or use
or allow the Premises to be used for any unlawful purpose, nor shall
Tenant cause, maintain, or permit any nuisance in or about the Premises.
Tenant shall not commit or suffer to be committed any waste in or upon the
Premises.
7.4 Hazardous and Toxic Substances.
------------------------------
a) Tenant shall comply, at its sole cost, with all federal, state and
local laws, statutes, ordinances, codes, regulations and orders relating to
the receiving, handling, use, storage, accumulation, transportation,
generation, spillage, migration, discharge, release and disposal of any
flammable, combustible, explosive, infectious, corrosive, caustic,
irritant, strong sensitizing, carcinogenic or radioactive materials,
hazardous waste, toxic substances or related materials, including without
limitation, substances defined as "hazardous substances," "hazardous
materials" or "toxic substances" by federal, state and local laws, and in
the regulations adopted in publications promulgated pursuant to said laws
(collectively referred to herein as the "Laws"). Such materials and
substances are hereinafter collectively referred to as "Toxic Materials."
It shall be the sole obligation of Tenant to obtain any permits and
approvals required pursuant to the Laws.
b) Tenant shall be solely responsible for and shall indemnify, protect, defend
and hold harmless Landlord and its agents, employees, representatives,
directors and officers (collectively hereinafter referred to as the
"Indemnitees") from and against any and all claims, costs, penalties,
fines, losses, liabilities, reasonable attorneys' fees, damages, injuries,
causes of action, judgments, and expenses which arise during or after the
term of this Lease as a result of the receiving, handling, use, storage,
accumulation, transportation, generation, spillage, migration, discharge,
release or disposal of Toxic Materials in, upon or about the Premises or
the Project, by Tenant or its agents, employees, contractors, licensees,
customers or invitees. This indemnification of the Indemnitees by Tenant
includes, without limitation, any and all costs incurred in connection with
any investigation of site conditions and any clean-up, remediation, removal
or restoration work required by any federal, state or local governmental
agency or political subdivision because of Toxic Materials present in the
soil, subsoils, ground water or elsewhere in, on, under or about the
Premises or the Project. This indemnification by Tenant under this Section
7.4 shall survive the termination of this Lease. The foregoing shall not
apply to the extent of the presence of Toxic Materials which results from
the acts or omissions of Landlord.*
(c) If Tenant or its agents, employees, contractors, licensees, customers
or invitees causes contamination or deterioration of water or soil
resulting in a level of contamination greater than the maximum levels
established from time to time during the term of this Lease by any
governmental authority having jurisdiction over such contamination, then
Tenant shall promptly take any and all action necessary to clean-up such
contamination in the manner as required by law. If Tenant fails to take
such action, Landlord may, but shall not be obligated to, take such action.
In such event, all costs incurred by Landlord with respect to such clean-up
activities shall be for the account of Tenant. Any amount so expended by
Landlord shall be paid by Tenant promptly after demand by Landlord, with
interest at the maximum rate permitted by law.
(d) Tenant shall immediately provide Landlord with telephonic notice,
which shall later be confirmed by written notice, of any and all
accumulations, spillage, discharge, release and disposal of Toxic
Materials, onto or within the Premises or the Project, and any injuries or
damages relating directly or indirectly therefrom.
(e) On or before the expiration of this Lease, Tenant shall take any and
all action required to be taken under the Laws in order to surrender the
Premises, including such portions of the Project which are subject to this
Lease, to Landlord in a condition which would be completely free of any and
all Toxic Materials caused or permitted during the term of this Lease to be
in or about the Premises or the Project by Tenant, its agents, employees,
contractors, licensees, customers or invitees.
*/ or its agents, employees, contractors or other tenants.
<PAGE>
ARTICLE 8. COMMON AREAS
8.1 Definition. The phrase "Common Areas" means all areas and facilities
----------
outside the Premises and in the Project that are provided and designated
for general use and convenience of Tenant and other tenants and their
respective officers, agents, employees, licensees, customers and invitees.
1 Common Areas include (but are not limited to) pedestrian sidewalks,
landscaped areas, roadways, parking areas, railroad tracks 2 and roofs,
walls, and foundations not specifically part of any tenant's premises. 3
Landlord reserves the right from time to time to make changes in the shape,
size, location, number and extent of the land and improvements constituting
the Common Areas. Landlord may designate from time to time additional
parcels of land for use as a part thereof: any additional land so
designated by Landlord for such use shall be included until such
designation is revoked by Landlord.
8.2 Maintenance. During the term of this Lease, Landlord shall operate,
-----------
manage, and maintain the Common Areas so that they are clean and free from
accumulations of debris, rubbish, and garbage. The manner in which such
Common Areas shall be so maintained, and the expenditures for such
maintenance, shall be at the sole discretion of Landlord, and the use of
the Common Areas shall be subject to such reasonable regulations and
changes therein as Landlord shall make from time to time, including (but
not by way of limitation) the right to close from time to time, if
necessary, all or any portion of the Common Areas to such extent as may be
legally sufficient, in the opinion of Landlord's counsel, to prevent a
dedication thereof or the accrual of rights of any person or of the public
therein, or to close temporarily all or any portion of such Common Areas
for such purposes.
8.3 Tenant's Rights and Obligation. Landlord hereby grants to Tenant,
------------------------------
during the term of this Lease, the license to use, for the benefit of
Tenant and its officers, agents, employees, contractors, licensees,
customers, and invitees, in common with the others entitled to such use,
the Common Areas as they from time to time exist, subject to the rights,
powers and privileges herein reserved to Landlord. Storage, either
permanent or temporary, of any materials, supplies or equipment in the
Common Areas without Landlord's prior written consent is strictly
prohibited. Should Tenant violate this provision of the Lease, then in
such event, Landlord may, at Landlord's option, either terminate this Lease
or , without notice to Tenant, remove said materials, supplies or equipment
from the Common Areas and place such items in storage, the cost thereof to
be reimbursed by Tenant within ten (10) days from receipt of a statement
submitted by Landlord. All subsequent costs in connection with the storage
of said items shall be paid to Landlord by Tenant as accrued. Failure of
Tenant to pay these charges within ten (10) days from receipt of statement
shall constitute a breach of this Lease. Tenant and its officers, agents,
employees, customers, and invitees shall park their motor vehicles only in
areas designed by Landlord for that purpose from time to time. Within five
(5) days after request from Landlord, Tenant shall furnish to Landlord a
list of the license numbers assigned to its motor vehicles, and those of
its officers, agents, and employees. Tenant shall not at any time park or
permit the parking of motor vehicles, belonging to it or to others, so as to
interfere with the pedestrian sidewalks, roadways, and areas, or in any
portion of the Common Area not designated by Landlord for such use by
Tenant. Parking areas shall be allocated to Tenant in accordance with the
site plan attached hereto as Exhibit A. In no event may any automobiles
not in active use (defined as a minimum of three in-and-out [illegible] from
parking lot in any seven day period) be stored at the Project. Tenant shall
repair, at its cost, all deteriorations or damages to the Common Areas
occasioned by its acts or omissions, ordinary wear and tear excepted.
8.4 Common Area Expenses; Tenant's Share
------------------------------------
a. Common Area Expenses. All expenses in connection with the Common
--------------------
Areas shall be charged and prorated in the following manner. It is
understood and agreed that the phrase "Common Area Expenses" as used herein
shall include. 4 all sums expended in connection with said Common Areas
for cleaning, sweeping, and janitorial services: purchases, replacement,
and maintenance of trash receptacles located within the Common Areas:
maintenance and repair of exterior sprinkler systems, planting and
landscaping; lighting and other utilities; personnel to implement such
services including, if Landlord deems necessary, the cost of security
guards; all costs and expense pertaining to a security alarm system or
other security measures for the Project; any governmental imposition or
surcharge imposed upon Landlord or assessed against any portion of the
Common Areas. Landlord may cause any or all of said services to be
provided by an independent contractor or contractors. Anything to the
contrary notwithstanding contained hereinabove, all expenses in connection
with the original construction and rehabilitation of the Common Areas and
any property management fees shall be at the sole cost and expense of the
Landlord and shall not in any event be charged to Tenant. 5
b. Tenant's Share. Landlord agrees to furnish to Tenant an itemized
--------------
<PAGE>
statement in reasonable detail setting forth the total Common Area Expenses
for the previous three (3) calendar months, said statement to be furnished
as soon as reasonably possible following the expiration of the calendar
quarter (i.e. March 31, June 30, September 30, and December 31).
Throughout the term of this Lease, Tenant shall pay its pro rata share (as
set forth in Article 1 hereof) of such Common Area Expenses for the
previous three (3) month period within ten (10) days after receipt of said
statement subject to Landlord's election to bill such amounts monthly in
advance as contained in Article 21.1 of this Lease.
ARTICLE 9. REPAIRS, MAINTENANCE, AND IMPROVEMENTS
9.1 Landlord's Obligations. Such to the provisions of Article 8 and
----------------------
Article 16, Landlord shall keep the Common Areas in good order, condition,
and repair. Landlord shall not have the obligation to make repairs under
this Article 9 until a reasonable time after receipt of written notice of
the need for such repairs. Tenant expressly waives the benefits of any
statute now or hereafter in effect which would otherwise afford Tenant the
right to make repairs at Landlord's expense or to terminate this Lease
because of Landlord's failure to keep the Project in good order, condition
and repair.
9.2 Tenant's Obligations. Subject to the provisions of Article 16 and
--------------------
Article 9.1, Tenant at its sole cost and expense shall keep in good order,
condition, and repair the Premises and every part thereof including without
limitation thereto all doors, locks, windows, glass, plumbing, heating, air
conditioning, ventilating, electrical and lighting facilities and equipment
within the Premises. Tenant shall repair all damage to the Common Areas caused
by its operations or activities or those of its agents, contractors, licensees,
customers, invitees, or employees immediately upon notice from Landlord.
Landlord shall not be responsible to Tenant for damage to Tenant's property from
any cause, including but not limited to: leaking roofs, windows, walls, floors,
water pipes, sprinklers, or water entering from other areas within the Project,
unless caused by the negligence or willful misconduct of Landlord. Tenant shall
maintain adequate insurance.
<PAGE>
Inserts to Article 8 of Simmons Lease
- -------------------------------------
1. and shall include both "General Common Areas" and "Building Common
Areas." The General
2. , lunchroom and corridor leading thereto (located in Building #1), but
shall exclude Building Common Areas. The phrase "Building Common
Areas" shall include the stairways, corridors, loading areas,
3. and located in the building of which the Premises are a part.
4. all expenses incurred by Landlord in operating, maintaining, insuring
and repairing the General Common Areas and the Building Common Areas,
respectively, including, without limitation
5. Common Area Expenses arising from the operation, maintenance,
insurance and repair of Building Common Areas shall be allocated to
Tenant according to its Pro Rata Share of the Building (as set forth
in Article 1), and all other Common Areas Expenses shall be allocated
to Tenant according to its Pro Rata Share of the Project.
<PAGE>
to compensate Tenant for any loss of or damage to Tenant's property in the
event that Tenant does not maintain such insurance. Tenant will be deemed
to have self-insured Tenant's property. Tenant agrees to perform at its
own expense all work necessary to bring the sprinkler system existing on
the property as of July 16, 1992, into compliance with applicable legal
requirements of the laws of the State of California.
9.3 Surrender. Upon the expiration of earlier termination of this Lease,
---------
Tenant shall surrender the Premises in the same condition as received,
broom clean, ordinary wear and tear excepted. Tenant at its sole cost and
expense agrees to repair any damage to the Premises caused by or in
connection with the removal of any articles of personal property, business
or trade fixtures, machinery, equipment, cabinetwork, furniture, movable
partitions, or permanent improvements or additions, including the floor and
patching the walls where required by Landlord to Landlord's reasonable
satisfaction. Tenant shall indemnify the Landlord against any loss or
liability from delay by Tenant in so surrendering the Premises, including
without limitation, any claims made by any succeeding Tenants founded on
such delay.
9.4. Landlord's Rights. In the event Tenant fails to perform Tenant's
-----------------
obligations under this Article 9, Landlord shall give Tenant notice to do
such acts as are reasonably required to so maintain the Premises. If
Tenant fails to do the work and diligently prosecute it to completion, then
Landlord shall have the right (but not the obligation) to do such acts and
expend such funds at the expense of Tenant as are reasonably required to
perform such work. Any amount so expended by Landlord shall be paid by
Tenant promptly after demand with interest at the maximum rate permitted by
law from the date of such work. Except as provided in this Article 9 and
in Article 16 hereof, there shall be no abatement of Rent and no liability
of Landlord by reason of any injury or interference with Tenant's business
arising from the making of any repairs, alterations, or improvements in or
to any portions of the Project or the Premises or in or to fixtures,
appurtenances, and equipment therein. Landlord reserves the right to enter
Tenant's Premises to repair the roof or roof structures or to install
electrical, water, drain, sewer, telephone, ventilation, and other conduits
for the benefit of the Project or of other tenants of the Project. Repair
of the roof or of roof structures may require exposing certain areas of the
Project to the elements. For this purpose Tenant agrees to allow Landlord
to occupy the Premises or portion thereof for a period not to exceed three
(3) days. Tenant agrees to protect Tenant's own possessions during this
period. In the event Landlord so occupies the Premises or portion thereof,
Tenant shall be given an abatement of Rent for that portion of the Premises
for the period during which Landlord so occupies that portion of the
Premises. There shall be no other compensation to Tenant.
ARTICLE 10. ALTERATIONS and ADDITIONS
Tenant shall not, without Landlord's prior written consent, make any
alterations, additions, improvements or utility installations in, on, or
about the Premises, except for non-structural alterations not exceeding
$25,000 in cost per work of alteration. As used in this Article 10, the
term "utility installations" shall include, but not be limited to, gas
lines, water lines, ducting, power panels, fluorescent fixtures, space
heaters, conduit and wiring. As a condition to giving such consent,
Landlord may require that Tenant agree to remove all such alterations,
additions, improvements, or utility installations at the expiration of the
term and to restore the Premises to their prior condition.
Unless Landlord requires their removal pursuant hereto, all alterations,
additions, improvements, and utility installations on the Premises (whether
or not such utility installations constitute trade fixtures of Tenant)
shall at the expiration or earlier termination of the Lease become the
property of Landlord and remain upon and be surrendered with the Premises.
Notwithstanding the foregoing, personal property, business and trade
fixtures, cabinetwork, furniture, movable partitions, machinery and
equipment, other than that which is affixed to the Premises so that it
cannot be removed without material damage to the Premises, shall remain the
property of Tenant and may be removed by Tenant subject to the provisions
of Article 9, at any time during the term of this Lease when Tenant is not
in default.
ARTICLE 11. UTILITIES
Tenant shall pay prior to delinquency for all water, gas, heat, light,
power, telephone, sewage, air conditioning and ventilating, scavenger,
janitorial, landscaping, and all other services, materials, and utilities
supplied to the Premises. If any such services are not separately metered
to Tenant, Tenant shall pay a reasonable proportion of all charges which
are jointly metered, the determination to be made by Landlord, and payment
to be made by Tenant within ten (10) days of receipt of a statement for
such charges. Landlord shall not be liable in damages or otherwise (except
for its negligence or willful misconduct) for any failure or interruption
of any utility service furnished to the Premises, and no such failure or
<PAGE>
interruption shall entitle Tenant to terminate this Lease or withhold Rent
or other sums due hereunder.
ARTICLE 12. LIENS
Tenant shall keep the Premises and the Project free from any liens arising
out of work performed, materials furnished, or obligations incurred by
Tenant and shall indemnify, hold harmless and defend Landlord from any
liens and encumbrances arising out of any work performed or materials
furnished by or at the direction of Tenant. In the event that Tenant shall
not, within twenty (20) days following the imposition of any such lien,
cause such lien to be released of record by payment or posting of a proper
bond, Landlord shall have, in addition to all other remedies provided
herein and by law, the right, but not the obligation, to cause the same to
be released by such means as it shall deem proper, including payment of the
claim giving rise to such lien. All such sums paid by Landlord and all
expenses incurred by it in connection therewith including attorneys' fees
and costs shall be payable to Landlord by Tenant on demand with interest at
the maximum rate permitted by law. Landlord shall have the right at all
times to post and keep posted on the Premises any notices permitted or
required by law, or which Landlord shall deem proper, for the protection of
Landlord, the Project and the Premises, and any other party having an
interest therein, from mechanics' and materialmen's liens, and Tenant shall
[illegible] to Landlord at least ten (10) business days prior written notice of
the expected date of commencement of any work relating to alterations
[illegible] additions to the Premises.
ARTICLE 13. LANDLORD'S ACCESS
<PAGE>
13.1 Access. Landlord and Landlord's agent's shall have the right at
------
reasonable times upon reasonable notice to enter the Premises to inspect
the same or to maintain or repair, make alterations or additions to the
Premises or any portion thereof or to show the Premises to prospective
purchasers, tenants, or lenders. Upon request from Landlord, Tenant shall,
within 24 hours, provide Landlord, for Landlord's permanent possession,
with a copy of any keys required [illegible] access to the Premises or to any
area within the Premises. Landlord may at any time place on or about the
Premises any ordinary "for sale" signs: Landlord may at any time during
the last ninety (90) days of the term of the Lease place on or about the
Premises any ordinary "for lease" signs.
13.2 Easements. Landlord reserves to itself the right, from time to time,
---------
to grant such easements, rights, and dedications that Landlord deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the Premises by
Tenant. Tenant shall sign any of the aforementioned documents upon request
of Landlord and failure to do so shall constitute a material breach of this
Lease.
ARTICLE 14. INDEMNITY; EXEMPTION OF LANDLORD FROM LIABILITY
14.1 Indemnity. Tenant shall indemnify and hold Landlord harmless from and
---------
against any and all claims of liability for any injury or damage to any
person or property arising from Tenant's use of the Premises or the
Project, or from the conduct of Tenant's business, or from any activity,
work or thing done, permitted or suffered by Tenant in or about the
Premises, the Project or elsewhere. Tenant shall further indemnify and
hold Landlord harmless from and against any and all claims arising from any
breach or default in the performance of any obligation on Tenant's part to
be performed under this Lease, or arising from any act or omission of
Tenant or Tenant's agents, employees, contractors, licensees, customers, or
invitees and from and against all costs, reasonable attorneys' fees,
expenses, and liabilities incurred in the defense or any such claim or any
action or proceeding brought thereon. In the event any action or
proceeding is brought against Landlord by reason of any such claim, Tenant
upon notice from Landlord shall defend same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon, or about the Premises arising from any cause
and Tenant hereby waives all claims in respect thereof against Landlord,
except for damages arising from the negligence or willful misconduct of
Landlord or its agents, employees or contractors.
14.2 Exemption of Landlord from Liability. Landlord shall not be liable
------------------------------------
for injury to Tenant's business or loss of income therefrom or for damage
which may be sustained by the persons, goods, ware, merchandise, or
property of Tenant. Tenant's agents, employees, contractors, licensees,
customers, or invitees, or any other person in or about the Premises or the
Project caused by or resulting from fire, steam, electricity, gas, water,
or rain, which may leak or flow from or into any part of the Premises, or
from the breakage, leakage, obstruction, or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures
of the same, regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Tenant, except to the extent
caused by the negligence or willful misconduct of Landlord or its agents,
employees or contractors. Landlord shall not be liable for any damages
arising from any act or omission of any other tenant (if any) of the
Project.
ARTICLE 15. INSURANCE
15.1 Liability Insurance. Tenant shall at all times during the term hereof
-------------------
and at its own cost and expense procure and continue in force Worker's
Compensation Insurance (which may include a self-insurance program
reasonably acceptable to Landlord) and Bodily Injury Liability and Property
Damage Liability Insurance naming Landlord as an additional named insured
under the liability policy against liability, injury, or death of any
person in connection with the use, operation, or condition of the
Premises. Such insurance shall be in an amount of not less than
$1,000,000.00 combined single limit for bodily injury and property damage.
The limits of such insurance shall not limit the liability of Tenant. Said
insurance shall have a Landlord's Protective Liability endorsement attached
thereto. All insurance required hereunder shall be with companies rated at
B+ or better in Best's Insurance Guides. Tenant shall delivery to Landlord
certificates of insurance evidencing the existence and amounts of such
insurance with less payable clauses reasonably satisfactory to Landlord,
provided that in the event Tenant fails to procure and maintain such
insurance, Landlord may (but shall not be required to) procure same at
Tenant's expense after ten (10) days prior written notice. No such policy
shall be cancelable except after thirty (30) days prior written notice to
Landlord by the insurer. Tenant shall, within twenty (20) days prior to
the expiration of such policies furnish Landlord with renewals or binders,
<PAGE>
or Landlord may order such insurance and charge the cost to Tenant, which
amount shall be payable by Tenant upon demand. All such policies shall be
written as primary policies, not contributing with and not in excess of
coverage which Landlord may have. Tenant shall have the right to provide
such insurance coverage pursuant to blanket policies obtained by Tenant
provided such blanket policies expressly afford coverage to the Premises,
the Project, Landlord, and Tenant as required by this Lease.
15.2 Fire and Extended Coverage. Landlord shall procedure and maintain at
--------------------------
all times during the term of this Lease, a policy or policies of insurance
covering loss or damage to the Premises in the amount of the full
replacement value thereof (inclusive of Tenant's trade fixtures, personal
property and equipment), providing protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, sprinkler leakage and special extended peril (all-risk), and; if
determined by Landlord after consultation with Tenant, and if available at
commercially reasonable rates, earthquake insurance. During the term of
this Lease, Tenant shall pay the amount of any premium for the insurance
required under this article 15.2. Tenant shall pay such premium to
Landlord within fifteen (15) days after receipt by Tenant of a copy of the
premium statement or other reasonably satisfactory evidence of the amount
due which shall include the method of calculation of Tenant's share thereof
if the insurance covers other improvements than the Premises. If the term
of this Lease does not expire concurrently with the expiration of the
period covered by the insurance, Tenant's liability for insurance premiums
shall be prorated on an annual basis. Tenant shall not do or permit
anything to be done in or about the Premises which will materially increase
the existing rate of insurance upon the Premises or the Project or cause
the cancellation of any insurance policy covering said Premises or the
Project. If Tenant's conduct or use of the Premises causes any increase in
the premium for such insurance policies, then Tenant shall pay as
additional rent hereunder, on demand from Landlord, all of such increase,
provided, however, nothing herein shall be construed to prohibit or
restrict the continuation of Tenant's business operations on the Premises
as conducted prior to the Commencement Date. Tenant shall, at Tenant's
expense, comply with all insurance company requirements pertaining to the
use of the Premises so that the Premises shall at all times be insurable for
fire, extended coverage and the risks specified above.
<PAGE>
15.3 Waiver of Subrogation. Landlord and Tenant each hereby waive any and
---------------------
all rights of recovery against the other or against the officers,
employees, agents, and representatives of the other, on account of loss or
damage occasioned to such waiving party or its property or the property
[illegible] under its control caused by fire or any of the extended
coverage risks described above to the extent that such loss or damage is
insured against under any insurance policy in force at the time of such
loss or damage. The insuring party shall, upon obtaining the policies of
insurance required under this Lease, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in
this Lease.
ARTICLE 16. DAMAGE OR DESTRUCTION
16.1 Uninsured Damage. In the event improvements in the Premises are
----------------
damaged or rendered unsafe by any casualty which is covered under an
insurance policy required to be maintained pursuant to Article 15.2 then
Article 16.4 shall apply. In the event the improvements on the Premises are
damaged by any casualty not covered under an insurance policy required to be
maintained pursuant to Article 15.2, then Landlord may, at Landlord's
option, either (a) repair such damage as soon as reasonably possible at
Landlord's expense, in which event this Lease shall continue in full force
and effect, or (b) give written notice to Tenant within sixty (60) days
after the date of occurrence of such damage of Landlord's intention to
cancel and terminate this Lease as of the date of the occurrence of the
damage: provided, however, that if such damage is caused by an act or
omission to act of Tenant, it's agents, employees, contractors, licensees,
customers, or invitees, then Tenant shall repair such damage, promptly at
its sole cost and expense. In the event Landlord elects to terminate this
Lease pursuant hereto, Tenant shall have the right within (10) days after
receipt of the required notice to notify Landlord in writing of Tenant's
intention to repair such damage at Tenant's expense, without reimbursement
from Landlord, in which event this Lease shall continue in full force and
effect and Tenant shall proceed to make such repairs as soon as reasonably
possible. If Tenant does not give such notice, within the ten (10) day
period, this Lease shall be canceled and terminated as of the date of the
occurrence of such damage. In no event shall Landlord be required to
repair any injury or damage by fire or other cause, or to make any
restoration or replacement of any paneling, decorations, office fixtures,
partitions, railings, ceilings, floor covering, equipment, machinery, or
fixtures or any other improvements or property installed in the Premises by
Tenant or at the direct or indirect expense of Tenant. Tenant shall be
required to restore or replace same in the event of damage.
16.2 Total Destruction. If the improvements on the Premises are totally
-----------------
destroyed during the term of this Lease from any cause whether or not
covered by the insurance required under Article 15.2 (including any
destruction required by any authorized public authority), this Lease shall
automatically terminate as of the date of such total destruction.
16.3 Damage Near End of the Term. If the improvements on the Premises are
---------------------------
partially destroyed or damaged during the last 12 months of the term of
this Lease, Landlord may at Landlord's option cancel and terminate this
Lease as of the date of occurrence of such damage by giving written notice
to Tenant of Landlord's election to do so within thirty (30) days after the
date of occurrence of such damage.
16.4 Partial Destruction. If fifty percent (50%) or more of the Premises
-------------------
shall be damaged or destroyed by an insured risk, Landlord may at its
option cancel and terminate this Lease by giving written notice of its
election to do so within forty-five (45) days from the date of occurrence
of such damage or destruction in which event the term of this Lease shall
expire at the end of the calendar month in which such notice is given and
Tenant shall thereupon surrender the Premises to Landlord. Otherwise,
Landlord shall repair such damage as soon as reasonably possible and this
Lease shall remain in full force and effect.
16.5 Abatement of Rent: Tenant's Remedies; Advance Payments.
-------------------------------------------------------
a. Abatement of Rent. If the Premises are partially destroyed or
-----------------
damaged and Landlord or Tenant repairs from them pursuant to this Lease,
the Rent payable hereunder for the period during which such damage and
repair continues shall be abated in proportion to the extent to which
Tenant's use of the Premises is impaired. Except for abatement of Rent (if
any), Tenant shall have no claim against Landlord for any damage suffered
by reason of any such damage, destruction, repair, or restoration.
b. Tenant's Remedies. If Landlord shall be obligated to repair or
-----------------
restore the Premises under this Article 16 and shall not commence such
repair or restoration within sixty (60) days after such obligation shall
accrue, or such repair or restoration cannot reasonably be expected to be
completed within 180 days after such obligation shall accrue, then Tenant
at Tenant's option may cancel and terminate this Lease by written notice to
Landlord at any time prior to the commencement of such repair or restoration.
In such event this Lease shall terminate as of the date of such notice.
<PAGE>
c. Advance Payments. Upon termination of this Lease pursuant
----------------
hereto, an equitable adjustment shall be made concerning Prepaid Rent and
any advance payments made by Tenant to Landlord. Landlord shall in
addition return to Tenant so much of Tenant's Security Deposit as has not
theretofore been applied by Landlord or to which Landlord is not otherwise
entitled.
ARTICLE 17. CONDEMNATION
If the Premises or any portion thereof are taken under the power of
eminent domain, or sold by Landlord under the threat of the exercise of
said power (all of which is herein referred to as "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever occurs first. If more than
twenty-five percent (25%) of the Premises is taken by condemnation, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes possession by notice in writing of such election within
twenty (20) days after the condemning authority shall have taken
possession.
If this Lease is not terminated by either Landlord or Tenant then it
shall remain in full force and effect as to the portion of the Premises
remaining, provided the Rent shall be reduced in the proportion that the
floor area taken within the Premises bears to the total floor area of all
the Premises leased to Tenant pursuant hereto. In the event this Lease is
not so terminated, then Landlord agrees, at Landlord's sole cost, to
restore the Premises as soon as possible a complete unit reasonably capable
in Landlord's opinion of accommodating Tenant's usage as that usage existed
prior to
<PAGE>
the condemnation. All awards for the taking of any part of the Premises or
any payment made under the threat of the exercise of power of
eminent domain shall be the property of Landlord, whether made as
compensation for the taking of the fee or severance damages. Nothing
contained herein shall be deemed to give Landlord any interest in or to
require Tenant to assign to Landlord any award made to Tenant for the
taking of personal property and fixtures belonging to Tenant and/or for the
interruption of or damage to Tenant's business and/or for Tenant's business
and/or for Tenant's unamortized cost of its leasehold improvements provided
that as to partitions or other improvements in the nature of realty
installed or constructed by Tenant. Tenant shall be entitled to receive
only the unamortized cost thereof computed over the remaining useful life,
not to exceed the balance of the original term of this Lease. In the event
that this Lease is not terminated by reason of such condemnation, Landlord
shall, to the extent of severance damages received by Landlord in
connection with such condemnation, promptly commence and diligently
complete the repair any damage to the Premises caused by such condemnation
except to the extent that Tenant has been reimbursed therefor by the
condemning authority in which case Tenant shall pay any amount in excess of
such severance damages required to complete such repair.
ARTICLE 18. ASSIGNMENT AND SUBLETTING
18.1 Landlord's Consent Required. Tenant shall not voluntarily or by
---------------------------
operation of law assign this Lease, sublet all or any part of the Premises,
or otherwise transfer, mortgage, pledge, hypothecate, or encumber all or
any part of Tenant's interest in this Lease or in the Premises or any part
thereof, without Landlord's prior written consent and any attempt to do so
without such consent being first obtained shall be wholly void and shall
constitute a breach of this Lease, provided, however, that no consent shall
be required in connection with any merger or consolidation by Tenant or any
sale of all or substantially all Tenant's assets to a single purchaser.
18.2 Reasonable Consent. In the event that Landlord offers to accept a
------------------
surrender of the leasehold, and termination of this Lease as of the date of
the proposed sublease or assignment, then Landlord may withhold consent to
any sublet or assignment in its sole and absolute discretion. Otherwise if
Tenant complies with the following conditions. Landlord shall not
unreasonably withhold its consent to the assignment of the Lease or the
subletting of the Premises or any portion thereof. Tenant shall submit in
writing to Landlord: (a) the name and legal composition of the proposed
Assignee or Sublessee; (b) the nature of the proposed Assignee's or
Sublessee's business to be carried on in the Premises; (c) the terms and
provisions of the proposed Assignment or Sublease; (d) such reasonable
financial information as Landlord may request concerning the proposed
Assignee or Sublessee.
18.3 No Release of Tenant. No consent by Landlord to any assignment or
--------------------
subletting by Tenant shall relieve Tenant of any obligation to be performed
by Tenant under this Lease, whether occurring before or after such consent,
assignment of the Lease or subletting of the Premises. The consent by
Landlord to any assignment or subletting shall not relieve Tenant from the
obligation to obtain Landlord's express written consent to any other such
assignment of the Lease or subletting of the Premises. The acceptance of
Rent by Landlord from any other person shall not be deemed to be a waiver
by Landlord of any provision of this Lease or to be a consent to any
assignment, subletting or other transfer. Consent to one assignment,
subletting, or other transfer shall not be deemed to constitute consent to
any subsequent assignment, subletting or other transfer. All rent or other
sums received by Tenant from its subtenants in excess of the Rent payable by
Tenant to Landlord under this Lease shall be retained by Tenant.
18.4 Form of Consent. Each transfer, assignment, subletting, license,
---------------
concession agreement, mortgage and hypothecation to which there has been
consent shall be by an instrument in writing in form satisfactory to
Landlord, and shall be executed by the parties thereto who shall agree in
writing for the benefit of Landlord herein to assume, to be bound by, and
to perform all of the terms, covenants, and conditions of this Lease. One
executed copy of such written instrument shall be delivered to Landlord.
Failure to first obtain in writing Landlord's consent or failure to comply
with the provisions of the Article 18 shall operate to prevent any such
transfer, assignment, subletting, license, concession agreement or
hypothecation from becoming effective.
ARTICLE 19. DEFAULT, REMEDIES
19.1 Defaults by Tenant; Remedies. The occurrence of any of the following
----------------------------
shall constitute a material default and breach of this Lease by Tenant:
(a) any failure by Tenant to pay Rent or any other monetary sums required
to be paid hereunder (where such failure continues for ten (10) days after
written notice by Landlord to Tenant); (b) the abandonment or permanent
vacation of the Premises by Tenant; (c) a failure by Tenant to observe and
<PAGE>
perform any other provision of this Lease to be observed or performed by
Tenant, where such failure continues for thirty (30) days after written
notice thereof by, Landlord to Tenant; provided, however, that if the
nature of the default is such that the same cannot reasonably be cured
within said thirty (30) day period. Tenant shall not be deemed to be in
default if Tenant shall within such period commence such cure and
thereafter diligently prosecute the same to completion; provided, further,
however, Landlord in its sole discretion may require Tenant to deliver a
bond, deposit funds [illegible] such other form of security device which may
[illegible] necessary to protect the Premises, Landlord, and the Project in the
event such default cannot be cured within said thirty (30) day period. Any such
notice shall be in lieu of, and not in addition to, any notice required by
law.
<PAGE>
the exercise of any right or remedy at law or in equity which Landlord may
have by reason of such default or breach:
(i) Maintain this Lease in full force and effect and recover the Rent
and other monetary charges as they become due without terminating Tenant's
right to possession, irrespective of whether Tenant shall have abandoned
the Premises. In the event Landlord elects not to terminate the Lease,
Landlord shall have the right to attempt to re-let the Premises at such
rent and upon such conditions and for such a term, and to do all acts
necessary to maintain or preserve the Premises as Landlord deems reasonable
and necessary without being deemed to have elected to terminate the Lease,
including removal of all persons and property from the Premises; such
property may be removed and stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant. In the event any such re-
letting occurs, this Lease shall terminate automatically upon the new
tenant taking possession of the Premises. Notwithstanding that Landlord
fails to elect to terminate the Lease initially, Landlord at any time
during the term of this Lease may elect to terminate this Lease by virtue
of such previous default of Tenant.
(ii) Terminate Tenant's right to possession by any lawful means, in
which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event Landlord
shall be entitled to recover from Tenant all damages incurred by Landlord
by reason of Tenant's default, including without limitation thereto, the
following: (a) the worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus (b) the worth at the time
of award of the amount by which the unpaid Rent for the balance of the term
after termination until the time of award exceeds the amount of such rental
loss that is proved could have been reasonably avoided; plus (c) the worth
at the time of award of the amount by which the unpaid Rent which would
have been due after the time of award exceeds the amount of such rental
loss that is proved could be reasonably avoided; plus (d) any other amount
necessary to compensate Landlord for the detriment proximately caused by
Tenant's failure to perform his obligations under this Lease or which in
the ordinary course of events would be likely to result therefrom; plus (e)
at Landlord's election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable state law.
Upon any such re-entry Landlord shall have the right to make any reasonable
repairs, alterations, or modifications to the Premises which Landlord in its
sole discretion deems reasonable and necessary. Any and all amounts
expended in relating the Premises and all monetary damages suffered,
including brokers fees to lease the Premises, shall be paid by Tenant. As
used in (a) above, the "worth at the time of award" shall be computed by
adding interest to such amounts at the maximum rate permitted by law. As
used in (b) and (c) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the U.S. Federal Reserve
Bank at the time of award plus one percent (1%). For all purposes of this
Article 19, the term "Rent" shall be deemed to be the Rent and all other
sums required to be paid by Tenant pursuant to the terms of this Lease; all
such sums, shall be computed on the basis of the average monthly amount
thereof accruing during the immediately preceding sixty (60) month period,
except that if it becomes necessary to compute such Rent before such a
sixty (60) month period has occurred, then on the basis of the average
monthly amount thereof during such shorter period.
b. Bankruptcy - Insolvency of Tenant; Landlord's Remedies. Tenant
------------------------------------------------------
agrees that in the event all or substantially all of Tenant's assets are
placed in the hands of a receiver or trustee, and such receivership or
trusteeship continues for a period of thirty (30) days, or in the event
Tenant makes an assignment for the benefit of creditors or is finally
adjudicated a bankrupt, or in the event Tenant institutes any proceedings
under the Bankruptcy [illegible] the same now exists or under any amendment
thereof which may hereafter be enacted, or under any other act relating to
the subject of bankruptcy wherein Tenant seeks to be adjudicated a
bankrupt, or to be discharged of its debts, or to effect a plan of
liquidation, composition, or reorganization or in the event any involuntary
proceedings are filed against Tenant under any such bankruptcy laws and
such proceedings are not removed within sixty (60) days thereafter, then
this Lease or any interest in and to the Premises shall not become an asset
in any of such proceedings and, in any such events and in addition to any
and all rights or remedies of Landlord hereunder or by law provided, it
shall be lawful for the Landlord to declare the term hereof ended and to
re-enter the Premises and take possession thereof and remove all persons
therefrom and Tenant shall have no further claim thereon or hereunder. For
the purposes of this Article 19, the occurrence of any of the events set
forth in this Article 19.1.b with respect to any Guarantor of this Lease
shall entitle Landlord to exercise its rights and remedies provided
hereunder or by law.
c. Late Charges. Tenant hereby acknowledges that late payment by
------------
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
<PAGE>
limited to, processing and accounting charges and late charges which may be
imposed on Landlord by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of Rent or any other sum due
from Tenant shall not be received by Landlord or Landlord's designee within
ten (10) days after such amount shall be due, Tenant shall pay to Landlord
a late charge equal to five percent (5%) of such overdue amount. The
parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Landlord will incur by reason of late payment by
Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue
amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
Landlord shall be under no obligation to observe or perform any
covenant of this Lease on its part to be observed or performed which accrues
after the date of any default by Tenant hereunder.
<PAGE>
The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same, or any other
term, covenant or condition herein contained. The subsequent acceptance of
Rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this
Lease, other than the failure of Tenant to pay the particular Rent
accepted, regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such Rent. No covenant, term, or condition of
this Lease shall be deemed to have been waived by Landlord unless such
waiver be in writing by Landlord.
19.2 Default by Landlord. Landlord shall not be in default unless Landlord
-------------------
fails to perform obligations required of Landlord within a reasonable time
but in no event later than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Tenant in writing, specifying wherein Landlord has failed to perform such
obligations; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days are required for performance, then
Landlord shall not be in default if Landlord commences performance within
such thirty (30) day period and thereafter prosecutes the same to
completion.
ARTICLE 20. CANCELLATION OR RELOCATION
ARTICLE 21. ADDITIONAL PROVISIONS
21.1 Payment of Tenant's Pro Rata Share of Real Property Taxes, Common
-----------------------------------------------------------------
Areas Expenses and/or Insurance. At Landlord's election, Landlord may
- -------------------------------
require Tenant to pay its pro rata share of Common Area Expenses (as set
forth in Article 1 hereof) and/or the cost of Landlord's insurance (as set
forth in Article 16.2 hereof) monthly in advance. In the event of such an
election, Landlord shall calculate an amount estimated to be Tenant's share
of such costs and expenses. Commencing with the first (1st) of the month
following ten (10) days written notice to Tenant of the amount so
calculated by Landlord as Tenant's share thereof, Tenant shall commence
paying such sum to Landlord simultaneously with the payment of Rent;
thereafter such sum as adjusted pursuant hereto shall be remitted monthly
in advance without further billing therefor. Said initial monthly sum may
be adjusted by Landlord at the end of any calendar quarter on the basis of
Landlord's experience and reasonably anticipated costs. Within thirty (30)
days following the end of each calendar quarter, or, at Landlord's option,
each calendar year, Landlord shall furnish Tenant a statement covering the
calendar quarter or year just expired, certified as correct by Landlord
and/or an authorized representative of Landlord, showing the total charges
pursuant to the above, the amount of Tenant's share thereof for such
calendar quarter or year and the payments made by Tenant with respect to
such period. If Tenant's share of such expenses exceeds Tenant's payments
so made, Tenant shall pay Landlord the deficiency within ten (10) days
after receipt of such statement. If said payments exceed Tenant's pro rata
share of such expenses, Tenant shall be entitled to offset the excess
against payments next thereafter to become due Landlord as set forth above.
* See below.
21.2 Subordination. At Landlord's option this Lease shall be subject and
-------------
subordinate to the lien of any deeds of trust in any amount or amounts
whatsoever now or hereafter placed on or against the Premises or on or
against Landlord's interest or estate therein, without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination. If any trustee shall elect to have this
Lease prior to the lien of its deed of trust, and shall give written notice
thereof to Tenant, this Lease shall be deemed prior to such deed of trust,
whether this Lease is dated prior or subsequent to the date of the recording
thereof. Tenant covenants and agrees to execute and deliver upon demand
without charge therefor, such further instruments evidencing such
subordination of this Lease to the lien of any such deeds of trust as may
be required by Landlord. Tenant hereby appoints Landlord as Tenant's
attorney-in-fact irrevocably, to execute and deliver any such agreements,
instruments, releases, or other documents.
<PAGE>
21.3 Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
---------------
Tenant paying Rent and other monetary sums due under the Lease and
performing its covenants and conditions, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises for the term, subject, however,
to the terms of the Lease and of any of the aforesaid deeds of trust
described in Article 21.2 above.
21.4 Attornment. In the event of foreclosure of the exercise of the power
----------
of sale under any deed of trust made by Landlord covering the Premises,
Tenant shall attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as Landlord under the Lease, provided such
purchaser expressly agrees in writing to be bound by the terms of the
Lease.
21.5 Estoppel Certificate. Tenant shall within ten (10) days after receipt
--------------------
of a request therefor from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the Rent and other charges
are paid in advance, if any) and (ii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by a prospective purchaser or encumbrancer of the
Premises. Tenant's failure to deliver such statement within such time
shall be conclusive upon Tenant: (i) that this Lease is in full force and
effect without modification except as may be represented by Landlord, (ii)
that there are no uncured defaults in Landlord's performance, and (iii)
that not more than one month's Rent has been paid in advance. If Landlord
desires to finance or refinance the Project or any part thereof, Tenant
hereby agrees to deliver to any lender designated by Landlord such
financial statements of Tenant as may be reasonably required by such
lender. All such financial statements shall be received by Landlord in
confidence and shall be used only for the purposes herein set forth.
21.6 Transfer of Landlord's Interest. In the event of a sale or conveyance
-------------------------------
by Landlord of Landlord's interest in the Premises or the Project other
than a transfer for security purposes only, Landlord shall be relieved from
and after the date specified in such notice of transfer of all obligations
and liabilities accruing thereafter on the part of Landlord, provided that
any funds in the hands of Landlord at the time of transfer in which Tenant
has an interest shall be delivered to the successor of Landlord. This
Lease shall not be affected by any such sale and Tenant agrees to attorn to
the purchaser or assignee provided that all of Landlord's obligations
hereunder are assumed in writing by the transferee.
21.7 Captions, Attachments, Defined Terms. The captions of the Articles of
------------------------------------
this Lease are for convenience only and shall not be deemed to be relevant
in resolving any question of interpretation or construction of any section
of this Lease. Exhibits attached hereto, and addenda and schedules
initialed by the parties, are deemed by attachment to constitute part of
this Lease and are incorporated herein. The words "Landlord" and Tenant",
as used herein, shall include the plural as well as the singular. Words
used in neuter gender include the masculine and feminine and words in the
masculine or feminine gender include the neuter. If there be more than one
Landlord or Tenant, the obligations hereunder imposed upon Landlord or
Tenant shall be joint and several. If the Tenants are husband and wife,
the obligations shall extend individually to their sole and separate
property as well as to their community property. The term "Landlord" shall
mean only the owner or owners at the time in question of the fee title to
the Premises. The obligations contained in this Lease to be performed by
Landlord shall be binding on Landlord's successor and assigns only during
[illegible] respective periods of ownership.
21.8 Entire Agreement. This instrument along with any exhibits and
----------------
attachments hereto constitutes the entire agreement between Landlord and
Tenant relative to the Premises and this Agreement and the exhibits and
attachments may be altered, amended or revoked only by an instrument in
writing signed by both Landlord and Tenant. Landlord and Tenant agree
hereby that all prior or contemporaneous oral agreements between and among
themselves and their agents and representatives relative to the leasing of the
Premises are merged in or revoked by this Agreement.
21.9 Severability. If any term or provision of this Lease shall, to any
------------
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be effected thereby,
and each term and provision of this Lease shall be valid and be enforceable
to the fullest extent permitted by law.
21.10 Costs of Suit and/or Enforcement of Lease. If Tenant or Landlord shall
-----------------------------------------
bring any action for any relief against the other, declaratory or otherwise,
arising out of this Lease, including any suit by Landlord for the recovery
of Rent or possession of the Premises or the curing of any default, the
<PAGE>
losing party shall pay the successful party a reasonable sum for attorneys'
fees and/or other costs of enforcement which shall be deemed to have
accrued on the commencement of such action and shall be paid whether or not
such action is prosecuted to judgment. Should Landlord, without fault on
Landlord's part be made a party to any litigation instituted by Tenant or by
any third party against Tenant, or by or against any person holding under
or using the Premises by license of Tenant, or for the foreclosure of any
lien for labor or materials furnished to or for Tenant or any such other
person or otherwise arising out of or resulting from any act or transaction
of Tenant or of any such other person. Tenant covenants to save and hold
Landlord harmless from any judgment rendered against Landlord or the
Premises or the Project, and all costs and expenses, including reasonable
attorneys' fees, incurred by Landlord in or in connection with such
litigation.
21.11 Time, Joint and Several Liability. Time is of the essence of this
---------------------------------
Lease and each and every provision hereof, except as to the conditions
relating to the delivery of possession of the Premises to Tenant. All of
the terms, covenants and conditions contained in this Lease to be performed
by either party if such party shall consist of more than one person or
organization, shall be deemed to be joint and several, and all rights and
remedies of the parties shall be cumulative and non-exclusive of any other
right or remedy at law or in equity.
21.12 Binding Effect: Choice of Law. The parties hereto agree that all
-----------------------------
the provisions hereof are to be construed as both covenants and conditions
as though the words importing such covenants and conditions were used in
each separate paragraph hereof; subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to Section 21.8
all of the provisions hereof shall bind and inure to the benefit of the
parties hereto and their respective heirs, legal representatives,
successors, and assigns. This Lease shall be governed by the laws of the
State of California.
21.13 Waiver. No covenant, term or condition or the breach thereof shall
------
be deemed waived, except by written consent of the party against whom the
waiver is claimed and any waiver of the breach of any covenant, term, or
condition shall not be deemed to be a waiver of any preceding or
<PAGE>
succeeding breach of the same or any other covenant, term, or condition.
Acceptance by Landlord of any performance by Tenant after the time [illegible]
shall have become due shall not constitute a waiver by Landlord of the
breach or default of any covenant, term or condition unless otherwise
expressly agreed to by Landlord in writing. Pursuit of any remedy shall
not preclude pursuit of any other remedies herein provided or any other
remedies provided by law, such remedies being cumulative and non-exclusive,
nor shall pursuit of any other remedy constitutes a forfeiture or waiver of
any Rent due to Landlord hereunder or of any damages accruing to Landlord
by reason of the violation of any of the terms, provisions, and covenants
herein contained. Landlord's acceptance of the payment of Rent or other
payments hereunder after the occurrence of an event of default shall not be
construed as a waiver of such default, unless Landlord so notifies Tenant
in writing. Forbearance by Landlord to enforce one or more of the remedies
herein provided upon an event of default shall not be deemed or construed
to constitute a waiver of such default or of Landlord's right to enforce
any such remedies with respect to such default.
21.14 Surrender of Premises. The voluntary or other surrender of Lease by
---------------------
Tenant, or a mutual cancellation thereof, shall not work a merger and
shall, at the option of the Landlord, terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord, operate as an
assignment to Landlord of any or all such subleases or subtenancies.
21.15 Holding Over. If Tenant remains in possession of all or any part of
------------
the Premises after the expiration of the term hereof, with or without the
express or implied consent to Landlord, such tenancy shall be from month to
month only and not a renewal hereof or an extension for any further term.
In such case, Rent and other monetary sums due hereunder shall be payable
at the time specified in this Lease, and such month to month tenancy shall
be subject to every other term, covenant, and agreement contained herein
except that the monthly Rent shall be at a rate equivalent to 150% of the
monthly Rent paid by Tenant at the expiration of this Lease. In the event
of such holding over, all options and rights of first refusal, if any,
granted under the terms of this Lease shall be deemed terminated and be of
no further effect during said month to month tenancy.
21.16 Signs. Tenant shall not place or permit to be placed in, upon or
-----
about the Premises or the Project where visible from outside the Premises
or any part of any building within the Project, any signs, notices, drapes,
shutters, blinds, or displays of any type without the prior written consent
of Landlord. Landlord hereby consents to all signage in place on the
Premises as of the date of this Lease.
21.17 [Secion Deleted]
21.18 Interest on Past Due Obligations. Except as expressly herein
--------------------------------
provided, any amount due to Landlord not paid when due shall bear interest
[illegible] maximum rate permitted by law from the due date. Payment of such
interest shall not excuse or cure any default by Tenant under this Lease.
21.19 Recording. Tenant shall not record this Lease without Landlord's
---------
prior written consent, and such recordation shall, at the option of
Landlord, constitute a non-curable default of Tenant hereunder. Either
party shall, upon request of the other, execute, acknowledge, and deliver
to the other a short form memorandum of this Lease for recording purposes.
21.20 Notices. All notices or demands of any kind required or desired to
-------
be given by Landlord or Tenant hereunder shall be in writing and shall be
deemed delivered when personally delivered or forty-eight (48) hours after
depositing the notice or demand in the United States mail, certified or
registered, postage prepaid, addressed to the Landlord or Tenant,
respectively, at the addresses set forth in Article 1 above.
21.21 No Reservation. Submission of this instrument for examination or
--------------
signature by Tenant does not constitute a reservation of or option for
lease; it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.
21.22 Corporate Authority. If Tenant is a corporation, each individual
-------------------
executing this Lease on behalf of said corporation represents and warrants
that he/she is duly authorized to execute and deliver this Lease on behalf
of said corporation in accordance with a duly adopted resolution of the Board
of Directors of said Corporation or in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation, Tenant shall, within thirty (30)
days after execution of this Lease, deliver to Landlord a certified copy of
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
<PAGE>
21.23 Security Measures. Tenant hereby acknowledges that the Rent payable
-----------------
to Landlord hereunder does not include the cost of guard services or other
security measures, and that Landlord shall have no obligation whatsoever to
provide same. Landlord has provided locks and other measures for the
convenience of the tenants in the Project, as well as tenants' agents,
employees, contractors, licensees, customers, or invitees. However,
Landlord can make no guarantees of any nature with respect to the
effectiveness of such measures in eliminating criminal acts. Tenant
assumes all responsibility for the protection of Tenant and Tenant's
agents, employees, contractors, licensees, customers, or invitees, and the
property belonging to same, from acts of third parties, and indemnifies
Landlord and holds Landlord harmless therefrom.
21.24 Additional Rent. Any monetary obligations of Tenant to Landlord
---------------
under the terms of this Lease shall be deemed to be Rent.
21.25 Pets. Without the prior written consent of Landlord, Tenant shall
----
allow no pets of any nature in the Premises or the Project. Landlord may
require a higher Security Deposit or additional rent as a condition for
Tenant having pets.
21.26 Rules and Regulations. Tenant agrees to abide by Rules and
---------------------
Regulations as the Landlord may from time to time establish for the common
benefit of the Tenants and the Projects; provided, however, that such Rules
and Regulations shall not unreasonably or significantly interfere with
Tenant's use and operation of the Premises as permitted or contemplated
herein.
<PAGE>
SEE EXHIBIT D INCORPORATED HEREIN BY REFERENCE
In Witness Whereof Landlord and Tenant have executed this Lease as of the
date first written above.
Landlord: Tenant: SIMMONS COMPANY
By: /s/ By: /s/
-------------------------- -------------------------------
LANDLORD AND ORBIT PROPERTY MANAGEMENT, THROUGH THEIR AGENTS AND/OR
EMPLOYEES MAKE NO REPRESENTATIONS OR RECOMMENDATIONS WITH RESPECT TO THE
LEGAL SUFFICIENCY OR TAX OR LEGAL EFFECT OF THIS LEASE. THIS DOCUMENT HAS
BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY WITH WHOM YOU SHOULD CONSULT
TO SEE THAT YOUR RIGHTS ARE ADEQUATELY PROTECTED.
<PAGE>
Includes all second floor space, and all
of the first floor space except (1)
lunchroom and corridor leading thereto,
(2) lobby area, (3) staircase (4)
bathroom (but not the changing areas,
which shall be a part of Tenant space)
and (5) offices just north of the
corridor to the lunchroom.
[Blueprint drawing]
Area 1-A (see Exhibit A-1)
EXHIBIT A
<PAGE>
Exhibit A-1
Landlord shall provide 150 parking spaces in the area marked 1-A.
<PAGE>
Exhibit B to Lease
CONSTRUCTION TO BE PERFORMED BY LANDLORD: NONE
CONSTRUCTION TO BE PERFORMED BY TENANT: NONE
<PAGE>
EXHIBIT C TO LEASE
------------------
RENT
----
1. Rent. The monthly Rent payable during the first five (5)
----
years of the Lease term shall be:
Months 1 through 36: $57,500 per month
Months 37 through 60: $34,530 per month
2. CPI Adjustments. On the first day of the sixty-first
---------------
(61st), the one hundred third (103rd) and one hundred forty-fifth (145th)
months of the term of this Lease (each such date being an "Adjustment
Date"), the monthly Rent shall be increased (but not decreased) to be an
amount equal to the product obtained by multiplying (a) $34,530 by (b) one
plus a fraction of which the numerator shall be one-half of the increase in
the Index from the Commencement Date until such Adjustment Date and the
denominator shall be the Index as of the Commencement Date.
Notwithstanding the foregoing, the maximum adjusted Rent
as of any Adjustment Date shall be the result obtained by increasing the
sum of $34,530 at the rate of five percent (5%) per year (non-compounded)
for the number of years (or fractions thereof) elapsed between the
Commencement Date and such Adjustment Date.
The term "Index" means the Consumer Price Index for All Urban
Consumers for the San Francisco-Oakland-San Jose Metropolitan Area (1982-
1984 = 100) as published by the United States Department of Labor, Bureau
of Labor Statistics. If the Index is discontinued during the term of this
Lease, such other government index or computation with which it is
replaced, or such other comparable index or publication as may then be
available, shall be used in order to obtain substantially the same result
as would be obtained if the Index had not been discontinued.
<PAGE>
EXHIBIT D TO LEASE
------------------
Upon execution and delivery of this Lease, Landlord shall also
deliver to tenant the sum of $300,000 ("Equipment Allowance") to be used
for the purpose of paying (or reimbursing Tenant) for costs relating to the
acquisition and installation of such equipment and fixtures as Tenant deems
appropriate in its sole and absolute discretion for the conduct of its
business operations on the Premises. Upon request by Landlord, Tenant
shall provide to Landlord an itemized list (with copies of supporting
invoices or purchase orders) describing the equipment and fixtures for
which the Equipment Allowance was used.
Exhibit 10.43
LEASE AND OPTION TO BUY AGREEMENT
In the City of San Juan, Commonwealth of Puerto Rico, on this twenty-five
day of May, Nineteen Hundred Eighty Nine
BEFORE ME
EDUARDO M. JOGLAR, Attorney at Law and Notary Public in and for the
Commonwealth of Puerto Rico, with residence in San Juan, and offices in the Six
Floor of Banco Cooperativo Plaza, 623 Ponce de Leon Avenue, Hato Rey, Puerto
Rico
PERSONALLY APPEAR
ALTA CASTING CORPORATION (hereinafter called "Landlord"), a corporation
organized under the laws of the Commonwealth of Puerto Rico with offices State
Road #2, Kilometer 19.6, Toa Baja, Puerto Rico, represented herein by its
Treasurer Mister Rene Ruisanchez, of legal age, married, property owner and
resident of Guaynabo, Puerto Rico, who binds himself to show his authority to
execute this deed for and on behalf of Landlord - whenever and wherever required
to do so, and
SIMMONS CARIBBEAN BEDDING, INC., (hereinafter called "Tenant") a
corporation organized under the laws of Puerto Rico duly authorized to do
business in the Commonwealth of Puerto Rico and with offices within said
Commonwealth at the leased premises, represented herein by its Vice President,
Mister Jose J. Perez, of legal age, married, executive and a resident of
Guaynabo, Puerto Rico, who binds himself to show his authority to execute this
agreement on behalf of Tenant, whenever and wherever required to do so.
I CERTIFY
That I personally know the appearing parties, and from their statements I
also attest as to their age, civil status, occupation and residence. They
assure me that they have, and in my judgment they do have, the legal capacity
necessary for this act, and for that purpose, they,
DECLARE AND SAY
FIRST: The Leased Premises - Landlord represents, warrants and covenants,
-------------------
that it is the owner of record in fee simple (pleno dominio), of, and has good
and marketable title
<PAGE>
to the following property described in Spanish as follows:
"RUSTICA": Parcela radicada en el barrio Candelaria del termino municipal
de Toa Baja, Puerto Rico, con una cabida superficial de tres mil metros
cuadrados con sesenta y dos centesimas (3,000.62) y an lindes: por el Norte, en
treinta y tres metros con la Carretera numero Dos (2); por el Sur, Este y Oeste,
en cuarenta metros, ochenta y cinco metros y ochenta y tres metros
respectivamente con la finca principal de la cual se segrega, propiedad del
senor German Acuna. Dicha parcela es segregacion de la finca numero doscientos
nueve (209) que se encuentra inscrita al folio numero doscientos doce (212) del
tomo numero cuatro (4) de Bayamon, Puerto Rico, segun consta de la escritura
numero Uno de Segragacion, Compraventa e Hipoteca otorgada ante el Notario
Edgar Mendez Rivera los cuatro dias del mes de enero de mil novecientos
sesenta y ocho la cual ha sido presentada en el Registro".
SECOND: Landlord hereby leases, rents, lets, and demises unto Tenant, and
Tenant hereby takes and hires from Landlord, the above referred parcel of land
and the factory building (the Building) existing on the said parcel at present
(parcel) building, hereinafter referred to as the demised premises or the leased
premises which building is described as follows:
One-story steel and concrete industrial building at Kilometer 19.6, State
Road #2, Barrio Candelaria, Toa Baja, Puerto Rico, consisting of a total of
24,400 square feet of construction on a lot area of 3,000 square meters.
To be used for the installation and operation of a factory to warehouse,
assemble and/or manufacture bedding furniture and any other home furnishings for
the term hereinafter set forth, upon and subject to the following conditions,
covenants, limitations and terms:
ARTICLE ONE: TERM - The term of this lease (the Lease) shall be sixty
----
months (60) commencing June 1, 1989 and ending May 31, 1994. Landlord hereby
grants Tenant an option for two more terms of five years each. Shall Tenant
exercise the option of the first five years extension the same shall commence
June 1, 1994 and ends May 31, 1999. The second extension will be commencing
June 1, 1999 and ending May 31, 2004. Tenant shall give Landlord notice of its
intention to exercise those options with at least one month in advance of the
commencement of each of the extensions, by certified mail, or such
<PAGE>
option will expire automatically, and therefore be considered null and void.
ARTICLE TWO: RENT - The rent for the demised premises shall be at the rate
----
of $3.10 per square foot equivalent to $75,640.00 per annum, payable monthly in
advance in equal installments of $6,303.33 each for the first sixty months.
In the case that Tenant exercises the option for the first extension
aforementioned for five more years, then the rent from month sixty one (61) to
eighty four (84), both inclusive, will be at a rate of $3.30 per square foot or
$6,710.00 monthly: the rent for the months eighty five (85) to one hundred and
eight (108) both inclusive, will be at a rate of $3.45 per square foot or
$7,315.00 monthly; and the rent for the months one hundred and nine (109) to
one hundred and twenty (120) both inclusive will be at a rate of $3.60 per
square foot or $7,320.00 monthly.
In the case that Tenant exercises the option for the second five years
extension, then the rent for the first 24 months of this second extension will
be at a rate of $3.75 per square foot or $7,625.00 monthly; for the months 25 to
48 of the extension the rent will be at a rate of $3.90 per square foot or
$7,930.00 monthly; and the rent for the months 49 to 60 of the second extension
will be at a rate of $4.05 per square foot or $8,235.00 monthly.
ARTICLE THREE: USE OF THE PREMISES - Tenant shall be able to use the
-------------------
demised premises in accordance with the existing use permit. However, for all
new uses Tenant shall forthwith obtain a use permit for the demised premises and
Tenant shall use the demised premises for the uses therein permitted and for no
other purpose. Tenant shall not use the demised premises in any manner
forbidden or prohibited by any laws, rules or regulations of the Commonwealth
of Puerto Rico, the Planning Board, or any other governmental authority having
jurisdiction over the premises; nor shall Tenant use the demised premises in any
manner which may reasonably be expected to result in
<PAGE>
damage to the floor, roof or structural portions of the building, normal wear
and tear excepted. Tenant shall have the rights to install and remove interior
partitions, a water heater, lighting fixtures, power transformers and power
distribution system, trade fixtures, machinery, and equipment necessary for the
uses of the demised premises herein permitted: provided, however, that upon the
expiration of this lease, Tenant shall be obligated at Tenant sole expense, if
requested by the Landlord, to remove same and restore the demised premises to
its original state and condition at the commencement of this lease, normal wear
and tear excepted; and provided, further, that Tenant shall not make any
structural alterations in or to the demised premises or alter the roof or
exterior appearance of the Building in any manner without first procuring the
Landlord's written consent, such consent not to be unreasonably withheld.
Tenant shall not install a boiler in or about the demised premises without the
prior written consent of the Landlord, such consent not to be unreasonably
withheld. Any improvement to the leased premises will remain for the benefit of
the Landlord and Tenant will not be entitled to reimbursement of any kind.
ARTICLE FOUR: INSURANCE - Tenant shall not do anything in or about the
---------
demised premises which will in any way impair or invalidate the obligation of
any policy of insurance on the Landlord's property or the Building, or increase
the cost of insurance coverage of the Building above the standard rate for light
industry and general warehousing. Landlord shall not be liable to Tenant for
damage to or destruction of Tenant's property or that of Tenant's customers,
employees or agents, resulting from fire, water damage or other casualty. Tenant
shall, throughout the term of this lease, maintain in full force public
liability insurance insuring both the Landlord and the Tenant against any and
all claims for damages to persons or property, or for loss of life or of
property, occurring upon the or about the demised premises, such insurance to
afford-
<PAGE>
immediate protection to the limits of not less than THREE HUNDRED THOUSAND
DOLLARS ($300,000.00) in respect to bodily injury or death to any one person,
and to the limit of not less than ONE MILLION DOLLARS ($1,000,000.00) in respect
to any one accident, and to the limit of not less than ONE HUNDRED THOUSAND
DOLLARS ($100,000.00) for property damage. In the event Tenant fails or
refuses to maintain such insurance, Landlord may, at its option, after notifying
Tenant in writing of Landlord's intention to do so procure the same for the
account of the Tenant, the premiums therefor to be deemed as additional rent due
and payable with the next following month's installment of stipulated rent.
ARTICLE FIVE: FIRE OR OTHER CASUALTY - In the event of extensive damage or
----------------------
destruction of the demised premises, Landlord shall have the option either: (1)
to repair or rebuild the demised premises or (2) to terminate this lease by
written notice to Tenant forwarded within thirty (30) days of the occurrence of
the fire or other casualty causing such extensive damage or destruction.
Extensive damage or destruction shall be deemed to have occurred when the cost
of repairing the same exceeds twenty-five percent (25%) of the appraised value
of the demised premises immediately preceding such fire or other casualty.
Tenant agrees to give the Landlord written notice of any damage to or
destruction of the demised premises, within five (5) days after the occurrence
of the casualty.
If the demised premises or any portion therein are so damaged as to be
untenantable or unfit for occupancy, or for formal conduct of business and
Tenant temporarily vacates the demised premises or any portion thereof, then the
rent hereby reserved shall be abated or proportionally reduced from the date of
the casualty, until the said premises have been repaired or rebuilt and made fit
for occupancy and use, or, if this Lease is terminated by Landlord as aforesaid,
until the date of such termination.
<PAGE>
Should any repairs or rebuilding of the demised premises planned or
undertaken by Landlord after such extensive damage or destruction of the demised
premises require for completion more than six (6) months, from the date of
notice to Landlord of such damage or destruction, then Tenant shall have the
option to terminate this lease effective thirty (30) days after sending to the
Landlord written notice of such decision to terminate the lease.
It is agreed that the liability of the Landlord, if any, hereunder shall be
limited repairing and restoring the demised premises within a period not to
extend beyond six (6) months from the date of notice of the event causing the
damage or destruction excluding any leasehold improvements by Tenant to the same
condition it was in immediately prior to such damage by fire or other casualty,
and that Landlord shall not be liable to repair or restore any leasehold
improvements installed by the Tenant nor fixtures, equipment, inventory or other
property brought upon the demised premises by Tenant, nor shall Landlord be
responsible for any delays occasioned by cause beyond its control.
ARTICLE SIX: PARKING FACILITIES - The Landlord agrees that all parking
------------------
spaces within or adjacent to the demised premises are covered by this lease and,
therefore, are for the exclusive use of Tenant at no additional rent.
ARTICLE SEVEN: SUBLEASE - Tenant shall not have the right to sublet or
--------
assign the whole or part of the demised premises without the prior written
consent of the Landlord, such written consent not to be unreasonably withheld.
However, Landlord agrees that Tenant shall have the right to sublet or assign
the whole or part of the demised premises without the prior written consent of
the Landlord if the assignment or the subleasing is to a corporation which is an
Affiliate or Subsidiary or Parent of the Tenant, or to a corporation into which
the Tenant, Affiliate or Subsidiary, may be merged or consolidated. No sublease
or assignment by Tenant under this lease shall affect
<PAGE>
or reduce any of the obligations of Tenant under this Lease, but the lease shall
continue in full force and effect.
The consent of the Landlord to the sublease of or to the assignment of this
lease on the demised premises shall not be deemed a novation of this contract,
and the Tenant agrees to remain liable hereunder irrespective of such sublease
or assignment.
ARTICLE EIGHT: UTILITIES - Tenant shall promptly pay for all waste
---------
collection, septic tank cleaning, lights, electrical power, water or other
utilities used in the demised premises. If a water heater, or electric power
transformer and distribution systems are required by the Tenant, the same shall
be installed by the Tenant at Tenant's sole cost and expense. Tenant shall
have the right to remove the above items prior to the termination of the lease.
ARTICLE NINE: MAINTENANCE - Tenant shall keep the grounds adjacent to the
-----------
demised premises, and the exterior, interior and doors and windows of the
demised premises clean and in good order, condition, and repair as when
delivered to Tenant, excepting ordinary wear and tear, damage by force majeure
or damage resulting from Landlord's negligence and Landlord shall maintain the
roof and all structural parts of the demised premises, except for repairs
necessitated by Tenant's negligence, within a reasonable item (in no event later
than thirty (30) days after Tenant has demanded in writing that Landlord perform
such work) and, if Landlord fails to so perform this work, then Tenant may, at
its option, perform such work and offset the cost of such work, and the cost
of any other work necessitated by Landlord's failure to timely perform against
the rent.
ARTICLE TEN: ENTRY AND INSPECTION - Tenant, upon receiving reasonable
--------------------
notice from the Landlord shall permit Landlord or Landlord's agent to enter the
demised premises at all reasonable hours for the purpose of inspecting the same,
or for cleaning and/or making repairs required hereunder to be
<PAGE>
performed by the Landlord, or that Tenant neglects or refuses to make in
accordance with the terms and covenants and conditions of this lease. Any and
all cost and expenses incurred by Landlord in cleaning and/or maintaining the
Demised Premises when such work is Tenant's responsibility, and/or the grounds
adjacent thereto shall be charged to Tenant as additional rent which shall be
due and payable in full together with the next following regular monthly
installment or rental - provided that the Landlord, before cleaning and/or
maintaining the Demised Premises and/or the grounds adjacent thereto, gave
Tenant a written notice of its intention to perform such work if the Tenant
continued to default in its obligation to perform such work, for a period of
thirty (30) days after Tenant's receipt of such written notice.
ARTICLE ELEVEN: DEFAULT BY TENANT - The following shall be considered
-----------------
events of default hereunder:
(a) Non-payment by Tenant of any installment of the stipulated rent or
additional rent within ten (10) days after the rent installment is due. Non-
compliance by Tenant with any of the terms, conditions or covenants of this
lease except for non-payment of rent, after written notice of such non-
compliance had been given to Tenant and the same has not been corrected within
thirty (30) days thereafter.
(b) The adjudication of Tenant in bankruptcy, either by voluntary or involuntary
proceedings, or the filing by or against the Tenant of a legal proceeding
seeking reorganization, arrangement or composition proceedings under the Acts of
Congress relating to bankruptcy, the appointment of a Trustee or of a Receiver
either temporarily or permanently, for the business or property of the Tenant or
any part of it, voluntarily or through legal proceedings; and the levy of any
business or property of the Tenant, shall cause the termination of this lease.
Except that when the foregoing proceedings are not voluntary on the part of the
Tenant, the Tenant shall have thirty (30) days from the filing of such petition
or the
<PAGE>
appointment of such trustee or receiver, within which to vacate the proceedings.
(c) If any of the EVENTS OF DEFAULT herein mentioned occur, the Landlord, at
its option, may reenter and take possession of the Demised Premises and remove
all persons and property therefrom. Tenant agrees to pay Landlord on demand,
the cost including attorney's fees, of recovery of possession of said premises
and the worth, at the time or such termination of the excess, if any, of the
amount of rent and charges equivalent to the rent reserved in this lease for the
balance of the term, over the then reasonable rental value for the Demised
Premises for the same period. The several rights and remedies herein granted to
Landlord shall be cumulative and, in addition to any others, it may be entitled
to by law, and the exercise of one or more rights or remedies shall not impair
Landlord from exercising any other right or remedy; and Tenant hereby waives all
claims for damages that may be caused by the action of Landlord under the
provisions of this paragraph, and all claims for damages to, or loss of property
belonging to Tenant, or any other person, firm or corporation that may be in or
upon the Demised Premises at the time.
ARTICLE TWELVE: NO WAIVER - Any failure of Landlord to enforce the
---------
provisions of this Lease shall not be construed as modifying in any way the
terms of this lease or a waiver of Landlord's rights to terminate this lease as
herein provided or otherwise enforce the provisions hereof for any subsequent
default.
ARTICLE THIRTEEN: DELIVERY OF POSSESSION - Landlord shall not be liable for
----------------------
any damages sustained by Tenant arising out of the failure of the Landlord to
deliver possession of the Demised Premises to the Tenant on the date herein
provided for the commencement of this lease except to the extent of abatement of
stipulated rent from the date of commencement of this lease to the day
possession is delivered to the Tenant.
ARTICLE FOURTEEN: DAMAGES FOR DEFAULT - Tenant agrees to
-------------------
<PAGE>
pay all damages, and reasonable costs and expenses which the Landlord may suffer
or incur by reason of any default of Tenant for failure on his part to comply
with the covenants of this lease.
Tenant shall place with Landlord a bond or surety either in cash or through
a Bonding and/or Surety Company equivalent to the rent of two months. These
monies, if any, deposited with the Landlord cannot be applied to any unpaid rent
and shall be given back to Tenant at the expiration of the lease once the
Demised Premises have been delivered to Landlord in satisfactory conditions.
Tenant and landlord further agree as a liquid sum payable to Landlord in
case of default by Tenant and the abandonment of the Demised Premises by it
before the expiration of the lease or any of its extensions, equal to the
remaining months of the agreement at the moment of default or abandonment in the
case that the Demised Premises could not be leased to any other party, but in
case that the Landlord be able to lease the property again, then Tenant shall be
responsible for those months for which the Demised Premises were unrented plus
the expenses the Landlord might have to incur in the new lease including any
realtor fee, if any; in addition, tenant shall pay to Landlord the difference in
rent if the rent of the new tenant is less than that established in this
agreement for Tenant for that specific period of time.
ARTICLE FIFTEEN: BINDING ON SUCCESSORS. This lease agreement shall inure
---------------------
to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors or assigns.
ARTICLE SIXTEEN: NOTICES - All notices, demands and communications
-------
hereunder shall be made in writing and sent by registered mail, and if intended
for Landlord shall be addressed to: Alta Casting Corporation, P.O. Box 2407, Toa
Baja, Puerto Rico 00759-2661 or such address as may be requested by Landlord in
writing; and if intended for Tenant,
<PAGE>
shall be addressed to: Simmons Caribbean Bedding, Inc., P.O. Box 229 , Toa
Baja, Puerto Rico 00759.
ARTICLE SEVENTEEN: VACATION AT EXPIRATION OF LEASE: Tenant obligates
-------------------------------
himself to vacate the premises upon the expiration of this lease unless a
mutually satisfactory extension has been agreed upon. Tenant will be held fully
liable for damage suffered by Landlord because of Tenant's failure to vacate the
premises upon the expiration of this lease.
ARTICLE EIGHTEEN: PLACE OF PAYMENT - All rent shall be payable at the
-----------------
office of the Landlord, or at such other place as Landlord may from time to time
designate by notice in writing.
ARTICLE NINETEEN: WARRANTY OF TITLE - Landlord covenants and warrants that
-----------------
it is seized of good marketable title to the Demised Premises, free of all
occupancies, tenants or encumbrances and that it has full right and authority to
enter into this lease and that the Demised Premises will be free of all
encumbrances or other objections to title at the commencement of the term of
this lease, except to easements and restrictions of record which will not affect
Tenant's use and occupancy of the premises.
ARTICLE TWENTY: Any increase in property tax imposed on the Demised
Premises after the execution of this agreement shall be considered as additional
rent and shall be paid by Tenant when due but only after the first sixty (60)
months of this agreement have expired. That means that any increase in property
tax will be considered as additional rent only after month sixty (60) of this
agreement, even though the tax increase had been imposed prior to that month
and that any increases in such property tax during the first 60 months shall be
the sole responsibility of and for the account of Landlord for those sixty
months only, being the Tenant's sole responsibility thereafter.
ARTICLE TWENTY-ONE: OPTION TO BUY - Landlord hereby grants Tenant an option
-------------
to buy from them the Demised Premises under the follow-
<PAGE>
ing conditions:
ONE: The price of sale of the Demised Premises is hereby established as
SEVEN HUNDRED THOUSAND DOLLARS ($700,000.00) if Tenant exercises this option and
therefore buys the Demised Premises from Landlord during the next five years
from the execution of this agreement. After five years from the execution of
this agreement this option will expire, except that if, and only if, Tenant
exercises its option to expand the lease agreement of the Demised Premises as it
is hereby established, then during any extensions of the lease agreement, Tenant
might exercise an option to buy the Demised Premises from Landlord, but in that
case the price of sale will be that of the market value of the Demised Premises
at the moment of the sale. The price will be established by an independent
licensed Professional Appraiser selected jointly by the Landlord and Tenant, but
it is hereby agreed and stated by the parties of this contract that in any case
the price of sale shall not be less than SEVEN HUNDRED THOUSAND DOLLARS
($700,000.00).
TWO: The consideration for this option is the amount of one dollar
($1.00).
THREE: In the case that Tenant be declared in default by Landlord in the
lease agreement and such default shall continue for 30 days after notice of such
default to Tenant from the Landlord then the option to buy hereby granted will
expire and/or will be considered null and void automatically.
ARTICLE TWENTY-TWO: ENTIRE AGREEMENT - This lease and option to buy
----------------
agreement contains the entire agreement between the parties and shall not be
modified except by an instrument in writing executed by the parties or their
respective successors in interest.
The undersigned Notary Public hereby certifies that he has made to the
appearing parties all necessary legal admonitions and advertences pertinent
to this contract, and thus they state and execute.
<PAGE>
JOSE J. PEREZ RENE RUISANCHEZ
- ----------------------------------- ------------------------------
TENANT LANDLORD
Simmons Caribbean Bedding, Inc. Alta Casting Corporation
by: Jose J. Perez, Vice by: Rene Ruisanchez
President Lic. #651335 Treasurer
Affidavit num 739
-----
Sworn and subscribed to before me by Rene Ruisanchez and Jose J. Perez, of
the personal circumstances above stated and to whom I know personally, in San
Juan, Puerto Rico this day of May, 1989
[SEAL EDUARDO M. JOBLAR
of NOTARY PUBLIC
Notary]
<PAGE>
ADDENDUM
--------
MODIFICATION OF LEASE AGREEMENT
In the City of San Juan, Commonwealth of Puerto Rico, on this Seventh (7th)
day of April Nineteen Hundred Ninety Four (1994).
APPEARANCE
----------
AS PARTY OF THE FIRST PART: ALTA CASTING CORPORATION (hereinafter referred
to as "Landlord"), a corporation organized under the Laws of the Commonwealth
of Puerto Rico represented herein by Mr. Rene Ruisanchez, of legal age, married,
Treasurer and resident of Guaynabo, Puerto Rico, who binds himself to show his
authorization to execute this document for and on behalf of Landlord whenever
and wherever required to do so, and:
AS PARTY OF THE SECOND PART: SIMMONS CARIBBEAN BEDDING, INC. (hereinafter
referred to as "Tenant"), a corporation organized under the Laws of Puerto Rico
duly authorized to do business in the Commonwealth of Puerto Rico and with
offices within said Commonwealth at the leased premises, represented herein by
its President, Mr. Hector M. Osorio, of legal age, married, property owner and
resident of Guaynabo, Puerto Rico, who binds himself to show his authority to
execute this agreement on behalf of Tenant whenever and wherever required to do
so.
STATE
A. The herein appearing parties executed a Lease and Option To Buy
Agreement in San Juan, Puerto Rico on May 25, 1989 before Notary Public Eduardo
M. Joglar for the term of five (5) years (60 months) commencing on June 1, 1969
and ending on May 31, 1994, subject to renewal option for two (2) additional
terms of five (5) years as stated in Article One of the Lease Contract.
B. Leased Premises (Land and building) are located at
Km. 19.6 State Road #2, Barrio Candelaria, Toa Baja, Puerto Rico.
C. That the appearing parties acknowledge and agree that Tenant will
probably vacate leased premises by the end of 1994 due to relocalization of the
manufacturing facilities and to those effects have agreed to modify the terms of
the renewal option specified in Article One and Article Two of the Lease
Contract as follows:
<PAGE>
2
1. Renewal option of lease agreement will be for one (1) additional year,
on a month to month basis commencing on June 1, 1994.
- -------------------------
2. The Rent for the renewal option will be the same specified in Article
One of the Lease Contract executed between the parties, that is $3.30 per square
foot or $6,710.00 of monthly rent for the first two years of the renewal.
3. Tenant agrees to notify Landlord with four (4) months in advance the
anticipated date in which vacation of premises will take place.
4. During this term Tenant agrees and permits Landlord to visit and show
leased premises to prospective tenants.
5. In the event that Landlord cannot lease premises at the time Tenant
vacates the same, Tenant will pay the corresponding rent for a maximum term of
two (2) additional months.
6. If Landlord leases premises during said two (2) additional months,
Tenant will only pay Landlord rent for the corresponding period of time in which
premises are vacated.
7. All other terms and conditions of the Lease and Option To Buy Agreement
executed by the herein appearing parties on May 25, 1989 will remain in full
force and effect.
8. Tenant (at its cost) will place four (4) ads at "El Nuevo Dia"
newspaper offering the leased premises for rent. Said ads will be published
about two (2) months prior to date of moving out.
HECTOR M. OSORIO RENE RUISANCHEZ
- ----------------------------------- ------------------------------
TENANT LANDLORD
SIMMONS CARIBBEAN BEDDING, INC. ALTA CASTING CORPORATION
by: Mr. Hector M. Osorio by: Mr. Rene Ruisanchez
President Treasurer
Affidavit NO. 1544
-----
Sworn and subscribed to before me by Hector M. Osorio and Rene Ruisanchez
of the above personal circumstances, to me personally known in San Juan, Puerto
Rico this 7th day of April, 1994.
[SEAL OF JUAN CANIN-PIEVE
NOTARY PUBLIC]
NOTARY PUBLIC
Exhibit 10.47
LOAN AGREEMENT
Between
City of Janesville, Wisconsin
and
Simmons Manufacturing Company, Inc.
Dated as of November 1, 1982
Certain rights of the Issuer under this Loan Agreement have been
assigned to, and are subject to a security interest in favor of,
Continental Illinois National Bank and Trust Company of Chicago, as Trustee
under a Trust Indenture dated as of November 1, 1982, as amended or
supplemented from time to time, between the City of Janesville, Wisconsin,
and such Trustee. Information concerning such assignment may be obtained
from the Trustee at 30 North LaSalle Street, Chicago, Illinois 60693.
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not a part of the Loan Agreement but is for
convenience of reference only)
ARTICLE I
Definitions and Rules of Construction
Page
Sec. 1.01. Definitions I-1
Sec. 1.02. Rules of Construction I-5
ARTICLE II
Representations and Warranties
Sec. 2.01. Representations and Warranties
of the Issuer . . . II-1
Sec. 2.02. Representations and Warranties of
the Corporation II-2
ARTICLE III
Construction of the Project; Issuance of the Bonds
Sec. 3.01. Construction of the Project . . . . . . . . . . III-1
Sec. 3.02. Establishment of Completion Date
Sec. 3.03. Agreement to Issue Bonds . . . . . . . . . . . III-1
Sec. 3.04. Disbursements from Redemption Fund . . . . . . III-1
Sec. 3.05. Establishment of Payment of Notes . . . . . . . III-1
Sec. 3.06. Corporation Required to Pay Cost of
Refunding . . . . . . . . . . . . . . . . . . . III-2
Sec. 3.07. Disposition of Balance in Redemption Fund . . . III-2
ARTICLE IV
Loans by the Issuer to the Corporation; Repayment;
Maintenance; Taxes and Liens; Indemnity
Sec. 4.01. Loans by the Issuer; Repayment . . . . . . . . IV-1
Sec. 4.02. Payments to Remarketing Agent and Trustee . . . IV-2
Sec. 4.03. Letter of Credit . . . . . . . . . . . . . . . IV-3
Sec. 4.04. No Set-Off . . . . . . . . . . . . . . . . . . IV-5
Sec. 4.05. Prepayments . . . . . . . . . . . . . . . . . . IV-5
Sec. 4.06. Covenant to Maintain Project . . . . . . . . . IV-5
i.
<PAGE>
TABLE OF CONTENTS--Cont' d.
Page
Sec. 4.07. Expenses IV-6
Sec. 4.08. Indemnification IV-6
Sec. 4.09. Past Due Payments IV-7
Sec. 4.10. Issuance of Other Obligations IV-7
ARTICLE V
Further Agreements
Sec. 5.01. Covenant to Maintain Corporate Existence . . V-1
Sec. 5.02. Issuer's Covenant to Cooperate . . . . . . . V-1
Sec. 5.03. No Warranty by Issuer . . . . . . . . . . . . V-1
Sec. 5.04. Right of Inspection . . . . . . . . . . . . . V-1
Sec. 5.05. Officers of Issuer Not Liable . . . . . . . . V-2
Sec. 5.06. Reimbursement of Accrued Interest and Ex-
penses . . . . . . . . . . . . . . . . . . V-2
Sec. 5.07. Indemnification with Respect to Government
Obligations . . . . . . . . . . . . . . . . V-2
Sec. 5.08. Annual Reports . . . . . . . . . . . . . . . V-2
Sec. 5.09. Consent to Assignment . . . . . . . . . . . . V-2
Sec. 5.10. No Interest of Issuer in Project . . . . . . V-3
Sec. 5.11. Recording and Filing; Other Instruments . . . V-3
Sec. 5.12. Non-Arbitrage Covenant . . . . . . . . . . . V-3
Sec. 5.13. Provisions Respecting Insurance . . . . . . . V-3
Sec. 5.14. Use of Project . . . . . . . . . . . . . . . V-3
ARTICLE VI
Assignment
Sec. 6.01. Assignment by Corporation VI-1
Sec. 6.02. Assignment by Issuer VI-2
ARTICLE VII
Events of Default and Remedies
Sec. 7.01. Events of Default VII-1
Sec. 7.02. Acceleration; Remedies VII-3
Sec. 7.03. Remedies Not Exclusive VII-3
Sec. 7.04. Attorneys' Fees and Expenses VII-3
Sec. 7.05. Waivers VII-4
ii.
<PAGE>
TABLE OF CONTENTS--Cont'd. ARTICLE VIII
Prepayment of the Loan
Page
Sec. 8.01. Option to Prepay Loan VIII-1
Sec. 8.02. Mandatory Prepayment VIII-1
Sec. 8,03. Purchase of Bonds VIII-1
Sec. 8.04. Relative Position of Loan Agreement and
Trust Indenture VIII-2
ARTICLE IX
Miscellaneous
Sec. 9.01. Termination IX-1
Sec. 9.02. Reference to Bonds Ineffective After Bonds
Paid IX-1
Sec. 9.03. Authorized Issuer Representative IX-1
Sec. 9.04. Authorized Corporation Representative IX-1
Sec. 9.05. Confidential Information IX-1
Sec. 9.06. Notices IX-2
Sec. 9.07. Binding Effect IX-2
Sec. 9.08. If Payment or Performance Date a Legal
Holiday IX-2
Sec. 9.09. Severability IX-3
Sec. 9.10. Amendments, Changes and Modifications IX-3
Sec. 9.11. Execution in Counterparts IX-3
Sec. 9.12. Applicable Law IX-3
Sec. 9.13. No Charge Against Issuer Credit IX-3
Sec. 9.14. Issuer Not Liable IX-3
Sec. 9.15. Loan Agreement Supersedes Prior Agreements IX-4
Sec. 9.16. Delegation of Duties by Issuer IX-4
EXECUTION
Execution by Issuer . . . . . . . . . . . . . . . . . . . . . IX-4
Execution by Corporation . . . . . . . . . . . . . . . . . . IX-4
iii.
<PAGE>
LOAN AGREEMENT
This LOAN AGREEMENT, dated as of November 1, 1982, by and between the
City of Janesville, Wisconsin, a municipal corporation of the State of
Wisconsin (herein referred to as the "Issuer" or "City"), and Simmons
Manufacturing Company, Inc., a corporation organized and existing under the
laws of the State of Delaware and qualified to do business under the laws
of the State of Wisconsin (the "Corporation"),
WITNESSETH:
WHEREAS, Section 66.521, Wisconsin Statutes (the "Act"), has been
enacted by the Legislature of Wisconsin; and
WHEREAS, the Act provides that any incorporated city is authorized and
shall have the power to issue industrial development revenue notes and
bonds to finance all or any part of the costs of the construction,
equipping, re-equipping, acquisition, purchase, installation,
reconstruction, rebuilding, rehabilitation, improving, supplementing,
replacing, maintaining, repairing, enlarging, extending or remodeling of
industrial projects and the improvement of sites therefor and to enter into
a revenue agreement with an eligible participant to provide for the payment
of the principal of and interest on said notes and bonds; and
WHEREAS, pursuant to and in accordance with the provisions of the Act,
and pursuant to the terms and provisions of an Indenture of Trust dated as
of August 1, 1980 (the "Original Indenture") between the Issuer and First
Bank (N.A.) - Midland Milwaukee Division (the "Notes Trustee"), the City
has issued and sold its Industrial Development Revenue Bond Anticipation
Notes, Series A (Simmons Manufacturing Company, Inc. Project), in the
aggregate principal amount of $9,500,000 (the "Notes"), to provide funds to
loan to the Corporation, pursuant to the terms and provisions of a Loan
Agreement, dated as of AuguSt 1, 1980 (the "Original Loan Agreement")
between the Issuer and the Corporation, to pay all or a portion of the cost
of the acquisition of a "Project" within the meaning of the Act for use as
a warehousing and manufacturing facility (hereinafter referred to as the
"Project"), which Project is owned and operated by the Corporation; and
WHEREAS, the Act authorizes the Issuer to issue industrial development
revenue bonds of the Issuer to fund the whole or any part of any revenue
bonds or notes theretofore issued by the City, including any premium
payable with respect thereto and any interest accrued or to accrue thereon,
and the Issuer desires to refund the Notes in order
1
<PAGE>
to extend the period during which the principal of, premium, if any, and
interest on the indebtedness evidenced by the Notes may be paid; and
WHEREAS, pursuant to and in accordance with the provisions of the Act,
by Resolution of its City Council, the Issuer has authorized and undertaken
to issue its Floating Rate Demand Industrial Development Revenue Bonds
(Simmons Manufacturing Company, Inc. Project), Series 1982 (the "Bonds"),
to provide funds to loan to the Corporation to pay the principal of and
premium, if any, and interest on the Notes; and
WHEREAS, the Issuer has undertaken to issue the Bonds and to loan the
proceeds from the sale of the Bonds so as to enable the Corporation to
deposit with the Notes Trustee amounts sufficient to pay the principal of
and premium, if any, and interest on the Notes, and the Corporation agrees
to make loan payments hereunder sufficient to pay the principal of,
premium, if any, and interest on the Bonds and related expenses;
NOW THEREFORE, for and in consideration of the premises and the
respective covenants, agreements and representations hereinafter
contained, the parties hereto agree as follows:
2
<PAGE>
ARTICLE I.
Definitions and Rules of Construction.
Section 1.01. Definitions. In addition to the words and terms
-----------
elsewhere defined in this Loan Agreement, the following words
and terms shall have the following meanings:
"Act" means Section 66.521 of the Wisconsin Statutes, as amended
from time to time.
"Alternate Letter of Credit" means an irrevocable letter of
credit issued in accordance with Section 4.03(b) hereof.
"Authorized Corporation Representative" means each of the persons
at the time designated to act on behalf of the Corporation by written
certificate furnished to the Issuer and the Trustee containing the
specimen signatures of such persons and signed on behalf of the
Corporation by the President or any Vice President of the Corporation.
"Authorized Issuer Representative" means each of the persons at
the time designated to act on behalf of the Issuer by written
certificate furnished to the Corporation and the Trustee containing
the specimen signatures of such persons signed on behalf of the Issuer
by the City Manager.
"Bank" means Chemical Bank as the issuer of the Letter of Credit,
in its capacity as issuer of the Letter of Credit, its successors in
such capacity and their assigns.
"Bond Counsel" means any firm of nationally recognized bond
counsel acceptable to the Issuer and the Corporation.
"Bond Fund" means the fund created by Section 501 of the Trust
Indenture.
"Bonds" means the bonds of the Issuer authorized to be issued
under Section 208 of the Trust Indenture.
"City" means the Issuer.
"City Clerk" means the City Clerk or the Deputy City Clerk of the
Issuer for the time being, or if there is no City Clerk, then any
person designated by the Governing Body, the Constitution of the State
of Wisconsin or the charter of the Issuer to perform the functions of
City Clerk.
"City Manager" means the City Manager or the Assistant City
Manager of the Issuer for the time being, or if there is no City
Manager, then any person designated by the Governing Body, the
Constitution of the State of Wisconsin or the charter of the Issuer to
perform the functions of City Manager.
I-1
<PAGE>
"Code" means the Internal Revenue Code of 1954, as amended.
"Completion Date" means the date of completion of the acquisition and
construction of the Project as that date shall be certified as provided in
Section 3.02 hereof.
"Corporation" means Simmons Manufacturing Company, Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors and assigns and any surviving, resulting or transferee
corporation or other entity.
"Cost" means, without intending thereby to limit or restrict any proper
definiton of such word under the Act, all items of cost which are set forth
in Section 403 of the Trust Indenture.
"Eminent Domain" means the taking pursuant to eminent domain or
condemnation proceedings, or by any settlement or compromise of such
proceedings, or any voluntary conveyance of the Project or any part thereof
during the pendency of, or as a result of a threat of, such proceedings.
"Governing Body" means the City Council of the Issuer as constituted
from time to time or if said Council shall be abolished, then the board,
body or officer succeeding to the principal functions thereof or to whom
the powers of the Issuer shall be given by law.
"Guaranty" means the Guaranty Agreement, of even date herewith, from
Gulf & Western Industries, Inc. to the Trustee, together with any
amendments and supplements thereto permitted by the Trust Indenture.
"Indexing Agent" means the indexing agent appointed in accordance with
Section 926 of the Trust Indenture.
"Issuer" means the City of Janesville, Wisconsin, a municipal
corporation of the State of Wisconsin duly organized and existing under the
Constitution and laws of the State of Wisconsin, and any successor body to
the duties and functions of the Issuer.
"Letter of Credit" means the irrevocable letter of credit issued by the
Bank in favor of the Trustee in accordance with Section 4.03 hereof, and,
upon the issuance and delivery of an Alternate Letter of Credit in
accordance with Section 4.03(b) hereof, "Letter of Credit" shall mean such
Alternate Letter of Credit, and upon the termination of the Letter of
Credit, "Letter of Credit" shall mean any credit facility having terms
substantially the same as those of the Letter of Credit held by the Trustee
in accordance with Section 4.03(c) hereof.
I-2
<PAGE>
"Loan Agreement" means this Loan Agreement, together with any
amendments and supplements hereto permitted by the Trust Indenture.
"Loan Payments" means the payments required to be made by the
Corporation pursuant to Section 4.01 hereof.
"Moody's" means Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its
successors and their assigns, and, if such corporation shall be dissolved
or liquidated or shall no longer perform the functions of a securities
rating agency, "Moody's" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Issuer, with the
approval of the Corporation, by notice to the Corporation and the Trustee.
"Note Fund" means the "Janesville Note Fund - Simmons Manufacturing
Company, Inc. Project" created and established with the Notes Trustee
pursuant to the Original Indenture, and used to pay the principal of and
premium, if any, and interest on the Notes.
"Notes" means the Issuer's Industrial Development Revenue
Bond Anticipation Notes, Series A (Simmons Manufacturing Company,
Inc. Project) issued under the Original Indenture.
"Notes Trustee" means First Bank (N.A.) - Midland Milwaukee
Division, as trustee under the Original Indenture.
"Original Indenture" means the Indenture of Trust dated as of
August 1, 1980, between the Issuer and the Notes Trustee, pursuant to
which the Notes were issued and by which they were secured.
"Original Loan Agreement" means the Loan Agreement dated as of
August 1, 1980, between the Issuer and the Corporation, pursuant to which
the proceeds of the Notes were loaned to the Corporation in order to
finance the cost of the Project.
"Paying Agent" means any Paying Agent under the Trust Indenture.
"Payment of the Bonds" means payment of the principal of and
premium, if any, and interest on all the Bonds in accordance with
their terms, whether through payment at maturity or purchase or
redemption or surrender for cancellation or provision for such payment
in such a manner that the Bonds shall be deemed to have been paid
under the second paragraph of Section 1301 of the Trust Indenture.
I-3
<PAGE>
"Plans and Specifications" means, collectively, the plans and
specifications prepared for the Project as the same may be implemented and
detailed from time to time and as the same may be revised from time to time
prior to the completion of construction of the Project in accordance with
the Original Loan Agreement.
"Project" means the Project of the Corporation described in Exhibit A
to the Original Loan Agreement which has been or is to be acquired,
constructed and installed in the City pursuant to the Plans and
Specifications.
"Redemption Fund" means the fund created By Section 401 of the Trust
Indenture.
"Registrar" means the Registrar under the Trust indenture.
"Reimbursement Agreement" means the Letter of Credit and Reimbursement
Agreement, of even date herewith, between the Corporation and the Bank,
providing for the issuance of the Letter of Credit, and any and all
modifications, alterations, amendments and supplements thereto.
"Remarketing Agent" means the Remarketing Agent appointed under the
Trust Indenture.
"S&P" means Standard & Poor's Corporation, a corporation organized and
existing under the laws of the State of New York, its successors and their
assigns, and if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "S&P" shall
be deemed to refer to any other nationally recognized securities rating
agency designated by the Issuer with the approval of the Corporation, by
notice to the Trustee and the Corporation.
"State" means the State of Wisconsin.
"Trust Indenture" means the Trust Indenture, of even date herewith,
between the Issuer and the Trustee, as the same may be amended or
supplemented in accordance with the terms thereof.
"Trustee" means the bank or trust company at the time serving as
Trustee under the Trust Indenture.
I-4
<PAGE>
Section 1.02. Rules of Construction. (a) Words of the masculine gender
---------------------
shall be deemed and construed to include correlative words of the feminine
and neuter genders.
(b) Unless the context shall otherwise indicate, the
words "Bond", "coupon", "owner", "holder" and "person" shall in-
clude the plural as well as the singular number, "person" shall
mean any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organi-
zation or government or any agency or political subdivision
thereof, and "holder" and "Bondholder" when used herein with re-
spect to Bonds shall mean the holder or registered owner, as the
case may be, of Bonds at the time issued and outstanding under
the Trust Indenture.
(c) Words importing the redemption or calling for redemption of the
Bonds shall not be deemed to refer to or connote the payment of
Bonds at their stated maturity.
(d) The captions or headings in this Loan Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any
provisions or sections of this Loan Agreement.
(e) All references herein to particular articles or sections are
references to articles or sections of this Loan Agreement unless some other
reference is established.
(f) Any inconsistency between the provisions of this Loan Agreement and
the provisions of the Trust Indenture shall be resolved in favor of the
provisions of the Trust Indenture.
I-5
<PAGE>
ARTICLE II.
Representations and Warranties.
Section 2.01. Representations and Warranties of the Issuer.
--------------------------------------------
The Issuer represents and warrants that:
(a) It is a municipal corporation of the State of Wisconsin. Under the
provisions of the Act and the Constitution of the State of Wisconsin, the
Issuer is authorized to enter into, execute and deliver this Loan Agreement
and the Trust Indenture, and to undertake the transactions contemplated by
this Loan Agreement and the Trust indenture, to issue the Bonds and to
carry out its obligations hereunder and under the Trust Indenture. The
Issuer has adopted a resolution on November 29, 1982, authorizing the
execution and delivery of this Loan Agreement and the Trust Indenture and
the issuance of the Bonds.
(b) It will assist in financing the cost of paying the principal of and
premium, if any, and interest on the Notes by loaning to the Corporation
the proceeds of the sale of the Bonds. The Corporation has estimated that
the cost of paying the principal of and premium, if any, and interest on
the Notes will equal or exceed $9,700,000, and on that basis and without
any independent investigation thereof, the Issuer agrees to issue the Bonds
in the aggregate principal amount of $9,700,000.
(c) The Bonds will be issued under the Trust Indenture and will mature
on such dates and bear interest at such rates and will be subject to
redemption at the time and at the redemption prices as set forth in the
Trust Indenture.
(d) It will not assign or pledge the Loan Payments hereunder or any
other amounts derived from the Project or pledged pursuant to this Loan
Agreement or the Trust Indenture other than to secure the Bonds.
(e) To the best of its knowledge, information and belief, the Project
is of the type permitted by the Act, and the Issuer is issuing the Bonds to
accomplish the refunding of the Notes heretofore issued for the purpose of
providing funds to loan to the Corporation to pay the cost of the Project
so as to achieve the public purposes of the Act.
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<PAGE>
(f) Neither the execution or delivery of this Loan Agreement
or the consummation of the transactions contemplated herein, nor
the fulfillment of or compliance with the terms hereof will
conflict with or result in a breach of any of the terms of, or
constitute a default under any ordinance, indenture, mortgage,
deed of trust or other agreement or instrument to which the
Issuer is now a party or by which it is bound.
(g) All necessary authorizations, approvals, consents and
other orders of any Wisconsin governmental authority or agency
for the execution and delivery by the Issuer of this Loan
Agreement have been obtained and are in full force and effect.
Section 2.02. Representations and Warranties of the Corporation. The
---------------------------------------------------
Corporation represents and warrants that:
(a) It is a duly organized and existing corporation and in good
standing under the laws of the State of Delaware and is duly qualified
as a foreign corporation to transact business and is in good standing
under the laws of the State. The Corporation is not in violation of
any provision of its Certificate of Incorporation, as amended, or its
By-laws.
(b) It has the corporate power to enter into this Loan Agreement
and perform its agreements hereunder.
(c) It has duly authorized the execution, delivery and performance
of this Loan Agreement.
(d) Neither the execution or delivery of this Loan Agreement or
the consummation of the transactions contemplated herein, nor the
fulfillment of or compliance with the terms hereof will conflict with
or result in a breach of any of the terms or provisions of, or
constitute a material default under, the Corporation's Certificate of
Incorporation, its By-laws, or any material indenture, mortgage, deed
of trust or other agreement or instrument to which the Corporation is
now a party or by which it is bound.
(e) The Corporation has complete and lawful authority to acquire
and to operate the Project and has received all governmental permits
necessary therefor, required as of this date, and will obtain, if and
when required, all necessary governmental and administrative approvals
and permits required in the future in connection with the construction
and operation of the Project.
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<PAGE>
(f) (i) Ninety percent or more of the proceeds of the Notes (after
deducting amounts used to pay expenses of issuing such Notes) have been
used to pay those items of the Cost of the Project, or portions thereof,
which constitute costs of acquisition or improvement of land or costs of
acquisition, construction, reconstruction or improvement of property of a
character subject to the allowance for depreciation within the meaning of
Section 103(b)(6)(A) of the Code and the Tax Regulations and (ii) ninety
percent or more of the proceeds of the Bonds (after deducting amounts used
to pay expenses of issuing such Bonds) will be used to pay or provide for
the payment of the principal of and premium, if any, and interest on the
Notes.
(g) As of the date of issuance of the Bonds, the sum of (i) the face
amount of all bonds issued under Section 103(b)(6) of the Code, other than
the Bonds and the Notes, theretofore issued and presently outstanding with
respect to facilities located in the City, or with respect to facilities
integrated with or continguous to such facilities, the principal user of
which is or will be the Corporation or one or more related persons (as
defined in Section 103(b)(6)(C) of the Code), (ii) the aggregate amount of
"capital expenditures" (within the meaning of Section 103(b)(6)(D) of the
Code) with regard to such facilities paid or incurred during the period
beginning three years before the date of the issuance of the Notes (and
financed otherwise than out of the proceeds of the Bonds described in
clauses (i) and (iii) of this paragraph (g)), and (iii) the aggregate
authorized face amount of the Bonds, is less than $10,000,000.
(h) It presently intends to operate the Project, or cause the Project
to be operated, as a warehousing and manufacturing facility, or as
otherwise permitted by the Act through the expiration of the term of this
Loan Agreement.
(i) The Project is of the type authorized and permitted by the Act and
the estimated Cost of the Project determined in accordance with generally
accepted accounting principles exceeds $9,500,000. Subsequent to issuance
of the Bonds and the application of the proceeds thereof pursuant to the
provisions of the Trust Indenture, the Corporation shall have sufficient
funds available to deposit with the Notes Trustee the amounts required to
pay the outstanding principal of and premium, if any, and interest on the
Notes.
(j) The Project will be located at all times during the time the loan
hereunder is outstanding within the Issuer's corporate boundaries as in
existence on the date hereof and the Project has been acquired and
constructed by the Corporation as an industrial development facility in
accordance with the provisions of the Act.
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<PAGE>
(k) All necessary authorizations, approvals, consents and other orders
of any governmental authority or agency for the execution and delivery by
the Corporation of this Loan Agreement have been obtained and are in full
force and effect.
(1) Construction of the Project began after February 1980, the date on
which official action was taken by the Issuer with respect to the issuance
of the Notes.
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<PAGE>
ARTICLE III.
Construction of the Project; Issuance of the Bonds.
Section 3.01. Construction of Project. The Corporation has acquired and
-----------------------
constructed, or has caused to be acquired and constructed, the Project
substantially in accordance with the Plans and Specifications therefor.
Section 3.02. Establishment of Completion Date. The Completion Date for
--------------------------------
the Project has been evidenced to the Trustee by a certificate signed by an
Authorized Corporation Representative setting forth the Cost of the Project
and stating that, except for amounts not then due and payable or the
liability for the payment of which is being contested or disputed by the
Corporation, the acquisition and construction of the Project have been
completed substantially in accordance with the Plans and Specifications
therefor and the Cost of the Project has been paid, which certificate is
given without prejudice to any rights against third parties which exist at
the date of such certificate or which may subsequently come into being.
Section 3.03. Agreement to Issue Bonds. The Issuer agrees that it will
------------------------
use its best efforts to issue, sell and deliver to the purchasers thereof
its Bonds for the purpose of paying, with any other available funds
provided by the Corporation, the principal of and premium, if any, and
interest on the Notes. The proceeds of the Bonds (including accrued
interest) shall be delivered to the Trustee for deposit as follows: (a) to
the credit of the Bond Fund, an amount equal to the accrued interest, if
any, on the Bonds paid by the purchasers thereof, and (b) to the credit of
the Redemption Fund, an amount equal to the balance of such proceeds.
Section 3.04. Disbursements from Redemption Fund. The Issuer and the
----------------------------------
Corporation hereby agree that the moneys in the Redemption Fund shall be
applied to the payment of the principal of and premium, if any, and
interest on the Notes pursuant to the provisions of the Original Indenture
in accordance with Article IV of the Trust Indenture and such moneys shall
be invested and reinvested in accordance with Article VI of the Trust
Indenture.
Section 3.05. Establishment of Payment of Notes.
---------------------------------
The payment in full of the principal of and premium, if any, and
interest on the Notes and any additional amounts required to be paid by the
Corporation in connection with the payment of the Notes under the Original
Loan Agreement shall be evidenced to the Trustee by a certificate signed
by the Notes Trustee setting
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<PAGE>
forth the total amount required to be paid by the Corporation and stating
that such amount has been paid.
Section 3.06. Corporation Required to Pay Cost of Refunding. If the
---------------------------------------------
moneys in the Redemption Fund available for the refunding of the Notes
should not be sufficient to pay the principal of and premium, if any, and
interest on the Notes and any additional amounts required to be paid by the
Corporation pursuant to the Original Loan Agreement, the Corporation agrees
to pay all that portion of such costs as may be in excess of the moneys
available therefor in the Redemption Fund. The Issuer does not make any
warranty, either express or implied, that the moneys which will be paid
into the Redemption Fund will be sufficient to pay the Notes. The
Corporation agrees that if, after exhaustion of the moneys in the
Redemption Fund, the Corporation should pay any portion of the
amounts required to pay the Notes, it shall not be entitled to any
reimbursement thereof from the Issuer or from the Trustee and that
it shall not be entitled to any abatement, diminution or postponement of
the payments to be made pursuant to Article IV of this Loan Agreement.
Section 3.07. Disposition of Balance in Redemption Fund. Pursuant to
------------------------------------------
Section 406 of the Trust Indenture, as soon as practicable after, and in
any event within 60 days from the receipt of, the Certificate mentioned in
Section 3.05 hereof, all amounts remaining in the Redemption Fund,
including any unliquidated investments made with money theretofore
deposited in the Redemption Fund, shall, at the written direction of the
Corporation, be paid into the Bond Fund and used by the Trustee for the
redemption of Bonds at the earliest date permitted by the Trust Indenture,
the purchase of Bonds for the purpose of cancellation, the payment of
principal on the Bonds or any other purpose which will not impair the
validity of the Bonds under the Act or the exemption from Federal income
taxation of the interest thereon; provided, however, that if the proceeds
of the Bonds remaining in the Redemption Fund after the Trustee' s receipt
of the Certificate mentioned in Section 3.05 hereof shall exceed 5% of the
principal amount of the Bond issue no such excess shall be transferred to
the Bond Fund unless an opinion of Bond Counsel satisfactory to the Trustee
is obtained stating that such transfer will not adversely affect the
exemption of the interest on the Bonds from Federal income taxation
pursuant to Section 103(a) of the Code. After the Trustee's receipt of the
certificate mentioned in Section 3.05 hereof and until such time as the
proceeds remaining in the Redemption Fund are applied as set forth above,
such proceeds shall not be invested at a yield which exceeds the yield on
the Bonds except to the extent approved in an opinion of Bond Counsel.
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<PAGE>
ARTICLE IV.
Loans by the Issuer to the Corporation; Repayment; Maintenance; Taxes
and Liens; Indemnity.
Section 4.01. Loans by the Issuer; Repayment. Upon the terms and
------------------------------
conditions of this Loan Agreement the Issuer shall loan the Corporation the
proceeds of the sale of the Bonds. The principal amount of such loan shall
be equal to the aggregate principal amount of the Bonds.
The Corporation agrees to repay the loan in installments with respect
to each date on which the principal of and the premium, if any, and the
interest on the Bonds is payable (whether at maturity, upon acceleration,
by redemption or otherwise). On such dates, the Corporation will pay such
additional amounts which, together with other moneys available therefor in
the Bond Fund, will be sufficient to pay:
(a) all interest which will become due and payable on the Bonds on
such date;
(b) the principal amount of Bonds, if any, which will become due
and payable on such date, whether at maturity, upon acceleration, by
redemption or otherwise; and
(c) amounts, if any, required to pay any applicable redemption
premium.
The Corporation will pay the amounts it is required to
pay under this Section directly to the Trustee for deposit in the
Bond Fund before the corresponding amounts are due on the Bonds, and for
the purposes of this Section 4.01, all drawings by the Trustee under the
Letter of Credit shall be deemed to be payment by the Corporation.
From the date of the original issuance of the Bonds to and including
November 15, 1992, the Corporation shall secure the payments hereunder by
the delivery of the Letter of Credit to the Trustee simultaneously with the
original issuance and delivery of the Bonds. The Corporation hereby
authorizes and directs the Trustee to draw moneys under the Letter of
Credit in accordance with the provisions of the Trust Indenture to the
extent necessary to make any payments as provided therein.
The Trustee shall not (except as provided in Section 803 of the Trust
Indenture) use any of the amounts deposited in the Bond Fund pursuant to
this Section for any purpose other than the payment
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<PAGE>
of principal of and premium, if any, and interest on the Bonds payable on
the date with respect to which such amounts were deposited.
Section 4.02. Payments to Remarketing Agent and Trustee.
------------------------------------------
(a) The Corporation shall pay to the Remarketing Agent amounts
equal to the amounts to be paid by the Remarketing Agent pursuant to
Section 920 of the Trust Indenture in respect of the Bonds, such
amounts to be paid by the Corporation to. the Remarketing Agent on the
dates such payments pursuant to Section 920 of the Trust Indenture are
to be made; provided, however, that the obligation of the Corporation
to make any such payment hereunder shall be reduced by the amount of
any moneys available for such payment under clause (i), (ii) or (iii)
of Section 920(a) of the Trust Indenture or clause (i), (ii) or (iii)
of Section 920(b) of the Trust Indenture; and provided, further, that
the obligation of the Corporation to make any payment hereunder shall
be deemed to be satisfied and discharged to the extent of the
corresponding payment made by the Bank under the Letter of Credit.
(b) The Corporation shall pay to the Trustee amounts equal to the
amounts to be paid by the Trustee pursuant to Section 921(a) of the
Trust Indenture in respect of the Bonds, such amounts to be paid by
the Corporation to the Trustee on the dates such payments pursuant to
Section 921 (a) of the Trust Indenture are to be made; provided,
however, that the obligation of the Corporation to make any such
payment hereunder shall be reduced by the amount of moneys available
for such payment under clause (i) or (ii) of Section 921(a) of the
Trust Indenture; and provided, further, that the obligation of the
Corporation to make any payment hereunder shall be deemed to be
satisfied and discharged to the extent of the corresponding payment
made by the Bank under the Letter of Credit.
(c) From the date of the original issuance of the Bonds to and
including November 15, 1992, the Corporation shall provide for the
payment of the amounts to be paid by the Remarketing Agent pursuant
to Section 920 of the Trust Indenture, and by the Trustee pursuant to
Section 921(a) of the Trust Indenture, by the delivery of the Letter
of Credit to the Trustee simultaneously with the original issuance and
delivery of the Bonds. The Corporation hereby authorizes and directs
the Trustee to draw moneys under the Letter of Credit in accordance
with the provision of the Trust Indenture to the extent necessary to
provide moneys payable if and when due under Sections 920 and 921(a)
of the Trust Indenture.
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<PAGE>
Section 4.03. Letter of Credit.
----------------
(a) The Letter of Credit delivered to the Trustee shall be an
irrevocable letter of credit of a commercial bank which (or, if such bank
does not have outstanding senior long-term debt securities rated by either
Moody's or S&P, the parent corporation of which) has outstanding senior
long-term debt securities rated by either Moody's or S&P in either of its
two highest debt rating categories.
The Letter of Credit shall be an obligation of the Bank, which shall
not expire, except as otherwise provided in this Section 4.03, prior to
November 15, 1992, to pay to the Trustee, upon request and in accordance
with the terms thereof, up to (i) an amount equal to the aggregate
principal amount of the Bonds (A) to pay the principal of the Bonds when
due, whether at maturity, upon redemption or acceleration, or otherwise,
(B) to enable the Trustee to pay the portion of the purchase price of Bonds
delivered to it equal to the principal amount of such Bonds or (C) to
enable the Remarketing Agent to pay the portion of the purchase price of
the Bonds delivered to it equal to the principal amount of such Bonds plus
(ii) an amount equal to at least 71 days' interest accrued and unpaid on
all Bonds plus (iii) an amount equal to the discount from par attributable
to any Bonds remarketed by the Remarketing Agent which were purchased
pursuant to the provisions of Section 308(c) of the Trust Indenture,
provided however, that such amount shall not exceed three-tenths of one
percentum (.3%) of the aggregate principal amount of Bonds outstanding.
The Bank's obligation under the Letter of Credit may be reduced to the
extent of any drawing thereunder. The Letter of Credit shall provide,
however, that with respect to a drawing by the Trustee to enable the
Trustee or the Remarketing Agent to pay the portion of the purchase price
of Bonds delivered to it equal to the principal amount of such Bonds, upon
reimbursement by the Corporation to the Bank of the amount of such drawing
and any interest thereon in accordance with the terms of the Reimbursement
Agreement, and provided no event of default under the Reimbursement
Agreement has occurred and is continuing, (i) the Trustee shall be entitled
to again draw under the Letter of Credit to pay principal of the Bonds an
amount equal to the amount that could be drawn under the Letter of Credit
if such drawing in respect of purchase price were disregarded and (ii) the
Trustee shall be entitled to again draw under the Letter of Credit to
enable the Trustee or the
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<PAGE>
Remarketing Agent to pay the portion of the purchase price of Bonds
delivered to it equal to the principal amount of such Bonds, an amount
equal to the amount that could be drawn under the Letter of Credit if such
drawing in respect of purchase price were disregarded. The Letter of
Credit shall provide, with respect to a drawing by the Trustee to pay
interest on the Bonds, including accrued interest on Bonds delivered to it
or the Remarketing Agent for purchase, that upon reimbursement by the
Corporation to the Bank of the amount of such drawing and any interest
thereon in accordance with the terms of the Reimbursement Agreement, and
provided no event of default under the Reimbursement Agreement has occurred
and is continuing, the Trustee shall be entitled to again draw under the
Letter of Credit an amount equal to the amount that could be drawn under
the Letter of Credit if such drawing in respect of interest were
disregarded. The Letter of Credit shall provide, with respect to a drawing
by the Trustee representing the discount from par of the proceeds of any
sale by the Remarketing Agent of Bonds, that upon reimbursement by the
Corporation to the Bank of the amount of such drawing in accordance with
the terms of the Reimbursement Agreement, and provided no event of default
under the Reimbursement Agreement has occurred and is continuing, the
Trustee shall be entitled to again draw under the Letter of Credit an
amount equal to the amount that could be drawn under the Letter of Credit
if such drawing with respect to discount were disregarded. The
Reimbursement Agreement shall require the Bank to give notice to the
Trustee in the event that the Letter of Credit will not be reinstated (in
respect of principal, interest or discount) to an amount which equals at
least the outstanding principal amount of the Bonds or to an amount which
equals at least 71 days' interest accrued and unpaid on the Bonds or to an
amount which equals .3% of the aggregate principal amount of the Bonds then
outstanding. The Letter of Credit shall provide that, if, in accordance
with the terms of the Trust Indenture, the Bonds shall have been declared
to be immediately due and payable pursuant to any provision of the Trust
Indenture, the Trustee shall be entitled to draw on the Letter of Credit to
the extent of the aggregate principal amount of the Bonds, plus an amount
sufficient to pay up to 71 days' interest accrued and unpaid on all Bonds,
plus an amount sufficient to pay the discount from par received by the
Remarketing Agent in remarketing the Bonds, up to but not exceeding three-
tenths of one percentum (.3%) of the aggregate principal amount of Bonds
outstanding, less amounts paid in respect of interest or discount for
which the Letter of Credit shall not have been reinstated.
(b) At any time prior to November 15, 1992, the Corporation may, at its
option, provide for the delivery to the Trustee of
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<PAGE>
an Alternate Letter of Credit. An Alternate Letter of Credit shall be
an irrevocable letter of credit, other than the Letter of Credit
issued by the Bank and delivered to the Trustee concurrently with the
original issuance of the Bonds, issued by a commercial bank, the terms
of which shall in all material respects be the same as the Letter of
Credit. On or prior to the date of the delivery of an Alternate Letter
of Credit to the Trustee, the Corporation shall furnish to the Trustee
(i) an opinion of Bond Counsel stating that the delivery of such
Alternate Letter of Credit to the Trustee is authorized under this
Agreement and complies with the terms hereof and
(ii) written evidence from Moody's, if the Bonds are rated by Moody's,
and S&P, if the Bonds are rated by S&P, in each case to the effect
that such rating agency has reviewed the proposed Alternate Letter of
Credit and that the substitution of the proposed Alternate Letter of
Credit for the Letter of Credit will not, by itself, result in a
reduction of its ratings of the Bonds from those which then prevail.
(c) The Corporation may, at its election, and with the consent of
the Bank, provide for one or more extensions of the Letter of Credit
for any period commencing after November 15, 1992 or may, after such
date, provide another credit facility having terms substantially the
same as those cf the Letter of Credit and one or more extensions
thereof.
Section 4.04. No Set-Off. The obligation of the Corporation to make the
----------
payments required by Section 4.01 shall be absolute and unconditional. The
Corporation will pay without abatement, diminution or deduction (whether
for taxes or otherwise) all such amounts regardless of any cause or
circumstance whatsoever including, without limitation, any defense, set-
off, recoupment or counterclaim which the Corporation may have or assert
against the Issuer, the Remarketing Agent, the Trustee, any holder of a
Bond or coupon or any other person.
Section 4.05. Prepayments. The Corporation may at any time prepay all
-----------
or any part of the amounts it is required to pay under Section 4.01 as
provided in Section 8.01, and the Corporation shall be obligated to prepay
the entire amount payable under Section 4.01 as provided in Section 8.02.
Section 4.06. Covenant to Maintain Project. The Corporation will at its
----------------------------
own expense maintain, preserve and keep the Project with the appurtenances
and every part and parcel thereof, in good repair, working order and
condition and will from time to time make or cause to be made all necessary
and proper repairs, replacements and renewals; provided, however, that the
Corporation will
IV-5
<PAGE>
have no obligation to maintain, preserve, repair, replace or renew any
element or unit of the Project the maintenance, repair, replacement or
renewal of which becomes uneconomic to the Corporation because of damage or
destruction or obsolescence, or change in economic or business conditions,
or change in government standards and regulations, or the termination by
the Corporation of the operation of the production facilities to which the
element or unit of the Project is an adjunct. The Corporation will pay all
costs and expenses of operation of the Project.
The Corporation may also, at its own expense, make from time to time
any additions, modifications or improvements to the project that it may
deem desirable for its business purposes and that do not materially impair
the effective use of the Project.
Additional equipment ahd other facilities (i) which are not described
in Exhibit A of the Original Loan Agreement as part of the Project and are
not financed from the proceeds of the Bonds or (ii) which do not constitute
an integral part of improvements, equipment or other facilities referred to
in clause (i) of this paragraph shall not become part of the Project by
virtue of their location on the site of the Project or their affixation to
a part of the Project or their use in connection with the Project.
The Corporation covenants that as long as it operates the Project it
will maintain and operate the Project as a "Project" within the meaning of
the Act as in effect on the date hereof.
Section 4.07. Expenses. The Corporation will pay, with respect to this
--------
Loan Agreement, the Trust Indenture and any transaction or event
contemplated hereby or thereby or in connection with the issuance of the
Bonds, all reasonable fees and expenses of the Issuer, the Trustee, any
Paying Agent, the Registrar, the Remarketing Agent, the Indexing Agent and
any rating agency, including the reasonable compensation and the expenses
and disbursements of their counsel.
Section 4.08. Indemnification. The Corporation releases the Issuer, the
---------------
Trustee and the Remarketing Agent from, agrees that the Issuer, the
Trustee and the Remarketing Agent shall not be liable for, and agrees to
indemnify and hold the Issuer, the Trustee and the Remarketing Agent free
and harmless from, any liability for any loss or damage to property or any
injury to or death of any Person that may be occasioned by any cause
whatsoever pertaining to the Project, except in any case as a result of the
negligence or bad faith of the Issuer, the Trustee or the Remarketing
Agent.
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<PAGE>
The Corporation will indemnify and hold the issuer and its officials, the
Trustee, the Remarketing Agent and the Indexing Agent free and harmless
from any loss, claim, damage, tax, penalty, liability (including but not
limited to liability for any patent infringement), disbursement, litigation
expenses, attorneys' fees and expenses or court costs arising out of, or in
any way relating to, the execution or performance of this Loan Agreement,
the issuance or sale of the Bonds, actions taken under the Trust Indenture
or any other cause whatsoever pertaining to the Project or to the refunding
of the Notes, except in any case as a result of the negligence, bad faith,
malfeasance or nonfeasance of the Issuer, such officials, the Trustee, the
Remarketing Agent or the Indexing Agent.
If any claim is made which in the opinion of the Corporation might
result in the Corporation becoming liable to indemnify a party hereunder,
the Corporation may at its option and expense undertake full responsibility
for the defense of such claim with counsel of its choosing and may contest
or settle such claim on such terms as it may elect in its sole discretion.
It shall be a condition to a party's right to indemnification hereunder
that, upon request by the Corporation, such party shall have delivered to
the Corporation such reasonable consents, powers of attorney, assignments
and other documents, and shall have taken such other steps, as in the
opinion of counsel for the Corporation may be necessary or desirable to
enable the Corporation to conduct such defense or to effect such
settlement. This Section shall survive the term of this Loan Agreement
with respect to the Issuer.
Section 4.09. Past Due Payments. In the event the Corporation shall
-----------------
fail to pay amounts required to be paid under Section 4.01, any such
amounts attributable to principal of the Bonds shall continue to bear
interest from the maturity date or redemption date on the Bonds to which
such defaulted amounts relate at the rate of interest on such Bonds.
Section 4.10. Issuance of Other Obligations. The Issuer and the
-----------------------------
Corporation expressly reserve the right, at their discretion, to enter
into, to the extent permitted by law, an agreement or agreements other than
this Loan Agreement with respect to the issuance by the Issuer, under an
indenture or indentures other than the Trust Indenture, of obligations to
provide additional funds to pay the Cost of construction of the Project or
to refund all or any Principal amount of the Bonds, or any combination
thereof.
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<PAGE>
ARTICLE V.
Further Agreements.
Section 5.01. Covenant to Maintain Corporate Existence. The
----------------------------------------
Corporation covenants that so long as any Bonds are outstanding it will not
dispose of all or substantially all its assets and will not consolidate
with or merge into another corporation; provided, however, that the
Corporation may consolidate with or merge into another corporation, or
transfer to another corporation all or substantially all its assets, if the
successor or transferee corporation irrevocably and unconditionally assumes
in writing all the obligations of the Corporation here in and such
successor or transferee corporation is organized or qualified to do
business under the laws of the State of Wisconsin.
Section 5.02. Issuer's Covenant to Cooperate. In the event it may be
------------------------------
necessary, for the proper performance of this Loan Agreement, on the part
of the Issuer or the Corporation, that any application or applications for
any permit or license to do or to perform certain things be made to any
governmental or other agency by the Corporation or the Issuer, the
Corporation and the Issuer each agree to cooperate in such matters;
provided, however, that the Issuer and the Corporation are bound to the
agreement of this Section 5.02 only in the case of reasonable requests for
assistance.
Section 5.03. No Warranty by Issuer. The Issuer makes no warranty,
---------------------
either express or implied, as to the condition of the Project or that it
will be suitable for the Corporation's purpose or needs or that the
proceeds of the Bonds will be sufficient to pay the principal of and
premium, if any, and interest on the Notes or to reimburse the Corporation
for costs incurred in connection therewith. The Issuer further makes no
representation or warranty, either express or implied, as to the financial
condition of the Corporation or its ability to make installment payments
under this Loan Agreement sufficient to pay the principal of and interest
on the Bonds as and when the same shall become due.
Section 5.04. Right of Inspection. The Corporation agrees that the
-------------------
Issuer, the Trustee and their duly authorized agents shall have the right
at all reasonable times to enter upon and examine and inspect the Project,
subject to the provisions of Section 4.06 hereof, to determine whether the
Project continues to constitute a "Project" within the meaning of the Act.
The Issuer and Trustee shall also be permitted, at all reasonable times, to
examine the Plans and Specifications and the other books and records of the
Corporation with respect to the Project in connection with the transactions
contemplated by this Loan Agreement and the Trust
V-1
<PAGE>
Indenture. The aforesaid rights of examination and inspection shall be
exercised only upon such reasonable and necessary terms and conditions as
the Corporation shall prescribe, which conditions shall be deemed to
include, but not be limited to, those necessary to protect the
Corporation's trade secrets and proprietary rights.
Section 5.05. Officers of Issuer Not Liable. All covenants,
-----------------------------
stipulations, promises, agreements and obligations of the Issuer contained
herein shall be deemed to be covenants, stipulations, promises, agreements
and obligations of the Issuer and not of any member of the Governing Body
of the Issuer or any officer, official, agent, servant or employee of the
Issuer in his individual capacity, and no recourse shall be had for the
payment of the principal of or premium, if any, or interest on the Bonds or
for any claim based thereon or hereunder against any member of the
Governing Body of the Issuer or any officer, official, agent, servant or
employee of the Issuer or any natural person executing the Bonds. Neither
any member of the Governing Body of the Issuer nor any person executing the
Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance of the Bonds.
Section 5.06. Reimbursement of Accrued Interest and Expenses. If the
----------------------------------------------
Trustee shall use moneys in the Bond Fund to pay the purchase price of the
Bonds pursuant to the Trust Indenture, the Corporation shall, upon demand,
pay to the Trustee for deposit in the Bond Fund the amount of accrued
interest on the Bonds so purchased and, within 30 days of any such
purchase, all expenses incurred by the Trustee in connection with such
purchase.
Section 5.07. Indemnification with Respect to Government Obligations.
------------------------------------------------------
If the Corporation shall elect to deposit Government Obligations with the
Trustee pursuant to Section 1301 of the Trust Indenture, the Corporation
shall pay and shall indemnify and hold harmless the Trustee, the Issuer and
each holder of the Bonds against any tax, fee or other charge imposed upon
or assessed against such Government Obligations or the principal thereof,
or premium, if any, and interest received thereon.
Section 5.08. Annual Reports. The Corporation shall furnish a copy of
--------------
Gulf & Western Industries, Inc.'s annual report to the Trustee and to the
Issuer within 120 days following the completion of each fiscal year of Gulf
& Western Industries, Inc.
Section 5.09. Consent to Assignment. The Corporation consents to the
---------------------
assignment made by the Issuer of certain of its rights under this Loan
Agreeement to the Trustee in the Trust Indenture, and agrees to perform its
duties under sections 902, 905, 917 and 927 of the Indenture.
V-2
<PAGE>
Section 5.10. No Interest of Issuer in Project. The Issuer shall not
--------------------------------
have any rights to or interest in the Project, which shall be the sole and
exclusive property of the Corporation.
Section 5.11. Recording and Filing; Other Instruments.
---------------------------------------
(a) The Corporation shall, at its own cost, file and re-file and record
and re-record or cause to be filed and re-filed and recorded and re-
recorded all instruments required to be filed and re-filed and recorded or
re-recorded to the effect that all financing statements, continuation
statements, notices and other instruments required by applicable law have
been recorded or filed or re-recorded or re-filed in such manner and in
such places required by law in order fully to preserve and protect the
rights of the Trustee in the assignment of certain rights of the Issuer
under this Loan Agreement to the Trustee, as against creditors of, or
purchasers for value from, the Issuer or the Corporation.
(b) The Trustee and the Issuer shall execute and deliver all
instruments and shall furnish all information and evidence reasonably
deemed necessary or advisable by the Corporation to enable it to satisfy
the requirements of subsection (a) of this Section.
Section 5.12. Non-Arbitrage Covenant. Neither the Corporation nor the
----------------------
Issuer shall take any action, and the Corporation covenants that it will
not request the Trustee to take any action or make any investment or use of
the proceeds of the Bonds, which would cause the Bonds to be "arbitrage
bonds" within the meaning of Section 103(c) of the Code and the Tax
Regulations as the same may be applicable to the Bonds at the time of such
action, investment or use.
Section 5.13. Provisions Respecting Insurance. The Corporation
---------------------------------
covenants that, throughout the term of this Loan Agreement, it shall keep
the Project insured at all times against such risks and for such amounts as
are customarily insured against by businesses of like size and type (other
than business interruption insurance), and will pay all premiums due in
respect thereto.
Section 5.14. Use of Project. The Corporation will use the Project only
--------------
in furtherance of lawful corporate purposes of the Corporation.
V-3
<PAGE>
ARTICLE VI.
Assignment.
Section 6.01. Assignment by Corporation. The Project may be sold,
------------------------
leased or otherwise transferred as a whole or in part, and any proceeds
thereof retained by the Corporation without the necessity of obtaining the
consent of the Issuer, and this Loan Agreement may be assigned in whole or
in part, subject, however, to the following conditions:
(a) no sale, assignment or lease shall relieve the Corporation
from the obligation to make the payments required by Section 4.01
hereof;
(b) the Corporation shall, not more than sixty (60) nor less than
thirty (30) days prior to the effective date of any such sale,
assignment or lease, furnish or cause to be furnished to the Issuer
and to the Trustee a true and complete copy of each such contract of
sale, assignment or lease and assumption of obligations;
(c) the assignee shall, in a certificate delivered to the Issuer
and the Trustee, which certificate shall be in a form reasonably
satisfactory to the Issuer and the Trustee, expressly assume, and
agree to pay and to perform, all of the obligations of the Corporation
under this Loan Agreement which shall have been assigned to it except
the obligation to make the payments required by Section 4.01 hereof;
provided that the Corporation shall remain primarily liable for the
performance and observance of the other agreements on its part herein
provided to be performed and observed by the Corporation to the same
extent as though no assignment had been made;
(d) the assignee shall deliver to the Issuer and the Trustee a
certificate executed by its chief financial officer stating that none
of the obligations, covenants and performances under this Loan
Agreement assumed by it will conflict with, or constitute on the part
of such assignee a breach of or default under, any indenture,
mortgage, agreement or other instrument to which such assignee is a
party or by which it is bound, or any existing law, rule, regulation,
judgment, order or decree to which such assignee is subject; and
(e) the assignee shall agree to operate the Project through the
expiration of the term of this Loan Agreement and subsequent to such
assignment the use of the Project shall be consistent with the Act.
VI-1
<PAGE>
Section 6.02. Assignment by Issuer. By the provisions of
----------------------
the Trust Indenture, the Issuer will assign its rights under and interest
in this Loan Agreement (except its rights to receive notices, reports and
other statements given both to the Issuer and the Trustee, its rights under
Sections 4.07, 4.08, 5.07 and 7.04 hereof to payment of certain costs and
expenses and to indemnification, and to individual and corporate rights to
exemption from liability under Sections 9.13 and 9.14 hereof) and will
pledge and assign any payments, receipts and revenues receivable by it
(except as aforesaid) under or pursuant to this Loan Agreement and income
earned by the investment of funds held under the Trust Indenture, to the
Trustee as security for payment of the principal of and premium, if any,
and interest on the Bonds. Except as provided in this Section 6.02, the
Issuer will not sell, assign, transfer, convey or otherwise dispose of its
interest in this Loan Agreement or the payments, receipts and revenues of
the Issuer derived hereunder.
VI-2
<PAGE>
ARTICLE VII.
Events of Default and Remedies.
Section 7.01. Events of Default. The following shall be "Events of
-------------------
Default" under this Loan Agreement, and the term "Events of Default" shall
mean, whenever used with reference to this Loan Agreement, any one or more
of the following occurrences:
(a) failure by the Corporation to pay the amounts required to be
paid with respect to principal of or premium, if any, or interest on
the Bonds when the same shall become due and payable at maturity, upon
redemption, by acceleration or otherwise; or
(b) failure by the Corporation to pay when due any payment
required to be made under this Loan Agreement other than payments
under Section 4.01 hereof, which failure shall continue for a period
of thirty (30) days after written notice, specifying such failure and
requesting that it be remedied, is given to the Corporation by the
Issuer or the Trustee, unless the Issuer shall agree in writing to an
extension of such time prior to its expiration; or
(c) failure by the Corporation to observe and perform any
covenant, condition or agreement on its part to be observed or
performed, other than as referred to in subsections (a) and (b) of
this Section, which failure shall continue for a period of ninety (90)
days after written notice, specifying such failure and requesting that
it be remedied, is given to the Corporation by the Issuer or the
Trustee, unless the Issuer shall agree in writing to an extension of
such time prior to its expiration; provided, however, that if such
failure cannot be corrected within such ninety (90) day period, it
shall not constitute an Event of Default if corrective action is
instituted by the Corporation within such period and is being
diligently pursued; or
(d) an event of default under the Guaranty; or
(e) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Corporation in an
involuntary case under federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
the Corporation or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or
<PAGE>
(f) the commencement by the Corporation of a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or any other applicable federal or state bankruptcy, insolvency or
other similar law, or the consent by it to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
custodian, sequestrator (or other similar official) of the Corporation
or for any substantial part of its property, or the making by it of
any assignment for the benefit of creditors, or the taking of
corporate action by the Corporation in furtherance of any of the fore-
going.
The foregoing provisions of subsections (b) and (c) of this Section are
subject to the following limitations: if by reason of Force Majeure, the
Corporation is unable in whole or in part to carry out any of its
agreements herein contained, failure of the Corporation to carry out
any such agreements other than the obligations on the part of the
Corporation contained in Sections 4.01 and 5.01 hereof, shall not be
deemed an Event of Default during the continuance of such inability,
including a reasonable time for the removal of the effect thereof.
The term "Force Majeure" shall mean, without limitation, the following:
(a) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind
of the government of the United States, the State or the City or any
of their departments, agencies, political subdivisions or officials,
or any civil or military authority; war; insurrections; civil
disturbances; riots; epidemics; landslides; lightning; earthquakes;
fires; hurricanes; storms; droughts; floods; washouts; arrests;
restraint of government and people; explosions; breakage, malfunction
or accident to facilities, machinery, transmission pipes or canals;
partial or entire failure of utilities; shortages of labor, materials,
supplies or transportation; or
(b) any cause, circumstance or event not reasonably within the
control of the Corporation.
The Corporation agrees, however, to use its best efforts to remedy with
all reasonable dispatch Force Majeure preventing it from carrying out its
agreements; provided, that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the
Corporation, and the Corporation shall not be required to make settlement
of strikes, lockouts and other industrial disturbances by acceding to the
VII-2
<PAGE>
demands of the opposing party or parties when such course is in the
judgment of the Corporation unfavorable to the Corporation.
Section 7.02. Acceleration; Remedies. Whenever any Event of Default
----------------------
specified in Sections 7.01(a), (b) or (e) hereof shall have happened and be
continuing, any one or more of the following remedial steps may be taken,
provided that written notice of the default has been given to the
Corporation by the Issuer or the Trustee and the default has not
theretofore been cured and provided further that no remedial steps shall be
taken by the Issuer the effect of which would be to entitle the Issuer to
funds for the payment of principal of and interest on Bonds which have not
yet matured or otherwise become due unless such principal and interest
shall have been declared due and payable in accordance with the Trust
Indenture and such declaration shall not have been rescinded.
(a) The Issuer may at its option declare all unpaid amounts
payable under Section 4.01 hereof to be immediately due and payable,
whereupon the same shall become immediately due and payable.
(b) The Issuer may take any action at law or in equity to collect
the payments then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of
the Corporation under this Loan Agreement.
Any amounts collected pursuant to action taken under this Section shall
be applied in accordance with the Trust Indenture.
Section 7.03. Remedies Not Exclusive. No remedy conferred upon or
----------------------
reserved to the Issuer in connection with the loan to the Corporation
pursuant to this Loan Agreement is intended to be exclusive of any other
available remedy or remedies, but each and every remedy shall be cumulative
and shall be in addition to every other remedy either given under this Loan
Agreement or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any
default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to
time and as often as it may be deemed expedient. In order to entitle the
Issuer to exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be herein
expressly required.
Section 7.04. Attorneys' Fees and Expenses. If an Event of Default
----------------------------
shall occur and the Issuer or the Trustee shall employ attorneys or incur
other expenses for the collection
VII -3
<PAGE>
of payments due hereunder or for the enforcement of performance or
observance of any obligation or agreement on the part of the Corporation
contained herein, the Corporation will on demand therefor reimburse the
reasonable fees of such attorneys and such other expenses so incurred.
Section 7.05. Waivers. In the event that any agreement contained herein
-------
shall be breached by either party and such breach shall thereafter be
waived by the other party, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach
hereunder. In view of the assignment of the Issuer's rights under and
interest in this Loan Agreement to the Trustee by the provisions of the
Trust Indenture, the Issuer shall have no power to waive any default
hereunder by the Corporation without the consent of the Trustee to such
waiver. Notwithstanding the foregoing, if, after the maturity of the
outstanding Bonds shall have been accelerated by the Trustee upon
occurrence of an event of default under the Trust Indenture, all arrears of
interest on the outstanding Bonds and interest on overdue installments of
principal, premium, if any, and (to the extent permitted by law)
interest at a rate per annum which is equal to the highest rate per
annum borne by the Bonds and the principal and premium (if any) on all
Bonds then outstanding which have become due and payable otherwise
than by acceleration, and all other sums payable under the Trust Indenture,
except the principal of and the interest on such Bonds which by such
acceleration shall have become due and payable, shall have been paid,
all other things shall have been performed in respect of which there was
a default, there shall have been paid the reasonable fees and expenses of
the Trustee and of the holders of such Bonds, including reasonable
attorneys' fees paid or incurred and such event of default under the Trust
Indenture shall be waived in accordance with the provisions of Section 814
of the Trust Indenture with the consequence that under such Section such
acceleration is rescinded, then the Corporation's default hereunder shall
be waived without further action by the Trustee or the Issuer.
VII-4
<PAGE>
ARTICLE VIII.
Prepayment of the Loan.
Section 8.01. Option to Prepay Loan. (a) The Corporation shall nave,
---------------------
and is hereby granted, an option to prepay in full the amounts payable in
respect of the Bonds under Section 4.01 hereof at any time by taking, or
causing the Issuer to take, the actions required for Payment of the Bonds.
(b) The Corporation shall have, and is hereby granted, the option to
prepay all or any portion of the amounts payable under Section 4.01 hereof
at any time by taking, or causing the Issuer to take, the actions required
(i) for Payment of the Bonds or (ii) to effect a partial redemption of the
Bonds.
(c) To exercise an option granted in subsection (a) or (b) of this
Section, the Corporation shall give written notice to the Issuer and the
Trustee which shall specify therein (i) the date of such prepayment, which
shall not be less than forty-five (45) days from the date the notice is
mailed, (ii) the amount to be prepaid and (iii) if Bonds are to be redeemed
pursuant to the Trust Indenture, (A) the date of redemption, (B) the
principal amount of the Bonds to be redeemed, and (C) the applicable
redemption provision of the Trust Indenture.
Section 8.02. Mandatory Prepayment. The Corporation shall be obligated,
--------------------
and agrees, to prepay the entire amount, or such portion as may be
required, of the amount payable under Section 4.01 whenever the Issuer is
required to take actions for Payment of the bonds.
Section 8.03. Purchase of Bonds. An Authorized Corporation
-----------------
Representative may at any time, and from time to time, direct the Trustee
by written notice to apply any moneys remaining in the Bond Fund after
payment of the principal of and premium, if any, and interest on all the
Bonds then due, together with any additional moneys furnished to the
Trustee for this purpose, to the payment of the purchase price of Bonds. In
addition, the Corporation may at any time, and from time to time, deposit
moneys with the Remarketing Agent or to the Bond Fund, accompanied by a
notice directing such moneys to be applied to the purchase of Bonds
delivered pursuant to Section 308 of the Trust Indenture, which Bonds
shall, at the direction of the Corporation, be delivered in accordance with
Section 922 of the Trust Indenture.
VIII-1
<PAGE>
Section 8.04. Relative Position of Loan Agreement and
---------------------------------------
Trust Indenture. The rights and the obligations of the Corporation in this
---------------
Article VIII shall be and remain prior and superior to the Trust Indenture
and may be exercised or shall be fulfilled, as the case may be, whether or
not the Corporation is in default hereunder, provided that such default
will not result in non fulfillment of any condition to the exercise of any
such right or obligation.
VIII-2
<PAGE>
ARTICLE IX.
Miscellaneous.
Section 9.01. Termination. Except as otherwise specifically provided in
-----------
Section 4.08 hereof, this Loan Agreement shall terminate upon (i) Payment
of the Bonds, and (ii) payment or satisfaction of all other obligations
incurred by the Issuer or the Corporation under this Loan Agreement,
including (without limitation) interest, premiums and other charges, if
any, thereon. Upon such termination, any amounts remaining in the Bond Fund
and any other fund established under the Trust Indenture not needed for
payment of the aforesaid items shall belong to and be paid to the
Corporation by the Trustee in accordance with the provisions of the Trust
Indenture.
Section 9.02. Reference to Bonds Ineffective After Bonds Paid. Upon
-----------------------------------------------
Payment of the Bonds, including all fees and charges of the Trustee, all
references in this Loan Agreement to the Bonds and the Trustee shall be
ineffective and the Trustee, the Issuer and the holders of any of the Bonds
shall not thereafter have any rights hereunder, excepting those that shall
have theretofore vested.
Section 9.03. Authorized Issuer Representative. Whenever under the
--------------------------------
provisions of this Loan Agreement the approval of the Issuer is required or
the Issuer is required to take some action at the request of the
Corporation, such approval shall be made or such action shall be taken by
an Authorized Issuer Representative; and the Corporation and the Trustee
shall be authorized to act on any such approval or action.
Section 9.04. Authorized Corporation Representative. Whenever under the
-------------------------------------
provisions of this Loan Agreement the approval of the Corporation is
required or the Corporation is required to take some action at the request
of the Issuer, such approval shall be made or such action shall be taken by
an Authorized Corporation Representative; and the Issuer and the Trustee
shall be authorized to act on any such approval or action.
Section 9.05. Confidential Information. The Corporation shall not be
------------------------
required to disclose, or to permit the Issuer, the Trustee or others to
acquire access to, any trade secrets of the Corporation or any other
processes, techniques or information deemed by the Corporation to be
proprietary or confidential.
IX-1
<PAGE>
Section 9.06. Notices. All notices, certificates, requests or other
-------
communications between the Issuer, the Corporation and the Trustee
required to be given hereunder or under the Trust Indenture shall be
sufficiently given and shall be deemed given when mailed by registered
mail, postage prepaid, addressed as follows:
If to the Issuer: City of Janesville
18 North Jackson Street
Janesville, Wisconsin 53545
Attention: City Manager
If to the Corporation: Simmons Manufacturing Company, Inc.
1809 Adel Street
Janesville, Wisconsin 53545
Attention: Operations Manager
with a copy to: Gulf & Western Industries, Inc.
1 Gulf & Western Plaza
New York, New York 10023
Attention: Senior Vice President
and Treasurer
If to the Trustee: Continental Illinois National
Bank and Trust Company of Chicago
Corporate Trust Department
30 North Lasalle Street
Chicago, Illinois 60693
Attention: Corporate Trust Department
A duplicate copy of each notice, certificate, request or other com-
munication given hereunder to the Issuer, the Corporation or the Trustee
shall also be given to each of the others. The Corporation, the Issuer and
the Trustee may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates, requests or
other communications shall be sent.
Section 9.07. Binding Effect. This Loan Agreement shall inure to the
--------------
benefit of and shall be binding upon the Issuer, the Corporation and their
respective successors and assigns, subject, however, to the provisions
contained in Sections 5.01 and 6.01.
Section 9.08. If Payment or Performance Date a Legal Holiday. If the
----------------------------------------------
date for making payment, or the last date for Performance of any act or the
exercising of any right, as provided in this Loan Agreement, shall be a
legal holiday or a day on which banking institutions in the State of
Illinois are authorized by law to remain closed such payment may be made
IX -2
<PAGE>
or act performed or right exercised on the next succeeding day not a legal
holiday or a day on which such banking institutions are authorized by law
to remain closed, with the same force and effect as if done on the nominal
date provided in this Loan Agreement, and no interest shall accrue for the
period after such nominal date.
Section 9.09. Severability. In the event any provision
------------
of this Loan Agreement shall be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
Section 9.10. Amendments, Changes and Modifications. Subsequent to the
-------------------------------------
issuance of the Bonds and prior to Payment of the Bonds, this Loan
Agreement may not be amended, changed, modified, altered or terminated
except in accordance with the Trust Indenture.
Section 9.11. Execution in Counterparts. This Loan Agreement may be
-------------------------
executed in several counterparts, each of which shall be an original and
all or which shall constitute but one and the same instrument.
Section 9.12. Applicable Law. This Loan Agreement shall be governed by
--------------
and construed in accordance with the laws of the State, except that the
rights, limitations of rights, immunities, duties and obligations of the
Trustee shall be governed by and construed in accordance with the laws of
the State of Illinois.
Section 9.13. No Charge Against Issuer Credit. No provision hereof
-------------------------------
shall be construed to impose a charge against the general credit of the
Issuer or shall impose any personal or pecuniary liability upon any
director, official or employee of the Issuer.
Section 9.14. Issuer Not Liable. Notwithstanding any other provision of
-----------------
this Loan Agreement (a) the Issuer shall not be liable to the Corporation,
the Trustee, any holder of any of the Bonds, or any other person for any
failure of the Issuer to take action under this Loan Agreement unless the
Issuer (i) is requested in writing by an appropriate person to take such
action and (ii) is assured of payment of or reimbursement for any expenses
in such action, and (b) except with respect to any action for specific
performance or any action in the nature of a prohibitory or mandatory
injunction, neither the Issuer nor any officer, official, employee or agent
of the Issuer shall be liable to the Corporation, the Trustee, any holder
or owner of any of the Bonds, or any other person for any action taken by
it or by its officers, servants, agents or employees, or for any failure to
take action under this Loan Agreement or the Trust Indenture. In acting
under this Loan Agreement, or in refraining from acting under this Loan
Agreement, the Issuer may conclusively rely on the advice of its legal
counsel.
IX-3
<PAGE>
Section 9. 15. Loan Agreement Supersedes Prior Agreements. Upon payment
------------------------------------------
of the principal of and premium, if any, and interest on the Notes,
together with any expenses relating to the redemption of such Notes and any
other amounts which are required to be paid by the Corporation under the
terms of the Original Loan Agreement, this Loan Agreement shall supersede
any other prior agreements or understandings, written or oral, between the
parties with respect to the Project.
Section 9.16. Delegation of Duties by Issuer. It is agreed that under
--------------------------------
the terms of this Loan Agreement and also under the terms of the Trust
Indenture the Issuer has delegated and assigned certain of its duties
hereunder to the Corporation and to the Trustee. The fact of such
delegation shall be deemed a sufficient compliance by the Issuer to satisfy
the duties so delegated and the Issuer shall not be liable in any way by
reason of acts done or omitted by the Corporation, the Authorized
Corporation Representative or the Trustee. The Issuer shall have the right
at all times to act in reliance upon the authorization, representation or
certification of the Authorized Cot-potation Representative or the Trustee.
IN WITNESS WHEREOF, the Issuer and the Corporation have caused this
Loan Agreement to be executed in their respective legal names and their
respective corporate seals to be hereunto affixed, and the signatures of
duly authorized persons to be attested, all as of the date first above
written.
CITY OF JANESVILLE, WISCONSIN
[SEAL]
By: /s/
----------------------------------
City Manager
Attest:
/s/
-------------------------------
City Clerk
SIMMONS MANUFACTURING COMPANY, INC.
[SEAL]
By: /s/
-----------------------------------
Vice President
Attest:
/s/
------------------------
Secretary
<PAGE>
EXHIBIT A
DESCRIPTION OF THE PROJECT
--------------------------
I. Project Site
Located at 1809 Adel Street, Janesville, Wisconsin.
II. Building
Approximately 284,000 square foot manufacturing facility located on
the Project Site (formerly known as the Hough Manufacturing Company
Plant).
III. Machinery and Equipment
1. Pocket Machines 7. BWC Radius
2. United Border with Tacker 8. Wells Single End Coiler:
3. Slitter 9. Tempering Oven
4. Scroll (Cash Twin) 10. Q/S Tufting
5. Pathe (84" wide) 11. Conveyors
6. K/S Tufting 12. Fork Lifts
A-1
Exhibit 10.48
DOWN PRODUCTS TRADEMARK LICENSE AGREEMENT
-----------------------------------------
THIS TRADEMARK LICENSE AGREEMENT ("Agreement") is made and entered
into as of the 4th day of January, 1991, by and between SIMMONS COMPANY, a
Delaware corporation having its principal offices at 6 Executive Park Drive,
Atlanta, Georgia 30329 (hereinafter the "Licensor"), and LOUISVILLE BEDDING
CO., a Delaware corporation, having its principal offices at 10400 Bunsen
Way, Louisville, Kentucky 40299 ("Licensee").
RECITALS:
--------
A. Licensor and Licensee entered into an Amended and Restated
Trademark License Agreement dated November 28, 1990 (the "Non-Down
Agreement") under which Licensor granted Licensee a license to use certain
trademarks in connection with certain bedding accessories, excluding,
however, down products.
B. Licensor and Licensee wish to enter into a license agreement
covering certain down products in accordance with the terms and conditions
hereinafter set forth.
C. Licensor has the sole and exclusive right to the use of the
marks BEAUTYREST and BEAUTY SLEEP, as more fully described in Exhibit A
hereto in connection with certain Products (as hereinafter defined)
(hereinafter designated as the "Trademarks") in the fifty (50) United
States and the District of Columbia (hereinafter designated as the
"Territory") and the right to grant licenses to others for the use of the
Trademarks. For purposes of this Agreement, the term "Products" shall
include comforters, mattress covers, and standard bed pillows designed and
used for sleeping (which shall exclude without limitation, decorative and
health pillows); provided, however, that notwithstanding the foregoing, the
-------- -------
term "Products" shall include only products which may be designated as
containing filling material made of "Down". For purposes of this Agreement,
the term "Down" shall have the meaning set forth in Guides 1 and 6 of The
Federal Trade Commission "Guides For The Feather And Down Products
Industry" promulgated October 29, 1971, a copy of which is attached hereto
as Exhibit B.
D. Licensee wishes to manufacture, market, distribute and sell
under the Trademarks the Products in the Territory.
E. Licensor is willing to grant Licensee a license to manufacture,
market, distribute and sell the Products under the Trademarks within the
United States under the terms and conditions of this Agreement.
<PAGE>
AGREEMENT:
---------
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of License; Extent of License.
------------------------------------
(a) Grant of License. Subject to the rights of third parties, if
----------------
any, as set forth in Schedule 1 and pursuant to the terms of this
Agreement, Licensee is hereby granted an exclusive license (the "License"),
without the right to sublicense, for the use of the Trademarks on the
Products in connection with the manufacture, sale and distribution of the
Products by Licensee in the Territory. Licensee shall not use the
Trademarks in connection with any item other than the Products. Licensee
will limit its manufacture, sales and distribution of Products to the
Territory and agrees not to sell the Products to anyone it has reason to
believe is purchasing the Products for export outside thereof.
Notwithstanding anything in the foregoing to the contrary, Licensee shall
be entitled to subcontract others to manufacture the Products to be sold by
Licensee under the Trademarks.
(b) Extent of License. Subject to the rights of third parties,
------------------
if any, as set forth in Schedule 1, Licensor shall not, nor shall it
license another to, manufacture, market, distribute or sell any of the
Products under the Trademarks within the Territory during the Term (as
hereinafter defined). Licensor, however, retains the right to manufacture,
distribute and sell, or license others to manufacture, distribute and sell,
1) items other than the Products under the Trademarks within or without the
Territory or 2) the Products under the Trademarks outside of the Territory.
2. Term. This Agreement shall commence on January 4, 1991 and
----
shall expire on December 31, 1995, unless sooner terminated as provided in
paragraphs 6 or 9 of this Agreement (the "Term").
3. Maintenance of Product Quality.
-------------------------------
(a) Standards. Licensee shall manufacture, distribute and sell
---------
the Products under the Trademarks in accordance with quality standards,
specifications, directions and processes set forth by Licensee from time to
time and reasonably acceptable to Licensor (the "Standards").
Notwithstanding the foregoing, the trademark "BEAUTYREST" shall be used
only in connection with Products of higher quality compared to other
Products distributed and sold by Licensee in the Territory, while the
trademark "BEAUTY SLEEP" shall be used only in connection with Products of
middle-level quality compared to other Products distributed and sold by
Licensee in the Territory. Without Licensor's prior written
2
<PAGE>
consent, the Licensee shall not sell the Products to wholesalers, jobbers
or to anyone it believes is purchasing the Products for transshipment to
other retailers, and all sales will be made directly to retail outlets.
(b) Inspection. Licensee shall permit duly authorized
-----------
representatives of Licensor to have access to Licensee's facilities during
normal business hours for the purpose of inspecting the Products in
manufacture and completed Products to determine whether the Products are in
accordance with the Standards.
(c) Samples. Licensee shall submit to Licensor, or to its
--------
duly authorized representative, samples of each Product which Licensee
intends to sell under the Trademarks. If Licensor determines that the
sample fails to comply with the Standards, Licensor must promptly
notify Licensee of the deficiency within 20 days of Licensor's receipt of
such sample. If Licensor fails to disapprove within the 20-day period any
sample submitted to it, such sample shall be deemed to be in compliance
with the Standards.
4. Use of Trademarks.
------------------
(a) Manner of Trademark Usage. Licensee agrees that the
-------------------------
Trademarks shall be physically affixed or attached to the Products sold
under the Trademarks in such a manner so as to at all times preserve the
validity of the Trademarks, and that Licensee will not do any act that
will in any way impair or adversely affect the validity of the Trademarks.
Licensee agrees that it will not use any other name or trademark in
association with the Trademarks, either on the Products, or in connection
with the packaging in which the said Products, or in connection with any
consumer advertising and publicity, which shall consist of the name of any
person, firm or corporation. Licensee shall provide Licensor samples of all
literature, packages, labels and labelings prepared by Licensee. If
Licensor fails to object to any label, package or literature submitted to
it within 20 days following receipt by it of such materials, Licensor shall
be deemed to have approved such material for use by Licensee.
(b) Reference to Ownership. Licensee shall use on the Products
----------------------
such legends as Licensor shall require to indicate that the Products and
use of the Trademarks is pursuant to license from Licensor. All Products,
labels, hangtags, packaging, advertising and the like must bear appropriate
notices such as the following unless otherwise specified or agreed to by
Licensor:
i. BEAUTYREST -REGISTERED TRADEMARK- is a registered trademark
of Simmons Company.
ii. "Licensed Article" manufactured by Louisville Bedding Co.
under exclusive license from Simmons Company, the trademark
owner.
3
<PAGE>
5. Advertising. All advertising by Licensee in any medium shall be
-----------
conducted in a dignified manner. Licensee shall have the authority to
direct all advertising programs with discretion over the creative concepts,
materials and media used in such a program, subject to Licensor's review:
Licensee shall use its best efforts to monitor such advertising by its
customers and shall terminate sales of Products to any customers which
persistently misuse the Trademarks.
6. Infringement of Trademark; Registration of Licensee.
----------------------------------------------------
(a) Infringement. (i) Licensee shall promptly notify Licensor
------------
of any infringement of the Trademarks, or any act of unfair competition by
third parties relating to the Trademarks, whenever such infringement or act
shall come to Licensee's attention. After receipt of such notice from
Licensee, Licensor may, in Licensor's discretion, take such action to stop
such infringement or act as Licensor may deem necessary to protect the
Trademarks for use on Products within the Territory. In connection
therewith, Licensee shall cooperate fully with Licensor to stop such
infringement or act and, if so requested by Licensor, shall join with
Licensor as a party to any action brought by Licensor for such purpose.
Licensor shall have full control over any action taken, including, without
limitation, the right to select counsel, to settle on any terms it deems
advisable in its discretion, to appeal any adverse decision rendered in any
court, to discontinue any action taken by Licensor, and otherwise to make
any decision in respect thereto as it in its discretion deems advisable.
Licensor shall bear all expenses connected with the foregoing, except that
if Licensee desires to retain its own counsel, it shall do so at its own
expense. If, after deducting all expenses, including all of Licensor's
reasonable counsel fees and other litigation expenses, there is a net
recovery resulting from such an action, Licensee shall be entitled to
damages specifically allocated to Licensee net of said expenses and fees or
ten percent of said net recovery, whichever is greater.
(ii) Licensee agrees that Licensor shall have the sole power to
take or omit to take legal or other action, before any court or
governmental authority or otherwise, with respect to infringement of or
the protection of the Trademarks and if Licensor shall determine, in its
discretion, that it would not be in the best interests of Licensor's
business, viewed as a whole, to take any such action, Licensor may
determine to omit from taking such action. Further, Licensor reserves
the right to settle any claim asserted against it or Licensee based upon
Licensee's use of the Trademarks by agreeing to an injunction with respect
to the use of the Trademarks in connection with one or more of the
Products.
4
<PAGE>
(iii) Prior to taking or omitting to take any action which shall
affect in any manner Licensee's right to use the Trademarks under the terms
of this Agreement, Licensor shall advise Licensee of Licensor's decision.
If, in Licensee's reasonable judgment, its rights under this Agreement
would be materially impaired as a result of Licensor's actions or
omissions, Licensee shall have the option, for a period of 60 days
following notice from Licensor, either to: (a) have the royalties due
hereunder ratably and equitably reduced to such lower rates as the parties
may agree to reflect any restriction on the scope of Licensee's rights
hereunder as a result of Licensor's actions or failures so to act or to
reflect diminution in the value of the license granted hereby, taking into
account, among other factors, the volume of the allegedly infringing
merchandise, the costs and expenses which would likely be incurred in any
effort to stop such infringement, and the likelihood of success of any such
effort; or (b) terminate the License and collect from Licensor all of
Licensee's out-of-pocket expenses reasonably incurred in connection with
the termination of this License. If, within 90 days after notice by
Licensee to Licensor of Licensee's election to have the royalties reduced,
the parties have not reached agreement regarding such reduction, then the
issue shall be submitted to arbitration in accordance with the provisions
of paragraph 6(b) hereof.
(b) Arbitration. Any dispute under paragraph 6(a) of this
-----------
Agreement arising from the parties' failure to reach agreement regarding
a reduction in the royalty rate to reflect any restriction on the scope of
Licensee's rights under the Agreement as a result of Licensor's decision
not to take action against a third party which is infringing the Trademarks
may be determined in accordance with the rules then obtaining of the
American Arbitration Association, by a single arbitrator if the parties
shall agree upon one, or by one arbitrator appointed by each party and a
third arbitrator designated by the other arbitrators. In case of any
failure of a party to make an appointment of an arbitrator, or of the two
arbitrators to agree upon a third arbitrator, in either such case within
two (2) weeks after commencement of the arbitration, such appointment shall
be made by the American Arbitration Association in New York City. Unless
otherwise agreed by the parties hereto, all such arbitration proceedings
shall be held in New York City. Each party agrees to comply with any award
made in any such proceeding and to the entry of a judgment in any court
having jurisdiction over arbitration proceedings upon any award rendered
in such proceeding. The decision of the arbitrators shall be rendered
within (30) days after the final submissions of the parties. The
allocation of expenses of the arbitration, including reasonable attorney's
fees, shall be strictly limited to matters as specified above regarding
paragraph 6(a). No other disputes shall be subject to arbitration.
5
<PAGE>
(c) Registration of Licensee. If the law permits, Licensor shall
------------------------
register Licensee as a permitted or registered user of the Trademarks.
If requested by Licensor or its duly authorized representative, Licensee
shall undertake to join in such application under the conditions of this
Agreement and execute any such documents, consistent with the terms
hereof, as may be necessary to implement such application.
(d) Registrations. Licensor shall promptly file for registration
-------------
of the Trademarks to cover the Products within the Territory.
Licensee agrees to cooperate with Licensor, at its request, in complying
with the requirements for registering the Trademark in the Territory.
7. Royalty Payment; Records.
-------------------------
(a) Royalty. Licensee shall pay Licensor as a royalty for the
-------
License the following percentages of the net selling price of the
Products sold under the Trademarks within the Territory during the
respective specified periods:
Period Percentage
------ ----------
January 4, 1991 - December 31, 1991 4%
January 1, 1992 - December 31, 1992 5%
January 1, 1993 - December 31, 1995 6%
"Net selling price" shall mean the invoice price less (i) quantity and cash
discounts actually allowed thereon, (ii) refunds for returned items, (iii)
sales and excise taxes and (iv) allowances for cooperative advertising
directly relating to the Products. For purposes of this Agreement, the
royalty shall accrue on the sale of the Products, and the Products shall be
considered sold when billed by Licensee.
(b) Payment of Royalty. Within 30 days after the close of each
------------------
calendar quarter within the Term, Licensee shall furnish Licensor with a
royalty statement showing the total number of Products sold under the
Trademarks during the immediately preceding calendar quarter, listing total
royalties earned by Licensor and all deductions from the gross selling
price of Products as listed in paragraph 7(a). At the time of furnishing
such statement, Licensee shall remit to Licensor the royalties earned as
shown by such statement. The first statement shall include all Products
sold under the Trademarks within the Territory between the date hereof and
the expiration of the first full calendar quarter thereafter.
Notwithstanding the foregoing, beginning for the quarter ended March 31,
1995 and for each calendar quarter thereafter, Licensee shall pay Licensor
within 30 days after the close of each such quarter the greater of (i)
actual royalties earned and payable for that quarter or (ii) 25% of the
minimum annual royalty specified in paragraph 7(d) hereof for the year
during which such quarter ended.
6
<PAGE>
(c) Maintenance of Records. Licensee shall maintain and
----------------------
preserve, for at least three years after the royalty payments are made,
complete records sufficient to determine royalty payments hereunder, in
accordance with generally accepted accounting principles applied on a
consistent basis. Licensor shall be permitted access to such records at
any time during normal business hours on 30 days' prior written notice to
Licensee unless Licensee objects. Upon such an objection, such access to
such records shall be limited to an independent certified public accountant
of Licensor's choice, the expense of which shall be shared by Licensor and
Licensee equally. If an audit of Licensee's books by an independent
certified public accountant shows an underpayment to Licensor of greater
than three percent (3%), then in addition to the payment of the
underpayment and interest, Licensee will also pay the entire costs incurred
by Licensor in performing the audit.
(d) Minimum Royalties. The Licensee shall pay the Licensor
-----------------
minimum annual royalties during the Term of the Agreement for each contract
period listed below. Such minimum royalties shall be paid on a quarterly
basis within thirty (30) days of the end of each relevant calendar quarter
as specified in paragraph 7(b) above.
Contract Period ended December 31 Minimum Royalty
--------------------------------- ---------------
1991 $ 40,000
1992 120,000
1993 250,000
1994 375,000
1995 550,000
8. Indemnification.
---------------
(a) By Licensee. Licensee shall indemnify Licensor against,
-----------
and hold it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by Licensor arising out of or
resulting from the activities of Licensee under tis Agreement, including
any products liability claim.
(b) By Licensor. Licensor shall indemnify Licensee against,
-----------
and hold it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by Licensee arising out of or
resulting from Licensee's use of the Trademarks pursuant to and in
compliance with this Agreement. Licensor shall not be responsible for lost
profits or damage to Licensee's goodwill which may result in the event
Licensee is enjoined from using any of the Trademarks.
7
<PAGE>
(c) Right of Set-off. Upon the occurrence of any event for which
----------------
either party is entitled to indemnification by the other under the
provisions of this Agreement, the party entitled to indemnification shall
have all of the rights and remedies available to it at law, in equity, in
bankruptcy or otherwise and, in addition, shall have the right to off-set
the amount for which it is entitled to indemnification against any amount
that it may at any time owe the other.
(d) Notice. Each party agrees to promptly notify the other party
------
in the event a claim is asserted against it which may invoke any of the
provisions of this paragraph.
(e) Defenses. Once one party (the "Indemnifying Party") has
--------
taken reasonable steps to defend or otherwise resolve a claim made against
the other party, and so notified the other party, any legal expenses
incurred by the other party after such notification shall be for its own
account unless the Indemnifying Party has discontinued taking such
reasonable steps to resolve said claims.
9. Termination.
-----------
(a) By Licensor. Licensee shall be in default and Licensor
-----------
may terminate, at its option, the License and all rights granted Licensee
hereunder, if Licensee fails to pay any sum when due, or makes any false
reports or commits any material breach of any covenant contained herein,
and fails to remedy such breach within 30 days after receipt of notice from
Licensor specifying the nature of the breach; provided, however, that if
the nature of the default is curable but is such that it cannot be cured
within 30 days, Licensee shall have a reasonable additional time to effect
such cure, upon the condition that Licensee shall proceed diligently and
continuously to effect same. Licensor shall have the right to terminate the
Agreement immediately upon notice in the event of a wilful breach of any
covenant of this Agreement by Licensee.
(b) By Licensee. Licensor shall be in default and Licensee may
-----------
terminate, at its option, the Agreement if Licensor commits any material
breach of any covenant contained herein, and fails to remedy such breach
within 30 days after receipt of notice from Licensee specifying the nature
of the breach.
(c) Failure to Meet Minimum Sales. In the event Licensee's net
-----------------------------
selling price for the Products is insufficient to generate the minimum
quarterly royalties (25% of the amounts specified in paragraph 7(d)
hereof) for five (5) consecutive quarters, then either Licensee or
Licensor may, upon 180 days' written notice to the order, terminate this
Agreement and the License granted hereunder. This right may be exercised
regardless of whether or not Licensee has paid the applicable minimum
8
<PAGE>
royalties due and shall not otherwise affect Licensee's obligation to
make royalty payments or either of the parties other rights, duties or
obligations hereunder through the end of the 180-day notice period.
(d) Continuance of Use of Trademarks. On termination or
--------------------------------
expiration of the Agreement for any reason, Licensee shall have, for a
period of 90 days thereafter, the right to dispose of all unsold Products
embodying or bearing the Trademarks that were completed by it prior to the
termination or expiration of the Term. Thereafter, Licensee agrees to
discontinue use of the Trademarks and shall no longer use or have any right
to use the Trademarks or any formulative thereof which may be confusingly
similar to the Trademarks. After expiration of the 90-day period
following termination or the expiration of the Term, any accrued and unpaid
royalties for Products sold during the Term or during the 90-day period
after termination or expiration of the Term shall become due and payable
immediately.
10. Ownership of Trademarks. Licensee acknowledges Licensor's
-----------------------
exclusive right, title and interest in and to the registrations of the
Trademarks and its sole and exclusive right to the use thereof and will not
at any time do or cause to be done any act or thing contesting or in any
way impairing or tending to impair any part of such right, title and
interest. In connection with the use of the Trademarks, Licensee shall not
in any manner represent that it has any ownership in the Trademarks or
registrations thereof. Licensee acknowledges that use of the Trademarks
shall not create in Licensee's favor any right, title or interest in or to
the Trademarks. All uses of the Trademarks by Licensee shall inure to the
benefit of Licensor.
11. Sleep Galleries. Notwithstanding anything to the contrary in
---------------
this Agreement, Licensor shall be permitted to manufacture, market, sell or
distribute the Products under the Trademarks, either within or without the
Territory, or otherwise, for, to or through Licensor's Sleep Gallery retail
stores, whether such stores are operated and/or owned by Licensor,
Licensor's authorized dealers or franchisees, or by others.
12. Notices. Any notices required or permitted to be given under this
-------
Agreement shall be in writing and shall be personally delivered, mailed by
certified or registered mail, postage prepaid, or deposited with a
reputable overnight delivery service addressed to the party to be notified
at its address shown at the beginning of this Agreement, or at such other
address as may be furnished in writing by either party to the other.
Notice delivered in compliance herewith shall be deemed delivered upon
personal delivery or upon deposit with the U.S. mail or a reputable
overnight delivery service, except that notice of change of address shall
not be deemed delivered until actual receipt by the intended recipient.
9
<PAGE>
13. Miscellaneous Provisions.
-------------------------
(a) Governing Law. This Agreement and all rights and
-------------
obligations of the parties herein shall be construed and enforced in
accordance with the laws of the Commonwealth of Kentucky should Licensor
bring an action against Licensee based upon this Agreement, and in
accordance with the laws of the State of Georgia should Licensee bring such
an action against Licensor.
(b) Assignment. This Agreement may be assigned by Licensee in
----------
connection with a merger, consolidation or sale of substantially all the
business and assets of Licensee unless said assignment is, in Licensor's
reasonable judgment, to a direct competitor of Licensor. Licensee agrees to
provide prompt notice to Licensor of any such assignment. The Agreement
shall not otherwise be assignable by Licensee in the absence of Licensor's
prior written consent. Licensor may assign this Agreement and its rights
and obligations herein without the prior written consent of Licensee.
Subject to the foregoing, this Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors and assigns.
Any sale of assets by Licensor including the Trademarks shall be subject to
the obligations of this Agreement.
(c) Independent Contractor Relationship. The parties understand
-----------------------------------
and agree that this Agreement does not create a fiduciary relationship
between them, that Licensee shall be an independent contractor of Licensor
and that nothing in this Agreement is intended to constitute either party
as an agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose whatsoever. During the
Term, Licensee shall hold itself out to the public as an independent
contractor operating pursuant to a license agreement. Licensee and Licensor
understand and agree that nothing in this Agreement authorizes either to
make any contract, agreement, warranty or representation for or on behalf
of the other, or to incur any debt or obligation in the other's name.
(d) Entire Agreement; Amendment. This Agreement constitutes
---------------------------
the entire agreement between Licensor and Licensee concerning its subject
matter. It supersedes all prior agreements, correspondence, representations
and writings regarding its subject matter. No amendment, modification or
supplement of this Agreement shall be binding unless executed in writing by
both of the parties hereto.
(e) Waiver. Any failure by either party to exercise any right
------
created hereby shall not constitute a waiver by that party of such right.
No waiver by either party of any provision of this Agreement shall be
deemed, or will constitute, a waiver of any
10
<PAGE>
other provision, whether or not similar, nor will any waiver constitute a
continuing waiver. No waiver will be binding unless executed in writing by
the party making the waiver.
(f) Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed to be an original, all of
which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first written above.
SIMMONS COMPANY
By: /s/
-----------------------------
Title:
--------------------------
LOUISVILLE BEDDING CO.
By: /s/
-----------------------------
Title:
--------------------------
<PAGE>
Exhibit A
---------
Trademark Name Registration No. Registration Expiration
-------------- ---------------- -----------------------
BEAUTYREST 512,535 July 19, 2009
BEAUTY SLEEP 1,198,771 June 27, 2002
Exhibit 10.50
TRADEMARK LICENSE AGREEMENT
---------------------------
THIS TRADEMARK LICENSE AGREEMENT ("Agreement") is made and entered
into this April ___, 1986, by and between SIMMONS U.S.A. CORPORATION,
a Delaware corporation having its principal offices at 6 Executive
Park Drive, Atlanta, Georgia 30329;
(hereinafter the "Licensor"), and LOUISVILLE BEDDING
CO. a Kentucky corporation, having its principal offices at 10400
Bunsen Way, Louisville, Kentucky 40299 ("Licensee").
RECITALS:
--------
A. Licensor has the sole and exclusive right to the use of the
marks BEAUTYREST and HIDE-A-BED hereinafter designated as the
"Trademarks," on, respectively, 1) Mattress Pads, Mattress Covers,
Pillows, Quilted Pillow Shams, Pillow Protectors, and
Bed Ruffles, and 2) Mattress Pads, hereinafter designated as the
"Products," in the United States, hereinafter designated as the
"Territory", and the right to grant licenses to others for the use of
the said "Trademarks".
B. Licensee wishes to manufacture, market, distribute and sell
under the Trademarks the Products in the Territory.
C. Licensor is willing to grant Licensee a license to manufacture,
market, distribute and sell the Products under the Trademarks within
the United States under the terms and conditions of this Agreement.
AGREEMENT:
---------
NOW, THEREFORE, The parties hereby agree as follows:
1. Grant of License; Extent of License.
-----------------------------------
(a) Grant of License. Pursuant to the terms of this
----------------
Agreement, Licensee is hereby granted an exclusive license (the
"License"), without the right to sublicense, for the use of the
Trademarks on the Products manufactured, sold or distributed by
Licensee in the Territory. Licensee shall not use the Trademarks
in connection with any item other than the Products. Licensee will
limit its sales of Products to the Territory and agrees not to
sell the Products to anyone it believes is purchasing the Products
for export outside thereof. Notwithstanding anything in the
foregoing to the
<PAGE>
contrary, Licensee shall be entitled to subcontract others to manufacture
the Products to be sold by Licensee under the Trademarks.
(b) Extent of License. Licensor shall not, nor shall it license
-----------------
another to, manufacture, market, distribute or sell any of the Products
under the Trademarks within the Territory during the Term. Licensor,
however, retains the right to manufacture, distribute and sell, or license
others to manufacture, distribute and sell, 1) items other than the
Products under the Trademarks within or without the Territory or 2) the
Products under the Trademarks outside of the Territory.
2. Term and Renewal.
----------------
(a) Term. The term of the Agreement shall commence on the date
----
hereof and expire on December 31, 1989, unless sooner terminated as
provided in paragraphs 6 and 9 of this Agreement (the "Term").
(b) Renewal of Term. Provided that Licensee's sales of Products
---------------
have been sufficient to generate the minimum royalties provided in
paragraph 7(d) during 1988 and 1989, Licensee may renew, at its option, the
License for an additional term of 3 years (the "Renewal Term"), by giving
Licensor notice of Licensee's election to renew the License not fewer than
six months nor more than twelve months prior to the end of the Term. The
term "Term", when used in this Agreement, shall include the Renewal Term
unless the context requires otherwise.
3. Maintenance of Product quality.
------------------------------
(a) Standards. Licensee shall manufacture, distribute and sell the
---------
Products under the Trademarks in accordance with quality standards,
specifications, directions and processes set forth by Licensee from time to
time and acceptable to Licensor (the "Standards"). The Licensee shall not
sell the Products to wholesalers, jobbers or to anyone it believes is
purchasing the Products for transshipment to other retailers, and all sales
will he made directly to retail outlets.
(b) Inspection. Licensee shall permit duly authorized
-----------
representatives of Licensor to have access to Licensee's facilities during
normal business hours for the purpose of inspecting the Products in
manufacture and completed Products to determine whether the Products are
in accordance with the Standards.
1333k
-2-
<PAGE>
(c) Samples. Licensee shall submit to Licensor, or to its duly
-------
authorized representative, at Licensor's request, samples of each Product
which Licensee intends to sell under the Trademarks. If Licensor determines
that the sample fails to comply with the Standards, Licensor must promptly
notify Licensee of the deficiency within 20 days of Licensor's receipt of
such sample. If Licensor fails to disapprove within the 20-day period any
sample submitted to it, such sample shall be deemed to be in compliance
with the Standards.
4. Use of Trademarks.
-----------------
(a) Manner of Trademark Usage. Licensee agrees that the Trademarks
-------------------------
shall be physically affixed or attached to the Products sold under the
Trademarks, in such a manner so as to at all times preserve the validity of
the Trademarks, and that License will not do any act that will in any way
impair or affect the validity of the Trademarks. License agrees that it
will not use any other name or trademark in association with the
Trademarks, either on the Products, or in connection with the packaging in
which the said Products will be sold, or in connection with any consumer
advertising and publicity, which shall consist of the name of any person,
firm or corporation. Licensee shall provide Licensor samples of all
literature, packages, labels and labelings prepared by Licensee. If
Licensor fails to object to any label, package or literature submitted to
it within 20 days following receipt by it of such materials, Licensor shall
be deemed to have approved such material for use by Licensee. This
paragraph shall not apply to cooperative advertising which shall be made
available to Licensor at its request.
(b) Reference to Ownership. Licensee shall use on the Products such
----------------------
legends as Licensor shall require to indicate that the Products and use of
the Trademarks is pursuant to license from Licensor. All Products, labels,
hangtags, packaging, advertising and the like must bear appropriate notices
such as the following unless otherwise agreed to by Licensor:
i. BEAUTYREST is a registered trademark of Simmons U.S.A.
Corporation.
ii."Licensed Article" manufactured by Louisville Bedding Co. under
exclusive license from Simmons U.S.A. Corporation, the trademark
owner.
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<PAGE>
5. Advertising. All advertising by Licensee in any medium shall be
-----------
conducted in a dignified manner. Licensee shall have the authority to
direct all advertising programs with discretion over the creative concepts,
materials, and media used in such a program, subject to Licensor's review.
Licensee shall use its best efforts to monitor such advertising by its
customers and shall terminate sales of Products to any customers which
persistently misuse the Trademarks.
6. Infringement of Trademark; Registration of Licensee.
---------------------------------------------------
(a) Infringement. (i) Licensee shall promptly notify Licensor of
------------
any infringement of the Trademarks, or any act of unfair competition by
third parties relating to the Trademarks, whenever such infringement or act
shall come to Licensee's attention. After receipt of such notice from
Licensee, Licensor may, in Licensor's discretion, take such action to stop
such infringement or act as Licensor may deem necessary to protect the
Trademarks for use on Products within the Territory. In connection
therewith, Licensee shall cooperate fully with Licensor to stop such
infringement or act and, if so requested by Licensor, shall join with
Licensor as a party to any action brought by Licensor for such purpose.
Licensor shall have full control over any action taken, including without
limitation, the right to select counsel, to settle on any terms it deems
advisable in its discretion, to appeal any adverse decision rendered in any
court, to discontinue any action taken by Licensor, and otherwise to make
any decision in respect thereto as it in its discretion deems advisable.
Licensor shall bear all expenses connected with the foregoing, except that
if Licensee desires to retain its own counsel, it shall do so at its own
expense. If, after deducting all expenses, including all of Licensor's
reasonable counsel fees and other litigation expenses, there is a net
recovery resulting from such an action, Licensee shall be entitled to
damages specifically allocated to Licensee net of said expenses and fees or
ten percent of said net recovery, whichever is greater.
(ii) Licensee agrees that Licensor shall have the sole power to
take or omit to take legal or other action, before any court or
governmental authority or otherwise, with respect to infringement of or
the protection of the Trademarks and that if Licensor shall determine, in
its discretion, that it would not be in the best interests of Licensor's
business, viewed as a whole, to take any such action, Licensor may
determine to omit from taking such action. Further, Licensor reserves the
right to settle any claim asserted against it or Licensee based upon
Licensee's use of the Trademarks by agreeing to an injunction with respect
to the use of the Trademarks in connection with one or more of the
Products.
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<PAGE>
(iii) Prior to taking or omitting to take any action which shall
affect in any manner Licensee's right to use the Trademarks under the
terms of this Agreement, Licensor shall advise Licensee of Licensor's
decision. If, in Licensee's reasonable judgment, its rights under this
Agreement would be materially impaired as a result of Licensor's actions
or omissions, Licensee shall have the option, for a period of 60 days
following notice from Licensor, either to: (A) have the royalties due
hereunder ratably and equitably reduced to such lower rates as the parties
may agree to reflect any restriction on the scope of Licensee's rights
hereunder as a result of Licensor's actions or failure so to act or to
reflect dimunition in the value of the license granted hereby, taking into
account, among other factors, the volume of the allegedly infringing
merchandise, the costs and expenses which would likely be incurred in any
effort to stop such infringement, and the likelihood of success of any such
effort; or (B) terminate the License and collect from Licensor all of
Licensee's out-of-pocket expenses reasonably incurred in connection with
the termination of this License. If, within 90 days after notice by
Licensee to Licensor of Licensee's election to have the royalties reduced,
the parties have not reached agreement regarding such reduction, then the
issue shall be submitted to arbitration in accordance with the provisions
of paragraph 6(b) hereof.
(b) Arbitration. Any disputes under paragraph 6(a) of this
-----------
Agreement arising from the parties' failure to reach agreement regarding a
reduction in the royalty rate to reflect any restriction on the scope of
Licensee's rights under the Agreement as a result of Licensor's decision
not to take action against a third party which is infringing the Trademarks
may be determined in accordance with the rules then obtaining of the
American Arbitration Association, by a single arbitrator if the parties
shall agree upon one, or by one arbitrator appointed by each party and a
third arbitrator designated by the other arbitrators. In case of any
failure of a party to make an appointment of an arbitrator, or of the two
arbitrators to agree upon a third arbitrator, in either such case within
two (2) weeks after commencement of the arbitration, such appointment shall
be made by the American Arbitration Association in New York City. Unless
otherwise agreed by the parties hereto, all such arbitration proceedings
shall be held in New York City. Each party agrees to comply with any award
made in any such proceeding and to the entry of a judgment in any court
having jurisdiction over arbitration proceedings upon any award rendered in
such proceeding. The decision of the arbitrators shall be rendered within
thirty (30) days after the final submissions of the parties. The allocation
of expenses of the arbitration, including reasonable attorney's fees, shall
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<PAGE>
be determined by the arbitrator(s), or in the absence of such
determination, each party shall pay its own expenses. This Paragraph 6(b)
shall be strictly limited to matters as specified above regarding paragraph
6(a). No other disputes shall be subject to arbitration.
(c) Registration of Licensee. If the law permits, Licensor shall
------------------------
register Licensee as a permitted or registered user of the Trademarks. If
requested by Licensor or its duly authorized representative, Licensee shall
undertake to join in such application under the conditions of this
Agreement and execute any such documents, consistent with the terms hereof,
as may be necessary to implement such application.
(d) Registrations. Licensor shall promptly file for registration of
-------------
the Trademarks to cover the Products within the Territory. Licensee agrees
to cooperate with Licensor, at its request, in complying with the
requirements for registering the Trademark in the Territory.
7. Royalty Payment; Records.
------------------------
(a) Royalty. Licensee shall pay Licensor as a royalty for the
-------
License four percent of the net selling price of the Products sold under
the Trademarks within the Territory. "Net selling price" shall mean the
invoice price less (i) quantity and cash discounts actually allowed
thereon, (ii) refunds for returned items, (iii) sales and excise taxes and
(iv) allowances for cooperative advertising directly relating to the
Products. For purposes of this Agreement, the royalty shall accrue on the
sale of the Products, and the Products shall be considered sold when
billed by Licensee.
(b) Payment of Royalty. Within 30 days after the close of each
------------------
calendar quarter within the Term, Licensee shall furnish Licensor with a
royalty statement showing the total number of Products sold under the
Trademarks during the immediately preceding calendar quarter, listing total
royalties earned by Licensor and all deductions from the gross selling
price of Products as listed in paragraph 7(a). At the time of furnishing
such statement, Licensee agrees to remit to Licensor the royalties earned
as shown by such statement. The first statement shall include all Products
sold under the Trademarks within the Territory between the date hereof and
the expiration of the first full calendar quarter thereafter.
(c) Maintenance of Records. Licensee shall maintain and preserve,
----------------------
for at least three years after the royalty payments are made, complete
records sufficient to determine royalty payments hereunder, in accordance
with generally
- 6 -
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<PAGE>
accepted accounting principles applied on a consistent basis. Licensor
shall be permitted access to such records at any time during normal
business hours on 30 days prior written notice to Licensee unless
Licensee objects. Upon such an objection, such access to such records shall
be limited to an independent certified public account of Licensor's choice,
the expense of which shall be shared by Licensor and Licensee equally. If
an audit of Licensee's books by an independent certified public accountant
shows an underpayment to Licensor of greater than three percent (3%), then
in addition to the payment of the underpayment and interest, Licensee will
also pay the entire cost incurred by Licensor in performing the audit.
(d) Minimum Royalties. The Licensee shall pay the Licensor minimum
-----------------
annual royalties during the Term of the Agreement for each contract period
listed below. Such minimum royalties shall be paid within thirty (30) days
of the end of each relevant calendar year or the expiration of the
Agreement, whichever is applicable, reduced or extinguished by payments (if
any) already made by the Licensee to the Licensor as a royalty on the sales
of the Products pursuant to paragraph 7(a) above.
Contract Period Minimum Royalty
--------------- ---------------
April , 1986 - December 31, 1986 - 0 -
---
January 1, 1987 - December 31, 1987 $40,000.00
January 1, 1988 - December 31, 1988 $80,000.00
January 1, 1989 - December 31, 1989 $120,000.00
The minimum royalties payable during any full calendar year during the
Renewal Term shall be $150,000.00.
8. Indemnification.
---------------
(a) By Licensee. Licensee shall indemnify Licensor against, and
-----------
hold it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by Licensor arising out of or
resulting from the activities of Licensee under this Agreement, including
any products liability claim.
(b) By Licensor. Licensor shall indemnify Licensee against, and
-----------
hold it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by Licensee arising out of or
resulting from Licensee's use of the Trademarks pursuant to and in
compliance
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<PAGE>
with this Agreement. Licensor shall not be responsible for lost profits or
damage to Licensee's goodwill which may result in the event Licensee is
enjoined from using any of the Trademarks.
(c) Right of Set-off. Upon the occurrence of any event for which
----------------
either party is entitled to indemnification by the other under the
provisions of this Agreement, the party entitled to indemnification shall
have all of the rights and remedies available to it at law, in equity, in
bankruptcy or otherwise and, in addition, shall have the right to off-set
the amount for which it is entitled to indemnification against any amount
that it may at any time owe the other.
(d) Notice. Each party agrees to promptly notify the other party
------
in the event a claim is asserted against it which may invoke any of the
provisions of this paragraph.
(e) Defenses. Once one party (the "Indemnifying Party") has taken
--------
reasonable steps to defend or otherwise resolve a claim made against the
other party, and so notified the other party, any legal expenses incurred
by the other party after such notification shall be for its own account
unless the Indemnifying Party has discontinued taking such reasonable steps
to resolve said claim.
9. Termination.
-----------
(a) By Licensor. Licensee shall be in default and Licensor may
-----------
terminate, at its option, the License and all rights granted Licensee
hereunder, if Licensee fails to pay any sum when due, or makes any false
reports or commits any material breach of any covenant contained herein,
and fails to remedy such breach within 30 days after receipt of notice from
Licensor specifying the nature of the breach, provided however that if the
nature of the default is curable but is such that it cannot be cured within
30 days, Licensee shall have a reasonable additional time to effect such
cure, upon the condition that Licensee shall proceed diligently and
continously to effect same. Licensor shall have the right to terminate the
Agreement immediately upon notice in the event of a wilful breach of any
covenant of this Agreement by Licensee.
(b) By Licensee. Licensor shall be in default and Licensee may
-----------
terminate, at its option, the Agreement if Licensor commits any material
breach of any covenant contained herein, and fails to remedy such breach
within 30 days after receipt of notice from Licensee specifying the nature
of the breach.
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<PAGE>
(c) Continuance of Use of Trademarks. On termination or expiration
--------------------------------
of the Agreement for any reason, Licensee shall have, for a period of 90
days thereafter, the right to dispose of all unsold Products embodying or
bearing the Trademarks which were completed by it prior to the termination
or expiration of the Term. Thereafter, Licensee agrees to discontinue use
of the Trademarks and shall no longer use or have any right to use the
Trademarks or any formulative thereof which may be confusingly similar to
the Trademarks. After expiration of the 90-day period following termination
or the expiration of the Term, any accrued and unpaid royalties for
Products sold during the Term or during the 90-day period after termination
or expiration of the Term shall become due and payable immediately.
10. Ownership of Trademarks. Licensee acknowledges Licensor's
-----------------------
exclusive right, title and interest in and to the registrations of the
Trademarks and its sole and exclusive right to the use thereof and will not
at any time do or cause to be done any act or thing contesting or in any
way impairing or tending to impair any part of such right, title and
interest. In connection with the use of the Trademarks, Licensee shall not
in any manner represent that it has any ownership in the Trademarks or
registrations thereof. Licensee acknowledges that use of the Trademarks
shall not create in Licensee's favor any right, title or interest in or to
the Trademarks. All uses of the Trademarks by Licensee shall inure to the
benefit of Licensor.
11. Notices. Any notices required or permitted to be given under
-------
this Agreement shall be in writing and shall be personally delivered or
mailed by certified or registered mail, postage prepaid, addressed to the
party to be notified at its address shown at the beginning of this
Agreement, or at such other address as may be furnished in writing by
either party to the other. Notice delivered in compliance herewith shall
be deemed delivered upon personal delivery or upon deposit with the U.S.
mail, except that notice of change of address shall not be deemed delivered
until actual receipt by the intended recipient.
12. Miscellaneous Provisions.
------------------------
(a) Governing Law. This Agreement and all rights and obligations of the
-------------
parties herein shall be construed and enforced in accordance with the laws
of the Commonwealth of Kentucky should Licensor bring an action against
Licensee based upon this Agreement, and in accordance with the laws of the
State of Georgia should Licensee bring such an action against Licensor.
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<PAGE>
(b) Assignment. This Agreement may be assigned by Licensee in
----------
connection with a merger, consolidation or sale of substantially all the
business and assets of Licensee unless said assignment is, in Licensor's
reasonable judgment, to a direct competitor of Licensor. Licensee agrees to
provide prompt notice to Licensor of any such assignment. The Agreement
shall not otherwise be assignable by Licensee in the absence of Licensor's
prior written consent. Licensor may assign this Agreement and its rights
and obligations herein without the prior written consent of Licensee.
Subject to the foregoing, this Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors and assigns.
Any sale of assets by Licensor including the Trademarks shall be subject to
the obligations of this Agreement.
(c) Independent Contractor Relationship. The parties understand and
-----------------------------------
agree that this Agreement does not create a fiduciary relationship between
them, that Licensee shall be an independent contractor of Licensor and that
nothing in this Agreement is intended to constitute either party as an
agent, legal representative, subsidiary, joint venturer, partner, employee
or servant of the other for any purpose whatsoever. During the Term,
Licensee shall hold itself out to the public as an independent contractor
operating pursuant to a license ageement. Licensee and Licensor understand
and agree that nothing in this Ageement authorizes either to make any
contract, agreement, warranty, or representation for or on behalf of the
other, or to incur any debt or obligation in the other' s name.
(d) Entire Agreement; Amendment. This Agreement constitutes the
----------------
entire agreement between Licensor and Licensee concerning its subject
matter. It supersedes all prior agreements, correspondence, representations
and writings regarding its subject matter. No amendment, modification or
supplement of this Agreement shall be binding unless executed in writing by
both of the parties hereto.
(e) Waiver. Any failure by either party to exercise any right
------
created hereby shall not constitute a waiver by that party of such right.
No waiver by either party of any provision of this Agreement shall be
deemed, or will constitute, a waiver of any other provision, whether or
not similar, nor will any waiver constitute a continuing waiver. No waiver
will be binding unless executed in writing by the party making the waiver.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, all of which
shall constitute one and the same Agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by
the parties as of the date first written above.
SIMMONS U.S.A. CORPORATION
By: /s/
-----------------------
Title:
--------------------
LOUISVILLE BEDDING CO.
By: /s/
-----------------------
Title:
--------------------
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<PAGE>
EXHIBIT A TO TRADEMARK LICENSE AGREEMENT
----------------------------------------
Trademark Products
--------- --------
Hide-A-Bed Mattress Pads
Beautyrest Mattress Pads
Mattress Covers
Pillows
Quilted Pillow Shams
Pillow Protectors
Bed Ruffles
<PAGE>
AMENDMENT NUMBER THREE TO
AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT
THIS AMENDMENT NUMBER THREE TO AMENDED AND RESTATED TRADEMARK
LICENSE AGREEMENT ("Amendment"), made and entered into as of the 21st day
of November, 1994, by and between SIMMONS COMPANY, a Delaware corporation
having its principal offices at One Concourse Parkway, Suite 600, Atlanta,
Georgia 30328 ("Licensor"), and LOUISVILE BEDDING CO., a Delaware
corporation having its principal offices at 10400 Bunsen Way, Louisville,
Kentucky 40299 ("Licensee");
WITNESSETH:
----------
WHEREAS, Licensor and Licensee entered into a certain Trademark
License Agreement dated as of April 14, 1986, which agreement was revised
and restated by that certain Amended and Restated Trademark License
Agreement dated as of November 28, 1990, as amended by Amendment Number
One to Amended and Restated Trademark License Agreement dated as of
February 15, 1993, and Amendment Number Two to Amended and Restated
Trademark License Agreement dated as of April 15, 1994, (such agreement
together with all such amendments being referred to hereinafter
collectively as the "License Agreement");
WHEREAS, the parties hereto desire to further amend certain
terms and conditions of the License Agreement; and
WHEREAS, Section 12(d) of the License Agreement permits the License
Agreement to be amended by a writing executed by both the parties thereto,
and both parties are desirous of amending certain provisions of the License
Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms used herein and not
------------------
otherwise defined herein shall have the meaning ascribed to such terms in
the License Agreement.
2. Amendments.
----------
(a) For purposes of amending the term "Products" as defined in
Recital C on the first page of the License Agreement, the following shall
be inserted beginning at line 11 of Recital C immediately following the
parenthetical:
<PAGE>
"sheets, pillow cases, pillow shams, textile window
treatments, synthetic filled comforters and duvet covers and
decorative pillows that coordinate with bedding products"
In addition, the following shall be inserted at line 8 of
Recital C immediately following the words "mattress pads":
"(specifically excluding automatic, electric heating pads)"
(b) Section 7(a) of the License Agreement shall be and hereby is
amended by inserting the following at the end of Section
7(a):
Notwithstanding the above royalty payment schedule, the
parties hereto agree that royalties on sheets, pillow cases,
pillow shams, textile window treatments, synthetic filled
comforters and duvet covers and decorative pillows that
coordinate with bedding products shall be paid by Licensee
on a trial basis for a two and a half (2 1/2) year period
beginning on January 1st, 1995, during which period a five-
percent (5%) rate on net sales shall apply.
3. Affirmation of License Agreement. Except as herein expressly
--------------------------------
amended, the License Agreement shall continue in full force
and effect without change.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the date first written above.
SIMMONS COMPANY
By: /s/ John P. Peterken
------------------------
Title: Sr. Ex. V.P.
LOUISVILLE BEDDING CO.
By: /s/
------------------------
Title: Sr. V.P. Finance
2
<PAGE>
AMENDMENT NUMBER TWO TO
AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT ("the
Amendment") is made and entered into as of this 15th day of April 1994, by
and between SIMMONS COMPANY, a Delaware corporation having its principal
offices at One Concourse Parkway, Suite 600, Atlanta, Georgia 30328
("Licensor"), and LOUISVILLE BEDDING CO., a Delaware corporation having its
principal offices at 10400 Bunsen Way, Louisville, Kentucky 40299
("Licensee"). Capitalized terms used herein and not otherwise defined
herein shall have the meaning given thereto in the License Agreement, as
hereinafter defined.
RECITALS
--------
WHEREAS, Licensor and Licensee entered into a Trademark, License
Agreement dated April 14, 1986, as amended by Amended and Restated
Trademark License Agreement dated November 28, 1990 (the "License
Agreement"), and by Amendment Number One, to Amended and Restated Trademark
License Agreement dated February 15, 1993 (jointly the "Revised License
Agreement") in which Licensor licensed to Licensee certain rights relating
to Products; and
WHEREAS, subsequent to the execution of the License Agreement and
Amendment Number One, the parties have decided to amend certain terms and
conditions of the License Agreement; and
WHEREAS, Section 12(d) of the License Agreement permits the License
Agreement to be amended by a writing executed by both the parties thereto,
and both parties are desirous of amending certain provisions of the License
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendments. Bed ruffles shall be added to the products
----------
identified, in lines eight (8) through eleven (11) of RECITAL: C on the
first page of the License Agreement, as being included in the term
"Products". The remainder of RECITAL: C continues unchanged.
2. Effects on Other Terms and Provisions. To the extent that the
-----------------------------------------
terms and provisions of the Revised License Agreement are not inconsistent
with or contradictory to the revision contained herein, the parties hereto
hereby ratify and confirm each and every such term and provision of the
Revised License Agreement. The Revised License Agreement, as amended
hereby, shall remain in full force and effect.
-8-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned parties has caused this
Amendment to be executed, intending to be legally bound thereby, by its
duly authorized representative as of the day and year first written above.
SIMMONS COMPANY
By: /s/
-----------------------
Title:
--------------------
LOUISVILLE BEDDING CO.
By: /s/
-----------------------
Title:
--------------------
<PAGE>
AMENDED AND RESTATED
TRADEMARK LICENSE AGREEMENT
---------------------------
THIS AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT ("Agreement") is
made and entered into as of the 28th day of November, 1990, by and between
SIMMONS COMPANY, a Delaware corporation having its principal offices at 6
Executive Park Drive, Atlanta, Georgia 30329 (hereinafter the "Licensor"),
and LOUISVILLE BEDDING CO., a Delaware corporation, having its principal
offices at 10400 Bunsen Way, Louisville, Kentucky 40299 ("Licensee").
RECITALS:
---------
A. Licensor and Licensee entered into a Trademark License Agreement
dated April 14, 1986 (the "Former Agreement") under which Licensor granted
Licensee a license to use certain trademarks in connection with certain
bedding accessories.
B. Licensor and Licensee wish to revise and restate the Former
Agreement in accordance with the terms and conditions hereinafter set
forth.
C. Licensor has the sole and exclusive right to the use of the marks
BEAUTYREST and BEAUTY SLEEP, as more fully described in Exhibit A hereto in
connection with certain Products (as hereinafter defined) (hereinafter
designated as the "Trademarks") in the fifty (50) United States and the
District of Columbia (hereinafter designated as the "Territory") and the
right to grant licenses to others for the use of the Trademarks. For
purposes of this Agreement, the term "Products" shall include mattress
pads, mattress covers, pillow protectors and standard bed pillows designed
and used for sleeping (which shall exclude without limitation, decorative
and health pillows); provided, however, that notwithstanding the foregoing,
--------- --------
the term "Products" shall (i) include a convoluted pillow of the type
currently produced and marketed by Licensee under the trademark
"BEAUTYREST" and (ii) exclude any products which may be designated as
containing filling material made of "Down", it being understood that
"Products" shall include any product which may be designated as containing
filling material made of "Feathers". For purposes of this Agreement, the
terms "Down" and "Feathers" shall have the meanings set forth in Guides 1
and 6 of The Federal Trade Commission "Guides For The Feather And Down
Products Industry" promulgated October 29, 1971, a copy of which is
attached hereto as Exhibit B.
D. Licensee wishes to manufacture, market, distribute and sell under
the Trademarks the Products in the Territory.
E. Licensor is willing to grant Licensee a license to manufacture,
market, distribute and sell the Products under the Trademarks within the
United States under the terms and conditions of this Agreement.
<PAGE>
AGREEMENT:
----------
NOW, THEREFORE, the parties hereby agree that effective the date of
this Agreement, the Former Agreement is hereby amended and restated to read
in its entirety as follows:
1. Grant of License; Extent of License.
------------------------------------
(a) Grant of License. Subject to the rights of third parties, if any,
----------------
as set forth in Schedule 1 and pursuant to the terms of this Agreement,
Licensee is hereby granted an exclusive license (the "License"), without
the right to sublicense, for the use of the Trademarks on the Products in
connection with the manufacture, sale and distribution of the Products by
Licensee in the Territory. Licensee shall not use the Trademarks in
connection with any item other than the Products. Licensee will limit its
manufacture, sales and distribution of Products to the Territory and agrees
not to sell the Products to anyone it has reason to believe is purchasing
the Products for export outside thereof. Notwithstanding anything in the
foregoing to the contrary, Licensee shall be entitled to subcontract others
to manufacture the Products to be sold by Licensee under the Trademarks.
(b) Extent of License. Subject to the rights of third parties, if
-----------------
any, as set forth in Schedule 1, Licensor shall not, nor shall it license
another to, manufacture, market, distribute or sell any of the Products
under the Trademarks within the Territory during the Term (as hereinafter
defined). Licensor, however, retains the right to manufacture,
distribute and sell, or license others to manufacture, distribute and sell,
1) items other than the Products under the Trademarks within or without the
Territory or 2) the Products under the Trademarks outside of the Territory.
2. Term and Renewal.
----------------
(a) Term. This Agreement commenced on April 14, 1986 and shall expire
------
on December 31, 1997, unless sooner terminated as provided in paragraphs 6
or 9 of this Agreement (the "Term").
(b) Renewal of Term. Provided that (i) Licensee has paid when due the
---------------
minimum royalties provided in paragraph 7(d) during the Term and (ii)
Licensee has not been in default at any time during the Term of this
Agreement of any of its other obligations under this Agreement, Licensee
may renew, at its option, the License for an additional term of five (5)
years, through December 31, 2002 (the "Renewal Term"), by giving Licensor
written notice of Licensee's election to renew the License at any time
during the period January 1, 1997 through June 30, 1997. The term "Term",
when used in this Agreement, shall include the Renewal Term unless the
context requires otherwise.
<PAGE>
3. Maintenance of Product Ouality.
------------------------------
(a) Standards. Licensee shall manufacture, distribute and sell the
---------
Products under the Trademarks in accordance with quality standards,
specifications, directions and processes set forth by Licensee from time to
time and reasonably acceptable to Licensor (the "Standards").
Notwithstanding the foregoing, the trademark "BEAUTYREST" shall be used
only in connection with Products of higher quality compared to other
Products distributed and sold by Licensee in the Territory, while the
trademark "BEAUTY SLEEP" shall be used only in connection with Products of
middle-level quality compared to other Products distributed and sold by
Licensee in the Territory. The Licensee shall not sell the Products to
wholesalers, jobbers or to anyone it believes is purchasing the Products
for transshipment to other retailers, and all sales will be made directly
to retail outlets.
(b) Inspection. Licensee shall permit duly authorized representatives
----------
of Licensor to have access to Licensee's facilities during normal business
hours for the purpose of inspecting the Products in manufacture and
completed Products to determine whether the Products are in accordance with
the Standards.
(c) Samples. Licensee shall submit to Licensor, or to its duly
-------
authorized representative, samples of each Product which Licensee intends
to sell under the Trademarks. If Licensor determines that the sample
fails to comply with the Standards, Licensor must promptly notify Licensee
of the deficiency within 20 days of Licensor's receipt of such sample. If
Licensor fails to disapprove within the 20-day period any sample submitted
to it, such sample shall be deemed to be in compliance with the Standards.
4. Use of Trademarks.
-----------------
(a) Manner of Trademark Usage. Licensee agrees that the Trademarks
--------------------------
shall be physically affixed or attached to the Products sold under the
Trademarks in such a manner so as to at all times preserve the validity of
the Trademarks, and that Licensee will not do any act that will in any way
impair or adversely affect the validity of the Trademarks. Licensee agrees
that it will not use any other name or trademark in association with the
Trademarks, either on the Products, or in connection with the packaging in
which the said Products, or in connection with any consumer advertising and
publicity, which shall consist of the name of any person, firm or
corporation. Licensee shall provide Licensor samples of all literature,
packages, labels and labelings prepared by Licensee. If Licensor fails to
object to any label, package or literature submitted to it within 20 days
following receipt by it of such materials, Licensor shall be deemed to have
approved such material for use by Licensee.
<PAGE>
Schedule 1
----------
1. Agreement dated June 29, 1990 among Simmons Company, Simmons I. P.,
Inc. and Simmons Canada, Inc. which permits the licensee
thereunder to manufacture (not sell, market or distribute) products
in the United States for export to and sale in Canada under certain of
the Canadian counterparts to the Trademarks.
2. Agreement dated May 21, 1990 between Simmons Company and Compania Simmons
S.A. de C.V. which permits the licensee thereunder to manufacture (not
sell, market or distribute) products in the United States for export to
and sale in Mexico under certain of the Mexican counterparts to the
Trademarks.
<PAGE>
AMENDMENT NUMBER ONE TO
AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED TRADEMARK LICENSE AGREEMENT (the
"Amendment") is made and entered into as of this 15th day of February,
1993, by and between SIMMONS COMPANY, a Delaware corporation having its
principal offices at One Concourse Parkway, Suite 600, Atlanta, Georgia
30328 ("Licensor") and LOUISVILLE BEDDING CO., a Delaware corporation
having its principal offices at 10400 Bunsen Way, Louisville, Kentucky
40299 ("Licensee"). Capitalized terms used herein and not otherwise
defined herein shall have the meaning given thereto in the License
Agreement, as hereinafter defined.
RECITALS
--------
WHEREAS, Licensor and Licensee entered into a Trademark License
Agreement dated April 14, 1986, as amended by Amended and Restated
Trademark License Agreement dated November 28, 1990 (the "License
Agreement"), in which Licensor licensed to Licensee certain rights relating
to Products; and
WHEREAS, subsequent to the execution of the License Agreement, the
parties have decided to amend certain terms and conditions of the License
Agreement; and
WHEREAS, Section 12(d) of the License Agreement permits the License
Agreement to be amended by a writing executed by both the parties thereto,
and both parties are desirous of amending certain provisions of the License
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendments. The License Agreement shall be and is hereby amended
----------
as follows:
(a) Section 7 of the Amended and Restated Trademark License Agreement
shall be amended in respect of the period January 1 - December 31, 1993
only as follows:
Royalty. Licensee shall pay Licensor as a royalty for the License the
following percentages of the net selling price of the Products sold under
the Trademarks within the Territory during the calendar year 1993:
(a) 6% of all net sales (being an aggregate amount of individual unit
sales multiplied by their respective net selling prices) to all Licensee
customers other than WAL-MART STORES INC.
<PAGE>
(b) 3 1/2% of net sales to WAL-MART STORES INC., provided that (i)
Licensee has paid to Licensor a royalty of 6% on net sales of at least
US$34,700,000 in (a) above and (ii) this 3 1/2% rate shall not apply to
any sales to WAL-MART STORES INC. that are included in that
US$34,700,000 net sales figure.
2. Effects on Other Terms and Provisions. To the extent that the
---------------------------------------
terms and provisions of the License Agreement are not inconsistent with or
contradictory to the revision contained herein, the parties hereto hereby
ratify and confirm each and every such term and provision of the License
Agreement. The original License Agreement, as amended hereby, shall remain
in full force and effect.
IN WITNESS WHEREOF, each of the undersigned parties has caused this
Amendment to be executed, intending to be legally bound thereby, by its
duly authorized representative as of the day and year first above written.
SIMMONS COMPANY
By /s/
------------------------
Its
------------------------
LOUISVILLE BEDDING CO.
By
------------------------
Its
------------------------
2
<PAGE>
DOWN PRODUCTS TRADEMARK LICENSE AGREEMENT
-----------------------------------------
THIS TRADEMARK LICENSE AGREEMENT ("Agreement") is made and entered into
as of the 1st day of January, 1995, by and between SIMMONS COMPANY, a
Delaware corporation having its principal offices at One Concourse Parkway,
Suite 600, Atlanta, Georgia 30328 (hereinafter the "Licensor"), and
LOUISVILLE BEDDING CO., a Delaware corporation, having its principal
offices at 10400 Bunsen Way, Louisville, Kentucky 40299 ("Licensee").
RECITALS:
--------
A. Licensor and Licensee entered into an Amended and Restated
Trademark License Agreement dated November 28, 1990 (subsequently thrice
amended, (No. 1) on February 15, 1993, (No.2) on April 15, 1990, and (No.
3) on November 21, 1994) ("Non-Down Agreement") under which Licensor
granted Licensee a license to use certain trademarks in connection with
certain bedding accessories, excluding, however, down products.
B. Licensor and Licensee entered into a license agreement covering
certain down products on January 4, 1991 (subsequently amended (No. 1) on
February 15, 1993 and (No. 2) on December 20, 1993), which license
terminated on December 31, 1994.
C. Licensor and Licensee wish to enter into a license agreement
covering certain down products in accordance with the terms and conditions
hereinafter set forth.
D. Licensor has the sole and exclusive right to the use of the marks
BEAUTYREST and BEAUTY SLEEP, as more fully described in EXHIBIT A hereto in
connection with certain Products (as hereinafter defined) (hereinafter
designated as the "Trademarks") in the fifty (50) United States and the
District of Columbia (hereinafter designated as the "Territory") and the
right to grant licenses to others for the use of the Trademarks. For
purposes of this Agreement, the term "Products" shall include comforters,
mattress covers and standard bed pillows designed and used for sleeping
(which shall exclude without limitation, decorative and health pillows);
provided, however, that notwithstanding the foregoing, the term "Products"
-------- -------
shall include only products that may be designated as containing filling
material made of "Down". For purposes of this Agreement, the term "Down"
shall have the meaning set forth in Guides 1 and 6 of The Federal Trade
Commission "Guides For The Feather And Down Products Industry" promulgated
October 29, 1971, a copy of which is attached hereto as EXHIBIT B.
E. Licensee wishes to manufacture, market, distribute and sell under
the Trademarks the Products in the Territory.
F. Licensor is willing to grant Licensee a license to manufacture,
market, distribute and sell the Products under the Trademarks within the
United States under the terms and conditions of this Agreement.
<PAGE>
AGREEMENT:
---------
NOW, THEREFORE, the parties hereby agree as follows:
1. Grant of License; Extent of License.
-----------------------------------
(a) Grant of License. Subject to the rights of third parties, if
----------------
any, as set forth in Schedule 1 hereto, and pursuant to the terms of this
Agreement, Licensor hereby grants an exclusive license (the "License"),
without the right to sublicense, for the use of the Trademarks on the
Products in connection with the manufacture, advertising, marketing, sale
and distribution of the Products by Licensee in the Territory. Licensee
shall limit its manufacture, sales and distribution of Products to the
Territory and shall not sell the Products to anyone it has reason to
believe is purchasing the Products for export outside the Territory. In the
event of any dispute between the parties to this Agreement regarding the
definition of the Products, the final decision regarding such definition
shall rest in Licensor's sole and absolute discretion. The rights granted
to Licensee herein are limited to use on or in connection with the
Products, and Licensee specifically agrees not to use the Trademarks in any
manner or on any product, service or item, except as set forth in this
Agreement. Notwithstanding anything in the foregoing to the contrary,
Licensee shall be entitled to subcontract others to manufacture the
Products to be sold by Licensee under the Trademarks.
(b) Extent of License. Subject to the rights of third parties, if
------------------
any, as set forth in Schedule 1 hereto, Licensor shall not, nor shall it
license another to, manufacture, market, distribute or sell any of the
Products under the Trademarks within the Territory during the Term (as
hereinafter defined). Licensor, however, retains the right to manufacture,
advertise, market, distribute and sell, or license others to manufacture,
advertise, market, distribute and sell, 1) items other than the Products
under the Trademarks within or without the Territory or 2) the Products
under the Trademarks outside of the Territory.
2. Term. This Agreement shall commence as of January 1, 1995 and
----
shall expire on December 31, 1995, unless sooner terminated as provided in
paragraphs 6 or 9 of this Agreement (the "Term"), or unless, extended by
the mutual consent of the parties thereto, on conditions to be negotiated
before December 1, 1995.
3. Maintenance of Product Quality.
------------------------------
(a) Standards. Licensee shall manufacture, distribute and sell the
Products under the Trademarks in accordance with quality standards,
specifications, directions and processes set forth by Licensee from time to
time and reasonably acceptable to Licensor (the "Standards").
Notwithstanding the foregoing, the trademark "BEAUTYREST" shall be used
only in connection with Products of higher quality compared to other
Products distributed
<PAGE>
and sold by Licensee in the Territory, while the trademark "BEAUTYSLEEP"
shall be used only in connection with Products of middle-level quality
compared to other Products distributed and sold by Licensee in the
Territory. Without Licensor's prior written consent, the Licensee shall not
sell the Products to wholesalers, jobbers or to anyone it believes is
purchasing the Products for transshipment to other retailers, and all sales
will be made directly to retail outlets.
(b) Inspection. Licensee shall permit duly authorized representatives
----------
of Licensor to have access to Licensee's facilities during normal business
hours for the purpose of inspecting the Products in manufacture and
completed Products to determine whether the Products are in accordance with
the Standards.
(c) Specimens and Samples. Upon request by Licensor, but not more
------------------------
frequently than every four (4) months, Licensee shall submit to Licensor,
or its duly authorized representative, not less than two (2) randomly
selected production run samples of each Product which Licensee intends to
sell under the Trademarks. If Licensor determines that the sample fails to
comply with the Standards, Licensor must promptly notify Licensee of the
deficiency within 20 days of Licensor's receipt of such sample. If Licensor
fails to disapprove within the 20-day period any sample submitted to it,
such sample shall be deemed to be in compliance with the Standards.
(d) Quality Consistency. Without the prior written approval of
-------------------
Licensor, Licensee shall not sell or distribute any Product sold under the
Trademarks that deviates from the Standards to a greater extent than would
occur as a result of normal deviations in raw material characteristics and
to a greater extent than results from manufacturing deviations that would
not cause such Product to become a manufacturing "second". Notwithstanding
the foregoing, pillow ticking with substandard printing may be used in the
manufacturing and sale of pillows provided they are clearly marked as
"Seconds" or "Irregular" before sale to the retail trade or end-consumer as
applicable.
4. Use of Trademarks.
------------------
(a) Manner of Trademark Usage. Licensee agrees that the Trademarks
---------------------------
shall be physically affixed or attached to the Products sold under the
Trademarks in such a manner so as to at all times preserve the validity of
the Trademarks, and that Licensee shall not do any act that will in any way
impair or adversely affect the validity of the Trademarks. Licensee shall
not use any other name or trademark in association with the Trademarks,
either on the Products, or in connection with the packaging for the
Products, or in connection with any consumer advertising and publicity,
which shall consist of the name of any person, firm or corporation.
Licensee shall provide Licensor samples of all literature,
3
<PAGE>
packages, labels and labelings prepared by Licensee. If Licensor fails to
object to any label, package or literature submitted to it within 20 days
following receipt by it of such materials, Licensor shall be deemed to have
approved such material for use by Licensee.
(b) Reference to Ownership. Licensee shall use on the Products such
-----------------------
legends as Licensor shall require to indicate that the Products and use of
the Trademarks is pursuant to license from Licensor. All Products, labels,
hangtags, packaging, advertising and the like must bear appropriate notices
such as the following unless otherwise specified or agreed to by Licensor:
i. BEAUTYREST(R) is a registered trademark of Simmons
Company; or
ii. "Licensed Article" manufactured by Louisville Bedding Co.
under exclusive license from Simmons Company, the
trademark owner.
5. Advertising. All advertising by Licensee in any medium shall be
-----------
conducted in a dignified manner. Licensee shall have the authority to
direct all advertising programs with discretion over the creative concepts,
materials and media used in such a program, subject to Licensor's review.
Licensee shall use its best efforts to monitor such advertising by its
customers and shall terminate sales of Products to any customers which
persistently misuse the Trademarks.
6. Infringement of Trademark: Registration of Licensee.
------------------------- -------------------------
Infringement. (i) Licensee shall apprise Licensor immediately upon
------------
discovery of any possible infringement of the Trademarks, or any act of
unfair competition by third parties relating to the Trademarks, whenever
such infringement or act shall come to Licensee's attention. After receipt
of such notice from Licensee, Licensor may, in Licensor's discretion, take
such action to stop such infringement or act as Licensor may deem necessary
to protect the Trademarks for use on Products within the Territory. In
connection therewith, Licensee shall cooperate fully with Licensor to stop
such infringement or act and, if so requested by Licensor, shall join with
Licensor as a party to any action brought by Licensor for such purpose.
Licensor shall have full control over any action taken, including without
limitation, the right to select counsel, to settle on any terms it deems
advisable in its discretion, to appeal any adverse decision rendered in any
court, to discontinue any action taken by Licensor, and otherwise to make
any decision in respect thereto as it in its discretion deems advisable.
Licensor shall bear all expenses connected with the foregoing, except that
if Licensee desires to retain its own counsel, it shall do so at its own
expense. If, after deducting all expenses, including all of Licensor's
reasonable counsel fees and other litigation expenses, there is a net
recovery resulting
4
<PAGE>
from such an action, Licensee shall be entitled to damages specifically
allocated to Licensee net of said expenses and fees or ten percent of said
net recovery, whichever is greater.
(ii) Licensor shall have the sole power to take or omit to take legal
or other action, before any court or governmental authority or otherwise,
with respect to infringement of or the protection of the Trademarks and if
Licensor shall determine, in its discretion, that it would not be in the
best interests of Licensor's business, viewed as a whole, to take any such
action, Licensor may determine to omit from taking such action. Further,
Licensor reserves the right to settle any claim asserted against it or
Licensee based upon Licensee's use of the Trademarks by agreeing to an
injunction with respect to the use of the Trademarks in connection with one
or more of the Products.
(iii) Prior to taking or omitting to take any action which shall affect
in any manner Licensee's right to use the Trademarks under the terms of
this Agreement, Licensor shall advise Licensee of Licensor's decision.
If, in Licensee's reasonable judgment, its rights under this Agreement
would be materially impaired as a result of Licensor's actions or
omissions, Licensee shall have the option, for a period of 60 days
following notice from Licensor, either to: (a) have the royalties due
hereunder ratably and equitably reduced to such lower rates as the parties
may agree to reflect any restriction on the scope of Licensee's rights
hereunder as a result of Licensor's actions or failures so to act or to
reflect diminution in the value of the license granted hereby, taking into
account, among other factors, the volume of the allegedly infringing
merchandise, the costs and expenses which would likely be incurred in any
effort to stop such infringement, and the likelihood of success of any such
effort; or (b) terminate the License and collect from Licensor all of
Licensee's out-of-pocket expenses reasonably incurred in connection with
the termination of this License. If, within 90 days after notice by
Licensee to Licensor of Licensee's election to have the royalties reduced,
the parties have not reached agreement regarding such reduction, then the
issue shall be submitted to arbitration in accordance with the provisions
of paragraph 6(b) hereof.
7. Royalty Payment; Records.
-------------------------
(a) Royalty. Subject to any applicable minimum royalties payable
-------
pursuant to paragraph 7 (d) hereof, Licensee shall pay Licensor as a
royalty for the License six (6) percent of the aggregate Net Selling Price
of the Products sold in 1995 under the Trademarks within the Territory.
"Net selling price" shall mean the invoice price less (i) quantity and cash
discounts actually allowed thereon, (ii) refunds for returned items, (iii)
sales and excise taxes and (iv) allowances for cooperative advertising
directly relating to the Products. For
5
<PAGE>
purposes of this Agreement, the royalty shall accrue on the sale of the
Products, and the Products shall be considered sold when billed by
Licensee.
(b) Payment of Royalty. Within 30 days after the close of each calendar
------------------
quarter within the Term, Licensee shall furnish Licensor with a royalty
statement showing the total number of Products sold under the Trademarks
during the immediately preceding calendar quarter, listing total royalties
earned by Licensor and all deductions from the gross selling price of
Products as listed in paragraph 7(a). At the time of furnishing such
statement, Licensee shall remit to Licensor the royalties earned as shown
by such statement. The first statement shall include all Products sold
under the Trademarks within the Territory between the date hereof and the
expiration of the first full calendar quarter thereafter.
Notwithstanding the foregoing, beginning for the quarter ended March 31,
1995 and for each calendar quarter thereafter, Licensee shall pay Licensor
within 30 days after the close of each such quarter the greater of (i)
actual royalties earned and payable for that quarter or (ii) 25% of the
minimum annual royalty specified in paragraph 7(d) hereof.
(c) Maintenance of Records. Licensee shall maintain and preserve, for
----------------------
at least three years after the royalty payments are made, complete records
sufficient to determine royalty payments hereunder, in accordance with
generally accepted accounting principles applied on a consistent basis.
Licensor shall be permitted access to such records at any time during
normal business hours on 30 days' prior written notice to Licensee unless
Licensee objects. Upon such an objection, such access to such records shall
be limited to an independent certified public accountant of Licensor's
choice, the expense of which shall be shared by Licensor and Licensee
equally. If an audit of Licensee's books by an independent certified
public accountant shows an underpayment to Licensor of greater than three
percent (3%), then in addition to the payment of the underpayment and
interest, Licensee will also pay the entire costs incurred by Licensor in
performing the audit.
(d) Minimum Royalties. The Licensee shall pay the Licensor minimum
-----------------
annual royalties during the Term of the Agreement as specified herein. Such
minimum royalties shall be paid on a quarterly basis within thirty (30)
days of the end of each relevant calendar quarter as specified in paragraph
7(b) above. For the calendar year 1995, the minimum royalty shall be
$50,000.00.
8. Indemnification.
---------------
(a) By Licensee. Licensee shall indemnify Licensor against, and
-----------
hold it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by
6
<PAGE>
Licensor arising out of or resulting from the activities of Licensee under
this Agreement, including any products liability claim.
(b) By Licensor. Licensor shall indemnify Licensee against, and hold
-----------
it harmless from, all claims, demands, actions, causes of action,
proceedings, damages, losses, expenses (including legal expenses) and
judgments of any kind or nature incurred by Licensee arising out of or
resulting from Licensee's use of the Trademarks pursuant to and in
compliance with this Agreement. Licensor shall not be responsible for lost
profits or damage to Licensee's goodwill which may result in the event
Licensee is enjoined from using any of the Trademarks.
(c) Right of Set-off. Upon the occurrence of any event for which either
----------------
party is entitled to indemnification by the other under the provisions of
this Agreement, the party entitled to indemnification shall have all of the
rights and remedies available to it at law, in equity, in bankruptcy or
otherwise and, in addition, shall have the right to off-set the amount for
which it is entitled to indemnification against any amount that it may at
any time owe the other.
(d) Notice. Each party agrees to promptly notify the other party in the
------
event a claim is asserted against it which may invoke any of the provisions
of this paragraph.
(e) Defenses. Once one party (the "Indemnifying Party") has taken
reasonable steps to defend or otherwise resolve a claim made against the
other party, and so notified the other party, any legal expenses incurred
by the other party after such notification shall be for its own account
unless the Indemnifying Party has discontinued taking such reasonable steps
to resolve said claims.
9. Termination.
-----------
(a) By Licensor. Licensee shall be in default and Licensor may
-----------
terminate, at its option, the License and all rights granted Licensee
hereunder, if Licensee fails to pay any sum when due, or makes any false
reports or commits any material breach of any covenant contained herein,
and fails to remedy such breach within 30 days after receipt of notice from
Licensor specifying the nature of the breach; provided, however, that if
the nature of the default is curable but is such that it cannot be cured
within 30 days, Licensee shall have a reasonable additional time to effect
such cure, upon the condition that Licensee shall proceed diligently and
continuously to effect same. Licensor shall have the right to terminate the
Agreement immediately upon notice in the event of a wilful breach of any
covenant of this Agreement by Licensee.
(b) By Licensee. Licensor shall be in default and
-----------
7
<PAGE>
Licensee may terminate, at its option, the Agreement if Licensor commits
any material breach of any covenant contained herein, and fails to remedy
such breach within 30 days after receipt of notice from Licensee specifying
the nature of the breach.
(c) Continuance of Use of Trademarks. On termination or expiration of
---------------------------------
the Agreement for any reason, Licensee shall have, for a period of 90 days
thereafter, the right to dispose of all unsold Products embodying or
bearing the Trademarks that were completed by it prior to the termination
or expiration of the Term. Thereafter, Licensee shall discontinue use of
the Trademarks and shall no longer use or have any right to use the
Trademarks or any formulative thereof which may be confusingly similar to
the Trademarks. After expiration of the 90-day period following
termination or the expiration of the Term, any accrued and unpaid royalties
for Products sold during the Term or during the 90-day period after
termination or expiration of the Term shall become due and payable
immediately.
10. Ownership of Trademarks. Licensee acknowledges Licensor's
-----------------------
exclusive right, title and interest in and to the registrations of the
Trademarks and its sole and exclusive right to the use thereof and will not
at any time do or cause to be done any act or thing contesting or in any
way impairing or tending to impair any part of such right, title and
interest. In connection with the use of the Trademarks, Licensee shall not
in any manner represent that it has any ownership in the Trademarks or
registrations thereof. Licensee acknowledges that use of the Trademarks
shall not create in Licensee's favor any right, title or interest in or to
the Trademarks. All uses of the Trademarks by Licensee shall inure to the
benefit of Licensor.
11. Sleep Galleries. Notwithstanding anything to the contrary in
---------------
this Agreement, Licensor shall be permitted to manufacture, market, sell or
distribute the Products under the Trademarks, either within or without the
Territory, or otherwise, for, to or through Licensor's Sleep Gallery retail
stores, whether such stores are operated and/or owned by Licensor,
Licensor's authorized dealers or franchisees, or by others.
12. Notices. Any notices required or permitted to be given under this
-------
Agreement shall be in writing and shall be personally delivered, mailed by
certified or registered mail, postage prepaid, or deposited with a
reputable overnight delivery service addressed to the party to be notified
at its address shown at the beginning of this Agreement, or at such other
address as may be furnished in writing by either party to the other.
Notice delivered in compliance herewith shall be deemed delivered upon
personal delivery or upon deposit with the U.S. mail or a reputable
overnight delivery service, except that notice of change of address shall
not be deemed delivered until actual receipt by the intended recipient.
8
<PAGE>
13. Miscellaneous Provisions.
-------------------------
(a) Governing Law: Arbitration. Without reference to any provisions
---------------------------
relating to conflicts of law, this Agreement and all rights and obligations
of the parties herein shall be construed and enforced in accordance with
the laws of the Commonwealth of Kentucky should Licensor bring an action
against Licensee based upon this Agreement, and in accordance with the laws
of the State of Georgia should Licensee bring such an action against
Licensor. In the event that any dispute, controversy or claim arises out of
or relates to this Agreement including without limitation, dispute under
paragraph 6 of this Agreement arising from the parties' failure to reach
agreement regarding a reduction in the royalty rate to reflect any
restriction on the scope of Licensee's rights under the Agreement as a
result of Licensor's decision not to take action against a third party that
is infringing the Trademarks and the same cannot be settled through
negotiation, the parties first shall attempt in good faith to settle such
dispute by mediation administered by the American Arbitration Association
under its Commercial Mediation Rules. In the event the parties are
unsuccessful in resolving such dispute through mediation, the parties shall
submit to arbitration in Atlanta, Georgia administered by the American
Arbitration Association, under its Commercial Arbitration Rules before a
single arbitrator if the parties shall agree upon one, or by one arbitrator
appointed by each party and a third arbitrator designated by the other
arbitrators. In case of any failure of a party to make an appointment of
an arbitrator, or of the two arbitrators to agree upon a third arbitrator,
in either such case within two (2) weeks after commencement of the
arbitration, such appointment shall be made by the American Arbitration
Association in Atlanta, Georgia. Unless otherwise agreed by the parties
hereto, all such arbitration proceedings shall be held in Atlanta, Georgia.
In any such arbitration, the parties agree that document discovery shall be
permitted at the discretion of the Arbitrator, but in no event shall
depositions be taken. Each party agrees to comply with any award made in
any such proceeding and to the entry of a judgment in any court having
jurisdiction over arbitration proceedings upon any award rendered in such
proceeding. The decision of the arbitrators shall be rendered within thirty
(30) days after the final submissions of the parties. The allocation of
expenses of the arbitration, including reasonable attorney's fees, shall be
determined by the arbitrator(s), or in the absence of such determination,
each party shall pay its own expenses.
(b) Assignment. This Agreement may be assigned by Licensee in
----------
connection with a merger, consolidation or sale of substantially all the
business and assets of Licensee unless said assignment is, in Licensor's
reasonable judgment, to a direct competitor of Licensor. Licensee agrees to
provide prompt notice to Licensor of any such assignment. The Agreement
shall not otherwise be assignable by Licensee in the absence of Licensor's
9
<PAGE>
prior written consent. Licensor may assign this Agreement and its rights
and obligations herein without the prior written consent of Licensee.
Subject to the foregoing, this Agreement shall inure to the benefit of, and
be binding upon, the parties and their respective successors and assigns.
Any sale of assets by Licensor including the Trademarks shall be subject to
the obligations of this Agreement.
(c) Independent Contractor Relationship. The parties understand and
------------------------------------
agree that this Agreement does not create a fiduciary relationship between
them, that Licensee shall be an independent contractor of Licensor and that
nothing in this Agreement is intended to constitute either party as an
agent, legal representative, subsidiary, joint venturer, partner, employee
or servant of the other for any purpose whatsoever. During the Term,
Licensee shall hold itself out to the public as an independent contractor
operating pursuant to a license agreement. Licensee and Licensor
understand and agree that nothing in this Agreement authorizes either to
make any contract, agreement, warranty or representation for or on behalf
of the other, or to incur any debt or obligation in the other's name.
(d) Entire Agreement; Amendment. This Agreement constitutes the
----------------------------
entire agreement between Licensor and Licensee concerning its subject
matter. It supersedes all prior agreements, correspondence, representations
and writings regarding its subject matter. No amendment, modification or
supplement of this Agreement shall be binding unless executed in writing by
both of the parties hereto.
(e) Waiver. Any failure by either party to exercise any right created
hereby shall not constitute a waiver by that party of such right. No waiver
by either party of any provision of this Agreement shall be deemed, or will
constitute, a waiver of any other provision, whether or not similar, nor
will any waiver constitute a continuing waiver. No waiver will be binding
unless executed in writing by the party making the waiver.
(f) Severability of Provisions. If any provision of this Agreement is
--------------------------
held to be illegal, invalid or unenforceable under present or future laws,
such provisions shall be fully severable. The Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provisions had
never comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be
affected by the legal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal,
invalid or unenforceable provision, there shall be added automatically as
part of this Agreement, a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid
or enforceable.
10
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, all of which
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as
of the date first written above.
SIMMONS COMPANY
By: /s/
------------------------
Title:
--------------------
LOUISVILLE BEDDING CO.
By: /s/
------------------------
Title:
--------------------
11
<PAGE>
Schedule 1
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Agreement dated June 29, 1990 among Simmons Company, Simmons I. P., Inc.
and Simmons Canada, Inc. which permits the licensee thereunder to
manufacture (not sell, market or distribute) products in the United States
for export to and sale in Canada under certain of the Canadian counterparts
to the Trademarks.
Agreement dated May 21, 1990 between Simmons Company and Compania Simmons
S.A. de C.V. which permits the licensee thereunder to manufacture (not
sell, market or distribute) products in the United States for export to and
sale in Mexico under certain of the Mexican counterparts to the Trademarks.
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Exhibit A
Trademark Name Registration No. Registration Expiration
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BEAUTYREST 512,535 July 19, 2009
BEAUTY SLEEP 1,198,771 June 22, 2002
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Exhibit 10.53
EXHIBIT 8.9
AGREEMENT
AGREEMENT made this 30th day of October, 1986, by and among SIMMONS
U.S.A. CORPORATION, a corporation duly created, organized and existing
under and by virtue of the laws of Delaware, having its office and
principal place of business at 6 Executive Park Drive, Atlanta, Georgia
30329 (hereinafter designated as the "Licensor"), SIMMONS UNIVERSAL
CORPORATION, a corporation duly created, organized and existing under
and by virtue of the laws of Delaware, having its office and principal
place of business at 15 Columbus Circle, New York, New York 10023
(hereinafter designated as the "Licensee"), Simmons Juvenile Products
Company Inc., and Hausted, Inc..
W I T N E S S E T H:
WHEREAS, Licensor is the owner of the trademarks listed on the
attached Schedule, hereinafter designated as the "Trademarks," in the
United States and its territories, hereinafter the "Licensed Territory",
and the right to grant licenses to others for the use of said
"Trademarks";
WHEREAS, Licensee desires to obtain the right to use the Trademarks
in connection with certain products manufactured, distributed, or sold
by it or its divisions or affiliates; and
WHEREAS, Licensor and Licensee desire to enter into an agreement
whereby Licensor shall supply Licensee with pocketed coil innerspring
assemblies for use within crib mattresses and mattresses for its
healthcare business.
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NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
DEFINITIONS
1.(a) "First Licensed Articles" shall mean furniture primarily
intended for the healthcare market including hospital beds, wheeled
stretchers, crib mattresses for hospital cribs, foam pads for pediatric
beds, bassinets, stretchers and special care beds with at least four
inch diameter wheels, bedside cabinets, overbed tables, other furniture
items for the healthcare market, and components thereof. Specifically
excluded are all other innerspring, foam, or other types of mattresses.
1.(b) "Second Licensed Articles" shall mean furniture and ancillary
items primarily intended for the juvenile market including cribs,
chairs, strollers, desks, chests, dressing tables, mirrors, dressing
kits, hutches, dressers, canopy kits, night stands, mattresses for the
juvenile market (excluding crib mattresses for hospital cribs), fabric
crib accessories, safety bumpers, other furniture and ancillary items
for the juvenile market, and components thereof.
1.(c) For the purposes of this Agreement, "mattresses for the
juvenile market" shall mean mattresses at least ten percent smaller in
length and width than "twin" size mattresses historically marketed by
Licensor in the United States, and at least ten percent smaller in
length and width than 185cm x 85cm for any such mattresses which may be
exported outside the United States by Licensee.
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GRANT OR LICENSE AND TERM
2.(a) Licensor hereby grants to Licensee, subject to the terms and
conditions of this Agreement, an exclusive, royalty-free license for the
use, in the Licensed Territory, of the Trademarks listed in Group A of
the Schedule attached hereto on or in connection with the First Licensed
Articles except that the license shall be non-exclusive with respect to
pads and to crib mattresses for hospital cribs. Licensor further
authorizes Licensee to use the term "Simmons Healthcare" as all or part
of the name of any incorporated or unincorporated business entity it may
control in connection with manufacturing, distributing, and/or selling
the First Licensed Articles. The licenses to use the term "Simmons
Healthcare" and to use the mark "SIMMONS" shall not apply to the
business presently operated by Licensee in Medina, Ohio under the name
of Hausted, Inc., or Hausted, Inc.'s successors or assigns. The license
to use the trademark "SIMLOK" shall not apply to the business presently
operated by Licensee in Charlotte, North Carolina, under the name of
Simmons Healthcare, or Simmons Healthcare's successors or assigns.
2.(b) Licensor hereby grants to Licensee, subject to the terms and
conditions of this Agreement, an exclusive, royalty-free license for the
use, in the Licensed Territory, of the Trademarks listed in Group B of
the Schedule attached hereto on or in connection with the Second
Licensed Articles. Licensor further authorizes Licensee to use the
term "Simmons Juvenile Products" as all or part of the name of any
incorporated or unincorporated business entity it may control in
connection with manufacturing, distributing, and/or selling the Second
Licensed
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Articles. The exclusive license to use the trademarks BABY BEAUTYREST
BACK CARE, BEAUTYREST, and MAXIPEDIC shall be limited to use in
connection with mattresses for the juvenile market.
2.(c) The licenses granted hereunder shall extend, respectively, for
as long as Licensee, its successors, or assigns continue to make
sufficient use of the Trademarks in connection with the First Licensed
Articles or the Second Licensed Articles, respectively, so as to at all
time constitute legal use (i.e., true commercial use sufficient to avoid
a finding of abandonment of said Trademarks by the U.S. Patent and
Trademark Office within the class(es) of goods within which the Licensed
Articles are classified or by a court of competent jurisdiction which
finding is final and nonappealable or to avoid a finding of abandonment
of said Trademarks within the class(es) of goods within which the
Licensed Articles are classified by the U.S. Patent and Trademark
Office). Use of the Trademarks in connection with all of the First and
Second Licensed Articles, respectively, shall not be a prerequisite for
the continuation of the respective licenses.
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MANUFACTURE AND DISTRIBUTION REQUIREMENTS
3.(a) The First Licensed Articles and Second Licensed Articles
distributed or sold by Licensee under or in connection with the
Trademarks shall be at least generally the same as the quality of its
present product line, the quality of which has been approved by
Licensor. Material changes to the First Licensed Articles and/or Second
Licensed Articles which are likely to result in a substantial decrease
in the quality thereof shall not be made without the prior written
approval of the Licensor, which approval will not be withheld unless
such decrease in quality is likely to materially impair the good will
attached to the Trademarks or any other marks owned by Licensor. Any
such disapproval shall indicate the specific reasons therefor and shall
be made in a reasonable time of Licensee's request for such approval.
Such approval shall not be withheld for changes of quality which are at
a level comparable to that maintained by Licensee's principal competitors
in the markets in which they currently compete with Licensee.
3.(b) All packaging and advertising of the First Licensed Articles
and Second Licensed Articles in connection with the Trademarks shall be
in good taste and consistent with the standards maintained during the
two years prior to this Agreement, Licensor having approved said
standards, and/or at a level comparable to that maintained by
Licensee's principal competitors in the markets in which they currently
compete.
3.(c) Licensee shall not use the trademarks BEAUTYREST or BABY
BEAUTYREST BACK CARE, or any mark including the term BEAUTYREST in
connection with crib mattresses unless such mattresses contain pocketed
coil innerspring assemblies.
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Notwithstanding the foregoing, if Licensor commences the use of
the trademark BEAUTYREST on mattresses which do not include pocketed
coil innerspring assemblies, or if Licensor discontinues supplying
pocketed coil innerspring assemblies to Licensee pursuant to paragraph
5, the restrictions in the preceding sentence shall not apply subject to
paragraph 5(a).
3.(d) The Trademarks may be used by Licensee only in connection with
the sale and distribution of the First Licensed Articles and
Second Licensed Articles and for no other purposes.
Notwithstanding the preceding sentence, the mark SIMMONS may
be used as part of the name(s) of the respective business
entities specified in paragraphs 2(a) and 2(b).
3.(e) Licensor shall have the right, during the term of this
Agreement, to inspect the portion(s) of the premises of
licensee wherein First Licensed Articles and/or Second Licensed
Articles are manufactured, work-in-progress, and finished
products to be sold under any of the Trademarks, during normal
business hours and upon reasonable notice solely for the
purpose of assuring that the requirements set forth in
paragraphs 3(a), 3(c) and 3(d) are fulfilled.
3.(f) Licensee agrees that all wares sold in association with the
Trademarks shall comply with all relevant federal, state and
municipal laws and regulations. Licensee further agrees to
apply proper trademark notices (e.g. (R) or TM) wherever
appropriate. For this purpose, should Licensor obtain federal
registration of any of the Trademarks not registered as of the
date of this Agreement, or should any of the existing
registrations of the Trademarks be cancelled, Licensor shall
promptly advise Licensee so that it may be aware of the proper
trademark notices to be utilized.
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3.(g) Licensee shall furnish Licensor with samples of all labels on
which any of the Trademarks are utilized.
3.(h) Nothing in this paragraph shall require Licensee to improve
the quality of Licensed Articles beyond the level existing as of the
date of this Agreement,
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USE OF TRADEMARKS
4.(a) Except as specifically granted in this Agreement, Licensee
agrees that it does not acquire any right to use the Trademarks or other
rights in and to the Trademarks. Licensee acknowledges and admits the
validity of the Trademark registrations on the attached schedule and the
ownership thereof by Licensor.
4.(b) Licensee agrees that it will not do any act or fail to do any
act that will in any way impair or affect the validity of the
registrations of the Trademarks.
4.(c)(i) Licensee shall be entitled to employ any stylized
version of the Trademarks previously or currently stylized by Licensor
or Licensee. The business entity operated by Licensee under the name
"Simmons Juvenile Products Company, Inc." in New London, Wisconsin shall
be entitled to employ any stylized versions of the trademarks
BEAUTYREST, CONTOUR-FLEX, DEEPSLEEP, DREAMSLEEP, MAXIPEDIC and REGENCY
employed by Licensor in the future on Licensee's mattresses for the
juvenile market. Licensee shall not be entitled to employ any other
stylized versions of the Trademarks in the absence of Licensor's
approval which approval will not be unreasonably withheld.
4.(c)(ii) Notwithstanding the preceding subparagraph 4.(c)(i),
Licensor shall be entitled to require Licensee to utilize stylized
version(s) of the Trademarks on the labels for any point-of-sale
advertising of the Licensee's mattresses which Licensor uses on the
labels for its own mattresses. Should Licensor employ more than one
stylized version of a Trademark on its mattresses, Licensee shall have
the option of employing any
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one or all of such stylized versions on the labels and point-of-sale
advertising of its Licensed mattresses. Should Licensor require
Licensee to use such stylized versions of the Trademarks as
provided herein, Licensee shall be entitled to first use its existing
inventory of labels and to sell Licensee's mattresses including such
labels; provided, however, such use shall not exceed a period longer
than six months from the date that Licensor gives written notice
requiring Licensee to use such stylized version. Notwithstanding the
foregoing, Licensor shall have the right to purchase Licensee's
inventory of labels at Licensee's cost thereof should it wish to
expedite Licensee's transition to the stylized versions discussed
herein.
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PURCHASE OF LICENSOR INNERSPRING ASSEMBLIES
5.(a) Licensor agrees to sell to Licensee pocketed coil innerspring
assemblies for incorporation within Licensee's crib mattresses marketed
under the trademark BEAUTYREST at net terms less favorable than those
then being offered to Licensor's other most favored customers for
similar products in similar quantities. The initial purchase price
for said innerspring assemblies shall be the price(s) charged to
Licensee as of its most recent purchase from Licensor prior to October
29, 1986. Thereafter, Licensor shall be entitled to raise the price(s)
charged Licensee for innerspring assemblies not more than once every
six months. Any such price increases shall be in accordance with the
Producer Price Index (Bedding: Bedsprings, Commodity Code 1214-0103) in
the most recent monthly publication thereof by the U.S. Department of
Labor, and shall be calculated from the initial purchase price defined
herein or the price as of the date the most recent increase is made
effective, whichever is applicable. The terms of this paragraph shall
apply for five (5) years unless Licensor discontinues the business of
manufacturing pocketed coil innerspring assemblies prior to the end of
this period. Should Licensor elect to discontinue supplying Licensee
with pocketed coil innerspring constructions in accordance with the
terms of this paragraph after the expiration of said five-year period,
Licensee's obligations under paragraph 3(c) shall no longer apply;
provided, however, should Licensee's obligations under this paragraph
5(a) or paragraph 3(c) no longer apply, Licensee shall be required, at
the option of Licensor, to purchase non-pocketed coil innerspring
assemblies for incorporation within Licensee's crib mattresses marketed
under the trademark BEAUTYREST in the event that the Licensee elects
to incorporate non-pocketed coil innerspring assemblies of the same
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type used by Licensor in its own mattresses licensed under the trademark
BEAUTYREST within Licensee's crib mattresses marketed under the
trademark BEAUTYREST. Licensee shall provide notice to licensor of such
election to use such non-pocketed coil innerspring assemblies within its
crib mattresses marketed under the Trademark BEAUTYREST. Licensor shall
have fifteen (15) days after its receipt of such notice to notify
Licensee whether it wishes to exercise said option. Should Licensor
exercise said option, the initial purchase price for such non-pocketed
innerspring assemblies shall be a price competitive with other suppliers
for innerspring assemblies of comparable quality. Price increases from
the initial purchase price shall be determined in the same manner as
provided in this subparagraph for pocketed coil innerspring assemblies.
Should Licensor fail to make such an election within said fifteen (15)
day period, or choose not to exercise said option, Licensee shall be
entitled to purchase said innerspring assemblies from any supplier
thereof or manufacture them itself. However, should Licensee continue to
use pocketed coil innerspring assemblies within Licensee's crib
mattresses marketed under the trademark BEAUTYREST, or utilize non-
pocketed coil, innerspring assemblies originating with a party other
than Licensor, such assemblies shall meet the quality control standards
described in paragraph 3(a) hereof.
5. (b) Any price increase for pocketed coil innerspring assemblies
set by Licensor shall be effective as of the date indicated by Licensor,
provided said effective date is at least six months after the effective
date of this Agreement or six months after the date of the previous
price increase, whichever is applicable. Notwithstanding the preceding
sentence, any price increase shall not apply to purchase orders received
from Licensee prior to the effective date of the price increase to the
extent they reasonably require delivery of said pocketed coil
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innerspring assemblies within ninety (90) days of the effective date
of such price increase. Licensor agrees to provide notice to Licensee
of any price increase and that the effective date of such price increase
will not be more than ten (10) days prior to the date said notice is
received by Licensee.
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NOTICES
6. Any and all notices or other writings which are required to be
served, or which may be served under the provisions of this License
Agreement, shall be in writing and shall be sufficiently served by mail
addressed to the parties concerned, as follows:
To Licensor: SIMMONS U.S.A. CORPORATION
Six Executive Park Drive
Atlanta, Georgia 30329
Attention: President
Copy to: General Counsel
Simmons U.S.A. Corporation
Six Executive Park Drive
Atlanta, Georgia 30329
To Licensee: SIMMONS UNIVERSAL CORPORATION
1285 Avenue of the Americas
New York, New York 10019
Copy to: Patent Counsel
Wickes Companies, Inc.
1285 Avenue of the Americas
New York, New York 10019
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ASSIGNMENT
7.(a) This Agreement, or any of the respective licenses pertaining
to the three business entities (Simmons Healthcare, Hausted, Inc., and
Simmons Juvenile Products, Inc.) presently controlled by Licensee, shall
be assignable by the Licensee to any entity controlled by or under common
control with Simmons Universal Corporation (an "Affiliate") without the
approval of the Licensor, provided that the assignee agrees to be bound
by the terms and conditions of this Agreement which relate to the
business entity making such assignment and the terms and conditions of
a certain Distribution Agreement of even date herewith between the
parties hereto. In addition, Licensee shall upon notice to Licensor,
be entitled to assign the Agreement (or portion thereof pertaining to
one of said three business entities), to a third party (or parties)
as part of an assignment (or assignments) of substantially all of the
assets of Licensee, or of the assets of any of said respective
business entities which distribute and/or sell First Licensed Articles
and/or Second Licensed Articles; provided that if the license is being
assigned by a business entity presently controlled by Licensee in
connection with the sale of substantially all of such entity's assets,
the assets of such entity being sold must be substantially the same
assets as one of three business entities described above as presently
operated as of the date hereof. Prior to such assignment to a third
party or parties, Licensee shall obtain the written consent of any such
assignee(s) thereunder to assume all the obligations of the Licensee
under this Agreement with respect to the assigned license. Licensor
shall, upon notice to Licensee, be entitled to assign the Agreement to
any person or entity without restriction. Licensor shall require any
such assignee to acknowledge this Agreement by
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becoming a party to this Agreement. This Agreement (or portions
thereof) shall inure to the benefit of and shall be binding upon
the successors and assigns of both parties (and/or the successors and
assigns of the three respective business entities described above).
7.(b) In the event either the business presently operated
by Licensee under the name of "Simmons Healthcare" in Charlotte, North
Carolina, its successors or assigns, or the business presently operated
by Licensee under the name of Hausted, Inc. in Medina, Ohio, its
successors or assigns, is conveyed or transferred in such a manner that
it is no longer owned or controlled by the same entity, the rights and
obligations of each of said businesses under this Agreement shall be
separately assignable thereto in accordance with paragraph 7(a).
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ENFORCEMENT OF RIGHTS
8.(a) (i) Licensor shall have the right to take action at its
own expense against infringers, to oppose any trademark applications
and to seek cancellation of any trademark registrations which, in its
sole opinion, would conflict with its rights in the Trademarks or would
otherwise affect its business. (ii) Each party shall promptly notify
the other of any actual or potential infringement of the Trademarks which
comes to its attention with respect to First Licensed Articles or Second
Licensed Articles. (iii) Licensor shall, prior to instituting any
judicial or administrative action against any actual or potential
infringer(s) of the Trademarks with respect to First Licensed Articles
or Second Licensed Articles, notify Licensee of its intention to do so.
Licensee shall have thirty days from its receipt of such notice to
participate in such an action at its own expense. Licensee shall have
the right to join any such action pursuant to paragraph 8(c). Licensor
shall have the exclusive right to control or settle such action with
respect to both Licensor and Licensee, in good faith, taking into
account, among other things, all damages claimed by Licensor and
Licensee, provided that Licensor shall not settle any such action without
the consent of Licensee which consent will not be unreasonably withheld.
(iv) Licensee may request permission from Licensor to bring an action at
Licensee's expense, and in its own name to enforce the Trademarks against
any actual or potential infringer(s) which it reasonably believes is
likely to cause confusion with its own use of the Trademarks under this
Agreement and to oppose trademark applications or seek cancellation of
trademark registrations of third parties which it reasonably believes
would conflict with its rights granted under this Agreement. Licensor
shall not unreasonably withhold or delay
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permission from Licensee to bring such an action. If deemed reasonably
necessary by Licensee, Licensor agrees to cooperate with Licensee in its
enforcement of the Trademarks against third party infringers, trademark
applicants, or registrants. Licensee agrees to pay Licensor's out-of-
pocket costs in rendering such cooperation at Licensee's request.
Licensor at its own expense reserves the right to control any action
concerning the Trademarks initiated by Licensee considered reasonably
necessary or appropriate by Licensor except an action solely between the
parties and/or their Affiliates to this Agreement. In the event that
Licensor shall assume control of any such action described in the
preceding sentence, it shall only settle the action in the manner
contemplated in this paragraph 8(a). (v) In the absence of an award
made specifically by a court to Licensor, Licensee shall be entitled to
any recovery from infringers sued by Licensee in connection with First
Licensed Articles or Second Licensed Articles or persons committing any
other acts of unfair competition with respect thereto.
8.(b) If deemed reasonably necessary by Licensor, Licensee agrees to
cooperate with Licensor in its enforcement of the Trademarks against
third party infringers, trademark applicants, and trademark registrants.
Licensor agrees to pay Licensee's out-of-pocket costs in rendering
such cooperation at Licensor's request. In the absence of an award made
specifically by a court to Licensee, Licensor shall be entitled to any
recovery from such third party infringers sued by Licensor at its sole
expense.
8.(c) Each party shall have the right, at its own expense, to join
in an action brought by the other party to enforce the Trademarks with
respect to the First Licensed Articles or the Second Licensed Articles
and to assert claims for legal or injunctive relief which it considers
appropriate. In such event,
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each party shall bear its own costs and shall be entitled to whatever
damages are awarded by a court or paid to it in settlement of the case.
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INDEMNITY
9.(a) Licensee agrees to defend, indemnify and hold Licensor harmless
from and against any and all product liability claims of third parties
(and liabilities, judgments, penalties, losses, costs, damages, and
expenses therefrom including reasonable attorney's fees) arising from
Licensee's manufacture, sale or distribution of First Licensed Articles
or Second Licensed Articles.
9.(b) Licensor agrees to promptly notify Licensee of any product
liability claim asserted against it with respect to Licensee's
manufacture, sale or distribution of First Licensed Articles or Second
Licensed Articles. Once Licensee has taken reasonable steps to defend
against such claim, and so notified licensor, any further expenses
incurred by Licensor, including attorney's fees, shall be for its own
account unless Licensee discontinues taking such reasonable steps. This
paragraph shall not apply to any claim against Licensee based upon a
product or component originating with Licensor, and Licensor hereby
agrees to indemnify Licensee for such claims under the same terms
provided by Licensee to Licensor herein.
9.(c) Licensee shall, at its sole cost and expense, have Licensor
named as an additional insured under its product liability insurance
policies that Licensee may have in effect from time to time which would
cover the Licensed Articles. Licensee shall maintain an amount of
product liability insurance as is customary in the Licensed Territory
for conducting the business of manufacturing and selling for First
Licensed Articles and Second Licensed Articles covered by this
Agreement. In the event Licensee discontinues any such insurance it
shall give Licensor at least ten (10) days notice before such insurance
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lapses or in the event that any such insurance lapses for any other
reason, Licensee shall promptly notify the Licensee of such event.
9.(d) Licensee agrees to indemnify Licensor for all damages arising
from (i) Licensee's acts which directly result in Licensor's loss of its
ownership or exclusive right to use any of the Trademarks in the Licensed
Territory, or (ii) Licensee's failure to act in contravention to the
terms of this Agreement which directly result in Licensor's loss of
its ownership or exclusive right to use any of the Trademarks in the
Licensed Territory. Conversely, Licensor agrees to indemnify Licensee
for all damages (A) arising from Licensor's failure to keep the
registrations of the Trademarks in force before the U.S. Patent and
Trademark Office, (B) Licensor's grant of a license to a third party
to distribute or sell First Licensed Articles or Second Licensed
Articles under or in connection with the Trademarks or in connection with
trademarks likely to cause confusion with the Trademarks or in connection
with trademarks likely to be associated by consumers with the Trademarks
or (C) Licensor's own distribution or sale of the First Licensed
Articles or Second Licensed Articles under or in connection with the
Trademarks, or under or in connection with trademarks likely to cause
confusion with the Trademarks under or in connection with trademarks
likely to be associated by consumers with the Trademarks, all of which
acts described under clauses (A), (B) and (C) above would be in
contravention of this Agreement.
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EXPORT
10. Nothing in this Agreement shall prohibit Licensee from exporting
First Licensed Articles or Second Licensed Articles under the Trademarks
to countries wherein Licensor or any of its divisions, affiliates,
companies under common control therewith, or their successors or assigns
own the rights to use the Trademarks or foreign equivalents thereof.
Licensee shall, upon Licensor's reasonable request, notify Licensor of
any exports of such Licensed Articles outside the Licensed Territory.
The use of the Trademarks in connection with the Second Licensed
Articles in Canada, whether such Articles are manufactured in Canada
or exported thereto by Licensee or an Affiliate, shall be governed by a
separate agreement between Wickes/Simmons Bedding, Ltd. and Little
Folks, Ltd. dated October 30, 1986, and not by this Agreement. Nothing
in this paragraph shall preclude Licensor from distributing or selling
Licensed Articles outside the Licensed Territory (excluding Canada) under
the Licensed Trademarks on a non-exclusive basis, or from granting non-
exclusive licenses for others to do so. Should Licensor distribute or
sell such Licensed Articles outside the Licensed Territory, it shall
neither export them to the Licensed Territory or distribute or sell
them to a third party outside the Licensed Territory which it knows or
reasonably believes is likely to export them to the Licensed Territory.
Licensor further agrees to include, as a condition of any license to
distribute or sell Licensed Articles under the Trademarks outside the
Licensed Territory, such provisions as will ensure that such Licensed
Articles will not be exported to the Licensed Territory, to the extent
legally permissible under the laws of the United States.
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SUB-LICENSES AND SUBCONTRACTS
11. Licensee shall be entitled to subcontract the manufacture of
First Licensed Articles and/or Second Licensed Articles or components
thereof, but shall not be entitled to sublicense third parties to use
any of the Trademarks in connection with the marketing, distribution or
sale of any articles. Notwithstanding the preceding sentence, Licensee
shall be entitled to sublicense its divisions, affiliates or other
companies under common control therewith to use the Trademarks in
connection with First Licensed Articles or Second Licensed Articles.
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MAINTENANCE OF TRADEMARK REGISTRATIONS
12.(a) It shall be Licensor's responsibility to keep in
force the registrations of the Trademarks. If Licensor elects not to
keep a registration of one of the Trademarks in force, it shall promptly
notify Licensee. Licensee shall then have the option of notifying
Licensor that it wishes to have Licensor renew such registration(s) or
file appropriate affidavits with respect thereto. If Licensee exercises
such option, it shall reimburse Licensor for its reasonable out-of-pocket
expenditures in keeping such registration in force.
12.(b) Licensee agrees to cooperate with Licensor in providing the
necessary labels, specimens or other information required for keeping
the registrations of said Trademarks in force.
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HIDE-A-BED, SIMMONS TRADEMARKS
13.(a) Licensee, and any successors and assigns of its upholstered
furniture business, shall have two (2) years from the date of this
Agreement in which to continue using the trademark HIDE-A-BED on a
non-exclusive basis in connection with upholstered furniture primarily
intended for office and institutional use and of at least substantially
the same quality as that presently marketed by Licensee's upholstered
furniture business, the quality thereof having been approved by Licensor.
Upon the expiration of said two-year period, Licensee shall no longer
have the right to use the trademark HIDE-A-BED in connection with any
articles unless such articles originate with Licensor.
13.(b) Licensee, through its subsidiary Thonet Industries, Inc, and
its successors or assigns, shall have two (2) years from the date of
this Agreement in which to continue using the trademark SIMMONS on a
non-exclusive basis in connection with chairs and associated case goods
primarily intended for the nursing home market and of at least
substantially the same quality as that presently marketed by said
subsidiary, the quality thereof having been approved by Licensor.
Upon the expiration of said two-year period, Thonet, Inc.'s right to
such use shall terminate, however, Licensee shall still have the right
to use the trademark SIMMONS to the extent provided in paragraphs 2 and
14 of this Agreement.
13.(c) Licensee, its Affiliates, successors and assigns, shall have
eighteen (18) months from the date of this Agreement in which to
continue using the trademark known as the "S and House Design" on the
First Licensed Articles, Second Licensed Articles, and the stationery,
business cards and packaging of the
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foregoing which Licensee is presently using such Trademark (the "S and
House Design Goods") and the S and House Design Goods shall be of
at least substantially the same quality as that presently marketed by
Licensee, the quality thereof having been approved by Licensor.
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BUSINESS NAMES
14.(a) Licensee's use of the term "Simmons" as part of the
name of a business entity, as authorized under paragraphs 2(a)
and 2(b), shall only be in conjunction with the terms "Simmons
Healthcare" and "Simmons Juvenile Products." Nothing herein
shall preclude such business entities from referring to themselves
simply as "Simmons".
14.(b) Licensee, its successors and assigns shall have the right for
a period of two (2) years from the date of this Agreement in which to
continue using the trade name "Simmons Universal Wallcovering Group" in
connection with the business of manufacturing, distributing and selling
wallcovering products, providing the quality of said wallcovering
products remains at least substantially the same as that presently
maintained by said business, the quality thereof having been approved by
Licensor. Upon the expiration of said two-year period, Licensee shall no
longer have the right to use the name "Simmons" as part of any trade
name identifying its wallcovering business.
14.(c) Licensee, its successors and assigns shall have the right
for a period of two (2) years from the date of this Agreement in which
to continue using the trade name "Simmons Universal" in connection with
the businesses of manufacturing, distributing and selling, First Licensed
Articles, Second Licensed Articles, wallcovering products, fabric piece
goods, curtains, drapes, and other home furnishing products, providing
the quality of said products remain at least substantially the same as
that presently maintained by Licensee, the quality thereof having been
approved by Licensor. Upon the expiration of said two-year period,
Licensee shall no longer use the trade name
- 26 -
<PAGE>
"Simmons Universal." Thereafter, Licensee's rights to use the name
"Simmons" shall be limited to the extent provided by paragraphs 2 and 14
of this Agreement.
- 27 -
<PAGE>
TERMINATION
15.(a) Licensor may terminate this Agreement by written notice to
Licensee if Licensee fails to correct within forty-five (45) days after
its receipt of written notice of a Material Default stating (i) the
nature of the Material Default, (ii) facts which Licensor reasonably
believes why the Default should be considered a Material Default, and
(iii) that the Agreement will terminate in forty-five (45) days if such
Material Default remains uncured for forty-five (45) days after the
notice has been delivered pursuant to Section 6. A Material Default for
purposes of the foregoing shall mean (i) any action by the Licensee
and/or its Affiliates which materially affected Licensor's ownership of
or exclusive right to use any of the Trademarks in the Licensed
Territory, or (ii) any inaction by the Licensee and/or its Affiliates
in contravention to the terms of this Agreement which materially
affected Licensor's ownership of an exclusive right to use any of the
Trademarks in the Licensed Territory. Any non-material default shall
be cured by Licensee as promptly as reasonably possible after notice,
provided, however, Licensee's deliberate failure to make a good faith
reasonable effort to cure a non-material default, despite notice from
Licensor demanding such cure, shall be considered a Material Default.
15.(b) Should a default under this Agreement be due to the action or
inaction of only one of the businesses presently operating under the
respective names of Simmons Healthcare, Hausted, Inc., and Simmons
Juvenile Products, Inc., the Agreement shall only be terminable with
respect to the business entity in such default.
- 28 -
<PAGE>
15.(c) Should a default under this Agreement be with respect
to only one of the Trademarks licensed hereunder, the Agreement
(or part thereof relating to the business entity in default) shall only
be terminable with respect to said one Trademark. If said default
concerns the mark or name "SIMMONS", the entire Agreement (or part
thereof relating to the business party in default) shall be terminable.
Should the Agreement be terminated for any reason with respect to one of
the business entities which operates under a trade name including the
term SIMMONS, said business entity shall have six months to discontinue
its use of the term SIMMONS within its trade name and shall, if
necessary, take prompt steps to correspondingly amend its corporate
name.
15.(d) In the event of termination pursuant to this paragraph,
Licensee or the business entity in default shall be entitled to fulfill
any existing contracts for the goods affected, to complete work-in-
process, and shall have six (6) months from the date of termination in
which to sell off any existing inventory of such goods, provided that
the goods, if sold under the Trademarks, meet the quality control
standards contained herein.
15.(e) In the event Licensee files a petition under Chapter 7 of the
bankruptcy laws (as currently stated) to commence a liquidation of
itself or of any of the three business entities identified in paragraph
15(b), this Agreement (or portion thereof relating to the business
entity to be liquidated) shall automatically terminate. If a third party
commences a Chapter 7 proceeding under the Bankruptcy Laws and the
proceeding is not converted into a Chapter 11 proceeding or dismissed
within ninety (90) days, this Agreement shall terminate. Should Licensee
or any of said three business entities otherwise file a petition in
- 29 -
<PAGE>
bankruptcy, become adjudged a bankrupt, make an assignment for the
benefit of creditors, or be placed in the hands of a receiver,
trustee or administrator, the debtor(s) in possession shall be required
to abide by the terms of this Agreement should it elect to assume the
Agreement, or any portion thereof relating to the business entity
affected.
- 30 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement,
all as and of the day and year first above written.
Witness: SIMMONS U.S.A CORPORATION
/s/ By: /s/
_______________________ ________________________
Witness: SIMMONS UNIVERSAL CORPORATION
/s/ By: /s/
_______________________ ________________________
Witness: SIMMONS JUVENILE PRODUCTS, INC.
/s/ By: /s/
________________________ ________________________
Witness: HAUSTED, INC.
/s/ By: /s/
________________________ _________________________
ACKNOWLEDGED AND AGREED FOR PARAGRAPH 10 OF THIS AGREEMENT:
Sleeper Associates Limited Partnership
By: Sleep, Inc., its general partner
/s/
By:__________________________________
<PAGE>
SCHEDULE
--------
Group A
-------
Trademark Registration No.
--------- ---------------
CONTOUR-FLEX 1,359,240
SIM-CARE 794,501
SIM-CLAD 804,674
SIM-GARD 1,172,312
SIM-MATIC 657,780
SIMCREST 966,623
787,168
681,470
SIMFLEX 740,633
839,577
951,439
SIMLOK 1,027,842
SIMMONS 532,319
548,280
<PAGE>
Group B
-------
Trademark Registration No.
--------- ----------------
BABY BEAUTY 420,150
BABY BEAUTYREST BACK CARE 1,324,572
BEAUTYREST 207,821
602,721
CONTOUR-FLEX 1,359,240
DEEPSLEEP 518,793
DREAMSLEEP 521,973
MAXIPEDIC 970,738
REGENCY 522,272
SIMMONS 532,319
548,280
SIMFLEX 839,577
EXHIBIT 10.55
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement"), is effective as of this 29th day
of June, 1990, between SIMMONS COMPANY, a corporation duly created, organized
and existing under the laws of the State of Delaware, having its office and
principal place of business at 6 Executive Park Drive, Atlanta, Georgia, U.S.A.
(hereinafter referred to as "Simmons") and Simmons I. P. [Illegible], a
corporation duly created, organized and existing under the laws of the
Province of Ontario, Canada having its office and principal place of business at
C/O Goodman & Goodman, 20 Queen Street West, Toronto, Ontario M5H 1V5, Attention
Joel S. Schachter (hereinafter referred to as "Licensor"), and SIMMONS CANADA
INC., a corporation duly created, organized and existing under the laws of the
Province of Ontario, Canada, having its office and principal place of business
at 6900 Airport Road, Mississauga, Ontario, Canada (hereinafter referred to as
"Primary Licensee").
Simmons has acquired and developed and continues to acquire and develop
patents, technology and know-how relating to the manufacture of mattresses
having pocket-coil and open-coil innerspring construction, box springs, bedding
components and related bedding accessories, including the equipment necessary
for the manufacture, packaging and labeling of bedding products, the use of
such equipment, plant layouts, product specifications, materials and other
information and Licensor has acquired patents relating thereto.
Licensor has, except as set forth in Schedule A hereto, (i) the right to
grant a license relating to the Patents (as hereinafter defined) and other
rights specified herein, and (ii) the sole and exclusive ownership rights in the
Licensed Trademarks (as hereinafter defined) in connection with the sale,
importation, distribution, advertisement and promotion of the Licensed Products
(as hereinafter defined) in the Licensed Territory (as hereinafter defined),
and (iii) the right to grant licenses to others for the use of the Licensed
Trademarks.
Simmons has the right to grant a license relating to the Technology (as
hereinafter defined). Simmons has developed and continues to develop Marketing
Information (as hereinafter defined) which may be used in connection with the
marketing, sale, importation, distribution, advertisement and promotion of the
Licensed Products in the Licensed Territory.
Primary Licensee desires to obtain an exclusive license for the use of the
Technology, the Licensed Trademarks and the Patents and other rights in
connection with the manufacture, use, sale, importation, distribution,
advertisement and promotion of the Licensed Products in the Licensed Territory,
and to use the Marketing Information in connection with the marketing, sale,
<PAGE>
importation, distribution, advertisement and promotion of the Licensed Products
in the Licensed Territory.
In consideration of the premises and the mutual promises, covenants and
conditions hereinafter contained and contained in the Stock Purchase Agreement
(as hereinafter defined), the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.1. "Affiliate" of a specified person shall mean a person that
-----------
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the specified person. For this
purpose, "control" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or otherwise.
For purposes of this Agreement, neither Primary Licensee nor any nonaffiliated
licensee of Simmons in the United States shall be an Affiliate of Simmons.
Section 1.2. "Competitor" shall mean any person which competes with
-----------
Simmons, either directly or through an Affiliate of such person, in the sale or
manufacture of Licensed Products and which holds more than six percent (6%) of
the market in the United States with respect to the mattress business. As of
the Effective Date of this Agreement, the persons listed in Schedule B attached
hereto are the only persons who are Competitors. Each party shall have the
right to update Schedule B from time to time upon providing the other party with
evidence reasonably satisfactory to the other party that persons added or
deleted from Schedule B have become, or are no longer, Competitors, as the case
may be.
Section 1.3. "Confidential Information" shall have the meaning set forth
-----------
in Section 4.2.
Section 1.4. "Effective Date" shall mean the date of this Agreement.
-----------
Section 1.5. "Equipment" shall have the meaning set forth in Section 3.3.
-----------
Section 1.6. "Licensed Products" shall mean bedding products (including
-----------
but not limited to mattresses, box springs, day beds, waterbeds, bedding
components and related bedding accessories) and upholstered products (including
but not limited to convertible sofa beds, recliners, stationary chairs and
sofas, love seats and sectional upholstered pieces). "Licensed Products" shall
include all Royalty Products (as hereinafter defined).
- 2 -
<PAGE>
Section 1.7. "Licensed Territory" shall mean Canada, its provinces and
-----------
territories and any jurisdictions that are successors thereto.
Section 1.8. "Licensed Trademarks" shall mean all trademarks now or
-----------
hereafter registered in the Licensed Territory by Simmons, Licensor or an
Affiliate of either which are identified on Schedule C attached hereto as
updated from time to time to reflect additional trademark registrations, if any
as required pursuant to Sections 2.3(b) and (c).
Section 1.9. "Marketing Information" shall mean the advertising and other
-----------
marketing aids presently within the knowledge, possession or control or
hereinafter developed or acquired by Simmons, Licensor or an Affiliate of either
which may be used in connection with the marketing, sale, importation,
distribution, advertisement and promotion of the Licensed Products.
Section 1.10. "Net Sales" shall mean the invoiced price of the Royalty
------------
Products sold by Primary Licensee and its Affiliates and each Secondary Licensee
and its Affiliates to an independent purchaser (either wholesale or retail) in
an arm's length transaction, excluding freight, cash and other customary trade
allowances, volume rebates and discounts, amounts refunded or credited on
returned products (provided that the sales price of such products was included
previously in Net Sales during the term of this Agreement), all taxes (including
excise, sales, goods and services and value added taxes) and any separate
invoiced charges which are not attributable to the sale of the Royalty Products.
"Net Sales" shall also include, in the case of the sale of any Licensed Product
which includes a Royalty Product as a component thereof, an amount equal to the
actual cost of such Royalty Products plus ten percent (10%) at the time of such
sale. In computing Net Sales, no deduction shall be made for other discounts
or uncollectible accounts or for any costs incurred by Primary Licensee or a
Secondary Licensee, as applicable, in the manufacture, sale or distribution of
the Royalty Products.
Section 1.11. "Patents" shall mean all patents set forth in Schedule D
------------
attached hereto (including, but not limited to, method patents, utility models
and industrial designs) issued prior to the Effective Date or to be issued
during the term of this Agreement as required pursuant to Section 12.2 in the
Licensed Territory, all continuations, continuations-in-part, derivatives,
substitutions, divisions, extensions, reissues, reexaminations or renewals of
such patents, and all patent applications for any such patents, filed prior to
the Effective Date or to be filed during the term of this Agreement in the
Licensed Territory, owned, controlled or licensable without payment of
consideration by Licensor, Simmons or an Affiliate of either now or at any time
during the term of this Agreement, which patents and patent
- 3 -
<PAGE>
applications cover mattresses having pocket-coil, open-coil or other coil
innerspring constructions, or box springs, related bedding accessories, the
equipment necessary for the manufacture, packaging and labeling of any of the
foregoing, the use of such equipment, and software and computer systems relating
to the manufacture of Licensed Products or for inventory control; provided that
"Patents" shall not include any such patents after the expiration thereof.
Section 1.12. "Patent License" shall have the meaning set forth in Section
------------
2.2.
Section 1.13. "Primary Licensee Technology" shall have the meaning set
forth in Section 2.5(iii).
Section 1.14. "Prime Rate" shall mean the annual variable rate of interest
------------
quoted or published by Bank of Montreal from time to time as the prime rate of
interest charged by Bank of Montreal for commercial loans in Canadian dollars
made in Canada by Bank of Montreal.
Section 1.15. "Royalty Products" shall mean (i) any Licensed Product
which is produced or assembled in accordance with the Technology or the
Patents or (ii) any other product sold by Primary Licensee, any Affiliate of
Primary Licensee or any Secondary Licensee under the Licensed Trademarks or
under any trademark which is identical or confusingly similar to any of the
Licensed Trademarks. The term Royalty Products shall not include upholstery
products or products directed toward the health care or hospital market. Use
of the name Simmons in Primary Licensee's corporate name or Secondary
Licensee's corporate name, where permitted under Section 2.4(v), shall not
by itself constitute use of a Licensed Trademark or use of a product for
purposes of this Section 1.15.
Section 1.16. "Secondary Licensee" shall have the meaning set forth in
------------
Section 2.4.
Section 1.17. "Stock Purchase Agreement" shall mean the Share Purchase
------------
Agreement dated the 16th day of May, 1990, by and among Simmons, Simmons Limited
and 896552 Ontario Inc.
Section 1.18. "Technology" shall mean all proprietary technology and know-
------------
how not patented in the Licensed Territory, including all technology which has
been patented, is the subject of a patent application or is patentable in any
country or territory outside the Licensed Territory and all technology which,
subsequent to the Effective Date and during the term of this Agreement, becomes
patented in the Licensed Territory under Section 12.2 hereof but in such case
only until it becomes so patented, relating to the manufacture of mattresses
having pocket-coil, open-coil or other coil innerspring constructions, box
springs, related bedding components and related bedding
- 4 -
<PAGE>
accessories, including the equipment necessary for the manufacture, packaging
and labeling of any of the foregoing, the use of such equipment, plant layouts,
product specifications, software and computer systems relating to the
manufacture of Licensed Products or for inventory control, materials and other
information ancillary to the bedding business, presently within Licensor's,
Simmons' or their Affiliates' knowledge, possession or control or hereinafter
developed or acquired by Licensor, Simmons or Affiliates of either.
Section 1.19. "Technology License" shall have the meaning set forth in
------------
Section 2.1.
Section 1.20. "Trademark License" shall have the meaning set forth in
------------
Section 2.3.
ARTICLE II
GRANT OF LICENSES
-----------------
Section 2.1 - Grant of Technology License. Simmons hereby grants to
-----------------------------------------
Primary Licensee the exclusive and perpetual right, license and privilege to use
the Technology in connection with the manufacture, use, sale, importation,
distribution, advertisement and promotion of the Licensed Products within the
Licensed Territory, such license and any secondary licenses being subject to the
conditions hereinafter contained (the "Technology License").
Section 2.2 - Grant of Patent License. Licensor hereby grants to Primary
-------------------------------------
Licensee the exclusive right, license and privilege to use the Patents for the
life of each of the Patents, in connection with the manufacture, use, sale,
importation, distribution, advertisement and promotion of the Licensed Products
within the Licensed Territory, such license and any secondary licenses being
subject to the conditions hereinafter contained (the "Patent License").
Section 2.3 - Grant of Trademark License.
----------------------------------------
(a) Subject to the rights of third parties, if any, as set forth in
Schedule A, Licensor hereby grants to Primary Licensee the exclusive and
perpetual right, license and privilege to use the Licensed Trademarks on and in
connection with the manufacture, sale, importation, distribution, advertisement
and promotion of the Licensed Products within the Licensed Territory, such
license and any secondary licenses being subject to the conditions hereinafter
contained (the "Trademark License").
(b) Licensor hereby grants to Primary Licensee the exclusive and perpetual
right, license and privilege to use any mark within the Licensed Trademarks in
combination with any other word, mark, symbol or logo (the "Combination Mark")
on and in
- 5 -
<PAGE>
connection with the manufacture, sale, importation, distribution, advertisement
and promotion of the Licensed Products within the Licensed Territory, provided
that (i) Primary Licensee shall notify Licensor of such Combination Mark, (ii)
Licensor or Simmons may, in the sole discretion of either, acting reasonably,
prohibit the use of any such Combination Mark which may have a detrimental
effect on the quality, validity or reputation of any mark within the Licensed
Trademarks, Licensor, Simmons or any product sold under the Licensed Trademarks,
and (iii) Primary Licensee shall cause each such Combination Mark to be
registered in the name of Licensor with the Canadian Trade Marks Office. All
Combination Marks shall be deemed to be included within Licensed Trademarks for
all purposes under this Agreement and shall be subject to all obligations under
this Agreement and of Primary Licensee or a Secondary Licensee with respect
thereto.
(c) Upon Primary Licensee's request and at Primary Licensee's expense,
Licensor shall apply for registration of trademarks in the Licensed Territory
for which an application for registration has been filed in the United States by
either (i) Simmons for those trademarks which are used on or in connection with
the sale of bedding products, or (ii) any of Simmons' Affiliates for those
trademarks which are (a) used on or in connection with the sale of bedding
products, and (b) are confusingly similar to any of the Licensed Trademarks
or are used in combination with any Licensed Trademark or any trademark
confusingly similar to any of the Licensed Trademarks and (c) were not
purchased or otherwise acquired from a party not affiliated with Simmons or
any such Affiliate. Simmons shall notify Primary Licensee of any such new
bedding product trademarks at the Technology Meetings (as hereinafter defined)
or upon Primary Licensee's request.
Section 2.4 - Exclusive Licensing Authority. Licensor hereby appoints
-------------------------------------------
Primary Licensee as Licensor's exclusive licensing authority in the Licensed
Territory whereby Primary Licensee may license on Licensor's behalf all or
any of the rights granted under Sections 2.1, 2.2 and 2.3 to any person
("Secondary Licensee"), including its Affiliates, provided that Primary Licensee
may not license any Patents, Technology or Licensed Trademarks to a Competitor
or to any person that Licensor or Primary Licensee has determined, after
reasonable inquiry, manufactures any mattresses, boxsprings or spring
assemblies for a Competitor. Primary Licensee shall notify Licensor prior to
entering into any such license agreement with a proposed Secondary Licensee.
The grant from time to time by Primary Licensee to a Secondary Licensee of
all or any of the rights granted under Section 2.1, 2.2 or 2.3 shall be by
written license agreement between Primary Licensee, acting as Licensor's
attorney, Primary Licensee acting on its own behalf, and Secondary Licensee.
Each such license agreement shall provide that:
- 6 -
<PAGE>
(i) Secondary Licensee shall be bound by all the terms and conditions
of this Agreement, including, without limitation, provisions
substantially similar (and no less stringent) than those
contained in Articles 4 and 5 and Section 6.1 of this Agreement
and, with respect thereto, Secondary Licensee shall be obligated
directly to Licensor in addition to any obligations to Primary
Licensee, for itself or as agent for Licensor.
(ii) Primary Licensee shall terminate such license agreement if the
Secondary Licensee thereunder breaches any of the provisions of
such license agreement which are substantially similar to the
provisions of Article 4 or 5 or Section 6.1 and fails to remedy
such breach within forty-five (45) business days after such
Secondary Licensee's receipt of Primary Licensee's written notice
of such breach.
(iii) Secondary Licensee must enter into a registered user application
(if applicable) which is substantially in the form annexed hereto
as Schedule E.
(iv) Secondary Licensee shall not be permitted to license others under
the rights granted to such Secondary Licensee in the license
agreement.
(v) Any Secondary Licensee who manufactures, sells, imports,
distributes, advertises or promotes bedding products shall not be
permitted to use Simmons in its corporate name, as a tradename or
in its trading style without the prior written consent of
Simmons. Primary Licensee may, however, permit Secondary
Licensees who manufacture, sell, import, distribute, advertise
or promote upholstery products (which shall include sofa beds),
and not bedding products, to use the Simmons name in such
Secondary Licensees' corporate names, as tradenames or in their
trading style, provided such use is consistent with the
provisions of Section 2.6 hereof and, provided further, that the
prior written consent of Simmons shall not be required for any
single such Secondary Licensee to so use the Simmons name, but
shall be required for any additional Secondary Licensees to so
use the Simmons name.
Primary licensee shall cause the delivery of the written notice referred to
in (ii) above within ten (10) business days of
- 7 -
<PAGE>
Primary Licensee having actual notice of such breach by Secondary Licensee
and take appropriate steps to cause such Secondary Licensee to rectify such
breach within such forty-five (45) day time period.
Primary Licensee shall be responsible to Licensor or Simmons, as
applicable, for the acts and omissions of any Secondary Licensee.
Nothing contained herein shall prevent or limit Primary Licensee's right to
be granted a further royalty or receive other consideration from a Secondary
Licensee without any right on the part of Licensor or Simmons to receive the
whole or any part of any such further royalty or other consideration except as
provided in this Agreement.
Primary Licensee shall provide copies of the license agreements with
Secondary Licensees to Licensor. Licensor hereby appoints Primary Licensee and
each of its directors and officers holding office from time to time as its agent
to enforce compliance by all Secondary Licensees appointed by Primary Licensee
with the provisions of their respective license agreements (including, without
limitation, the quality control and confidentiality provisions contained
therein). Upon termination of a license agreement with any Secondary Licensee,
all rights granted to such Secondary Licensee thereunder shall revert to Primary
Licensee.
Section 2.5 - Primary Licensee Technology. Primary Licensee shall, upon
-----------------------------------------
Licensor's or Simmons' request, grant to Licensor, Simmons or the Affiliate of
either, the exclusive and perpetual right, license and privilege to use, and to
grant secondary licenses to others to use, the Primary Licensee Technology (as
defined herein) in connection with the manufacture, use, sale, importation,
distribution, advertisement and promotion of the Licensed Products within the
United States, such license and any secondary licenses to be subject to the
terms and conditions set forth in this paragraph below:
(i) Upon the request of Licensor or Simmons and at the Technology
Meetings, Primary Licensee shall disclose and deliver to Licensor or
Simmons, as applicable, at the expense of Licensor or Simmons, any Primary
Licensee Technology which has been developed or acquired by Primary
Licensee. Upon the request of Licensor or Simmons and at Licensor's or
Simmons' expense, as applicable, Primary Licensee shall endeavor to
obtain patents in the United States with the appropriate registry in the
United States on inventions for which Primary Licensee has endeavored to
obtain patents in the Licensed Territory unless Primary Licensee receives
the opinion of counsel that registration in the United States is
precluded, a copy of which will be sent to Licensor and Simmons. Primary
Licensee shall not be
- 8 -
<PAGE>
required to prosecute or continue to prosecute any patent application in the
United States, or the Licensed Territory when, in the opinion of counsel,
meaningful patent protection is unlikely to be obtained. In the event that
Primary Licensee determines not to prosecute or to discontinue prosecution of a
patent application in the United States, Simmons shall be notified and given the
opportunity to prosecute such patent application at its own expense.
(ii) The license from Primary Licensee to Licensor or Simmons created
pursuant to this Section 2.5 shall be subject to the relevant provisions
of this Agreement construed in a manner so as to grant Primary Licensee
all of the privileges and obligations of a licensor granted Licensor
hereunder and to grant Licensor all of the privileges and obligations of
a licensee granted Primary Licensee hereunder but subject to the terms
and limitations of this Section 2.5.
(iii) As used in this Section 2.5, "Primary Licensee Technology" shall
mean all proprietary technology and know-how, whether or not patented or
patentable, developed or acquired (that Primary Licensee is free to
disclose to third parties without breaching any obligation to the owner
of such acquired proprietary technology or know-how) by Primary Licensee
and relating to the manufacture of mattresses having pocket-coil, open-
coil or other coil innerspring constructions, box springs, bedding
components and related bedding accessories, including the equipment
necessary for the manufacture, packaging or labeling of bedding
products, specifications, software and computer systems relating to the
manufacture of Licensed Products or for inventory control, materials and
other information ancillary to the bedding business.
(iv) The license from Primary Licensee to Licensor and Simmons created
pursuant to this Section 2.5 shall be royalty-free provided that
Licensor, Simmons or an Affiliate of either, directly or indirectly
through the services of another, continues efforts to enhance and
develop Technology. In the event that Licensor, Simmons and the
Affiliates of either, discontinue spending, for a two (2) year period,
the amount of the Royalty for such years set forth in Section 8.2 hereof
to enhance and develop Technology, the license from Primary Licensee to
Licensor and Simmons created pursuant to this Section 2.5 shall be
subject to a reasonable royalty to be negotiated in good faith by the
parties. Beginning immediately after the expiration of such two (2)
year period through such time as the parties agree upon a reasonable
royalty, Primary Licensee shall be permitted to discontinue and shall
not be obligated
- 9 -
<PAGE>
to continue to provide Primary Licensee Technology to Simmons and Licensor
and Licensee, Simmons and the Affiliates of either or any secondary
licensee of either who has been provided any Primary Licensee Technology by
either shall discontinue use of same. In the event that such spending
for enhancement and development of Technology is resumed at levels at least
equal in a particular year to the amount of the Royalty under Section 8.2
for such year, Primary Licensees obligations to provide Primary Licensee
Technology shall resume and the license of Primary Licensee Technology to
Licensor and Simmons shall again be royalty-free.
Section 2.6 - Use of Simmons in Corporate Name. Licensor shall use
----------------------------------------------
"Simmons" alone or in conjunction with one or more other words (but not
"Canada") in its corporate name during the term of this Agreement. Licensor
hereby grants to Primary Licensee the right, license and privilege to use
"Simmons" in conjunction with "Canada" (but not "Company") in its corporate
name during the term of this Agreement. Primary Licensee may grant
licenses to others to use Simmons in their corporate names only as provided
in Section 2.4(v) herein. Primary Licensee and secondary Licensees, if any,
shall promptly discontinue use of "Simmons" in their corporate names upon
termination of this Agreement.
Section 2.7 - Purchase of Le Duvet or Victoria Mattresses.
---------------------------------------------------------
Primary Licensee may purchase its requirements of down or wool top mattresses to
be sold under the Le Duvet or Victoria marks from Simmons at Simmons' standard
cost (as described in Section [illegible] hereof) of such mattresses plus ten
percent (10%); provided, however, that Simmons continues to manufacture such
-------- -------
mattresses
in the United States.
ARTICLE III
TECHNICAL ASSISTANCE
--------------------
Section 3.1 - Disclosure and Delivery of Technology and Patents. To assist
---------------------------------------------------------------
Primary Licensee in the production of the Licensed Products, Simmons and
Licensor, or the Affiliates of either, as applicable, shall disclose and deliver
to Primary Licensee, in exchange for the payments described in Section 8.2
hereof, (i) on the Effective Date, the Technology presently within the
knowledge, possession or control of Simmons or its Affiliates and the Patents,
and (ii) thereafter, the Technology and/or Patents developed or acquired by
Licensor, Simmons or the Affiliates of either, from time to time; provided,
however, that Simmons' and Licensor's obligation to disclose and deliver to
Primary Licensee Technology and/or Patents as described in this clause (ii)
shall continue only as long as the Technology License continues and is in effect
and Licensee continues to make the payments described in Section 8.2 hereof.
The Technology and/or Patent disclosure described in clause (ii) above shall be
- 10 -
<PAGE>
disclosed and delivered to Primary Licensee at meetings ("Technology Meetings")
to be held among Simmons, Licensor, Primary Licensee and in some cases, certain
other foreign licensees of Simmons. It is anticipated that there will be two
Technology Meetings each year to at least one of which, some or all of Simmons'
other licensees will be invited. In addition to this annual meeting(s), Primary
Licensee may schedule additional meetings with Simmons upon reasonable advance
notice to Simmons on a date reasonably acceptable to both parties. The
Technology Meetings and additional meetings will be held in the United States at
Simmons' headquarters or any other location established by Simmons, and any
expenses incurred by Primary Licensee in connection with the travel to any
Technology Meeting or additional meeting shall be for Primary Licensee's
account.
Section 3.2 - Disclosure and Delivery of Marketing Information. To assist
--------------------------------------------------------------
Primary Licensee in the marketing, sale, importation, distribution,
advertisement and promotion of the Licensed Products, Simmons shall, in exchange
for the payments described in Section 8.2 hereof, (i) as soon as possible after
the Effective Date, disclose and deliver to Primary Licensee the Marketing
Information presently within its knowledge, possession or control, and (ii)
thereafter, for so long as this Agreement is effective, inform Primary Licensee
of the Marketing Information developed or acquired by Simmons or Licensor from
time to time. Any Marketing Information developed or acquired by Simmons or
Licensor after the Effective Date shall be disclosed and delivered to Primary
Licensee at the Technology Meetings and at such additional meetings requested by
Primary Licensee. In addition to the Technology Meetings and consonant with
Section 3.1 hereof, Primary Licensee may schedule additional meetings upon
reasonable advance notice to Licensor or Simmons on a date reasonably acceptable
to the parties. Primary Licensee may purchase advertising material from Simmons
at Simmons' incremental cost of providing such material to the extent that such
purchase by Primary Licensee is not prohibited by any agreement Simmons or its
Affiliates may have with a third party;
Section 3.3 - Purchase of Equipment. Simmons shall from time to time
-----------------------------------
advise Primary Licensee of the manufacturing equipment ("Equipment") considered
to be most suitable for the manufacture of the Licensed Products. The most
suitable Equipment as of the Effective Date of this Agreement is set forth in
Schedule F attached hereto. Any Equipment incorporating the Technology or any
of the Patents and used to manufacture the Licensed Products in the Licensed
Territory (other than Equipment owned by Primary Licensee on the Effective Date)
shall be purchased by Primary Licensee only from or through Licensor of Simmons
at the standard cost of such Equipment (being the actual cost of raw material
incorporated therein plus the cost of direct labor applied to the Equipment and
the applicable share of overhead properly chargeable to the production of such
Equipment in accordance with generally accepted accounting principles
- 11 -
<PAGE>
in the United States) plus thirty percent (30%) of such cost, provided that the
purchaser may purchase such Equipment elsewhere if the cost to Primary Licensee
of such Equipment exceeds twenty-five percent (25%) above the cost to Primary
Licensee of acquiring comparable equipment from others, and provided further
that Primary Licensee may not disclose any Confidential Information of
Licensor, Simmons or the Affiliates of either to another for the purpose of
obtaining Equipment elsewhere unless and until such other person enters into
a written agreement binding such person to the confidentiality and nonuse
provisions hereunder directly enforceable by the party whose Confidential
Information would be disclosed. For purposes only of comparing the cost of
purchasing Equipment from Licensor or Simmons on the one hand and purchasing
Equipment elsewhere on the other hand, cost shall exclude freight, duties, cash
and other customary trade allowances, all taxes and any separate incidental
invoiced charges which are not attributable to the sale of such Equipment.
Simmons or Licensor shall provide Primary Licensee with a statement certified by
a senior officer of Simmons setting forth the cost of such Equipment and how
such cost was calculated. Payment for such Equipment shall be made by
Primary Licensee within thirty (30) days after the date of the invoice
therefor. Notwithstanding the foregoing, in the event that Licensor is not able
to deliver the Equipment to Primary Licensee within one hundred and forty (140)
days following Primary Licensee's order for such Equipment, Primary Licensee may
purchase comparable equipment elsewhere.
Section 3.4 - Provision of Technical Personnel. Primary Licensee may from
----------------------------------------------
time to time request Simmons to send, and Simmons shall send, qualified
technical personnel to Primary Licensee's facilities for the purpose of
installing Equipment, advising Primary Licensee how to employ and maintain the
Equipment, and instructing Primary Licensee with respect to the use of the
Technology and Patents for periods of time aggregating not more than sixty (60)
man days (or such greater number of man days as may be acceptable to Simmons)
during each calendar year (as prorated for 1990), but not exceeding twelve (12)
man days in any one-month period. Simmons agrees to waive the requirements set
forth in the preceding sentence in cases in which Primary Licensee demonstrates
to Simmons' reasonable satisfaction that compliance with such requirements would
result in demonstrable harm to Primary Licensee. Primary Licensee agrees to
reimburse Simmons for reasonable traveling, living and other expenses of
Simmons' personnel at Primary Licensee's facilities during each calendar year
and, in the event Simmons' technical personnel shall be required to be at
Primary Licensee's facilities pursuant to this Section 3.4 for more than thirty
(30) business days during any calendar year, to reimburse Simmons for the
reasonable salary of such personnel for each business day, in excess of thirty
(30) business days, that such personnel shall be at Primary Licensee's
facilities. Any visits by Primary Licensee's personnel to Simmons' facilities
shall be at the expense of
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<PAGE>
Primary Licensee and shall be made only upon thirty (30) days' prior written
notice to Simmons and with Simmons' prior written approval (or any reasonable
shorter period in the event that Primary Licensee demonstrates that it would be
harmed by having to wait the full thirty (30) day period, which approval shall
not be unreasonably withheld. Each party hereto hereby assumes full and
complete responsibility for any loss or damage resulting from any visit by
personnel of the visiting party to any facility of another party pursuant to
this Section 3.4 and agrees to indemnify and hold harmless the host party from
any such loss or only loss or damage (including the expenses of any claim or
suit), excepting only loss or damage which results from wilful or grossly
negligent acts or omissions of the host party or of its agents or employees.
Section 3.5 - Translation or Conversion. All information supplied pursuant
---------------------------------------
to this Article 3 shall be in the language versions and measurement systems in
which the information is then maintained by Simmons. Any further translation or
conversion required by Primary Licensee shall be at Primary Licensee's expense.
ARTICLE IV
CONFIDENTIALITY AND PROPRIETARY RIGHTS
--------------------------------------
Section 4.1 - Acknowledgement of Confidentiality. Simmons, Licensor and
------------------------------------------------
Primary Licensee acknowledge that the Technology, Patents, Primary Licensee
Technology and any technical or accounting data, or business information of
either Simmons, Licensor or Primary Licensee, including, but not limited to,
correspondence and private technical discussions and related memoranda, may
embody highly valuable confidential information which is not generally known to
the public and which is proprietary to Simmons, Licensor or Primary Licensee.
The parties further acknowledge that any such information is properly considered
to be trade secrets, and consist of devices, processes and compilations of
technical information which are secret, confidential and not generally known to
the public and which was the product of the expenditure of time, effort, money
and/or creative skills. Simmons, Licensor and Primary Licensee may each
disclose to the others confidential or proprietary technical, accounting or
general business data, and each may disclose any such data to its Affiliates,
and Primary Licensee may disclose any such data to its Secondary Licensees, all
of which data shall be maintained as confidential in accordance with the
provisions of this Article 4 by the party to whom it is disclosed.
Section 4.2 - Designation. Any information exchanged pursuant to this
-------------------------
Agreement which is to be maintained confidential (hereinafter "Confidential
Information") shall be (i) if delivered in writing, designated with the legend
"Confidential" (or comparable legend) and (ii) if disclosed orally, indicated
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<PAGE>
"Confidential" at the time of such disclosure and followed within thirty (30)
days with written notice specifying the confidentiality. In addition,
Confidential Information shall include any other information exchanged pursuant
to this Agreement which the party to whom it was disclosed had reason to believe
was confidential.
Section 4.3 - Obligation Not to Disclose. Simmons, Licensor and Primary
----------------------------------------
Licensee mutually agree to maintain each other's Confidential Information in
confidence, and, except as permitted by this Agreement, not to disclose such
Confidential Information to any third party without the prior written consent of
the transmitting party, during the term of this Agreement and for ten (10) years
thereafter. Such Confidential Information may be used by the receiving party
within its place of business and disclosed to its Affiliates and their
respective employees and agents, and in the case of Primary Licensee to its
Secondary Licensees, to whom disclosure is reasonably necessary.
Section 4.4 - Disclosure to Affiliates and Secondary Licensees. Simmons,
--------------------------------------------------------------
Licensor and Primary Licensee mutually agree and covenant that any Confidential
Information received pursuant to this Agreement and disclosed to their
respective Affiliates, and in the case of Primary Licensee its Secondary
Licensees, shall be held confidential by such Affiliates and Secondary Licensees
in the same manner that Simmons, Licensor and Primary Licensee are obligated
under the terms of this Article 4.
Section 4.5 - Copies. Each party may make copies of materials designated
--------------------
"Confidential" that are delivered to another party as permitted by this
Agreement. All such copies shall at all times be subject to the terms and
conditions of this Agreement and shall remain the property of the transmitting
party.
Section 4.6 - Confidential Information Used in Connection with
--------------------------------------------------------------
Manufacturing by Third Parties. Primary Licensee, its Affiliates and Secondary
- ------------------------------
Licensees shall be permitted to have other persons or firms, whether domestic or
foreign, manufacture any Licensed Products, or parts thereof, for the account of
Primary Licensee, its Affiliates or its Secondary Licensees, which manufacture
requires the use of material designated Confidential by Licensor or Simmons;
provided that (i) such other person or firm agrees in writing to protect
Simmons' and Licensor's Confidential Information in the same manner that Primary
Licensee is obligated under this Article 4, a copy of which agreement shall be
provided to Simmons and Licensor prior to any such disclosure and be in a form
reasonably acceptable to both, and such other person or firm is not a Competitor
and Simmons, Licensor, Primary Licensee, its Affiliates or Secondary Licensees,
as applicable, has determined, after reasonable inquiry, that such other person
or firm does not manufacture mattresses, boxsprings or spring assemblies for any
Competitor,
- 14 -
<PAGE>
or (ii) Simmons or Licensor, as the case may be, consents in writing prior to
any disclosure or use of its Confidential Information. In the event any party
hereto receives written notification from another party hereto, or actually
knows that any person or firm to which it has disclosed Confidential Information
in accordance with the terms of this Section 4.6 has breached any relevant
provision of this Article 4, such party shall use its best efforts to cause such
person or firm to remedy such breach and, in the event such breach is not
remedied within ten (10) business days after the receipt by such other person or
firm of written notice of such breach, the relevant party shall immediately
terminate the arrangement pursuant to which it disclosed such Confidential
Information to such person or firm.
Section 4.7 - Disclosure by Licensor and Simmons. Subject to Section 6.2,
------------------------------------------------
Simmons and Licensor shall be permitted to disclose to any third party any
Confidential Information relating to the Technology, patents corresponding to
Patents and to technical and accounting data or business information, but only
to the extent (i) such information has been developed by, or is proprietary to,
Simmons or Licensor, as the case may be, (ii) the disclosure thereof will not be
materially detrimental to Primary Licensee, (iii) the disclosure thereof will
not be made to a competitor in the mattress manufacturing business of Primary
Licensee or to a person who manufactures mattresses, boxsprings or spring
assemblies to a competitor of Primary Licensee, and (iv) the disclosed
information does not include Primary Licensee's Confidential Information or
Primary Licensee Technology, excluding the Technology.
Section 4.8 - Exclusions. The preceding provisions of this Article 4 shall
------------------------
not apply to any information designated "Confidential" which:
(i) at any time after the Effective Date and prior to the time of
disclosure becomes known to the receiving party, as evidenced by its
written records; or
(ii) is or becomes publicly known or available through no breach of this
Agreement; or
(iii) is independently developed by the receiving party as evidenced by
its written records; or
(iv) is disclosed pursuant to the requirement of a governmental agency or
by operation of law.
The foregoing exclusions shall not apply to information disclosed in confidence
to directors, officers, employees or agents of Primary Licensee while such
individuals were directors, officers, employees or agents of a predecessor in
interest of Licensor, Simmons or an Affiliate of either. Each party shall have
the right to file patent applications for its own inventions relating
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<PAGE>
to any product, and it shall not be considered a breach of this Agreement for
such party to set forth in the disclosure of those patent applications such
information disclosed hereunder as may be necessary to describe completely such
party's invention in accordance with the requirements of the patent law of the
country involved.
Section 4.9 - Procedures Employed. In performing its obligations under this
---------------------------------
Article 4, each party shall employ procedures no less restrictive than the
strictest procedures used by such party to protect its own confidential data,
which procedures on request shall be explained in reasonable detail in writing
to the requesting party.
Section 4.10 - Notification of Unauthorized Use. Each party will promptly,
-----------------------------------------------
during the term of this Agreement, notify the transmitting party of any actual
or suspected unauthorized use or disclosure of any Technology, Licensed
Trademarks or Confidential Information or infringement of any Patents of which
such transmitting party has knowledge and will reasonably cooperate with the
transmitting party in the investigation and prosecution of such unauthorized
use, disclosure or infringement.
Section 4.11 - Best Efforts. Each party will use its best efforts to
---------------------------
protect the good name and reputation of the other parties, the Licensed
Trademarks and the goods represented by the Licensed Trademarks.
ARTICLE V
STANDARD OF LICENSEE'S PERFORMANCE
----------------------------------
Section 5.1 - Standards of Quality. The Licensed Products to be
----------------------------------
manufactured, sold and distributed by Primary Licensee, its Affiliates or any of
its Secondary Licensees and all labels associated therewith, shall, at all
times, meet the standards of quality of materials, appearance and workmanship
currently maintained by Licensor's predecessor in interest with respect thereto
(as such standards may be revised from time to time to reflect changes in the
Patents or the Technology).
Section 5.2 - Samples of Labels, Packaging and Advertising. Upon
----------------------------------------------------------
Licensor's reasonable request and at Licensor's expense, Primary Licensee or
Secondary Licensee shall furnish Licensor with samples of all labels, packaging
and advertising, on which any of the Licensed Trademarks are utilized. Licensor
shall have the right to forbid the use of any such labels that Licensor can
reasonably demonstrate does not meet the standards of quality set forth in
Section 5.1
Section 5.3 - Right of Inspection. Licensor shall, upon reasonable written
---------------------------------
notice to Primary Licensee or a Secondary Licensee, have the right to inspect
Primary Licensee's or
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<PAGE>
Secondary Licensee's place of manufacture of the Licensed Products at all
reasonable times, and to inspect the finished inventory of Licensed Products,
labels and work in process of Licensed Products, and labels of Primary Licensee
or Secondary Licensee in order to ascertain whether Primary Licensee or
Secondary Licensee is in compliance with Section 5.1. The expenses of such
inspection shall be borne by Licensor.
Section 5.4 - Attachment of Licensed Trademarks. The Licensed Trademarks
-----------------------------------------------
shall be physically affixed or attached to the Licensed Products sold under
those marks, in such a manner so as to at all times constitute legal use of the
Licensed Trademarks and Primary Licensee, its Affiliates or Secondary Licensees
will not do any act, or omit to do any act, except as expressly contemplated in
this Agreement, that will in any way impair or affect the strength of the
Licensed Trademarks, continuity of the registrations therefor or Licensor's
interest therein. Primary Licensee shall, if requested by Licensor, include an
appropriate trademark notice on its labels, packaging or advertising, in a form
reasonably specified by Licensor.
Section 5.5 - Compliance with Applicable Laws. The Licensed Products shall
---------------------------------------------
at all times be manufactured, sold and distributed in accordance with all
material applicable laws.
ARTICLE VI
LICENSED PRODUCTS
-----------------
Section 6.1 - Sales by Primary Licensee Outside of Licensed Territory.
---------------------------------------------------------------------
Except as provided in Section 2.4, Primary Licensee shall not, directly or
indirectly, (and shall not permit any Secondary Licensee to whom Primary
Licensee may hereafter grant a license to manufacture, sell, distribute,
advertise, promote or export any products to) manufacture, sell, distribute,
advertise, promote or export to, any country or territory outside of the
Licensed Territory (including, without limitation, any territory where Simmons
or Licensor competes or where either has granted a license to another licensee),
any products covered in whole or in part by the Technology or Patents or sold
under the Licensed Trademarks, or any other products bearing trademarks
identical or confusingly similar to any of the Licensed Trademarks, or otherwise
identified as a product of Primary Licensee, or sell or distribute any such
products or any other products bearing trademarks identical or confusingly
similar to any of the Licensed Trademarks to any person which intends, to the
best knowledge of Primary Licensee or the Secondary Licensee, directly or
through its agents or customers, to export the same to any country or
territory outside of the Licensed Territory.
Nothing herein shall restrict Primary Licensee's right to attend trade
shows, exhibits or the like outside of the Licensed Territory. Nothing herein
shall prohibit Primary Licensee from
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<PAGE>
manufacturing outside of the Licensed Territory for sale in the Licensed
Territory. Advertising which is directed to an audience in the Licensed
Territory but is broadcast outside of the Licensed Territory by media located in
the Licensed Territory shall not constitute a breach of the prohibition on
advertising or promoting outside of the Licensed Territory.
Primary Licensee acknowledges that the Licensed Trademarks, especially the
SIMMONS and BEAUTYREST trademarks, are famous worldwide. Primary Licensee
acknowledges and agrees not to take any action questioning the validity of the
Licensed Trademarks or Patents and the title of Licensor thereto during the term
of this Agreement. The foregoing acknowledgement and agreement with respect to
the validity and title shall not be construed to have any effect on the
representations and warranties set forth in Sections 12.1 and 12.2 hereof.
Section 6.2 - Sales by Simmons or Licensor in Licensed Territory. Neither
----------------------------------------------------------------
Simmons nor Licensor shall, directly or indirectly, (and, except as set forth in
Schedule A, neither shall permit any third party to whom either has granted a
license to manufacture, sell, distribute, advertise, promote or export any
products to) manufacture, sell, distribute, advertise, promote or export to, the
Licensed Territory any products covered in whole or in part by the Technology or
Patents or sold under the Licensed Trademarks or any other products bearing
trademarks identical or confusingly similar to any of the Licensed Trademarks or
otherwise identified, as a bedding product of Simmons or Licensor or sell or
distribute any such products or any other products bearing trademarks identical
or confusingly similar to any of the Licensed Trademarks to any person which
intends, to the best knowledge of Simmons, Licensor or the third party licensee,
directly or through its agents or customers, to export the same to the Licensed
Territory. Simmons hereby and Licensor represent and warrant to Primary
Licensee that, except as set forth on Schedule A, none of the existing
license agreements between Simmons or Licensor and third parties relating
to the manufacture, sale, distribution and/or exportation of any products
permits the licensee thereunder to manufacture, sell, distribute or export to,
the Licensed Territory any such products or any other products bearing
trademarks identical or confusingly similar to any of the Licensed Trademarks,
or sell or distribute any Licensed Products or any other products bearing
trademarks identical or confusingly similar to any of the Licensed Trademarks
to any person which intends, to the best knowledge of Simmons, Licensor
or the third party licensee, directly or through its agents or customers, to
export the same to the Licensed Territory, and Simmons and Licensor hereby
covenant with Primary Licensee that neither will enter into any license
agreements in the future with third parties (other than Affiliates of
Primary Licenses) which would permit the licensee thereunder to manufacture,
sell, distribute or export to, the licensed Territory any such products
or any other products
- 18 -
<PAGE>
bearing trademarks identical or confusingly similar to any of the Licensed
Trademarks, or sell or distribute any such products or any other products
bearing trademarks identical or confusingly similar to any of the Licensed
Trademarks, to any person which intends, to the best knowledge of Simmons,
Licensor or the third party licensee, directly or through its agents or
customers, to export the same to the Licensed Territory and that Simmons and
Licensor shall enforce the relevant restrictions in any such license agreements
with third parties.
Nothing herein shall restrict the right of Licensor, Simmons or the
Affiliates of either to attend trade shows, exhibits or the like in the Licensed
Territory. Nothing herein shall prohibit Simmons from manufacturing in the
Licensed Territory for sales outside of the Licensed Territory. Advertising
which is directed to an audience outside of the Licensed Territory but is
broadcast into the Licensed Territory by media located outside of the Licensed
Territory shall not constitute a breach of the prohibition on advertising or
promotion inside the Licensed Territory.
ARTICLE VII
ENFORCEMENT
-----------
Section 7.1 - Unauthorized Use of Technology, Licensed Trademarks or
--------------------------------------------------------------------
Confidential Information.
- ------------------------
(i) In the event that Primary Licensee learns of an infringement or
other unauthorized use of any of the Technology, Patents or Licensed
Trademarks or of any use by any person of a trademark or trade name
identical or confusingly similar to any of the Licensed Trademarks
(collectively "Infringing Property"), it shall promptly notify Licensor or
Simmons, as applicable, in writing. Primary Licensee shall thereupon take
such action as it deems advisable for the protection of its rights in and
to the Technology, Licensed Trademarks or Patents and Licensor and/or
Simmons, as applicable, will, if requested to do so by Primary Licensee,
and at Primary Licensee's expense, cooperate with Primary Licensee in all
respects including, without limitation, being a plaintiff or co-plaintiff
and causing its officers to execute pleadings and other necessary
documents. It is understood that in the event that Primary Licensee
institutes court action to terminate the use of the Infringing Property,
Licensor and Simmons have the right to participate in such action should
either or both so decide, but such participation shall be at its own cost
and expense to the extent that either is protecting its interests under the
Technology, Patents or Licensed Trademarks. It is further understood that
in the event that Licensor or Simmons objects to any action, position or
strategy taken by Primary Licensee in protection of its
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<PAGE>
rights hereunder, Licensor or Simmons may take control of such action, at
its own cost and expense. Primary Licensee may, at its sole expense,
continue to participate in, but not control, such action. In no event,
however, will Primary Licensee be required to take any action if it deems
it inadvisable to do so. In the event that Primary Licensee decides not to
take any such action it shall promptly so advise Licensor and/or Simmons,
as applicable, in writing in sufficient time to permit Licensor or Simmons
to take action to protect their interests. In such event Licensor and/or
Simmons shall be free to take such action on its own in connection with any
Infringing Property keeping Primary Licensee advised as developments occur
and consulting with Primary Licensee to the extent that Primary Licensee
requests such consultation. All expenses (including legal fees and
disbursements) incurred by Licensor, Simmons or Primary Licensee in
connection with investigating and prosecuting any claim with respect to any
such claim will belong to the party taking such action. Subject to
Sections 12.1 and 12.2 hereof, neither Licensor nor Simmons shall be
obligated to Primary Licensee in respect of any loss, expense or damage
Primary Licensee may suffer as a result of such infringement or
unauthorized use.
(ii) In the event of any actual or suspected unauthorized use or
disclosure of any Confidential Information of Primary Licensee by any
person, Primary Licensee shall have the right (but not the obligation) to
take such action, including bringing a suit against such person, as it
shall deem advisable in its discretion. Licensor and Simmons shall provide
any assistance in the prosecution of such litigation reasonably required by
Primary Licensee at the expense of Primary Licensee.
(iii) In the event that any litigation is initiated pursuant to Section
7.1(i) or any settlement thereof is made, payment shall be made to
Licensor of any portion of proceeds of such litigation or settlement
remaining (following deduction of Primary Licensee's expenses incurred by
reason of such litigation which are not recovered from the infringing party
by Primary Licensee) which represents the royalty which would otherwise be
payable hereunder on lost sales of Royalty Products that Licensor would
have received but for the loss of such sales.
Section 7.2 - Third Party Claims. Should a third party at arm's length
--------------------------------
with Primary Licensee ("Third Party") claim in writing that Primary Licensee by
acting in accordance with this Agreement in its use of the Patents, Licensed
Trademarks or Technology is violating any intellectual property right of such
Third Party, Primary Licensee shall promptly notify Licensor and/or Simmons, as
applicable, accordingly in writing. Licensor or Simmons will thereupon take
such action as it deems advisable
- 20 -
<PAGE>
for the protection of its rights in and to the Patents, Licensed Trademarks or
Technology and for the protection of Primary Licensee. Licensor or Simmons
shall keep Primary Licensee advised as developments occur and take such actions
as are consented to in advance in writing by Primary Licensee to the extent that
such action affects the rights of Primary Licensee hereunder. Primary Licensee
will, if requested to do so by Licensor or Simmons, cooperate with Licensor or
Simmons in all respects including, without limitation, causing its officers to
execute pleadings and other necessary documents. In no event, however, will
Licensor or Simmons be required to take any action if it deems it inadvisable
to so. In the event that Licensor or Simmons decides not to take any such
action it shall so advise Primary Licensee in writing within thirty (30) days
of receipt of notification from Primary Licensee of the Third Party claim in
sufficient time to permit Primary Licensee to take action to protect its
interests. In such event, Primary Licensee shall be free to take such action on
its own in connection with such Third Party Claims, keeping Licensor or Simmons,
as applicable, advised as developments occur and taking such actions as are
consented to in advance in writing by Licensor or Simmons, as applicable, such
consent not to be unreasonably withheld. Each party shall bear its own expenses
(including legal fees and disbursements) incurred in connection with
investigating and defending against any such Third Party claim. Any damages
paid or recovered or sums paid or obtained in settlement of or with respect to
any such Third Party claim shall be for the account of the party taking such
action. Nothing in this Section 7.2 is intended to relieve Licensor or Simmons
of any liability it may have for a breach of any provision of this Agreement
including, without limitation, the representations and warranties provided by
Simmons and Licensor in this Agreement.
ARTICLE VIII
ROYALTIES AND REPORTS
---------------------
Section 8.1 - Royalty for Trademark License and Patent License.
--------------------------------------------------------------
(a) As compensation to Licensor for the Trademark License and Patent
License granted under Sections 2.2 and 2.3, Primary Licensee and each of
its Secondary Licensees shall pay to Licensor a non-refundable annual
royalty as follows:
(i) for the calendar year 1990, royalty-free;
(ii) for the calendar year 1991, 0.2% of total Net Sales of Royalty
Products if the Net Sales for such calendar year exceed $84.55
Million; and
(iii) from and after 1992, 0.4% of the total Net Sales of Royalty
Products for each calendar year,
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<PAGE>
(b) The royalty payments to be made by Primary Licensee and by any
Secondary Licensee pursuant to Section 8.1(a) shall be payable within
forty-five (45) days after the end of the first and second calendar years,
and thereafter within forty-five (45) days after the end of each six (6)
month period during the term of this Agreement and the relevant license
agreement; provided, that in the event Primary Licensee or any Secondary
Licensee fails to pay any royalties payable under this Section 8.1 when
due, Primary Licensee or such Secondary Licensee, as applicable, shall pay
to Licensor in addition to such royalties, interest thereon calculated at a
per annum rate equal to the sum of the Prime Rate plus three percent (3%).
At the time of payment of such royalties, Primary Licensee or a Secondary
Licensee, as applicable, shall furnish a royalty statement, certified to be
accurate by Primary Licensee or such Secondary Licensee, as applicable,
indicating the gross sales and Net Sales of the Royalty Products sold by
Primary Licensee or such Secondary Licensee, as applicable, in the Licensed
Territory, together with unit sales by model and size.
Section 8.2 - Royalty for Technology License and Marketing Information.
-----------------------------------------------------------------------
As compensation to Simmons for the Technology License and the Marketing
Information granted to Primary Licensee hereunder, Primary Licensee and each of
its Secondary Licensees shall pay to Simmons, in the aggregate, a non-refundable
annual royalty as follows:
(i) for the calendar year 1990, $120,000.00 prorated for the portion
of the year that this Agreement will have been in effect;
(ii) for the calendar year 1991, $120,000.00;
(iii) for the calendar years 1992-1993, $150,000.00 for each year; and
(iv) thereafter, $150,000.00 adjusted for increases, if any, in the
Canadian Consumer Price Index for the calendar year immediately preceding the
year for which the annual royalty is payable over the Canadian Consumer Price
Index for the calendar year 1993. In the event of use of comparable statistics
in place of the Consumer Price Index, revisions shall be made in the method of
computation herein provided as the circumstances may require to carry out the
intent of this Section.
The royalties under this Section 8.2 are payable in each case on or before
December 31 of the applicable calendar year for which the royalty is being paid.
Except as otherwise provided in this Section 8.2, the foregoing payment shall
continue to be made in full as long as the Technology License or the obligation
to supply Marketing Information to Primary Licensee continues in effect.
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<PAGE>
In the event that Simmons, Licensor and their Affiliates discontinue, for a two
(2) year period, spending the amount of the Royalty for such years set forth in
this Section 8.2 to enhance and develop Technology, directly and indirectly
through the services of another, Simmons shall notify Primary Licensee and
Primary Licensee's obligations to pay Simmons under this Section 8.2 shall cease
for so long as Simmons, Licensor or the Affiliates of either fails to spend the
Royalty amounts which would otherwise be payable to Simmons under this Section
8.2 (the"Development Lull Period"). Simmons shall refund to Primary Licensee
the Royalty paid for such two (2) year period with interest thereon from the
date of payment by Primary Licensee of such Royalty to the date of payment by
Simmons calculated at a per annum rate equal to the sum of the Prime Rate
plus one percent (1%). In the event that Simmons resumes its efforts to
enhance and develop Technology to a degree wherein expenditures for a
year exceed the
Royalty amount which would be due under this Section 8.2 for such year, Primary
Licensee's obligations to pay Simmons under this Section 8.2 shall resume.
During any Development Lull Period, Simmons or its Affiliates shall not be
obligated to provide any new Technology or Marketing Information to Primary
Licensee.
Section 8.3 - No Waiver or Estoppel. The rendering of any royalty
-----------------------------------
statement and/or payment of any royalties shown to be due thereby shall not in
any event bar, or in any way operate as an estoppel of, Licensor's rights of
examination, inspection and audit, as provided in Article 10, nor any rights or
remedies of Licensor to any additional royalties that may be found to be due,
all of which rights and remedies shall survive and shall not be deemed to have
been waived by any act or omission on the part of Licensor.
ARTICLE IX
CURRENCY AND TAXES
------------------
All amounts referred to in this Agreement shall be payable in Canadian
dollars. Primary Licensee and any Secondary Licensees, if any, shall pay to
Licensor and, if applicable, to Simmons the amount of any goods and services tax
exigible on any payments to be made by either or both of the Primary Licensee
and the Secondary Licensees under this Agreement, under the Excise Tax Act
(Canada), as the same may be amended form time to time. Such amount shall be
paid in addition to and at the same time as payments to be made by either or
both the Primary Licensee and Secondary Licensees hereunder, to the party
receiving such payment. The royalties described in Section 8.2 hereof payable
to Simmons shall be net of taxes withheld and remitted to the Receiver General
of Canada as hereinafter provided. Primary Licensee and Secondary Licensees
shall withhold from the payment of such royalties an amount equal to ten (110%)
percent thereof and shall remit such amount to the Receiver General of Canada
within the prescribed time limits under the Income Tax Act (Canada) on account
of the tax liability of
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<PAGE>
Simmons under Part XIII thereof; provided, however, that if Article XII(2) of
the Canada-United States Tax Convention is amended to provide for a higher or
lower rate of withholding (or for the elimination of same), the Primary Licensee
and Secondary Licensees shall withhold tax on such royalties at the increased or
decreased rate or shall cease to withhold any such amount, as the case may be.
ARTICLE X
EXAMINATION OF BOOKS
--------------------
Primary Licensee shall (and shall cause its Secondary Licensees to)
maintain, for a period of at least five (5) years after each royalty statement
is delivered to Licensor, such accurate books and records as shall be sufficient
to confirm the number of Royalty Products sold by Primary Licensee (and its
Secondary Licensees) in the Licensed Territory, and the total royalties due and
payable under this Agreement. Primary Licensee shall (and shall cause its
Secondary Licensees to) permit reasonable inspection by independent chartered
accountants of such books and records as may reasonably be required to verify
such data. Any such chartered accountants shall be chosen by Licensor subject
to the reasonable approval of Primary Licensee (or, if applicable, a Secondary
Licensee) and shall be paid by Licensor. Such chartered accountants shall only
verify to Licensor (with a copy of such verification to Primary Licensee)
whether Primary Licensee's (or a Secondary Licensee's) royalty statements are
correct and, if any such statements are found to be incorrect, such chartered
accountants will report to Licensor (with a copy of such report to
Primary Licensee) the number of Royalty Products sold in the Licensed Territory
by Primary Licensee (or its Secondary Licensee) during the period or periods in
question and the total royalty properly payable thereon. Notwithstanding any
other provision of this Agreement, should the royalty payment established by
such inspection by such chartered accountants differ by more than four percent
(4%) from the corresponding figure in the royalty statements furnished to
Licensor by Primary Licensee (or any Secondary Licensee) hereunder, Primary
Licensee (or such Secondary Licensee, as applicable) shall reimburse
Licensor for any and all expenses incurred by Licensor in the course of such
inspection. The accuracy of any royalty payment may not be challenged by
Licensor after expiration of the five (5) year period during which Primary
Licensee (and each Secondary Licensee) must maintain books and records
sufficient to confirm the accuracy of the report relating thereto.
ARTICLE XI
GOVERNMENT REGISTRATIONS
------------------------
Section 11.1 - Governmental Filings. Licensor and Primary Licensee shall
-----------------------------------
execute and file with the Canadian Trade Marks
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Office (at the cost of Licensor) a registered user application in respect of the
Trademark License in the form attached hereto as Schedule E.
Section 11.2 - Subsequent Registration of Patents. Licensor shall use its
-------------------------------------------------
best efforts and cooperate fully with Primary Licensee to register after the
Effective Date from time to time as any Patent is newly-registered in the
Licensed Territory as required under Section 12.2 hereof, the Patent License
granted under this Agreement as an exclusive license with the appropriate
registry in the Licensed Territory in which any Patents may be registered.
The expenses of registering new Patents shall be paid by Licensor. The
expenses of maintaining Patents shall be paid by Primary Licensee.
Section 11.3 - Registration of Primary Licensee in Licensed Territory.
---------------------------------------------------------------------
Licensor shall register Primary Licensee, immediately after the Effective Date,
as the exclusive Primary Licensee of each Licensed Trademark registered in the
Licensed Territory in the appropriate registries and Primary Licensee agrees to
cooperate fully with Licensor to obtain such registrations. From time to time
after the Effective Date, Licensor shall maintain and renew all registrations
for any Licensed Trademarks newly-registered as required under the provisions of
subsections 2.3(b) and (c), and shall use its best efforts and cooperate fully
with Primary Licensee in connection with Primary Licensee's renewal for each
such exclusive licensee registration. The expenses of registering new
Trademarks
shall be paid by Licensor. Licensor's expenses of renewing Trademarks and the
Registered User applications shall be reimbursed by Primary Licensee.
Section 11.4 - Registration by Primary Licensee. Primary Licensee shall
-----------------------------------------------
not register or apply to register with any government in the world any trademark
identical or confusingly similar to any Licensed Trademark for use on or in
connection with the manufacture, sale, importation, distribution, advertising
and promotion of any products.
Section 11.5 - Power of Attorney. Primary Licensee and Licensor will enter
--------------------------------
into a power of attorney substantially in the form set forth in Schedule H
attached hereto, on the Effective Date of this Agreement, whereby Licensor
authorizes Primary Licensee or its attorney to carry out any ministerial filings
required by this Article 11. Primary Licensee will, and will cause its attorney
to, dutifully carry out any obligation of Licensor pursuant to this Article 11
which Primary Licensee, or its attorney, is legally permitted and authorized by
the power of attorney to carry out.
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<PAGE>
ARTICLE XII
WARRANTIES AND INDEMNIFICATION
------------------------------
Section 12.1 - Technology and Trademark Warranties. Simmons represents and
--------------------------------------------------
warrants to Primary Licensee that on the Effective Date of this Agreement it
has the right to use the Technology presently in its knowledge, possession or
control. Licensor and Simmons jointly and severally represent and warrant to
Primary Licensee that, except as set forth in Schedule A, on the Effective Date
of this Agreement (i) Licensor is the registered and beneficial owner of the
Licensed Trademarks in the Licensed Territory, free from any security interests,
charges, mortgages or other encumbrances, and as of the date of this Agreement,
none of the Licensed Trademarks has been registered by Licensor with any
government in the Licensed Territory for use on or in connection with the
manufacture, sale, importation, distribution, advertisement or promotion of any
product other than as specified in Schedule A and none of the Licensed
Trademarks has been registered by any third party in the Licensed Territory
for use on or in connection with the manufacture, sale, importation,
distribution, advertisement, or promotion of any Licensed Products; (ii) each
has the right to enter into this Agreement and the right to grant the
licenses, rights and privileges granted herein, including but not limited to
the Technology License and, with respect to the Licensed Trademarks, the
Trademark License; (iii) there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements by Licensor, Simmons or the
Affiliates of either arising as a result of its action relating to the use of
the Technology, Patents, Licensed Trademarks or the Marketing Information
in the Licensed Territory or otherwise inconsistent with the rights granted
Primary Licensee by this Agreement; (iv) to the actual knowledge of Licensor and
Simmons, Primary Licensee's use of such Technology, Patents, Licensed Trademarks
and Marketing Information in connection with the manufacture, sale, importation,
distribution, advertisement or promotion of Licensed Products in accordance
with the terms of this Agreement does not infringe any right of any person, firm
or corporation under the patent, copyright or trademark laws of the Licensed
Territory; (v) neither Licensor nor Simmons is aware of any person infringing
upon the Patents, Technology or Licensed Trademarks against whom steps have not
been taken to protect the Patents, Technology Licensed Trademarks; and (vi)
neither Licensor nor Simmons has developed or is engaged in the development of
new technology relating to the bedding business other than the technology
contained in the Patents and Technology.
During the term of this Agreement, Licensor agrees that it will not without
the prior written consent of Primary Licensee:
(a) create, incur, assume or permit to exist any security interest,
charge, mortgage, lien, hypothec, pledge, assignment or other encumbrance in or
on any of the Patents or Licensed Trademarks;
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<PAGE>
(b) sell, assign, transfer, convey or otherwise dispose of any of the
Patents or Licensed Trademarks other than in accordance with Article 13;
(c) change its corporate name; or
(d) carry on any business or voluntarily incur any liabilities other than
as necessary to carry out its obligations under this Agreement.
Section 12.2 - Additional Patent Warranties. Licensor and Simmons jointly
-------------------------------------------
and severally represent and warrant to Primary Licensee, on the Effective Date
of this Agreement, that (i) the patents and/or applications therefor listed on
Schedule D attached hereto constitute all Patents issued to, owned or licensable
by Licensor, Simmons or the Affiliates of either as of the Effective Date of
this Agreement in the Licensed Territory which cover in whole or in part
devices or processes contained in or relating to pocket-coil, open-coil or other
coil mattresses and box springs; (ii) Licensor is the registered and beneficial
owner of the Patents in the Licensed Territory, free from any security
interests, charges, mortgages or other encumbrances; and (iii) Licensor has full
power and authority to enter into this Agreement and to grant the Patent License
to Primary Licensee under such Patents and/or applications therefor. Licensor
and Simmons agree to submit to Primary Licensee an updated Schedule D on the
Effective Date and otherwise within thirty (30) days after any change in the
Patents. From time to time during the term of this Agreement, Licensor and
Simmons shall endeavor to obtain Patents in the Licensed Territory for any new
Technology which is patentable and for which Licensor or Simmons has endeavored
to obtain patents in the United States, with the appropriate registry in the
Licensed Territory unless Simmons receives the opinion of legal counsel that
registration in the Licensed Territory is precluded, a copy of which shall be
provided to Primary Licensee. In its endeavor to obtain Patents in Licensor's
name in the Licensed Territory on new Technology, neither Simmons nor Licensor
shall be required to expend any more effort or resources than either may have
expended in connection with the United States counterpart to any patent
application filed in the Licensed Territory, nor shall either be required to
prosecute or continue to prosecute any patent application in the United States
or Canada when, in the opinion of counsel, meaningful patent protection is
unlikely to be obtained. In the event that Licensor or Simmons, as applicable,
determines not to prosecute or to discontinue prosecution of a patent
application in the Licensed Territory, Primary Licensee shall be notified and
given the opportunity to prosecute such patent application at its own expense.
Section 12.3 - Government Approvals. Licensor further represents that,
-----------------------------------
except for the notification and the registrations referred to in Sections 11.1,
11.2 and 11.3 hereof, it has made all
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<PAGE>
registrations and filings with, and obtained approvals of, any government agency
necessary in connection with this Agreement.
Section 12.4 - Indemnification. Each party hereto (the "Indemnifying
------------------------------
Party") agrees to indemnify, defend and hold harmless the other parties hereto,
any Affiliate thereof, and their respective successors and permitted assigns, if
any, (the "Indemnified Party"), at any time after the Effective Date, from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and attorneys' fees and expenses, which were reasonably
incurred by the Indemnified Party, net of any insurance proceeds received by the
Indemnified Party with respect thereto (all such amounts, net of insurance
proceeds being hereafter referred to collectively as "Damages"), asserted
against, resulting to, imposed upon or incurred by the Indemnified Party,
directly or indirectly, by reason of or resulting from (i) a breach of any
representation or warranty or any covenant or other agreement of the
Indemnifying Party contained in or made pursuant to this Agreement or any facts
or circumstances constituting such a breach and (ii) any claim against the
Indemnifying Party by a third party based upon the manufacture, sale,
advertisement, promotion or distribution of any Licensed Product by the
Indemnifying Party (items (i) and (ii) are, collectively, "Claims").
Section 12.5 - Damage Limitations.
---------------------------------
(i) Notwithstanding any other provisions of this Agreement, and
consonant with Section 11.4 of the Stock Purchase Agreement, no amount
shall be payable in indemnification under this Article 12 of this Agreement
to Primary Licensee with respect to a breach of representation or warranty
unless and until such losses and losses suffered by Purchaser under the
Stock Purchase Agreement, in the aggregate, equal or exceed $350,000.00
provided that if such losses, in the aggregate, equal or exceed $350,000.00
Primary Licensee shall be entitled to be indemnified for all its losses in
excess of $350,000.00 up to a maximum amount equal to the Purchase Price
as defined in the Stock Purchase Agreement. The parties agree that
Primary Licensee shall not be entitled to be indemnified for any
individual event giving rise to Damages the amount of which amounts to
less than $35,000.00 (an "Immaterial Loss") and such Immaterial Losses
shall not be included in the computation of the dollar limits set forth
in the preceding sentence.
(ii) For greater certainty the parties agree that the dollar
thresholds and limits referred to in (i) above shall only apply to losses
suffered by Primary Licensee as a result of the breach of any
representation or warranty made by Licensor or Simmons pursuant to this
Article 12.
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<PAGE>
(iii) In any case where an Indemnifying Party has indemnified an
Indemnified Party for any Damages and such Indemnified Party recovers from
third parties all or any part of the amount so indemnified by the
Indemnifying Party, such Indemnified Party shall promptly pay over to the
Indemnifying Party the amount so recovered (after deducting therefrom the
full amount of the expenses incurred by it in procuring such recovery), but
not in excess of the amount so indemnified by the Indemnifying Party.
Section 12.6 - Notice of Indemnification. The obligations and liabilities
----------------------------------------
of the Indemnifying Party under any provision of this Agreement with respect to
Claims relating to third parties shall be subject to the following terms and
conditions:
(i) Whenever the Indemnified Party shall have received notice that
such a claim has been asserted or threatened, which, if valid, would be
subject to an Indemnity under this Agreement, the Indemnified Party shall
as soon as reasonably possible and in any event within the earlier of
thirty (30) days after receipt of such notice or such date as will afford
sufficient time to prepare and file a timely answer to a complaint or
similar initiation of judicial proceedings, notify the Indemnifying Party
of such Claim and of all relevant facts within its knowledge which relate
thereto; provided, however, that the failure of the Indemnified Party to
give timely notice hereunder shall not relieve the Indemnifying Party of
its indemnification obligations under this Agreement unless, and only to
the extent that, such failure caused the Damages for which the Indemnifying
Party is obligated to be greater than they would have been had the
Indemnifying Party been given timely notice hereunder.
(ii) The Indemnifying Party will have the right, but not the
obligation, to assume the defense of any claim made pursuant to this
Section 12.6. If the Indemnifying Party, within the earlier of thirty (30)
days after receipt of notice of a Claim pursuant to this Section 12.6 or
such date as will afford sufficient time to prepare and file a timely
answer to a complaint or similar initiation of judicial proceedings, fails
to assume the defense of such Claim, the Indemnified Party will (upon
further notice to the Indemnifying Party) have the right to undertake, at
the Indemnifying Party's expense, the defense, compromise or settlement of
such Claim on behalf of and for the account and risk of the Indemnifying
Party, subject to the right of the Indemnifying Party to assume the defense
of such Claim at any time prior to settlement, compromise or final
determination thereof. The Indemnified Party will keep the Indemnifying
Party reasonably informed of the progress of any such defense, compromise
or settlement.
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<PAGE>
(iii) Anything in this Section 12.6 to the contrary notwithstanding, (1) if
there is a reasonable probability that a Claim may materially and adversely
affect the Indemnified Party, the Indemnified Party shall have the right to
defend, at its own cost and expense, and to compromise or settle such claim
with the consent of the Indemnifying Party, and (2) the Indemnifying Party
shall not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment. In the event
the Indemnifying Party makes a bona fide settlement proposal which the
third party claimant has confirmed is acceptable to it and which the
Indemnified Party rejects, the Indemnifying Party's obligation to indemnify
the Indemnified Party shall be limited to such settlement proposal.
Section 12.7 - Survival of Indemnification. The Indemnification set forth
------------------------------------------
in this Article 12 shall survive the termination of this Agreement only in
respect of any Claims based on facts or circumstances existing as of, or arising
out of Licensed Products manufactured or sold prior to, the date of such
termination, for a period within which a third party can sue Primary Licensee or
Licensor or Simmons, as the case may be, or one (1) year if the Indemnified
Party is not claiming indemnification as a result of a third party suit or, if
shorter, the relevant statute(s) of limitations.
Section 12.8 - Other Remedies. Nothing in this Article 12 shall be
-----------------------------
construed to limit the non-monetary equitable remedies of either party hereto in
respect of any breach by the other party of any covenant or other agreement of
such other party contained in or made pursuant to this Agreement required to be
performed after the Effective Date.
Section 12.9 - Set-off.
----------------------
(a) In addition to any other rights Primary Licensee may have under
this Agreement or at law or in equity, the parties agree that Primary
Licensee shall have the right, exercisable in accordance with subsections
(b) and (c), to set-off against the royalty payments required to be made
from time to time by Primary Licensee under this Agreement for its
exclusive use of the Licensed Trademarks and Patents, (i) all amounts which
may be owing from time to time by Simmons or Licensor to Primary Licensee
hereunder and (ii) any amounts which may be owing from time to time by
Simmons or Simmons Limited to 896552 Ontario Inc., or its successors and
assigns, under the Stock Purchase Agreement.
(b) Each time Primary Licensee claims an amount from Simmons or
Licensor pursuant to Section 12.9(a) it shall do so by written notice
specifying the amount, the provision of this Agreement, the Stock Purchase
Agreement or other agreement by virtue of which it is claimed and the
reasons for the claim.
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<PAGE>
If Simmons or Licensor does not for any reason whatsoever pay the amount
within ten (10) days following the receipt of the notice or notify Primary
Licensee within such ten (10) day period that it disputes Primary
Licensee's claim, then Primary Licensee shall be entitled to claim an
equivalent amount by way of set-off pursuant to Section 12.9(a) hereof
together with interest thereon at a rate per annum equal to the Prime Rate
plus one and one-quarter percent (1 1/4%) from the date it provided the
notice to the Vendor until the date or set-off.
(c) In the event that Simmons or Licensor notifies Primary Licensee
within such ten (10) day period that it disputes Primary Licensee's
entitlement to receive the amount claimed, Primary Licensee shall forthwith
deposit the amount claimed in trust with Primary Licensee's solicitors, a
recognized trust company duly qualified to carry on business in the
Province of Ontario or such other person (the "Agent") as may be mutually
agreed upon by the parties until the Agent receives either a joint written
direction or a final judgment certificate (as those terms are hereinafter
respectively defined). Upon the receipt by the Agent of such joint written
direction or final judgment certificate, as the case may be, the Agent
shall be entitled to release the amount claimed and any accumulated
interest thereon to the party or parties and in proportions and in the
manner therein provided. For purposes of this Section 12.9(c), the term
"joint written direction" shall mean a written communication addressed to
the Agent and executed by or on behalf of either Simmons or Licensor and by
Primary Licensee and the term "final judgment certificate" shall mean a
certified transcript of a judgment from which the appeal period has expired
without appeal.
ARTICLE XIII
OPTION TO PURCHASE LICENSED TRADEMARKS AND PATENTS
--------------------------------------------------
Section 13.1 - Triggering Event. If the following events under (i) both
-------------------------------
subsections (a) and (b) of this Section 13.1 or (ii) both subsections (c) and
(d) of this Section 13.1, shall have occurred and be continuing, a triggering
event (a "Triggering Event") shall be deemed to have occurred:
(a) a liquidation or sale of the shares or assets of Simmons (i) pursuant
to a liquidation plan under Chapter 11 of the United States Bankruptcy Code,
(ii) by the trustee in Bankruptcy pursuant to a proceeding under Chapter 7 of
the United States Bankruptcy Code, (iii) pursuant to Section 363 of the United
States Bankruptcy Code, or (iv) by means other than a permitted assignment as
set forth in Article 17; and
(b) (i) such sale is not to an entity that will continue the portion of
business of Simmons or Licensor relating to the
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<PAGE>
Patents and Licensed Trademarks, such that the rights of Primary Licensee under
the Trademark License and Patent License shall be terminated, or (ii) there is a
failure by Licensor or the successor in interest of Licensor to meet the
material obligations of Licensor under this Agreement and a demonstrable
inability to cure such failure within forty-five (45) days of the receipt by
Licensor or such successor in interest to Licensor of notice from Primary
Licensee of such failure, such notice setting forth with particularity the acts
and omissions alleged to have caused such failure.
(c) (i) Licensor shall admit in writing its insolvency or make a general
assignment for the benefit of creditors or any proceeding shall be instituted by
Licensor seeking relief on its behalf as debtor, or to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding-up, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking
appointment of a receiver, receiver and manager, trustee, custodian or other
similar official for it or any substantial part of its property and assets or it
shall take any corporate action to authorize any of the foregoing actions; or
(ii) any proceeding shall be instituted against Licensor seeking to have an
order for relief entered against it as a debtor or to adjudicate it a bankrupt
or insolvent, or seeking liquidation, winding-up, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking
appointment of a receiver, receiver and manager, trustee, custodian or
similar official for it or for any substantial part of its property and
assets and such proceedings are not or no longer being contested in good
faith by appropriate proceedings, but in no event longer than forty-five (45)
days from the institution of such first-mentioned proceedings; and
(d) there is a breach by Licensor or the successor in interest of Licensor
to meet the material obligations of Licensor under the Trademark License or
the Patent License and such failure shall not have been cured within forty-five
(45) days of the receipt by Licensor or such successor in interest to Licensor
of notice from Primary Licensee of such failure, such notice setting forth in
reasonable detail the acts or omissions alleged to have caused such failure.
Any proceedings against Licensor referred to in subsection (c)(ii) of this
Section 13.1 initiated by Primary Licensee or a Secondary Licensee shall not
give rise to a Triggering Event.
Section 13.2 - Option. If a Triggering Event occurs, Primary Licensee
---------------------
shall have the right (but not the obligation) to require Licensor or its
successor in interest to sell the Patents and
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<PAGE>
Licensed Trademarks (collectively, the "Purchased Assets") to Primary Licensee
in accordance with the provisions of this Article 13.
Section 13.3 - Notice. Primary Licensee may exercise its right under
---------------------
Section 13.2 by giving notice ("Notice") to Licensor or its successor in
interest stating its desire to purchase the Purchased Assets.
Section 13.4 - Purchase Price. If Primary Licensee exercises its rights
-----------------------------
pursuant to this Article 13, the aggregate purchase price for the Purchased
Assets to be sold by Licensor and to be purchased by Primary Licensee shall be
$10 for each such unexpired Patent, patent application and Licensed Trademark
(the "Exercise Price") and (ii) the royalties payable under Section 8.1 hereof
to Licensor or its successor in interest for so long as Primary Licensee
continues to use or license others to use the Patents or Licensed Trademarks.
Such royalty payments for purposes of this Section 13.4 shall be deemed deferred
payments of the purchase price.
Section 13.5 - The Closing. The closing of the sale of the Purchased
--------------------------
Assets pursuant to this Article 13 shall occur at the offices of counsel to
Primary Licensee at 2:00 p.m. (Toronto time) on the tenth (10th) business day
following the day on which the Notice was received by Licensor or its successor
in interest or at such other place or time or on such date as Primary Licensee
and Licensor may determine ("Closing Date"). At closing on the Closing Date:
(a) Licensor shall deliver to Primary Licensee all such bills of sale,
transfers, assignments, notices and other documents which in the opinion of
counsel to Primary Licensee would be necessary or advisable to effectively vest
title to the Purchased Assets in Primary Licensee free and clear of any
mortgage, lien, charge, pledge, hypothecation, security interest, encumbrance or
adverse claim of any kind created by or arising through Licensor other than
those in favor of Primary Licensee; and
(b) Primary Licensee shall deliver to Licensor a cheque payable to the
order of Licensor in the amount of the Exercise Price.
Section 13.6. The exercise of the right granted to Primary Licensee under
------------
this Article 13 by delivery of the Notice to Licensor shall be irrevocable and
shall bind Licensor or its successor in interest to sell, and Primary Licensee
to purchase, the Purchased Assets in accordance with the foregoing provisions of
this Article 13.
Section 13.7 - Power of Attorney. In the event Primary Licensee exercises
--------------------------------
the rights to purchase the Purchased Assets, Licensor hereby irrevocably
constitutes and appoints Primary
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<PAGE>
Licensee and each of its directors and officers holding office from time to time
as its true and lawful attorney-in-fact and agent for, in the name of and on
behalf of Licensor or its successor in interest, to execute and deliver in the
name of Licensor or its successor in interest all such bills of sale, transfers,
assignments, notices, agreements and other documents as may be necessary to
transfer and assign the Purchased Assets, or any part thereof, to Primary
License, or its nominee or nominees. Such appointment and power of attorney,
being coupled with an interest, shall not be revoked by the insolvency or
bankruptcy of Licensor and Licensor hereby ratifies and confirms and agrees to
ratify and confirm all that Primary Licensee may lawfully do or cause to be done
by virtue of the provisions hereof.
ARTICLE XIV
ACKNOWLEDGEMENT OF DAMAGES
AND SECURITY INTEREST
---------------------
Section 14.1 - Breach of Patent and Trademark Licenses.
------------------------------------------------------
(a) The parties acknowledge that damages may not be an adequate remedy if
Licensor breaches its material obligations under the Patent License or the
Trademark License and Primary Licensee loses all of its rights under the Patent
License and Trademark License. As such, the parties agree Primary Licensee may
seek and obtain an order for specific performance, injunction or similar
equitable remedy to ensure Licensor's performance of the Patent License and the
Trademark License and that such remedy may be sought in lieu of or in addition
to damages. The parties agree that the amount of losses or damages suffered or
incurred by Primary Licensee in the event of any material breach of its
material obligations under the Patent License or the Trademark License is
the fair market value of the Patents or Licensed Trademarks, as the case may
be, at the time or such breach plus $25,000 (representing the parties' estimate
of the reasonable costs and expenses to be incurred by Primary Licensee as a
result of such breach) (collectively, the "Loss Amount"). The parties agree
that the Loss Amount is a genuine attempt by them to estimate Primary Licensee's
actual losses and damages which may arise in connection with a breach by
Licensor of its material obligations under the Patent License or the Trademark
License and that upon such a breach and a failure to cure such a breach within
forty-five (45) days after receipt by Licensor or its successor in interest of
written notice from Primary Licensee calling attention to such breach,
specifying the nature thereof and the action required to correct such breach,
the Loss Amount shall become immediately due and payable by Licensor to Primary
Licensee. The parties agree that such damages should not be construed as
granting an undue benefit to Primary Licensee or as imposing a penalty upon
Licensor.
(b) In order to secure Licensor's obligations to perform the Patent License
and the Trademark License and to secure the payment
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<PAGE>
of its obligations under paragraph (a) above, Primary Licensee shall be granted
a security interest in the Licensed Trademarks and Patents substantially in the
form set forth in Schedule G attached hereto.
Section 14.2 - Breach of Obligation to Sell Purchased Assets.
------------------------------------------------------------
(a) The parties acknowledge that damages may not be an adequate remedy if
Licensor breaches its obligation to sell the Purchased Assets to Primary
Licensee pursuant to the rights of Primary Licensee under Article 13. As such,
the parties agree that Primary Licensee may seek and obtain an order for
specific performance, injunction or similar equitable remedy to ensure
Licensor's performance of its covenants contained in Article 13 and that such
remedy may be sought in lieu of or in addition to damages. The parties agree
that the amount of losses or damages suffered or incurred by Primary Licensee in
the event of any material breach by Licensor of its covenants contained in
Article 13 is the fair market value of the Patents and Licensed Trademarks at
the time of such breach plus $35,000 (representing the parties' estimate of the
reasonable costs and expenses to be incurred by Primary Licensee as a result of
such breach) (collectively, the "Damage Amount"). The parties agree that the
Damage Amount is a genuine attempt by them to estimate Primary Licensee's actual
losses and damages which may arise in connection with a breach by Licensor of
its obligations under the covenants contained in Article 13 and that upon such a
breach the Damage Amount shall become immediately due and payable by Licensor to
Primary Licensee. The parties agree that such damages should not be
construed as granting an undue benefit to Primary Licensee or as imposing a
penalty upon Licensor.
(b) In order to secure Licensor's obligations to perform its covenants
contained in Article 13 and to secure the payment of its obligations under
paragraph (a) above, Primary Licensee shall be granted a security interest in
the Licensed Trademarks and Patents substantially in the form set forth in
Schedule G attached hereto.
Section 14.3 - Recourse. Any recourse under this Article 14 in respect of
-----------------------
any breach by Licensor, Simmons or the successor in interest of either with
respect to its obligations under Section 14.1(a) or 14.2(a) shall be limited to
the realization of the Patents and Licensed Trademarks and there shall be no
additional liability for any deficiency. In the event recourse is taken by
Primary Licensee as described in the preceding sentence, Primary Licensee and
any Secondary Licensee shall continue to be obligated to pay royalties to
Licensor or Simmons, as the case may be, as set forth in Article 8 hereof.
Nothing contained in this Article 14, however, shall limit any of the rights or
remedies otherwise available to Primary Licensee under any other Articles of
this Agreement (except Article 13) in the event of any breach by
- 35 -
<PAGE>
Licensor, Simmons or the successor in interest of either with respect to any of
their obligations under any other Articles of this Agreement (except Article
13), including without limitation obligations under the Trademark License and
Patent License.
ARTICLE XV
ACKNOWLEDGMENT OF INTENTION OF THE PARTIES
------------------------------------------
The parties acknowledge that in negotiating the Stock Purchase Agreement it
was 896552 Ontario Inc.'s position that since Primary Licensee was purchasing
the Bedding Business and Upholstery Business (as such terms are defined
therein) as going concerns Primary Licensee should also be acquiring both legal
and beneficial title to the Patents and Licensed Trademarks. However, it is
Simmons' policy in selling its operations in countries outside of the United
States to retain through itself or an Affiliate both the legal and beneficial
title to the intellectual property to ensure the continued strength and validity
of its trademarks and security of its Technology and to license such interest to
its licensees. The understanding between the parties, however, and the purpose
of the provisions contained herein, including, without limitation, the security
interest granted pursuant to Article 14 and the option provided pursuant to
Article 13, is to ensure that as long as Primary Licensee complies with the
provisions of this Agreement it will be entitled to the exclusive right to use
the Patents and Licensed Trademarks and, accordingly, Licensor and Simmons
hereby declare that effective upon the occurrence of (a) a Triggering Event or
(b) a breach of the Trademark License and Patent License which, were it not for
this provision, would result in a loss of Primary Licensee's rights hereunder as
described in Section 14.1(a) hereof, Licensor and Simmons hold this Agreement
and the rights of Primary Licensee hereunder in trust for the benefit of Primary
Licensee.
ARTICLE XVI
CONSTRUCTION OF AGREEMENT
-------------------------
This Agreement shall be construed, interpreted and enforced in accordance
with, and the respective rights and obligations of the parties shall be governed
by, the laws of the Province of Ontario and the federal laws of Canada
applicable therein and each party hereby irrevocably and unconditionally attorns
to the non-exclusive jurisdiction of the courts of such province.
ARTICLE XVII
ASSIGNMENT
----------
Subject to the restrictions set forth herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties
- 36 -
<PAGE>
and their respective successors and permitted assigns. This Agreement, or any
rights or obligations hereunder, may not be assigned by any party hereto without
the prior written consent of the other parties, which consent will not be
unreasonably withheld. The prohibition against assignment of any of the rights
and obligations hereunder shall not apply to and no consent of the other parties
are required for (i) additional licenses permitted pursuant to Section 2.4
hereof, (ii) assignments by Primary Licensee to any person who is not a
Competitor, (iii) assignments to a successor in interest of Simmons which
acquires substantially all of the business of Simmons, whether by sale of
assets, sale of shares, amalgamation, arrangement, consolidation or merger,
(iv) assignments by Simmons (but not Licensor) to an Affiliate of Simmons
and (v) assignments by Licensor or Primary Licensee of its rights but not its
obligations hereunder to any of its creditors as required pursuant to the
terms or conditions of any mortgage, indenture, debenture, pledge, security
agreement or other agreement, document or instrument made or entered into
by Licensor or Primary Licensee, or (v) amalgamation of Primary Licensee
and 896552 Ontario, Inc. The parties shall give prior written notice to the
other party of any of the foregoing permitted assignments to any person
(other than the amalgamation referred to in (v) above). Assignments under
(ii) and (iii) shall release the assignor from any further obligations under
this Agreement provided that the assignee agrees in writing to be bound by the
terms of this Agreement.
ARTICLE XVIII
LICENSE AGREEMENT ONLY
----------------------
It is the intention of the parties hereto to enter into a license agreement
and option sale agreement only and nothing herein contained shall be construed
to regard the parties hereto as constituting partners or joint venturers, or to
constitute the arrangement herein provided for as a partnership or joint
venture. No party has the authority to contract or sign documents on behalf of
another party except as specifically provided herein.
ARTICLE XIX
NOTICES
-------
Any and all notices or other writings which are required to be served, or
which may be served under the provisions of this Agreement, shall be in writing,
and shall be sufficiently served if delivered personally, by facsimile
transmission, telexed or mailed by registered or certified mail (return receipt
registered), postage prepaid, or by a reputable overnight delivery service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice; provided that notices of a change of address
shall be effective only upon receipt thereof):
- 37 -
<PAGE>
To Simmons: Simmons Company
6 Executive Park Drive
Atlanta, Georgia, U.S.A. 30329
Attention: President
Facsimile No.: (404) 325-9785
Copy to: Simmons Company
6 Executive Park Drive
Atlanta, Georgia, U.S.A 30329
Attention: General Counsel
Facsimile No.: (404) 325-9785
To Licensor: C/O Simmons Company
To Primary Licensee:
Simmons Canada Inc.
6900 Airport Road
Mississauga, Ontario CANADA
Facsimile No.: (416) 671-0669
If mailed as aforesaid, seven (7) days after the date of mailing shall be
the date notice shall be deemed to have been received unless mailed by overnight
delivery service, in which case notice shall be deemed to have been received the
next business day after delivery by such service.
ARTICLE XX
AMENDMENT AND MODIFICATION
--------------------------
This Agreement may be amended, modified or supplemented only by written
agreement of the parties hereto.
ARTICLE XXI
TERM AND TERMINATION
--------------------
Section 21.1 - Term. The term of this Agreement and the licenses granted
-------------------
hereunder shall commence on the Effective Date and shall continue perpetually,
unless terminated pursuant to, and only by reason of the events described in,
this Article 21.
Section 21.2 - Termination for Failure to Pay Monies Due. Licensor and
--------------------------------------------------------
Simmons may terminate this Agreement by giving Primary Licensee written notice
thereof in the event, and only following such event, that Primary Licensee shall
have failed to pay when due any royalties payable by Primary Licensee to
Licensor pursuant to Section 8.1 or to Simmons pursuant to Section 8.2 (except
as otherwise set forth in Section 8.2) and Primary Licensee shall not have paid
such royalties within forty-five (45) days after the
- 38 -
<PAGE>
giving of such notice. In the event of a dispute or controversy as to the
amount of royalties, the failure to pay any amount in dispute shall not be
deemed a failure to pay for purposes of this Section 21.2 until fifteen (15)
days after such dispute shall have been resolved, provided that any additional
royalties ultimately determined to be owing shall be treated as not having been
paid when due for purposes of Section 8.1.
Section 21.3 - Other Terminations. Licensor may terminate this Agreement
----------------------------------
by giving Primary Licensee written notice thereof in the event that (i) Primary
Licensee or any of its Affiliates breaches any provision of Article 4 or 5 of
this Agreement, and such breach has a material detrimental effect on Simmons
(ii) Primary Licensee or any of its Affiliates breaches the provisions of
Section 6.1 hereof and such breach has a material detrimental effect on Simmons,
and with respect to (i) and (ii), such breach has not been remedied within
forty- five (45) days after receipt by Primary Licensee or its Affiliate of
written notice from Licensor or Simmons calling attention to such breach,
specifying the nature thereof and the action required to correct the breach,
or (iii) (A) Primary Licensee shall admit in writing its insolvency or make
a general assignment for the benefit of creditors or any proceeding shall be
instituted by it seeking relief on its behalf as debtor, or to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking appointment of a receiver, receiver and manager, trustee, custodian
or other similar official for it or any substantial part of its property
and assets or it shall take any corporate action to authorize any of the
foregoing actions; or (B) any proceeding shall be instituted against Primary
Licensee seeking to have an order for relief entered against it as a debtor
or to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding-up, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, receiver and manager,
trustee, custodian or similar official for it or for any substantial part
of its property and assets and such proceedings are not or are no longer
being contested in good faith by appropriate proceedings but in no event
longer than forty-five (45) days from the institution of such first-mentioned
proceedings; and (C) there is a breach by Primary Licensee or the successor
in interest of Primary Licensee to meet the material obligations of Primary
Licensee under this Agreement, and such failure shall not have been cured
within forty-five (45) days of the receipt by Primary Licensee or such successor
in interest to Primary Licensee of notice from Licensor of such failure,
such notice setting forth in reasonable detail the acts or omissions alleged
to have caused such failure.
- 39 -
<PAGE>
A "material detrimental effect", as used herein, shall mean any material
damage to or material diminution of the good will or reputation of Licensor,
Simmons or Simmons' products.
Section 21.4 - Breach by Secondary Licensee. A breach by a Secondary
--------------------------------------------
Licensee shall not trigger the termination of this Agreement unless Primary
Licensee fails to take appropriate steps to terminate the license agreement with
such Secondary Licensee pursuant to Section 2.4 hereof, or to take reasonable
steps to cure or have cured the breach within the forty-five (45) day period for
cure permitted under Section 2.4 (iii).
Section 21.5 - Termination by Primary Licensee. Primary Licensee may
----------------------------------------------
terminate this Agreement upon ninety (90) days prior written notice to Simmons
and Licensor.
Section 21.6 - Payment of Royalties After Termination.
-----------------------------------------------------
Termination of this Agreement for any reason shall not release Primary Licensee
from any obligation to pay any royalties accrued and unpaid at the effective
date of such termination nor to pay royalties on the Royalty Products
manufactured prior to termination but sold or used after termination, nor shall
such termination release any party of any part of any obligation accrued prior
to the date of such termination, or obligations continuing beyond termination
of the Agreement.
Section 21.7 - Sales of Inventory After Termination. Upon termination
---------------------------------------------------
of this Agreement, Primary Licensee shall have a period of six (6) months after
the date of termination in which to sell off its then remaining inventory of
Licensed Products and shall report to Licensor with respect to such sales and
make the requisite royalty payment, if any, within thirty (30) days after the
end of the aforesaid six month period. All other duties and obligations of
Primary Licensee under this Agreement shall remain in force during the sell-off
period. Within thirty (30) days after termination of this Agreement, Primary
Licensee and each Secondary Licensee shall deliver to Licensor a statement
indicating the number and description of the Licensed Products which it had on
hand or in the process of manufacturing as of the termination date. Licensor
shall have the option of conducting a physical inventory at the time of
termination and/or at a later date in order to ascertain or verify such
statement. In the event that Primary Licensee refuses to permit Licensor to
conduct such physical inventory, Primary Licensee shall forfeit its rights
hereunder to dispose of such inventory. In addition to such forfeiture,
Licensor shall have recourse to all other remedies available to it.
Section 21.8 - Reversion of Licenses. After the termination of this
------------------------------------
Agreement or any of the licenses granted hereunder, all rights granted to
Primary Licensee pursuant to the Patent License and/or the Trademark License, as
applicable, shall forthwith revert to Licensor, and all rights granted to
Primary Licensee pursuant to the Technology License shall forthwith revert to
Simmons, who shall
- 40 -
<PAGE>
be free to license others to use such terminated rights in connection with the
manufacture, sale, distribution, advertisement, promotion and exportation of the
Licensed Products in the Licensed Territory and, except as otherwise expressly
permitted by this Agreement, Primary Licensee shall refrain from further use of
such rights or any further reference to them, either directly or indirectly, in
connection with the manufacture, sale, advertisement, promotion and exportation
of the Licensed Products in the Licensed Territory.
Section 21.9 - Acknowledgment of Damage. Except as may otherwise be
---------------------------------------
permitted by this Agreement, Primary Licensee acknowledges that its failure to
cease the manufacture, sale, advertisement, promotion and exportation of the
Licensed Products in the Licensed Territory and/or use in any way of the
Patents, Licensed Trademarks, Technology and Marketing Information at the
termination of this Agreement will result in immediate and irreparable damage to
Licensor and Simmons and to the rights of any subsequent licensee of Licensor or
Simmons. Primary Licensee acknowledges and admits that there is no adequate
remedy at law for failure to cease such activities and Primary Licensee agrees
that in the event of such failure, Licensor or Simmons, as applicable, shall be
entitled to equitable relief by way of injunctive relief and such other relief
as any court with jurisdiction may deem just and proper.
Section 21.10 - Insufficient Use of a Trademark. In the event any Licensed
-----------------------------------------------
Trademark registered in the Licensed Territory shall not have been sufficiently
used by Primary Licensee, its Affiliates or Secondary Licensees for a period of
time that, under the applicable laws of the Licensed Territory, Licensor's
ownership right to such Licensed Trademark shall be subject to forfeiture,
Primary Licensee shall give notice of such fact to Licensor and if Primary
Licensee does not cure such insufficient use within sixty (60) days of
Licensor's notice thereof, then Licensor may by written notice terminate the
Trademark License with respect to such Licensed Trademark only and shall
thereafter have the right to use or license others and use such Licensed
Trademark in connection with the manufacture, sale, distribution, advertisement,
promotion and exportation of the Licensed Products in the Licensed Territory.
ARTICLE XXII
FORCE MAJEURE
-------------
If the performance of this Agreement or of any obligation hereunder is
prevented, restricted or interfered with by reason of fire, or other casualty
or accident, strikes or labor disputes, inability to procure raw materials,
delays in transportation, war or other violence, any law, order, proclamation,
regulation, ordinance, demand or requirement of any govenment agency (including
but not limited to the foreign exchange controls of any country or territory
in the Licensed Territory applicable to
- 41 -
<PAGE>
Primary Licensee or any Secondary Licensee), or any other act or condition
whatsoever beyond the reasonable control of the parties hereto (excluding
economic conditions of a party), the party so affected, upon giving prompt
notice to the other party, shall be excused from such performance to the extent
of such prevention, restriction or interference, provided that the party so
affected shall use its best efforts to avoid or remove such causes of non-
performance and shall continue performance hereunder with the utmost dispatch
whenever such causes are removed and shall faithfully provide substitute
performance as the parties hereto may reasonably agree.
ARTICLE XXIII
TRANSFER OF TECHNICAL DATA
--------------------------
Primary Licensee agrees that none of the Technology or Equipment received
directly or indirectly from Licensor or Simmons shall be transshipped directly
or indirectly to those countries to which such transshipment is prohibited by
the laws, statutes and regulations of the United States of America as they may
from time to time be amended.
ARTICLE XXIV
INTEGRATION
-----------
This Agreement, the Stock Purchase Agreement and all related agreements
being executed simultaneously herewith or, by their terms, effective on even
date herewith, embody the entire understanding between the parties relating to
the subject matter hereof and all prior representations or agreements relating
to the subject matter hereof are superseded and replaced by such agreements
as of the date of signing by each of the parties.
ARTICLE XXV
SEVERABILITY
------------
The parties agree that (1) the provisions of this Agreement shall be
severable in the event that any of the provisions hereof are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, (2) such
invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions but are valid and
enforceable and (3) the remaining provisions shall remain enforceable to the
fullest extent permitted by law.
- 42 -
<PAGE>
ARTICLE XXVI
CAPTIONS
--------
The titles to the Sections of this Agreement are included herein solely for
convenience, are not a part of this Agreement and do not in any way limit or
amplify the terms of this Agreement.
ARTICLE XXVII
SIMMONS' CONTROL OF LICENSOR
----------------------------
Simmons shall cause Licensor to do all acts and perform all obligations
required of Licensor under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the day and year first
above written.
SIMMONS COMPANY
By /s/
__________________________________
Its CFO
_________________________________
Witness:
/s/
____________________________________
LICENSOR
By /s/
___________________________________
Its
__________________________________
Witness:
/s/
____________________________________
SIMMONS CANADA INC.
By /s/ Pat Thody
____________________________________
Its
___________________________________
Witness:
/s/
____________________________________
- 43 -
EXHIBIT 10.56
DATED AS OF THE 9TH DAY OF APRIL, 1987
----------------------------------------------------
SIMMONS U.S.A. CORPORATION,
SIMMONS COMPANY,
INFO ESTABLISHMENT
and
CHRISTIE-TYLER PLC
--------------------------------------------------------
INDUSTRIAL PROPERTY
LICENSE AGREEMENT
Eire, France, Italy, Monaco, United Kingdom
and the Channel Islands
Area 1
--------------------------------------------------------
Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
<PAGE>
AREA 1
INDEX TO CLAUSES:
- ----------------
Number Page
------ ----
Definitions 1 4
Licence Under Patents 2 6
Licence Under Marks 3 7
Licence for Intellectual Property Rights 4 8
Exclusivity 5 9
Other Territories 6 9
Use and Maintenance of the Patents and Marks 7 11
Infringement and Defence 8 12
Third Party Claims 9 13
Product Liability 10 14
Improvement Patents 11 14
Transmission of Rights 12 15
Duration 13 17
Effect of Termination 14 17
Sales to International Hotel Chains in Europe 15 17
Notices 16 18
Jurisdiction and Choice of Law 17 19
Severance and Notification 18 19
Joint Obligations of Simmons 19 20
The Patents and Applications Schedule 1
The Marks Schedule 2
The Technology and
the Non-Registered Marks Schedule 3
The Formal Patent Licence Schedule 4
The Registered User Agreement Schedule 5
The Licence Schedule 6
<PAGE>
THIS AGREEMENT is made as of the 9th April, 1987
BETWEEN:
(1) SIMMONS U.S.A. CORPORATION and SIMMONS COMPANY, each a company organized
and existing under the laws of the State of Delaware in the United States of
America and each having its principal place of business at Six Executive Park
Drive, Atlanta, Georgia 30329 and INFO ESTABLISHMENT, a company organized and
existing under the laws of Liechtenstein and having its address c/o Allgemeines
Treuunternehmen, P.O. Box 83, FL 9490 Vaduz, Liechtenstein (collectively
referred to as "Simmons"); and
(2) CHRISTIE-TYLER plc a company incorporated in England and having its
registered office situate at Brynmenyn, Bridgend, Mid Glamorgan CF3 29LN
("Christie");
RECITALS:
(A) Simmons and others have entered into an Agreement with Christie for the
acquisition by Christie of Sleepeezee Limited, Compagnie Continentale Simmons
S.A. and Compagnia Italiana Simmons SpA (respectively "the Acquisition
Agreement" and "the Subsidiaries").
(B) Simmons is the beneficial owner of the Letters Patent short particulars of
which are set forth in Part I of the First Schedule hereto ("the Patents") and
is the Applicant for Letters Patent short particulars of which are set out in
Part II of the First Schedule hereto and any applications corresponding thereto
anywhere in the Territory ("the Applications") all relating to bedding products
and/or their manufacture.
(C) Simmons is the beneficial owner of the trademarks short particulars of
which are set out in the Second Schedule hereto and the goodwill associated
therewith ("the Marks").
<PAGE>
(D) In the premises the parties hereto have agreed on the grant of Licence
rights in respect of the said Patents, Applications for Patents and the Marks in
favour of Christie on the terms herein set forth.
(E) In the premises the parties hereto have agreed on the grant of certain
rights in respect of the technology set forth in Part I of the Third Schedule
hereto (the "Non-Patented Technology") and the trademarks set forth in Part II
of the Third Schedule hereto together with all the goodwill and the like rights
associated therewith in all the Territory (the "Non-Registered Marks")
(collectively, the "Intellectual Property Rights").
(F) Contemporaneously herewith, the parties have executed four additional
licence agreements in respect of corresponding patents, patent applications and
trademarks in the following territories: (i) Andorra, Belgium, Denmark,
Finland, Gibraltar, Greece, Iceland, Liechtenstein, Luxembourg, Netherlands,
Norway, Portugal, Sweden, Switzerland and Turkey ("Area 2"), (ii) Austria, Spain
and West Germany ("Area 3"), (iii) Bahrain, Dubai, Israel, Jordan, Kuwait,
Qatar, Saudi Arabia, Sudan and the United Arab Emirates ("Area 4") and (iv)
Congo, Gabon, Ivory Coast, Senegal, Sierra Leone, Zaire and the islands located
in the Caribbean ("Area 5"). (All such additional license agreements are
hereafter referred to as the "Other Licence Agreements.")
(G) Compagnie Continentale Simmons S.A. entered into an Agreement dated 26th
December 1984 with S.A. Beka N.V. under which S.A. Beka N.V. is licensed to use
certain of the Marks on pocketed coil mattresses on a non-exclusive basis on the
terms and conditions stated therein throughout the European Economic Community
(the "EEC") for an initial period of five years (the "Belgian License").
- 2 -
<PAGE>
(H) Contemporaneously herewith, Simmons U.S.A. Corporation and Christie have
executed a Technology Agreement which provides for the exchange of various ideas
and provides assistance to Christie in connection with the use and exploitation
of the patents in the Patent Portfolio and the Non-Patented Technology (the
"Technology Agreement").
- 3 -
<PAGE>
IT IS AGREED As follows: -
INTERPRETATION
--------------
1. Definitions.
-----------
1.1 In this Agreement and in the Schedules:
(a) the following definitions apply:-
"Existing Patents" shall mean the Patents and the Applications
and any patents granted in accordance with
the Applications.
"Improvement Invention" shall mean any invention or development
modification or improvement relating to the
Goods made during the life of this
Agreement.
"Improvement Patent" shall mean letters patent and other
protection granted in the Territory in
respect of any Improvement Invention or any
Process and any application therefor.
"Territory" shall mean Eire, France, Italy, Monaco, the
United Kingdom and the Channel Islands.
"Patent Portfolio" shall mean the Existing Patents and any
Improvement Patents in the Territory.
- 4 -
<PAGE>
"Goods" means beds, mattresses, box springs,
upholstered and padded furniture,
convertibles, water beds, furniture, and all
materials and all component parts thereof,
and any and all developments, modifications
and improvements thereof.
"Process" means any and all processes and methods of
working which have been or may hereafter be
developed or acquired by Simmons and
relating to or in respect of or for the
manufacture of the Goods and shall include
any improvements thereto developed after the
date of this Agreement.
(b) unless the context otherwise requires:-
(i) words in the singular include the plural and vice versa;
(ii) words importing any gender include all genders; and
(iii) a reference to a person includes a reference to a body
corporate and to an unincorporated body of persons.
(iv) all dates in the Schedules hereto are in U.S. format;
- 5 -
<PAGE>
(c) a reference to a clause, sub-clause or Schedule (or any part
thereof) is to a clause, sub-clause or Schedule (or any part
thereof) (as the case may be) of or to this Agreement;
(d) the headings are for convenience only and do not affect
interpretation.
1.2 The designations adopted in the recitals and introductory statements
preceding this clause apply throughout this Agreement.
2. Licence Under Patents
---------------------
2.1 Subject to Clause 15 and the Belgian Licence, Simmons hereby agrees
for the consideration mentioned in the Acquisition Agreement to grant
to Christie forthwith an exclusive right, licence and privilege to use
the Existing Patents in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods and to use and
exercise the Processes for such purpose within the scope of the
Existing Patents or any of them in the territory for the full life of
the relevant rights.
2.2 Simmons shall execute a licence or several licences as the case may
require in such form as may be appropriate in respect of the Existing
Patents, such licence or licences to be substantially in the form set
forth in the Fourth Schedule hereto or so near such as may be
appropriate. It is agreed that this Agreement shall not itself be
registered unless required by a court of competent jurisdiction or
otherwise required by law. Any such formal licence shall operate
subject to the terms of this Agreement, and the terms of the said
formal licence or licences shall be deemed to be incorporated into
this Agreement. Simmons shall in addition do all such acts, matters
or things as may be
- 6 -
<PAGE>
necessary to grant the licences required to be given hereunder and to
procure the registration of the same at the relevant Patent Offices in
the Territory.
2.3 Simmons does not warrant that any letters patent of the Patent
Portfolio is or will be valid or that the Non-Patented Technology can
be the subject of a valid patent or that manufacture or dealing in the
Goods is not an infringement of the rights of third parties. However,
the foregoing sentence is without prejudice to the rights and remedies
of Christie under the Acquisition Agreement.
3. Licence Under Marks
-------------------
3.1 Subject to Clause 15 and the Belgian Licence, Simmons hereby agrees
for the consideration mentioned in the Acquisition Agreement to grant
to Christie an exclusive right, license and privilege to use the Marks
in connection with the manufacture, use, sale, distribution,
advertising and promotion of the Goods in the Territory.
3.2 Simmons and Christie hereby agree forthwith to do all things
reasonably necessary or desirable to effect the recordal respectively
as appropriate at the British and Irish Trade Marks Registries and the
French Institute National de la Propriete Industrielle and the Officio
Centrale Brevetti of the Ministero dell' Industria, del Commercio e
dell'Artigianato in Italy and the Direction due Commerce de
l'Industrie et de la Propriete Industrielle in Monaco of Christie as a
registered user or licensee of the Marks in respect of goods for which
the Marks are registered. To this effect the parties hereby agree
that Registered User Agreements in respect of the British and Irish
Marks in the form set forth in the Fifth Schedule hereto and the
licences as
- 7 -
<PAGE>
appropriate in the form set out in the Sixth Schedule hereto or so
near thereto as may be appropriate in each case shall be executed by
Simmons and Christie.
3.3 Simmons does not warrant that any of the Marks are or will be
registered or are capable of registration or that manufacture or
dealing in the goods is not an infringement of the rights of third
parties. However, the foregoing sentence is without prejudice to the
rights and remedies of Christie under the Acquisition Agreement.
4. Licence for Intellectual Property Rights
----------------------------------------
4.1 Subject to the Belgian Licence, Simmons, for the consideration
mentioned in the Acquisition Agreement, grants to Christie an
exclusive right, license and privilege to use the Non-Patented
Technology in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods in the Territory
until such time as a patent application is filed in any country in the
Territory with respect to any portion of such Non-Patented Technology
which is the subject of such patent application filed in any country
in the Territory shall be considered part of the Patent Portfolio for
purposes of this Agreement and the First Schedule hereto shall be so
amended.
4.2 Subject to the Belgian Licence, Simmons, for the consideration
mentioned in the Acquisition Agreement, grants to Christie an
exclusive right, license and privilege to use the Non-Registered Marks
in the Territory in connection with the manufacture, use, sale,
distribution, advertising and promotion of the goods in the Territory
until such time as a registration for a Non-Registered Mark is
effected in
- 8 -
<PAGE>
any country in the Territory, in which case such Non-Registered Mark
shall be considered to be a Mark for purposes of this Agreement and
the First Schedule hereto shall be so amended.
4.3 Christie hereby acknowledges and agrees that Simmons shall at all
times during the life of this Agreement be permitted to file patent
applications as the registered proprietor thereof with respect to the
Non-Patented Technology in the Non-Patented Territory and register the
Non-Registered Marks in its own name at its own cost in the Non-
Patented Territory; provided, however, Christie shall have the right
and Simmons shall cooperate, at the expense of Christie, to file such
patent applications which designate Simmons in its own name with
respect to the Non-Patented Technology in the Territory and register
the Non-Registered Marks which registration designates Simmons as the
registered proprietor thereof in the territory subject always and in
each case to Simmons granting to Christie an exclusive licence of the
rights under the relevant application and any patents or registered
trademarks which result form such applications under the terms of this
Agreement.
5. Exclusivity
-----------
Simmons covenants that it has not granted and will not grant any
licence and will not itself do or cause or procure to be done anything
which derogates from or conflicts with the rights granted to Christie
hereunder.
6. Other Territories
-----------------
Save as may specifically be agreed to in the Other Licenses or in writing
between the parties, Christie agrees as follows:-
- 9 -
<PAGE>
(a) Not to manufacture, advertise, or knowingly sell or supply for
export to any market outside the EEC any Goods manufactured in
accordance with any one or more of the patents in the Patent
Portfolio and/or on which any of the Marks is or is to be applied
or used.
(b) Not to manufacture any Goods outside the Territory in any country
where the inventions employed in the manufacture of such Goods,
or the Goods themselves so manufactured are protected in such
country by patents corresponding to the patents in the Patent
Portfolio owned by or registered or applied for in the name of
Simmons or Simmons International Ltd. or any entity which has
been notified to Christie as being controlled by or under common
control with Simmons.
(c) Not actively to seek customers for the Goods nor to advertise the
Goods nor to establish any branch or distribution depot handling
the Goods outside the Territory in any other member state of the
EEC where the inventions employed in the manufacture of such
Goods, or the Goods themselves so manufactured, are protected in
such member state by patents corresponding to the patents in the
Patent Portfolio owned by or registered or applied for in the
name of Simmons or Simmons International Ltd. or any entity which
has been notified to Christie as being controlled by or under
common control with Simmons.
(d) Not to apply or use on the Goods outside the Territory in any
member state of the EEC any Mark being a trade mark which is
owned by or registered or applied for in the name of Simmons or
Simmons International Ltd. or any entity which has been notified
to Christie as being controlled by or
- 10 -
<PAGE>
under common control with Simmons in that member state in respect
of the Goods on which such Mark is to be applied or used.
7. Use and Maintenance of the Patents and Marks
--------------------------------------------
7.1 Subject to Clause 7.3, Christie shall pay such application and renewal
fees and do such acts and things as may be necessary to complete the
Applications, and to maintain and keep on foot the patents in the
Patent Portfolio and the Marks as it shall in its absolute discretion
think fit.
7.2 Simmons shall procure that Christie be advised in writing of any
applications in respect of the Patent Portfolio and for any renewal
and renewal fees in respect of the Marks. Forthwith upon receipt by
Simmons of such application Simmons shall at Christie's request and
expense do such acts, matters and things as may be reasonably
necessary to complete the Applications and to maintain and keep on
foot the Patent Portfolio and the Marks or any of them.
7.3 Simmons and Christie mutually undertake for the duration of this
Agreement (a) not to cancel or do anything which might materially
affect the validity of any patent in the Patent Portfolio, or (b) not
to amend the specification of any such patent or the specification
accompanying any application for letters patent within the scope of
this Agreement, without the consent of Christie.
7.4 Simmons shall notify Christie of, and at the expense and direction of
Christie defend, every proceeding or application in the patent Office,
the Court or elsewhere for opposition to the grant of or for
revocation of the Patent Portfolio or the cancellation of the Marks or
any of them.
- 11 -
<PAGE>
7.5 Simmons undertakes that it will at the direction and expense of
Christie apply for the renewal of the registration of the Marks or any
of them and use its reasonable endeavours to prosecute such
applications and any applications for Improvement Patents in the
Territory.
7.6 Christie shall affix the Marks only to those Goods which are of no
lesser quality than the equivalent Goods in relation to which the
Marks have been used in any part of the Territory by any of the
Subsidiaries for the last three years prior to the date of this
Agreement.
8. Infringement and Defense
------------------------
8.1 Christie and Simmons hereby mutually agree forthwith to give notice in
writing by telex or telecopier to the other of any infringement or
suspected or threatened infringement in the Territory of any patent in
the Patent Portfolio or of any Mark or the Non-Registered Marks which
shall at any time come to their knowledge.
8.2 Simmons agrees with Christie that Christie may at its own expense
bring proceedings for infringement in the Territory of the Patent
Portfolio and the Marks and the Non-Registered Marks and whether in
its own name or in the name of Simmons and Christie shall, if
successful, be entitled to any damages or costs which it shall recover
therein.
8.3 In the event that Christie shall elect not to bring proceedings for
any infringement of the Patent Portfolio or the Marks, Simmons shall
be entitled in its own name and at its own expense to bring
proceedings for infringement thereof in the Territory and Simmons
shall, if successful, be entitled to any damages or costs which it
shall recover therein.
- 12 -
<PAGE>
8.4 Simmons and Christie and each of them hereby agree that each shall
cooperate in the prosecution of any suit or undertaking commenced by
the other under sub-clauses 8.2 or 8.3 hereof in all respects as the
party bringing that suit may reasonably require, and at that party's
expense.
9. Third Party Claims
------------------
9.1 If any proceedings are threatened or commenced by a third party
against either Christie or any person claiming through, under or in
trust for Christie or any of its customers or Simmons or any person
claiming through, under or in trust for Simmons in any country of the
Territory on the ground that the goods manufactured by Christie as
above infringe any patent monopoly right or trademark vested in such
third party the party so threatened or sued shall inform the other
forthwith upon becoming aware of such threat or action.
9.2 If Christie or both parties shall decide that such proceedings shall
be defended Christie shall have sole control of the proceeding and
shall bear the whole costs thereof and shall pay any damages and costs
awarded (whether awarded against Christie or Simmons) in favour of
such third party. If Simmons only shall decide that such proceedings
shall be defended, Simmons shall bear the whole cost thereof and shall
pay any damages and costs awarded (whether against Christie or
Simmons) in favour of such third party save that if such action shall
arise solely as a result of Christie's use of any of the patents in
the Patent Portfolio or Marks or other Intellectual Property Rights,
Christie shall bear the whole cost and damages thereof without
prejudice to Christie's rights under the Acquisition Agreement. If
one party only shall decide that such proceedings shall be defended
the
- 13 -
<PAGE>
other party to this Agreement shall render to the party so defending
all assistance that it reasonably can at the requesting party's cost
if so requested.
10. Product Liability
-----------------
10.1 Christie agrees to defend, indemnify and hold Simmons harmless from
and against any and all product liability claims of third parties (and
liabilities, judgments, penalties, losses, costs, damages, and
expenses therefrom including reasonable attorneys' fees) arising from
Christie's manufacture, sale or distribution of the Goods.
10.2 Simmons agrees to promptly notify Christie of any product liability
claim asserted against it with respect to Christie's manufacture, sale
or distribution of the Goods. Once Christie has taken reasonable
steps to defend against such claim, and so notified Simmons, any
further expenses incurred by Simmons, including attorneys' fees, shall
be for its own account unless Christie discontinues taking such
reasonable steps.
10.3 Christie shall maintain an amount of product liability insurance as is
customary in the Territory for conducting the business of
manufacturing and selling the Goods. In the event Christie
discontinues any such insurance, it shall give Simmons at least ten
(10) days notice before such insurance lapses or in the event that any
such insurance lapses for any other reason, Christie shall promptly
notify Simmons of such event.
11. Improvement Patents
-------------------
Simmons hereby agrees to grant to Christie in respect of Improvement
Patents granted to Simmons the like licence as is agreed to be granted
herein under the Existing Patents
- 14 -
<PAGE>
(at no additional royalty) and to execute a formal licence or licences
therefor substantially as set forth in the Fourth Schedule hereto.
12. Transmission of Rights
----------------------
12.1 This Agreement and the rights licenced or to be licenced hereunder may
not be Transferred (as defined in subclause 12.2) by Simmons except
(i) to any entity under common control with Simmons or (ii) to a third
party in connection with the sale, transfer or other disposition of
substantially all of its business in the Goods and may not be
otherwise dealt with by Simmons.
12.2 This Agreement and the rights licensed or to be licensed
hereunder may not be assigned, sub-licensed or in any other
manner conveyed or transferred (including without limitation by
means of a change in control) (collectively, a "Transfer") except
upon written notice to Simmons:
(i) by Christie to any entity controlled by or under common
control with Christie;
(ii) to a third party in connection with the sale, transfer or
other disposition by Christie of substantially all of the
business carried on by the Subsidiaries as of the date
hereof; or
(iii) to a third party to the extent only that such portion of
this Agreement to be Transferred relates to a business
carried on in or from a country in the Territory which is a
country in which a Subsidiary is located as part of the
sale, transfer or other disposition of such Subsidiary
together with its business and assets or substantially all
of the
- 15 -
<PAGE>
business and assets of such Subsidiary as carried on as of
the date hereof; provided, however, Christie shall not
Transfer this Agreement or any portion thereof to a
Simmons' competitor in the bedding industry in the markets
in which Simmons competes in North America for the life of
the Technology Agreement.
Prior to such Transfer to a third party, Christie shall obtain the
written consent of such third party to assume all the obligations of
Christie under this Agreement with respect to that portion of the
Transferred license.
12.3 If either party (the "First Party") shall Transfer the benefit of this
Agreement to a third party as provided herein, the other party hereto
(the "Other Party") shall at the request of the First Party forthwith
enter into a new agreement with such third party which agreement shall
be co-terminous with this Agreement and will release the First Party
from all obligations and liabilities hereunder in respect of anything
arising after the date of such assignment to the extent of that
portion of the Agreement Transferred.
12.4 Each party agrees that if the other shall deal with the rights granted
to it hereunder, such party will do all such acts, matters and things,
including the execution of any document, including, in particular and
without prejudice to the generality of the foregoing, any licence or
Registered User Agreement as may reasonably be necessary to give
effect to the same. The provisions of this sub-clause shall survive
termination of this Agreement.
- 16 -
<PAGE>
13. Duration
--------
This Agreement shall be co-terminous with the Technology Agreement. On
termination of this Agreement Simmons shall forthwith grant to
Christie exclusive licences on the same terms and conditions as this
Agreement insofar as practicable of all the rights to which Christie
is entitled hereunder or under the Technology Agreement for the life
of the relevant rights.
14. Effect of Termination
---------------------
Any termination of this Agreement shall be without prejudice to the
rights of either party against the other which may have accrued up to
the date of such termination.
15. Sales to International Hotel Chains in Europe
---------------------------------------------
(a) Simmons hereby agrees not to solicit any business relating to
the Goods in the Territory during the term of this Agreement.
(b) Where inquiries or orders for Goods for delivery in the Territory
are received by Simmons, Simmons will use its reasonable
endeavours to persuade the potential buyer to place the contract
with or through Christie or a permitted sublicensee of Christie
hereunder.
(c) If Christie's sales efforts generate orders for Goods which
Simmons manufactures outside the Territory or Simmons fails to
persuade any buyer referred to under sub-clause (b) above to buy
from Christie or a permitted sublicensee of Christie hereunder,
then Simmons will pay Christie a five percent (5%) commission on
the Net Sales (as defined in the Other Licenses) if Simmons
accepts such orders.
- 17 -
<PAGE>
16. Notices
-------
(1) All notices and other communications to be sent by either party
to the other shall be in writing and shall be sent to the other party
at the address of that party set out below, or such other address (if
any) as that party may have notified in writing to the party serving
the notice as its address for service hereunder.
(2) Notice may be given by air mail letter or by telex, telemessage,
fax, or cable confirmed by air mail letter, and each letter containing
or confirming notice will be sent by registered air mail addressed to
the other party at the address for service and will be deemed to have
been received on the earlier of the tenth (10) day (not including
Sundays or public holidays) after dispatch of the notice or the date
of receipt of confirmation of delivery of such notice:
To Simmons:
Simmons USA Corporation Inc.
6 Executive Park Drive
Atlanta, Georgia 30329, USA
Attention: Mr. Robert A. Magnusson
with copy to:
Messrs. Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
Attention: Mr. William Morton
To Christie:
Christie-Tyler plc
Brynmenyn, Bridgend
Mid Glamorgan CF 32 9LN
Wales
Attention: Mr. Kevin O'Sullivan
- 18 -
<PAGE>
with copy to:
Messrs. Herbert Smith
Watling House
35 Cannon Street
London EC4M 5SD
Attention: Mrs. Margaret Mountford
Or such other addresses as the party to be served shall have notified as its
address or addresses for service therewith.
17. Jurisdiction and Choice of Law
------------------------------
This Agreement shall be governed by English law in every particular
including formation and shall be deemed to have been made in England
and be subject to the non-exclusive jurisdiction of the English
Courts.
18. Severance and Notification
--------------------------
18.1 This Agreement shall be construed in a manner to avoid violation of,
or invalidity under, any applicable law, including the Treaty of Rome
and EEC Regulations. Should any provision of this Agreement
nevertheless be or become invalid, illegal or unenforceable under any
applicable law, the other provisions of this Agreement shall not be
affected and, to the extent permissible, the parties will negotiate
and agree to a lawful alternative which in practical terms secures the
same commercial result as the invalid, illegal or unenforceable
provision.
18.2 The parties have agreed at their own expense to notify this Agreement
to the Commission of the EEC pursuant to Articles 2 and 4 of Council
Regulation 17/62 and subject to clause 18.1 herein hereby agree to
negotiate in good faith and make all such modifications to this
Agreement as may be required by the Commission of the EEC as
conditions precedent either to the granting of a negative clearance or
to the application of Article 85
- 19 -
<PAGE>
(3) of the Treaty of Rome to this Agreement provided if the Commission
of the EEC requires that the rights granted to Christie under this
Agreement shall become non-exclusive and/or the intentions of the
parties hereto have become substantially negated by reason of such
required modifications after the parties have in good faith used their
best efforts to avoid such a requirement, the Marks and the patents in
the Patent Portfolio which are the subject of such requirement shall,
upon the request of Christie, be assigned by Simmons to Christie, and
Christie agrees to continue to observe all its obligations and the
restrictions set out in this Agreement to the extent possible.
19. Joint Obligations of Simmons. Simmons U.S.A. Corporation, Simmons
----------------------------
Company and Info Establishment hereby agree that the liabilities and
obligations of Simmons under this Agreement shall be construed as
liabilities and obligations of them jointly, each of them singly and
any two or more of them together.
- 20 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date
first above written.
SIMMONS U.S.A. CORPORATION
BY: /s/
------------------------------
Vice President
SIMMONS COMPANY
BY: /s/ Robert A. Magnusson
------------------------------
Robert A. Magnusson
President
INFO ESTABLISHMENT
BY: /s/
------------------------------
Vice President
CHRISTIE-TYLER plc
BY: /s/
------------------------------
- 21 -
<PAGE>
THE FIRST SCHEDULE
------------------
PART 1
"The Patents")
FRANCE
- ------
Patent
Number Date Filed
------ ----------
Ultrasonic Pocketing Machine 2389573 11/11/83
Apparatus for making assemblies
of pocketed springs 0060146 01/02/86
Pocketed spring assembly 2451729 01/16/84
ITALY
- -----
Patent
Number Date Filed
------ ----------
Ultrasonic Pocketing Machine 1102546 10/07/85
Pocketed spring assembly 1127369 05/21/86
Apparatus for making assemblies
of pocketed springs 0060146 01/02/86
UNITED KINGDOM
- --------------
Patent
Number Date Filed
------ ----------
Thermally welded spring pockets 1586909 05/27/81
Apparatus for making assemblies
of pocketed springs 0060146 01/02/86
Pocketed Spring Assembly 2044609 01/16/84
<PAGE>
PART 2
("The Applications")
FRANCE
- ------
Patent
Number Date Filed
------ ----------
Ultrasonic Separation Apparatus 84303338 05/17/84
Method and Apparatus for
Manufacturing Inner Spring
Constructions 85301642 03/08/85
Inner Spring Construction 84306855 10/09/84
ITALY
- -----
Ultrasonic Separation Apparatus 84303338 05/17/84
Method and Apparatus for
Manufacturing Inner Spring
Constructions 85301642 03/08/85
Inner Spring Construction 84306855 10/09/84
UNITED KINGDOM
- --------------
Ultrasonic Separation Apparatus 84303338 05/17/84
Method and Apparatus for
Manufacturing Inner Spring
Constructions 85301642 03/08/85
Inner Spring Construction 84306855 10/09/84
<PAGE>
THE SECOND SCHEDULE
-------------------
("The Marks")
FRANCE
- ------
Registration Expiration
Number Date
------------ ---------
S Simmons (Vignette) 1328770 12/29/95
Simmons 1051294 05/26/88
S with House Design 1200707 04/06/92
S-Emblem 1008176 02/07/87
Contour-Flex 1309105 05/13/95
Beautyrest 1162669 02/13/91
Hide-A-Bed 1132278 04/23/90
Simmons 1162668 02/13/91
Quietude 1228937 03/02/93
Confopedic 1294196 11/07/94
Dorsopedic 1281624 08/07/94
Dorsotonic 1295479 01/10/95
Foundation Simmons
Sur Le Sanmeil 1281623 05/26/88
Simflex 1037603 12/11/96
ITALY
- -----
Registration Expiration
Number Date
------------ ---------
Beautyrest 311881 06/11/93
Hide-A-Bed 298985 12/01/96
S with House Design 283250 03/27/92
Simmons 298983 12/23/93
Beautyrest 376582 10/02/90
Hide-A-Bed 374849 12/02/90
S (with design) 354862 01/21/89
Simmons R173292 12/07/93
MONACO
- ------
Registration Expiration
Number Date
------------ ---------
Beautyrest 376582 10-02-90
Hide-a-Bed 374849 12/02/90
S (with design) 354862 01/21/89
Simmons R173292 12/07/93
<PAGE>
UNITED KINGDOM
- --------------
Registration Expiration
Number Date
------------ ----------
Beautyrest 600431 08/17/87
S Symbol 960389 06/01/91
Maxipaedic 1024385 02/01/95
Hidabed B866432 07/07/99
Contour-Flex 1241627 05/10/92
Hydabed B961346 06/22/91
<PAGE>
THE THIRD SCHEDULE
------------------
PART 1
("The Technology")
The Technology consists of the technology described in the following patent
applications and patents without regard to the country in which such patent
applications and patents were filed:
Patent Country Date
Description of Technology Number of Filing Filed
- ------------------------- ------ --------- -----
Ultrasonic Separation Apparatus 0144114 United Kingdom 05/17/84
Method and Apparatus for
Manufacturing Inner
Spring Constructions 0155158 United Kingdom 10/09/84
Inner Spring Construction 0154076 United Kingdom 10/09/84
Ultrasonic Pocketing Machine 2389573 France 11/11/83
Pocketed Spring Assembly 8005062 United Kingdom 04/20/82
- ----------------
* Denotes patent application number.
PART II
("The Non-Registered Marks")
The marks consist of the following: *
- ---------------------------------
* See attached sheets.
<PAGE>
THIS IS A LISTING OF "THE MARKS"
REFERRED TO IN PART II OF THE THIRD SCHEDULE
Beautyrest
MAXIPEDIC
HIDE-A-BED
CONTOUR-FLEX
SIMMONS
SIMMONS
<PAGE>
THE FOURTH SCHEDULE
-------------------
(Clause 2.2)
("The Formal Patent Licence")
BY THIS LICENCE,
-------------------------------------------------------------
(hereinafter called the "Licensor") of
---------------------------------------
HEREBY GRANT to of
- ----------------------------- ---------------------------
(hereinafter called
- --------------------------------------------------------
"the Licencee") in respect of each of the following letters patent, of which we
are Proprietors, that is to say Nos. (hereinafter called "the
-----------
Patents").
WITNESSETH that the Licensor hereby grants to the Licensee an exclusive Licence
in respect of the aforesaid Letters Patent upon the terms and conditions of an
Agreement dated April 1987 and made between the parties hereto.
-----
SIGNED by
for and on behalf of
-------------------------------
Authorized Signatory
<PAGE>
THE FIFTH SCHEDULE
------------------
(Clause 3.2)
REGISTERED USER AGREEMENT
-------------------------
Dated this day of 1987
Parties:
, a company incorporated in the
- ------------------------------------------- -----
, whose principal place of business is situate at
- ------------- -----------------
, (the "Licensor") (1) and , a company
-----------------------------------
incorporated in whose registered office is situate at
----------------------- --
, ("the Licencee") (2).
- ------------------------
1. Definitions "The Marks" The trade marks registered at
the Trade Mark Registry under the
provisions of the Trade Mark Act 1938 as
follows:
Trademark Number Class Registration Date
- --------- ------ ----- -----------------
2. Recitals (a) The Licensor is the Registered Proprietor of the Marks.
<PAGE>
(b) The Licensee is desirous of being
entered at the Trade Marks Registry as a
Registered User of the Marks in respect of
all goods for which the Marks are so
registered.
(c) The Licensor is willing to enter the
Licensee as such Registered User upon the
Terms and Conditions set out below.
3. The authority In consideration of the agreements on the
part of the Licensee later in this
Agreement the Licensor hereby authorizes
the Licensee to use the Marks as a
Registered User of the Marks for so long as
the Licensee remains registered as such
Registered User.
4. The Licensee's The Licensee hereby agrees with the
obligations
Licensor throughout obligations the Term as
follows:
(a) not to use the Marks except strictly in
accordance with the terms and conditions
hereof.
(b) not to use the Marks on or in relation
to any goods which do not conform to the
quality and standards stipulated in the
License Agreement made between the Licensor
and others and the Licensees dated the
______day of April 1987.
5. Duration The term of this Agreement shall be as set
forth in the Agreement subject to the
Licensees observance of the conditions
hereof.
<PAGE>
6. Acknowledgement The Licensor and the Licensee agree that
the Licensee shall not be the sole
Registered User of the Marks.
7. The Licensor's The Licensor shall join with the Licensee
Obligations
in making an obligations application to the
Registrar of Trade Marks for the purposes
of securing the registration of the
Licensee as such Registered User of the
Marks under Section 28 of the Trade Marks
Act 1938 and shall procure the Licensee to
be registered as user of the Marks free of
any encumbrances such as provided therein.
SIGNED by
for and on behalf of
------------------------------------------
Authorized Signatory
SIGNED by
for and on behalf of
------------------------------------------
Authorized Signatory
<PAGE>
THE SIXTH SCHEDULE
------------------
Dated this day of , 1987.
----- ----------
Parties:
, a company incorporated in the
- ------------------------------- -----------------
, whose principal place of business is situate at
- -------------------------------
. (the
- ---------------------------------------------------------------------
"Licensor") (1) and , a
--------------------------------------------------
company incorporated in , whose
----------------------------------------------
registered office is situate at , ("the
------------------------------------
Licensee")(2).
1. Definitions: "The Marks" are the trademarks registered
at the ( ) Registry as follows:
--------------------------
Trademarks Number Class Registration Date
---------- ------ ----- -----------------
2. The Licensor hereby grants to the Licensee an exclusive Licence in respect
of the Marks upon the terms and conditions of an Agreement dated _____ April
1987 and made between the parties hereto.
SIGNED by
for and on behalf of
------------------------------------------
Authorized Signatory
SIGNED by
for and on behalf of
------------------------------------------
Authorized Signatory
<PAGE>
DATED AS OF THE 9TH OF APRIL 1987
----------------------------------------------------------------------
SIMMONS U.S.A. CORPORATION,
SIMMONS COMPANY,
INFO ESTABLISHMENT
AND
CHRISTIE-TYLER PLC
----------------------------------------------------------------------
INDUSTRIAL PROPERTY
LICENCE AGREEMENT
Andorra, Belgium, Denmark, Finland, Gibraltar,
Greece, Iceland, Liechtenstein, Luxembourg,
Netherlands, Norway, Portugal, Sweden,
Switzerland and Turkey
Area 2
----------------------------------------------------------------------
Lane & Partners
46/67 Bloomsbury Square
London WC1A 2RU
<PAGE>
AREA 2
------
INDEX TO CLAUSES:
- ----------------
Number Page
------ ----
Definitions 1 4
License Under Patents 2 6
License Under Marks 3 7
License for Intellectual Property Rights 4 8
Exclusivity 5 10
Royalties and Payments 6 10
Reports, Records and Access 7 14
Other Territories 8 15
Use and Maintenance of the Patents and Marks 9 17
Infringement and Defence 10 21
Third Party Claims 11 23
Product Liability 12 24
Improvement Patents 13 24
Transmission of Rights 14 26
Duration 15 26
Termination 16 27
Effect of Termination 17 28
Sales of International Hotel Chains in Europe 18 28
Notices 19 29
Jurisdiction and Choice of Law 20 30
Severance and Notification 21 31
Joint Obligations of Simmons 22 31
The Patents and Applications Schedule 1
The Marks Schedule 2
The Technology
and the Non-Registered Marks Schedule 3
The Formal Patent Licence Schedule 4
The Registered User Agreement Schedule 5
<PAGE>
THIS AGREEMENT is made as of the 9th April, 1987
BETWEEN:
(1) SIMMONS U.S.A. CORPORATION and SIMMONS COMPANY, each a company,
organized and existing under the laws of the State of Delaware in the
United States of America and having its principal place of business at
Six Executive Park Drive, Atlanta, Georgia 30329 and INFO
ESTABLISHMENT, a company organised and exiating under the laws of
Liechtenstein and having its address c/o Allgemeines Treuunternehmen,
P.O. Box 83, FL 9490 Valduz, Liechtenstein (collectively referred to
as "Simmons"); and
(2) CHRISTIE-TYLER plc, a company incorporated in England and having its
registered office situate at Brynmenyn, Bridgend, Mid Glamorgan CF3
29LN ("Christie");
RECITALS
(A) Simmons and others have entered into an Agreement with Christie for
the acquisition by Christie of Sleepeezee Limited, Compagnie
Continentale Simmons S.A. and Compagnia Italiana Simmons SpA
(respectively, "the Acquisition Agreement" and "the Subsidiaries").
(B) Simmons is the beneficial owner of the Letters Patent short
particulars of which are set forth in Part I of the First Schedule
hereto ("the Patents") and is the Applicant for Letters Patent short
particulars of which are set out in Part II of the First Schedule
hereto and any applications corresponding thereto anywhere in the
Territory ("the Applications") all relating to bedding products and/or
their manufacture.
(C) Simmons is the beneficial owner of the trademarks short particulars of
which are set out in the Second Schedule hereto and the goodwill
associated therewith ("the Marks").
<PAGE>
(D) In the premises the parties hereto have agreed on the grant of licence
rights in respect of the said Patents and Applications for Patents and
the Marks in favor of Christie on the terms herein set forth.
(E) In the premises the parties hereto have agreed on the grant of certain
rights in respect of the technology set forth in Part I of the Third
Schedule hereto (the "Non-Patented Technology") and the trademarks set
forth in Part II of the Third Schedule hereto together with all the
goodwill and the like rights associated therewith in the Territory
(the "Non-Registered Marks") (collectively, the "Intellectual Property
Rights").
(F) Contemporaneously herewith, the parties have executed four additional
licence agreements in respect of corresponding patents, patent
applications and trademarks in the following territories: (i) Eire,
France, Italy, Monaco, the United Kingdom and the Channel Islands
("Area 1"); (ii) Austria, Spain and West Germany ("Area 3"); (iii)
Bahrain, Dubai, Israel, Jordan, Kuwait, Qatar, Saudi Arabia, Sudan and
the United Arab Emirates ("Area 4"); and (iv) Congo, Gabon, Ivory
Coast, Senegal, Sierra Leone, Zaire and the islands located in the
Caribbean ("Area 5"). (All such additional license agreements are
hereafter referred to as the "Other License Agreements.")
(G) Compagnie Continentale Simmons S.A. entered into an Agreement dated
26th December 1984 with S.A. Beka N.V. under which S.A. Beka N.V. is
licensed to use certain of the Marks on pocketed coil mattresses on a
non-exclusive basis on the terms and conditions stated therein
throughout the European Economic Community (the "EEC") for an initial
period of five years (the "Belgian License").
(H) Contemporaneously herewith, Simmons U.S.A. Corporation and Christie
have executed a Technology Agreement which provides for the exchange
of various ideas and provides assistance to
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Christie in connection with the use and exploitation of the patents
in the Patent Portfolio and the Non-Patented Technology (the
"Technology Agreement").
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<PAGE>
(iii) a reference to a person includes a reference to a
body corporate and to an unincorporated body of
persons; and
(iv) all dates in the Schedules hereto are in U.S.
format.
(c) a reference to a clause, sub-clause or Schedule (or any part
thereof) is to a clause, sub-clause or Schedule (or any part
thereof) (as the case may be) of or to this Agreement.
(d) the headings are for convenience only and do not affect
interpretation.
1.2 The designations adopted in the recitals and introductory
statements preceding this clause apply throughout this Agreement.
2. Licence Under Patents
---------------------
2.1 Subject to Clause 18 and the Belgian License, Simmons hereby
agrees to grant to Christie forthwith an exclusive right, licence
and privilege to use the Existing Patents in connection with the
manufacture, use, sale, distribution, advertising and promotion
of the Goods and to use and exercise the Processes for such
purpose within the scope of the Existing Patents or any of them
in the Territory for the full life of the relevant rights.
2.2 Simmons shall execute a licence or several licences as the case
may require in such form as may be appropriate in respect of the
Existing Patents, such licence or licenses to be substantially in
the form set forth in the Fourth Schedule hereto or so near
thereto as may be appropriate. It is agreed that this Agreement
shall not itself be registered unless required by a court of
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<PAGE>
competent jurisdiction or otherwise required by law. Any such
formal licence shall operate subject to the terms of this
Agreement, and the terms of the said formal licence or licences
shall be deemed to be incorporated into this Agreement. Simmons
shall in addition do all such acts, matters or things as may be
necessary to grant the licences required to be given hereunder
and to procure the registration of the same at the relevant
Patent Offices in the Territory.
2.3 Simmons does not warrant that any letters patent of the Patent
Portfolio is or will be valid or that the Non-Patented Technology
can be the subject of a valid patent or that manufacture or
dealing in the Goods or the use of the Goods is not an
infringement of the rights of third parties but is not aware of
any such third party rights which may be infringed by such
manufacture or dealing or of any claim of such infringement other
than as a result of the Belgian License. The parties hereby
acknowledge and agree for purposes of this Agreement that the
term "aware" in the preceding sentence is limited to the
knowledge of Robert A. Magnusson, John P. Peterken and Eugene S.
Zimmer (Mr. Zimmer is associated with the law firm of Jones and
Askew in Atlanta, Georgia) as of the date hereof.
3. Licence under Marks
-------------------
3.1 Subject to Clause 18 and the Belgian License, Simmons hereby
agrees to grant to Christie an exclusive right, licence and
privilege to use the Marks in connection with the manufacture,
use, sale, distribution, advertising and promotion of the Goods
in the Territory.
3.2 Simmons and Christie hereby agree forthwith to do all things
reasonably necessary or desirable for the preservation of the
Marks to effect the recordal respectively of the Licences hereby
granted or agreed
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<PAGE>
to be granted at the relevant Trade Mark Registry in the
Territory in respect of Goods for which the Marks are registered.
To this effect the parties hereby agree that Licences in the form
set out in the Fifth Schedule hereto or so near thereto as may be
appropriate in each case shall be executed by Simmons and
Christie.
3.3 Simmons does not warrant that any of the Marks are or will be
registered or are capable of registration or that manufacture or
dealing in the Goods is not an infringement of the rights of
third parties but is not aware of any such third party rights
which may be infringed by such manufacture or dealing or of any
claim of such infringement other than as a result of the Belgian
License. The parties hereby acknowledge and agree for purposes
of this Agreement that the term "aware" in the preceding sentence
is limited to the knowledge of Robert A. Magnusson, John P.
Peterken and Eugene S. Zimmer (Mr. Zimmer is associated with the
law firm of Jones and Askew in Atlanta, Georgia) as of the date
hereof.
4. License for Intellectual Property Rights
----------------------------------------
4.1 Subject to the Belgian License, Simmons grants to Christie an
exclusive right, license and privilege to use the Non-Patented
Technology in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods in those
countries in the Territory in which there is no patent
application, patent or registration with respect to the Non-
Patented Technology (the "Non-Patented Territory") until such
time as a patent application is filed in the Non-Patented
Territory with respect to any portion of such Non-Patented
Technology, in which case the portion of such Non-Patented
Technology which is the subject of such patent application filed
in the Non-Patented
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<PAGE>
Territory shall be considered part of the Patent Portfolio for
purposes of this Agreement and the First Schedule hereto shall be
so amended.
4.2 Subject to the Belgian License, Simmons grants to Christie an
exclusive right, license and privilege to use the Non-Registered
Marks in those countries in the Territory in which there is no
registration with respect to the Non-Registered Marks (the
"Non-Registered Territory") in connection with the manufacture,
use, sale, distribution, advertising and promotion of the Goods
in such Non-Registered Territory until such time as a
registration for a Non-Registered Mark is effected in any of such
Non-Registered Territory, in which case such Non-Registered Mark
shall be considered to be a Mark for purposes of this Agreement
and the First Schedule hereto shall be so amended.
4.3 Christie hereby acknowledges and agrees that Simmons shall at all
times during the life of this Agreement be permitted to file
patent applications as the registered proprietor thereof with
respect to the Non-Patented Technology in the Non-Patented
Territory and register the Non-Registered Marks in its own name
at its own cost in the Non-Patented Territory; provided, however,
Christie shall have the right and Simmons shall cooperate, at the
expense of Christie, to file such patent applications which
designate Simmons in its own name with respect to the Non-
Patented Technology in the Non-Patented Territory and register
the Non-Registered Marks which registration designates Simmons as
the registered proprietor thereof in the Non-Registered Territory
subject always and in each case to Simmons granting to Christie
an exclusive Licence of the rights under the relevant application
and any patents or registered trademarks which result from such
applications under the terms of this Agreement.
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<PAGE>
5. Exclusivity
-----------
Simmons covenants that it has not granted and will not grant any
licence and will not itself do or cause or procure to be done anything
which derogates from or conflicts with the rights granted to Christie
hereunder.
6. Royalties and Payments
----------------------
6.1 (a) From the date of this Agreement, Christie shall pay to
Simmons U.S.A. Corporation royalties in respect of all
Goods sold by Christie during the life of this
Agreement.
(b) The said royalties shall be:
(i) in the case of Goods (other than convertible sofas
and slatted bases) the manufacture or sale of
which in the part of the Territory in which such
manufacture or sale takes place would have
infringed any one of the patents in the Patent
Portfolio were it not for this Licence Agreement,
two percent (2%) of Net Sales save that on the
sale of a mattress together with other Goods
royalty shall only be paid (insofar as that
mattress and those other goods fall within the
claims of any of the Patent Portfolio) on the Net
Sales of such mattress; provided, however, for
purposes of this royalty payment only, the
Patent Portfolio shall be deemed to consist of
the Non-Patented Technology within the
Non-Patented Territory and the expiration of such
Non-Patented Technology shall be deemed to be
fourteen years from the date hereof
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<PAGE>
(i.e., as if a valid patent with a life of
fourteen years from the date hereof existed with
respect to all of the Non-Patented Technology in
the Non-Patented Territory);
(ii) in respect of Goods (other than convertible sofas
and slatted bases) not covered by sub-clause (i)
above and sold under one or more of the Marks or
the Non-Registered Marks, one percent (1%) of Net
Sales; and
(iii) in respect of Goods consisting of convertible
sofas and slatted base foundations, nil royalty.
It is hereby agreed that if any of the Goods shall be liable
to bear royalty under one or more of the Other Licences,
only a single payment of royalty shall be due and payable in
respect of such Goods and such payment shall be of the
highest amount of royalty due and payable in respect of such
Goods pursuant to each of such Other Licences and this
Agreement.
(c) It is agreed that there shall be excluded from any
calculation of royalty under this Agreement supplies by
Christie of Goods to the following hotel groups in Portugal
which any of the Subsidiaries has supplied Goods to during
the three years prior to the date of this Agreement and any
person, firm or company which may hereafter acquire such
hotels owned by the said groups or any of them, which
supplies shall be royalty-free:
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<PAGE>
Parador
The Palaya Group
Grupo Hotels Fiesta
The Mellia Group
Estursa
Marbella Club
Club Mediterranee
Intercontinental
(d) For the purpose of calculating royalties, Net Sales shall be
converted into pounds sterling and then into U.S. dollars at
the rate of exchange announced by National Westminster Bank
plc (or if such rate of exchange is unavailable at National
Westminster Bank plc, at another major institution of
national standing in London, England) as at close of
business on the last day of each Royalty Period (as defined
below).
(e) Christie may deduct the sum of 125,000 pounds sterling (the
"Aggregate Deduction") when calculating its aggregate Net
Sales during each Royalty Period under this License and each
of the Other Licenses which provide for royalty payments.
In respect of the first and last Royalty Period of the
duration of this Agreement the Aggregate Deduction shall be
reduced in proportion to the extent to which such Royalty
Period falls short of the relevant six month period.
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<PAGE>
(f) For the purposes of this Agreement the term "Net Sales"
shall mean the ex-works invoice price of Goods shipped by
Christie in an arms-length sale, less actual trade discounts
including standard cash discounts, if any, not exceeding
five percent (5%), and less returns and the cost of freight,
insurance, packaging and any Value Added or other similar
tax and any duty. No deduction shall be made for other
discounts or uncollectible accounts or for any costs
incurred by Christie in the manufacture, sale or
distribution of the Goods.
6.2 The said royalties are payable by Christie to Simmons U.S.A.
Corporation within sixty (60) days after the end of each six
month period ending on 30th June and 31st December (each such six
month period is referred to as the "Royalty Period") in each year
during the life of this Agreement.
6.3 (a) The said royalties are payable by Christie from London,
England and are to be transferred by Christie in U.S.
dollars for the credit of Simmons U.S.A. Corporation's
account number 8800291992 at Trust Company Bank, Atlanta,
Georgia, U.S.A.
(b) Simultaneously with transferring each payment, Christie
shall telex Simmons U.S.A. Corporation details of the amount
in U.S. dollars sent and the date of sending.
(c) Simmons U.S.A. Corporation may by notice in writing to
Christie vary the place and manner of payment and may
require payments to be made on behalf of Christie by any one
of Christie's subsidiary companies which shall be able to do
so.
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<PAGE>
6.4 Christie shall pay any taxes, levies and other charges as are
required by English law to be withheld from Simmons and shall
submit to Simmons receipts for the monies so paid or withheld.
6.5 It shall be the responsibility of Christie to make all reasonable
efforts to obtain any necessary government or other official
permission for the transmission of such royalty payments to
Simmons.
6.6 If Christie shall be, at the time of any payment due to Simmons,
prevented by the laws and regulations then in force in England
from remitting any amount due to Simmons, Christie shall pay the
amount due to a bank account in England in the name of Simmons
U.S.A. Corporation and such payment shall be a full discharge of
Christie's obligation to make payment hereunder.
7. Reports, Records and Access
---------------------------
7.1 Christie shall, within sixty (60) days after the end of each
Royalty Period deliver to Simmons U.S.A. Corporation:
(a) a written report stating the aggregate invoice price charged
by Christie in respect of Goods falling within Clauses
6.1(b)(i) and 6.1(b)(ii) above respectfully in that Royalty
Period, and
(b) the amount of royalties due and owing under Clause 6A above.
7.2 Christie shall keep full, true and accurate records, vouchers and
books of account containing all particulars which may be
necessary for the purpose of calculating the amounts payable to
Simmons U.S.A. Corporation by way of royalties as aforesaid.
Such
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<PAGE>
books and the supporting data shall be open at all reasonable
times and upon reasonable notice for two (2) years following the
end of the Royalty Period to which they pertain to the inspection
of an independent chartered accountant retained by Simmons U.S.A.
Corporation at the sole option and at the cost of Simmons for the
purpose of verifying the royalty calculations of Christie, and
such accountant shall be entitled at Simmons U.S.A. Corporation
expense to take and remove copies of such books and supporting
data and Christie shall on the request by or on behalf of Simmons
U.S.A. Corporation provide full and true information and
explanations in writing of and concerning all matters and
questions appearing in or arising in relation to the said
accounts. Simmons U.S.A. Corporation hereby agrees that such
information shall be the confidential property of Christie and
that such accountant shall not disclose the same nor any part
thereof save the amount of any error to any person, firm or
company other than in confidence to Simmons U.S.A. Corporation's
own professional advisers or unless such disclosure is required
by a court of competent jurisdiction or otherwise required by
law.
7.3 Once annually, within sixty (60) days after the end of the audit
in respect to each of its financial years, Christie shall furnish
a statement setting out the Goods which it has sold during that
preceding financial year together with a calculation of the
royalties due thereon.
8. Other Territories
-----------------
8.1 Save as many specifically be agreed to in the Other Licenses or
in writing between the parties, Christie agrees as follows:
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<PAGE>
(a) not to manufacture, advertise, or knowingly sell or supply
for export to any market outside the EEC any Goods
manufactured in accordance with any one or more of the
patents in the Patent Portfolio and/or on which any of the
Marks is or is to be applied or use.
(b) not to manufacture any Goods outside the Territory in any
country where the inventions employed in the manufacture of
such Goods, or the Goods themselves so manufactured, are
protected in such country by patents corresponding to the
patents in the Patent Portfolio owned by or registered or
applied for in the name of Simmons or Simmons International
Ltd. or any entity which has been notified to Christie as
being controlled by or under common control with Simmons.
(c) not actively to seek customers for the Goods nor to
advertise the Goods nor to establish any branch or
distribution depot handling the Goods outside the Territory
in any other member state of the EEC where the inventions
employed in the manufacture of such Goods, or the Goods
themselves so manufactured, are protected in such member
state by patents corresponding to the patents in the Patent
Portfolio owned by or registered or applied for in the name
of Simmons or Simmons International Ltd. or any entity which
has been notified to Christie as being controlled by or
under common control with Simmons.
(d) not to apply or use on the goods outside the Territory in
any member state of the EEC any Mark being a trade mark
which is owned by or registered or applied for in the name
of Simmons or Simmons International Ltd. or any entity which
has been notified to Christie as being controlled by or
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<PAGE>
under common control with Simmons in that member state in
respect of the Goods on which such Mark is to be applied or
used.
9. Use and Maintenance of the Patents and Marks
--------------------------------------------
9.1 Christie agrees that it will use all reasonable endeavours in all
the circumstances to exploit the Goods covered by the Patent
Portfolio and to use the Marks and the Non-Registered Marks.
9.2 Christie shall, subject to being advised pursuant to Clause 9.3
below, for the duration of this Agreement, pay such application
and renewal fees and do such acts and things as may be necessary
to complete the Applications and to maintain and keep on foot the
patents in the Patent Portfolio and the Marks and shall so far as
it is able produce to Simmons the receipt for such application
and renewal fees seven days at the least before the last day for
paying any of them (excluding periods allowing an extension of
the time limit for renewing) and in default shall recognize the
right of Simmons to pay the same and to be credited with the cost
thereof.
9.3 Simmons shall procure that Christie be advised in writing of any
applications in respect of the Patent Portfolio and for any
renewal and renewal fees in respect of the Marks. Forthwith upon
receipt by Simmons of such applications, Simmons shall at
Christie's request and expense do all such acts, matters and
things as may be necessary to complete the Applications and to
maintain and keep on foot the Patent Portfolio and the Marks or
any of them.
9.4 Christie and Simmons mutually undertake for the duration of this
Agreement (a) not to abandon or allow to lapse any Applications,
or Marks, (b) not to amend
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<PAGE>
the specification of any such patent or the specification
accompanying any application for letters patent within the scope
of this Agreement for the duration of the Agreement, without the
consent of the other party but such consent shall not be
unreasonably withheld.
9.5 Simmons shall in relation to any of the Patent Portfolio or the
Marks in respect of which Christie is paying the application or
renewal fees notify Christie of, and at the expense and direction
of Christie defend, every proceeding or application in the Patent
Office, the Court or elsewhere for opposition to the grant of or
for revocation of the Patent Portfolio or the cancellation of the
Marks or any of them, provided always that if Christie shall
elect not to defend the same Simmons may do so at its own expense
and Christie shall at the request and expense of Simmons do all
such acts, matters and things as Simmons considers in its
absolute discretion to be desirable in connection with such
defense.
9.6 Simmons undertakes that it will at the direction and expense of
Christie apply for registration of the Marks or any of them and
use its reasonable endeavors to prosecute such applications and
any Applications for Improvement Patents in the Territory.
9.7 The Goods distributed or sold by Christie under or in connection
with the Marks and Non-Registered Marks shall be at least
generally the same as the quality of the Subsidiaries' present
product line, the quality of which has been approved by Simmons.
Material changes to the Goods which are likely to result in a
substantial decrease in the quality thereof shall not be made
without the prior written approval of Simmons, which approval
will not be withheld unless such decrease in quality is likely to
materially impair the
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<PAGE>
goodwill attached to the Marks and Non-Registered Marks or any
other marks owned by Simmons. Any such disapproval shall
indicate the specific reasons therefor and shall be made in a
reasonable time of Christie's request for such approval. Such
approval shall not be withheld for changes of quality which are
at a level comparable to that maintained by Christie's principal
competitors in the markets in which they may from time to time
compete with Christie.
9.8 All packaging and advertising of the Goods in connection with the
Marks and Non-Registered Marks shall be consistent with the
standards maintained during the two (2) years prior to this
Agreement by the Subsidiaries, Simmons having approved said
standard, and/or at a level comparable to that maintained by
Christie's principal competitors in the markets in which they may
from time to time compete.
9.9 The Marks and Non-Registered Marks may be used by Christie only
in connection with the sale, marketing and distribution of the
Goods and for no other purposes.
9.10 Simmons shall have the right, during the term of this Agreement,
to inspect the portion(s) of the premises of Christie wherein
the Goods are manufactured, work-in-progress, and finished
products to be sold under any of the Marks and Non-Registered
Marks within the Territory during normal business hours and upon
reasonable notice solely for the purpose of assuring that the
requirements set forth in paragraphs 9.7, 9.8, and 9.9 are
fulfilled.
9.11 Christie shall upon request furnish the Licensor with samples of
all labels on which any of the Marks or Non-Registered Marks are
utilized and any and all promotional materials and
advertisements.
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<PAGE>
9.12 Christie undertakes that it will render all assistance which it
may reasonably be required to render to Simmons in the
prosecution of Applications in the Territory in relation to the
Goods at the cost of Simmons. Simmons will keep Christie
informed of the progress of the Applications.
9.13 Christie shall as between the parties hereto be responsible for
observing all relevant laws of the respective countries in which
the Goods are marketed regarding the marking of goods as patented
or as sold under a trade mark duly registered in that country.
9.14 Christie acknowledges that the Marks and the Non-Registered Marks
are the sole property of Simmons that use thereof by Christie
shall inure to the benefit of Simmons, that Christie owns no
interest in the Marks and the Non-Registered Marks except its
Licence herein and the Other Licences, and that performance of
this Agreement shall in no way create any rights in the Marks and
the Non-Registered Marks in Christie that would survive the
termination of this Agreement.
9.15 Christie shall cooperate with Simmons in maintaining trademark
rights of Simmons by executing such documents prepared at
Simmons' expense as may reasonably be required by Simmons to
obtain or maintain new trademark registrations.
9.16 Christie shall observe, comply with and perform all rules,
restrictions and conditions imposed by statute or regulations on
the use of the Marks and Non-Registered Marks and not by any
abuse, misuse, trafficking device, evasion, act or omission,
knowingly prejudicially affect or endanger Simmons' registrations
of or rights to the Marks.
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<PAGE>
9.17 Christie shall not have any right except so far as expressly
permitted hereunder and under the Other Licences to use the Marks
or the Non-Registered Marks (or any other trademarks which so
nearly resemble any of the Marks or the Non-Registered Marks as
to be likely to deceive or cause confusion) in connection with
any goods other than the Goods.
10. Infringement and Defence
------------------------
10.1 Christie and Simmons hereby mutually agree forthwith to give
notice in writing by telex or telecopier to the other of any
infringement or suspected or threatened infringement in the
Territory of any patent in the Patent Portfolio or of any Mark or
Non-Registered Mark which shall at any time come to their
knowledge.
10.2 (a) If Simmons shall become aware that any patent in the Patent
Portfolio or any Mark or Non-Registered Mark is being
infringed by a third party, then Simmons shall have the
option within thirty (30) days after receipt of such notice
to take measures by suit or other undertaking to prevent
infringement by the said third party of the said patent
and/or Mark and to recover damages for such infringements.
Should Simmons exercise such option, all costs,
disbursements and expense of such suit or other undertaking
shall be borne by Simmons and Simmons shall have the sole
choice in the selection of legal representation, shall
control and be solely responsible for the conduct of such
suit or other undertaking. Any damages recovered from such
suit or other understanding shall be credited to Simmons.
Christie, at its own expense, may be represented in any such
suit or other undertaking commenced by Simmons.
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<PAGE>
(b) If, however, Simmons shall not exercise its option within
such thirty (30) day period, then Christie may, upon the
giving of notice to Simmons, at Christie's own expense and
in its own name commence a suit or other undertaking to
prevent infringement by the said third party of the said
patent and/or Mark and recover damages for such
infringements. All costs, including all costs,
disbursements and expenses of such suit or other undertaking
commenced by Christie shall be borne by Christie and
Christie shall have the sole choice in the selection of
legal representation, shall control and be solely
responsible for the conduct of such suit or such other
undertaking. Any damages recovered from such suit or other
undertaking shall be for the credit of Christie. Simmons
may, at its own expense, be represented in any such suit or
other undertaking commenced by Christie.
(c) If in any proceedings brought by one party (the "First
Party") under the provisions of this Clause it is necessary
to join the other party hereto as a nominal party, such
other party hereby agrees that it will permit itself to be
joined as a nominal party and will sign all necessary papers
and will fully cooperate with the First Party in the
prosecution of such suits or other undertaking provided that
all costs, claims, damages and expenses of such other party
incurred by or as a result of such joinder shall be borne by
the First Party.
10.3 Simmons and Christie and each of them hereby agree that each shall
cooperate in the prosecution of any suit or undertaking commenced
by the other under sub-clause
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<PAGE>
10.2 hereof in all respects as the party bringing such suit or
undertaking may reasonably require and at the expense of that
party.
11. Third Party Claims
------------------
11.1 If any proceedings are threatened or commenced by a third party
against either Christie or any of its customers or Simmons in any
country of the Territory either on the ground that the Goods sold
by Christie under this Agreement or the Other License Agreements
infringe any patent monopoly right or trademark vested in such
third party the party so threatened or sued shall inform the
other forthwith upon becoming aware of such threat or action.
11.2 If Christie or both parties shall decide on good commercial
grounds that such proceedings shall be defended, Christie shall
have sole control of the proceeding and shall bear the whole
costs thereof and shall pay any damages and costs awarded
(whether awarded against Christie or Simmons) in favor of such
third party. If Simmons only shall decide that such proceedings
shall be defended and Christie shall decide in good faith not to
defend such proceedings or Simmons wishes to control the
defense thereof, Simmons shall pay its own costs and expenses and
shall pay any damages and costs awarded (whether against Christie
or Simmons) in favour of such third party. If one party only
shall decide that such proceedings shall be defended, the other
to this Agreement shall render to the party so defending all
assistance that it reasonably can at the requesting party's cost
if so requested.
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12. Product Liability
-----------------
12.1 Christie agrees to defend, indemnify and hold Simmons harmless
from and against any and all product liability claims of third
parties (and liabilities, judgments, penalties, losses, costs,
damages and expenses therefrom including reasonable attorneys'
fees) arising from Christie's manufacture, sale or distribution
of the Goods.
12.2 Simmons agrees to promptly notify Christie of any product
liability claim asserted against it with respect to Christie's
manufacture, sale or distribution of the Goods. Once Christie
has taken reasonable steps to defend against such claim, and so
notified Simmons, any further expenses incurred by Simmons
including attorneys' fees, shall be for its own account unless
Christie discontinues taking such reasonable steps.
12.3 Christie shall maintain an amount of product liability insurance
as is customary in the Territory for conducting the business of
manufacturing and selling the Goods. In the event Christie
discontinues any such insurance, it shall give Simmons at least
ten (10) days notice before such insurance lapses or in the event
that any such insurance lapses for any other reason, Christie
shall promptly notify Simmons of such event.
13. Improvement Patents
-------------------
13.1 Simmons hereby agrees to grant to Christie in respect of
Improvement Patents granted to Simmons the like Licence as is
agreed to be granted herein under the Existing Patents (at no
additional royalty) and to execute a formal licence or licences
therefor substantially as set forth in the Fourth Schedule
hereto.
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<PAGE>
14. Transmission of Rights
----------------------
14.1 Notwithstanding the other subclauses in this clause 14, Simmons
shall have an unfettered right to assign the right to receive
royalties under this Agreement to any person or entity.
14.2 This Agreement and the rights licensed or to be licensed
hereunder may not be Transferred (as hereafter defined) by
Simmons except (i) to any entity under common control with
Simmons or (ii) to a third party in connection with the sale,
transfer or other disposition of substantially all of its
business in the Goods and may not be otherwise dealt in by
Simmons.
14.3 This Agreement and the rights licensed or to be licensed
hereunder may not be assigned or in any other manner conveyed or
transferred including without limitation by means of a change of
control (collectively, a "Transfer") by Christie except upon
written notice to Simmons (i) to any entity controlled by or
under common control with Christie, or (ii) to a third party in
connection with the sale, transfer or other disposition of
Christie, Compagnie Continentale Simmons S.A. ("Compagnie")
and/or Sleepeezee Limited ("Sleepeezee") together with
substantially all of its respective business and assets or
substantially all of the business and assets of Christie,
Compagnie and/or Sleepeezee as carried on as of the date hereof;
provided that such third party is not a Simmons' competitor in
the bedding industry in the markets in which Simmons competes in
North America. Prior to any such Transfer, Christie shall obtain
the written consent of any such third party to assume all the
obligations of Christie under this Agreement.
-25-
<PAGE>
14.4 If either party shall Transfer the benefit of this entire
Agreement to a third party (other than Simmons' right to receive
the royalty payments hereunder), that party shall agree with the
other that it will at the request of the other forthwith enter
into a new agreement with such new party which agreement shall be
co-terminous with this Agreement and otherwise upon the terms of
this Agreement and will release that other from all obligations
and liabilities hereunder in respect of anything arising after
the date of such Transfer.
14.5 Each party agrees that if the other shall deal with the rights
granted to it hereunder such party will do all such acts, matters
and things, including the execution of any document, including in
particular and without prejudice to the generality of the
foregoing, any licence or Registered User Agreement as may
reasonably be necessary to give effect to the same. The
provision of this sub-clause shall survive termination of this
Agreement.
15. Duration.
--------
Other than a termination of this Agreement pursuant to clause 16,
this Agreement shall be co-terminous with the Technology
Agreement. On termination of this Agreement (other than a
termination pursuant to clause 16), Simmons shall forthwith grant
to Christie exclusive licences on the same terms and conditions
as this Agreement insofar as practicable of all the rights to
which Christie is entitled hereunder or under the Technology
Agreement for the life of the relevant rights.
-26-
<PAGE>
16. Termination
-----------
Either party shall have the right to terminate this Agreement and the
licences hereunder forthwith by notice in writing to the other upon
the happening of any of the following events:
(i) if that other fails to perform or observe any of the terms
hereof or of any of the Other Licenses on that other's part
to be performed and observed and fails to remedy such breach
within 90 days of a notice from the first party to remedy
the same.
(ii) If Christie has a receiver appointed of the whole or any
substantial part of its assets, or if any order is made or a
resolution is passed for the winding up of Christie (except
where such winding up is for the purposes of amalgamation or
reconstruction such that the company resulting (if a
different legal entity) shall effectively agree to be bound
by or assume the obligations of this Agreement and such
company is one to which Simmons cannot reasonably object).
(iii) Simmons shall have the right to terminate this Agreement and
any Licences granted hereunder forthwith by notice in
writing to Christie if Christie, its business or undertaking
shall compete with Simmons in the bedding industry in the
markets in which it competes in North America.
(iv) This Agreement shall terminate forthwith with respect to any
Marks (and the Non-Registered Marks) at any time that
Christie shall not be making sufficient use of such Marks
(and the
-27-
<PAGE>
Non-Registered Marks) so as to at all times constitute legal
use (i.e., true commercial use sufficient to avoid a finding
of abandonment of Marks in the jurisdiction by any competent
court in the Territory).
17. Effect of Termination
---------------------
17.1 Any termination of this Agreement shall be without prejudice to
the rights of either party against the other which may have
accrued up to the date of such termination and shall (subject as
hereinafter provided) be without prejudice to the right of
Christie for a period of six months following the date of
termination to dispose of stocks of the Goods within the
Territory whether assembled or in course of assembly at the date
of termination.
17.2 Where this Agreement terminates under any of the provisions of
Clause 16 hereof all relevant licences shall on expiry of the
notice of termination themselves terminate and Christie shall not
thereafter be concerned in any of the Goods which would infringe
any of the Patent Portfolio or the Marks which shall not then be
Licenced hereunder in the Territory, and Christie hereby
specifically agrees that it shall not use any of the Non-Patented
Technology and Non-Registered Marks in the Territory, whether by
way of manufacture, use, exercise or vending or otherwise.
18. Sales to International Hotel Chains in Europe
---------------------------------------------
(a) Simmons hereby agrees not to solicit any business relating to the
Goods in the Territory during the term of this Agreement.
-28-
<PAGE>
(b) Where inquiries or orders for Goods for delivery in the Territory
are received by Simmons, Simmons will use its reasonable
endeavours to persuade the potential buyer to place the contract
with or through Christie or a permitted sublicensee of Christie
hereunder.
(c) Where Christie makes sales of Goods either as a result of direct
approach from a potential buyer or an inquiry referred from
Simmons, such sales shall be royalty bearing to the extent
provided herein.
(d) If Christie's sales efforts generate orders for Goods which
Simmons manufactures outside the Territory or Simmons fails to
persuade any buyer referred to in subclause (b) above to buy from
Christie or a permitted sublicensee of Christie hereunder, then
Simmons will pay Christie a five percent (5%) commission on the
Net Sales (as defined herein) if Simmons accepts such orders.
19. Notices
-------
(1) All notices and other communications to be sent by either
party to the other shall be in writing and shall be sent to
the other party at the address for that party set
out below, or such other address for that party set out
below or such other address (if any) as that party may have
notified in writing to the party serving the notice as its
address for service hereunder.
(2) Notice may be given by air mail letter or by telex,
telemessage, fax or cable confirmed by air mail letter, and
each letter containing or confirming notice will be sent by
registered air mail addressed to the other party at the
address for service and will be deemed to have been
-29-
<PAGE>
received on the earlier of the tenth (10) day (not including
Sundays or public holidays) after dispatch of the notice or
the date of receipt of confirmation of delivery of such
notice.
To Simmons:
Simmons USA Corporation Inc.
6 Executive Park Drive
Atlanta, Georgia 30329, USA
Attention: Mr. Robert A. Magnusson
with copy to:
Messrs. Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
Attention: Mr. William Morton
To Christie:
Christie-Tyler plc
Brynmenyn
Bridgend
Mid Glamorgan CF32 9LN
Wales
Attention: Mr. Kevin O'Sullivan
with copy to:
Messrs. Herbert Smith
Watling House
35 Cannon Street
London EC4M 5SD
Attention: Mrs. Margaret Mountford
20. Jurisdiction and Choice of Law
------------------------------
This Agreement shall be governed by English law in every particular
including formation and shall be deemed to have been made in England
and be subject to the non-exclusive jurisdiction of the English
courts.
-30-
<PAGE>
21. Severence and Notification.
--------------------------
21.1 This Agreement shall be construed in a manner to avoid violation
of, or invalidity under, any applicable law, including the Treaty
of Rome and EEC Regulations. Should any provision of this
Agreement nevertheless be or become invalid, illegal or
unenforceable under any applicable law, then subject to
subclause 2 of this clause the other provisions of this
Agreement shall not be affected and, to the extent permissible,
the parties will negotiate and agree to a lawful alternative
which in practical terms secures the same commercial result as
the invalid, illegal or unenforceable provision.
21.2 The parties have agreed at their own expense to notify this
Agreement to the Commission of the EEC pursuant to Articles 2 and
4 of Council Regulation 17/62 and subject to clause 21.1 herein
hereby agree to renegotiate in good faith the commercial terms
of this Agreement in light of all such modifications as may be
required by the Commission of the EEC as conditions precedent
either to the granting of a negative clearance or to the
application of Article 85 (3) of the Treaty of Rome to this
Agreement.
22. Joint Obligations of Simmons.
----------------------------
Simmons U.S.A. Corporation, Simmons Company and Info Establishment
hereby agree that the liabilities and obligations of Simmons under
this Agreement shall be construed as liabilities and obligations of
them jointly, each of them singly and any two or more of them
together.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the date first above written.
SIMMONS U.S.A. CORPORATION
BY: /s/
-------------------------
Vice President
SIMMONS COMPANY
BY: /s/ Robert A. Magnusson
-------------------------
Robert A. Magnusson
President
INFO ESTABLISHMENT
BY: /s/
--------------------------
Vice President
CHRISTIE-TYLER plc
BY: /s/
--------------------------
<PAGE>
THE FIRST SCHEDULE
------------------
PART 1
("Patents")
BELGIUM
- -------
Patent
Number Date Filed
------ ----------
Inner Spring Construction 0154076 10/09/84
LIECHTENSTEIN
- -------------
Patent
Number Date Filed
------ ----------
Apparatus for making assemblies
of pocketed springs 0060146 01/02/86
LUXEMBOURG
- ----------
Patent
Number Date Filed
------ ----------
Inner Spring Construction 0154076 10/09/84
NETHERLANDS
- -----------
Patent
Number Date Filed
------ ----------
Inner Spring Construction 0154076 10/09/84
SWITZERLAND
- -----------
Patent
Number Date Filed
------ ----------
Apparatus for making assemblies
of pocketed springs 0060146 01/02/86
<PAGE>
PART 2
("The Applications")
BELGIUM
- -------
Patent
Number Date Filed
------ ----------
Method and Apparatus for
Inner Spring Construction 85301642 03/08/85
Ultrasonic Separation 84303338 05/17/84
LIECHTENSTEIN
- -------------
Patent
Number Date Filed
------ ----------
Ultrasonic Separation Apparatus 84303338 05/17/84
LUXEMBOURG
- ----------
Patent
Number Date Filed
------ ----------
Method and Apparatus for
Manufacturing Inner Spring
Construction 85301642 03/08/85
NETHERLANDS
- -----------
Patent
Number Date Filed
------ ----------
Method and Apparatus for
Manufacturing Inner Spring
Construction 85301642 03/08/85
Ultrasonic Separation Apparatus 84303338 05/17/84
SWITZERLAND
- -----------
Patent
Number Date Filed
------ ----------
Ultrasonic Separation Apparatus 84303338 05/17/84
<PAGE>
THE SECOND SCHEDULE
-------------------
("The Marks")
BELGIUM
- -------
Registration Expiration
Number Date
------------ ---------
Beautyrest 376582 10/02/90
Hide-A-Bed 374849 10/02/90
S with Design 354862 01/21/89
Simmons R173292 12/07/93
Beautyrest 054938 07/19/91
Simmons 054939 05/07/91
Simmons Design 309066 03/28/92
DENMARK
- -------
Registration Expiration
Number Date
------------ ----------
S with House Design 296673 10/05/93
FINLAND
- -------
Registration Expiration
Number Date
------------ ----------
S with House Design 64763 12/30/95
GREECE
- ------
Registration Expiration
Number Date
------------ ----------
Beautyrest 25950 08/23/90
S with House Design 48179 03/27/92
Crowned "S" 25951 08/23/90
Simmons 25949 08/23/90
LIECHTENSTEIN
- -------------
Registration Expiration
Number Date
------------ ----------
Beautyrest 376582 10/02/90
Hide-A-Bed 374849 12/02/90
S with Design 354862 01/21/89
Simmons R173292 12/07/95
<PAGE>
LUXEMBOURG
- ----------
Registration Expiration
Number Date
------------ ---------
Beautyrest 054938 07/19/91
S with House Design 309066 03/28/92
Simmons 054939 05/07/91
Hide-A-Bed 374849 12/02/90
Beautyrest 376582 10/02/90
S with House Design 354862 01/21/89
NETHERLANDS
- -----------
Registration Expiration
Number Date
------------ ----------
Beautyrest 054938 07/19/91
S with House Design 309066 03/28/92
Simmons 054939 05/07/91
S with House Design 354862 01/21/89
NORWAY
- ------
Registration Expiration
Number Date
------------ ----------
S with House Design 86798 01/11/93
PORTUGAL
- --------
Registration Expiration
Number Date
------------ ----------
Beautyrest 85433
Beautyrest 135821
S with House Design Ap# 196038
S with House Design Ap# 196039
S with House Design Ap# 196209
Simmons 85432
SWEDEN
- ------
Registration Expiration
Number Date
------------ ----------
S with House Design 140233 08/04/92
<PAGE>
SWITZERLAND
- -----------
Registration Expiration
Number Date
------------ ----------
Beautyrest 317894 03/25/2002
S with House Design 258053 04/06/93
Simmons 317895 03/25/2002
Beautyrest 376582 10/02/90
S with House Design 354862 01/21/89
Hide-A-Bed 374849 12/02/90
Simmons R173292 12/07/93
<PAGE>
THE THIRD SCHEDULE
------------------
PART 1
("The Technology")
The Technology consists of the technology described in the following patent
applications and patents without regard to the country in which such patent
applications and patents were filed:
Patent Country Date
Description of Technology Number of Filing Filed
------------------------- ------ --------- ------
Ultrasonic Separation Apparatus 0144114 United Kingdom 05/17/84
Method and Apparatus for
Manufacturing Inner
Spring Constructions 0155158 United Kingdom 10/09/84
Inner Spring Construction 0154076 United Kingdom 10/09/84
Ultrasonic Pocketing Machine 238973 France 11/11/83
Pocketed Spring Assembly 8005062 United Kingdom 04/20/82
______________________
* Denotes patent application number.
PART II
("The Non-Registered Marks")
The marks consist of the following: *
_________________________
* See attached sheets.
<PAGE>
THIS IS A LISTING OF "THE MARKS"
REFERRED TO IN PART II OF THE THIRD SCHEDULE
BEAUTYREST
MAXIPEDIC
HIDE-A-BED
CONTOUR-FLEX
SIMMONS
<PAGE>
THE FOURTH SCHEDULE
-------------------
(Clause 2.2)
("The Formal Patent Licence")
BY THIS LICENCE,
________________________________________________________________________________
(hereinafter called the "Licensor") of _________________________________________
HEREBY GRANT to ________________________________________________________________
of_______________________(hereinafter called "the Licensee") in respect of each
of the following letters patent, of which we are Proprietors, that is to say
Nos. ______________ (hereinafter called "the Patents").
WITNESSETH that the Licensor hereby grants to the Licensee an exclusive Licence
in respect of the Patents upon the terms and conditions of an Agreement dated
_______ April 1987 and made between the parties hereto.
SIGNED by
for and on behalf of
______________________________
Authorised Signatory
<PAGE>
DATED AS OF THE 9TH OF APRIL, 1987
----------------------------------------------------------------------
SIMMONS U.S.A. CORPORATION,
SIMMONS COMPANY,
INFO ESTABLISHMENT
AND
CHRISTIE-TYLER PLC,
----------------------------------------------------------------------
INDUSTRIAL PROPERTY
Licence AGREEMENT
Austria, Spain and West Germany
Area 3
----------------------------------------------------------------------
Lane & Partners
46/67 Bloomsbury Square
London WC1A 2RU
<PAGE>
AREA 3
------
INDEX TO CLAUSES:
- ----------------
Number Page
------ ----
Definitions 1 4
Licence Under Patents 2 7
License Under Marks 3 8
License for Intellectual Property Rights 4 9
Exclusivity 5 11
Royalties and Payments 6 11
Reports, Records and Access 7 17
Other Territories 8 18
Use and Maintenance of the Patents and Marks 9 19
Infringement and Defence 10 24
Third Party Claims 11 26
Product Liability 12 26
Improvement Patents 13 27
Transmission of Rights 14 27
Duration 15 29
Termination 16 29
Effect of Termination 17 30
Sales to International Hotel Chains in Europe 18 31
Notices 19 32
Jurisdiction and Choice of Law 20 33
Severance and Notification 21 33
Joint Obligations of Simmons 22 34
The Patents and Applications Schedule 1
The Marks Schedule 2
The Technology
and the Non-Registered Marks Schedule 3
The Formal Patent Licence Schedule 4
The Registered User Agreement Schedule 5
<PAGE>
THIS AGREEMENT is made as of the 9th April, 1987
BETWEEN:
(1) SIMMONS U.S.A. CORPORATION and SIMMONS COMPANY, each a company,
organized and existing under the laws of the State of Delaware in the
United States of America and having its principal place of business at
Six Executive Park Drive, Atlanta, Georgia 30329 and INFO
ESTABLISHMENT, a company organized and existing under the laws of
Liechtenstein and having its address c/o Allgemeines Treuunternehmen,
P.O. Box 83, FL 9490, Vaduz, Liechtenstein (collectively referred to
as "Simmons"); and
(2) CHRISTIE-TYLER plc, a company incorporated in England and having its
registered office situate at Brynmenyn, Bridgend, Mid Glamorgan
CF3 29LN ("Christie");
RECITALS:
(A) Simmons and others have entered into an Agreement with Christie for
the acquisition by Christie of Sleepeezee Limited, Compagnie
Continentale Simmons S.A. and Compagnia Italiana Simmons SpA
(respectively, "the Acquisition Agreement" and "the Subsidiaries").
(B) Simmons is the beneficial owner of the Letters Patent short
particulars of which are set forth in Part I of the First Schedule
hereto ("the Patents") and is the Applicant for Letters Patent short
particulars of which are set out in Part II of the First Schedule
hereto and any applications corresponding thereto anywhere in the
Territory ("the Applications") all relating to bedding products and/or
their manufacture.
(C) Simmons is the beneficial owner of the trademarks short particulars of
which are set out in the Second Schedule hereto and the goodwill
associated therewith ("the Marks").
<PAGE>
(D) In the premises the parties hereto have agreed on the grant of licence
rights in respect of the said Patents and Applications for Patents and
the Marks in favour of Christie on the terms herein set forth.
(E) In the premises the parties hereto have agreed on the grant of certain
rights in respect of the technology set forth in Part I of the Third
Schedule hereto (the "Non-Patented Technology") and the trademarks set
forth in Part II of the Third Schedule hereto together with all the
goodwill and the like rights associated therewith in the Territory
(the "Non-Registered Marks") (collectively, the "Intellectual Property
Rights").
(F) Contemporaneously herewith, the parties have executed four additional
licence agreements in respect of corresponding patents, patent
applications and trademarks in the following territories: (i) Eire,
France, Italy, Monaco, the United Kingdom and the Channel Islands
("Area 1"); (ii) Andorra, Belgium, Denmark, Finland, Gibraltar,
Greece, Iceland, Liechtenstein, Luxembourg, Netherlands, Norway,
Portugal, Sweden, Switzerland, and Turkey ("Area 2"); Bahrain, Dubai,
Israel, Jordan, Kuwait, Qatar, Saudi Arabia, Sudan and the United Arab
Emirates ("Area 4"); and (iv) Congo, Gabon, Ivory Coast, Senegal,
Sierra Leone, Zaire and the islands located in the Caribbean ("Area
5"). (All such additional license agreements are hereafter referred
to as the "Other License Agreements.")
(G) Compagnie Continentale Simmons S.A. entered into an Agreement dated
26th December 1984 with S.A. Beka N.V. under which S.A. Beka N.V. is
licensed to use certain of the Marks on pocketed coil mattresses on a
non-exclusive basis on the terms and conditions stated therein
throughout the European Economic Community (the "EEC") for an initial
period of five years (the "Belgian License").
- 2 -
<PAGE>
(H) Contemporaneously herewith, Simmons U.S.A. Corporation and Christie
have executed a Technology Agreement which provides for the exchange
of various ideas and provides assistance to Christie in connection
with the use and exploitation of the patents in the Patent Portfolio
and the Non-Patented Technology (the "Technology Agreement").
- 3 -
<PAGE>
IT IS AGREED AS follows:
INTERPRETATION
--------------
1. Definitions
-----------
1.1 In this Agreement and in the Schedules:
(a) the following definitions apply:
"Existing Licences" the licence granted by Simmons
International Ltd. to Schlaraffia
Werke Hueser GmbH and Co. KG. dated
1st April, 1986, for, among other
things, certain technology (the
"German License") and the two
licenses granted by Simmons
International Ltd. to Hermanos
Cuens S.L. Dormillon dated 18th
July, 1986 for the supply and
licensing of inter alia certain
technical knowledge and marketing
information (the "Spanish License").
"Existing Patents" shall mean the Patents and any
patents granted in accordance with
the Applications.
"Improvement Invention" shall mean an invention development
modification or improvement
relating
- 4 -
<PAGE>
to the Goods made during the life
of this Agreement.
"Improvement Patent" shall mean letters patent and other
protection granted in the Territory
in respect of any Improvement
Invention or any Process and any
application therefor.
"Territory" shall mean Austria, Spain and West
Germany.
"Patent Portfolio" shall mean the Existing Patents and
any Improvement Patents in the
Territory.
"Goods" means beds, mattresses, box
springs, upholstered and padded
furniture, convertibles, water
beds, bedroom furniture and all
materials and all component parts
thereof, and any and all
developments, modifications and
improvements thereof.
"Process" means any and all processes and
methods of working which have been
or may hereafter be developed or
acquired by Simmons and relating to
- 5 -
<PAGE>
or in respect of or for the
manufacture of the Goods and shall
include any improvements thereto
developed after the date of this
Agreement.
(b) unless the context otherwise requires:
(i) words in the singular include the plural and vice versa;
(ii) words importing any gender include all genders;
(iii) a reference to a person includes a reference to a body
corporate and to an unincorporated body of persons; and
(iv) all dates in the Schedules hereto are in U.S. format.
(c) a reference to a clause, sub-clause or Schedule (or any part
thereof) is to a clause, sub-clause or Schedule (or any part
thereof) (as the case may be) of or to this Agreement.
(d) the headings are for convenience only and do not affect
interpretation.
1.2 The designations adopted in the recitals and introductory
statements preceding this clause apply throughout this Agreement.
- 6 -
<PAGE>
2. Licence Under Patents
---------------------
2.1 Except as otherwise provided herein, Simmons hereby grants to
Christie a non-exclusive right, licence and privilege commencing
on the 16th October, 1989 in relation to West Germany and Austria
and on 30th June, 1990 in relation to Spain, to use the Existing
Patents in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods and to use
and exercise the Processes for such purpose within the scope of
the Existing Patents or any of them in the Territory for the full
life of the relevant rights.
2.2 Simmons shall execute a licence or several licences as the case
may require in such form as may be appropriate in respect of the
Existing Patents, such licence or licences to take effect from
the 16th October, 1989 in relation to Austria and West Germany
and on 30th June, 1990 in relation to Spain, and to be
substantially in the form set forth in the Fourth Schedule hereto
or so near thereto as may be appropriate. It is agreed that
this Agreement shall not itself be registered unless required by
a court of competent jurisdiction or otherwise required by law.
Any such formal licence shall operate subject to the terms of
this Agreement, and the terms of the said formal licence or
licences shall be deemed to be incorporated into this Agreement.
Simmons shall in addition do all such acts, matters or things as
may be necessary to grant the licences required to be given
hereunder and to procure the registration of the same at the
relevant Patent Offices in the Territory.
2.3 Simmons does not warrant that any letters patent of the Patent
Portfolio is or will be valid or that the Non-Patented Technology
can be the subject of a valid patent or that manufacture or
dealing in the Goods or
- 7 -
<PAGE>
the use of the Goods is not an infringement of the rights of
third parties but is not aware of any such third party rights
which may be infringed by such manufacture or dealing or of any
claim of such infringement other than as a result of the Belgian
Licence. The Parties hereby acknowledge and agree for the
purposes of this Agreement that the term "aware" in the preceding
sentence is limited to the knowledge of Robert A. Magnusson, John
P. Peterken and Eugene S. Zimmer (Mr. Zimmer is associated with
the law firm of Jones an Askew in Atlanta, Georgia) as of the
date hereof.
3. Licence under Marks
-------------------
3.1 Subject to Clause 18, the Belgian License and the German License
and as otherwise provided herein, Simmons hereby grants to
Christie an exclusive right, licence and privilege to use the
Marks in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods in Austria
and West Germany.
3.2 Simmons hereby grants to Christie a non-exclusive right, licence
and privilege to use the Marks with effect from 30th June 1990
in connection with the manufacture, use, sale, distribution,
advertising and promotion of the Goods in Spain. To this effect
the parties hereby agree that licenses in the form set out in the
Fifth Schedule hereto or so near thereto as may be appropriate in
each case shall be executed by Simmons and Christie.
3.3 Simmons and Christie hereby agree forthwith to do all things
reasonably necessary or desirable for the preservation of the
Marks to effect the recordal respectively of the Licences hereby
granted or agreed to be granted at the relevant Trade Mark
Registry in the Territory in respect of Goods for which the Marks
are registered.
- 8 -
<PAGE>
3.4 Simmons does not warrant that any of the Marks are or will be
registered or are capable of registration or that manufacture or
dealing in the Goods is not an infringement of the rights of
third parties but is not aware of any such third party rights
which may be infringed by such manufacture or dealing or of any
claim of such infringement other than as a result of the Belgian
License or German License. The Parties hereby acknowledge and
agree for the purposes of this Agreement that the term "aware" in
the preceding sentence is limited to the knowledge of Robert A.
Magnusson, John P. Peterken and Eugene S. Zimmer (Mr. Zimmer is
associated with the law firm of Jones and Askew in Atlanta,
Georgia) as of the date hereof.
4. Licence for Intellectual Property Rights
----------------------------------------
4.1 Subject to the Belgian License, Simmons hereby grants forthwith to
Christie with effect from the 16th October 1989 in relation to West
Germany and Austria and 30th June 1990 in relation to Spain a non-
exclusive right, license and privilege to use the Non-Patented
Technology in connection with the manufacture, use, sale,
distribution, advertising and promotion of the Goods in those
countries in the Territory in which there is no patent application,
patent or registration with respect to the Non-Patented Technology
(the "Non-Patented Territory") until such time as a patent application
is filed in the Non-Patented Territory with respect to any portion of
such Non-Patented Technology, in which case the portion of such Non-
Patented Technology which is the subject of such patent application
filed in the Non-Patented Territory shall be considered part of the
Patent Portfolio for purposes of this Agreement and the First Schedule
hereto shall be so amended.
- 9 -
<PAGE>
4.2 Subject to the Belgian License, the German License and clause 18,
Simmons hereby grants to Christie with immediate effect in
relation to West Germany and Austria an exclusive, and with
effect from 30th June, 1990 in relation to Spain a non-exclusive,
right, license and privilege to use the aforementioned Non-
Registered Marks in those countries in the Territory in which
there is no registration with respect to the Non-Registered
Marks (the "Non-Registered Territory") in connection
with the manufacture, use, sale, distribution, advertising and
promotion of the Goods in such Non-Registered Territory until
such time as a registration for a Non-Registered Mark is effected
in any of such Non-Registered Territory, in which case such
Non-Registered Mark shall be considered to be a Mark for
purposes of this Agreement and the First Schedule hereto shall
be so amended.
4.3 Christie hereby acknowledges and agrees that Simmons shall at all
times during the life of this Agreement be permitted to file
patent applications as the registered proprietor thereof with
respect to the Non-Patented Technology in the Non-Patented
Territory and register the Non-Registered Marks in its own name
at its own cost in the Non-Patented Territory, provided, however,
Christie shall have the right and Simmons shall cooperate, at the
expense of Christie, to file such patent applications which
designate Simmons in its own name at its own cost with respect to
the Non-Patented Technology in the Non-Patented Territory and
register the Non-Registered Marks which registration designates
Simmons as the registered proprietor thereof in the Non-
Registered Territory subject always and in each case to Simmons
granting to Christie a license of the rights under the relevant
application and any patents or registered trademarks which result
from such applications under the terms of this Agreement.
- 10 -
<PAGE>
5. Exclusivity
-----------
Simmons covenants that it has not granted and will not grant any Licence
and will not itself do or cause or procure to be done anything which
derogates from or conflicts with the rights granted to Christie hereunder.
6. Royalties and Payments
----------------------
6.1 (a) From the date of this Agreement, Christie shall pay to
Simmons U.S.A. Corporation royalties in respect of all Goods
sold by Christie during the life of this Agreement.
(b) The said royalties shall be:
(i) commencing (a) immediately in relation to the license
of the Marks or Non-Registered Marks in Austria and
West Germany, (b) 16th October 1989 with respect to
license of any of the patents in the Patent Portfolio
or the Non-Patented Technology in Austria and Germany
and (c) 30th June 1990 in relation to the license to
use all of the intellectual property rights referred
to herein in Spain; in the case of Goods (other than
convertible sofas and slatted bases) the manufacture
or sale of which in the part of the Territory in
which such manufacture or sale takes place would have
infringed any one of the patents in the Patent
Portfolio were it not for this Licence Agreement,
three and three quarter percent (3-3/4%) of Net Sales
save that on the sale of a mattress together with
other Goods royalty shall only be paid (insofar as
that mattress
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<PAGE>
and those other goods fall within the claims of any of
the Patent Portfolio) on the Net Sales of such
mattress; provided, however, in the event that the
royalties paid hereunder for any Royalty Period exceed
the Minimum Royalty (as hereafter defined), the royalty
shall be two percent (2%) of Net Sales for the portion
of such royalties which are in excess of the Minimum
Royalty for such Royalty Period. After 16th October
1992 in relation to Austria and West Germany and 30th
June 1993 in relation to Spain, the royalty shall be
two percent (2%) of Net Sales. For purposes of the
preceding sentences, the Patent Portfolio shall be
deemed to consist of the Non-Patented Technology
within the Non-Patented Territory and the expiration of
such Non-Patented Technology shall be deemed to be
fourteen years from the date hereof (i.e., as if a
valid patent with a life of fourteen years from the
date hereof with respect to all of the Non-Patented
Technology in the Non-Patented Territory);
(ii) in respect of Goods (other than convertible sofas and
slatted bases) not covered by sub-clause (i) above and
sold under one or more of the Marks or the Non-
Registered Marks, one percent (1%) of Net Sales; and
(iii) in respect of Goods consisting of convertible sofas and
slatted base foundations, nil royalty.
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<PAGE>
It is hereby agreed that if any of the Goods shall be
liable to bear royalty under one or more of the Other
Licences, only a single payment of royalty shall be due
and payable in respect of such Goods and such payment
shall be of the highest amount of royalty due and
payable in respect of such Goods pursuant to each of
such Other Licences and this Agreement.
(c) On the date that either or both the German License or
the Spanish license become non-exclusive, Christie
hereby agrees to pay Simmons U.S.A. Corporation a
minimum royalty payment for each of the Royalty Periods
during each of the three years following the date that
each of the German License and/or Spanish License
becomes non-exclusive in an amount (the "Minimum
Royalty") which shall equal the difference between (x)
one-half of the royalties paid by the relevant licensee
under the German License and the Spanish License, as
the case may be, in the third year of such license
agreement by such relevant licensee and (y) the amount
paid by Christie and such relevant licensee by way of
royalty in each Royalty Period during each such
succeeding year with respect to such Territory. For
avoidance of doubt, it is the intention of the parties
that Simmons U.S.A. Corporation be guaranteed by
Christie minimum royalties under this Agreement, for
each of the three years succeeding the date that the
German License and Spanish License become non-
exclusive, in an aggregate amount equal to the amount
of the royalties paid by the licensee under the German
License and the licensee under the Spanish License in
the
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<PAGE>
third year of each such license. Such Minimum Royalty
payment shall be taken into account for purposes of
calculating royalties under this clause 6 during each
Royalty Period for such succeeding three years. For
purposes of verification only, Simmons shall, upon
request, procure that Christie have access to such
books and records as is reasonably necessary to verify
the calculation of the Minimum Royalty.
(d) It is agreed that there shall be excluded from any
calculation of royalty under this Agreement supplies by
Christie of Goods to the following hotel groups in
Spain and any person, firm or company which may
hereafter acquire the hotels owned by the said groups
or any of them, which supplies shall be royalty-free:
Parador
The Palaya Group
Grupo Hotels Fiesta
The Mellia Group
Estursa
Marbella Club
Club Mediterranee
Intercontinental
(e) For the purpose of calculating royalties, Net Sales
shall be converted into pounds sterling and then into
U.S. dollars at the rate of exchange announced by
National Westminster Bank plc (or if such rate of
exchange is unavailable at National Westminster Bank
plc, at another major institution of national
- 14 -
<PAGE>
standing in London, England) as at close of business on
the last day of each Royalty Period (as defined below).
(f) Christie may deduct the sum of 125,000 pounds sterling
(the "Aggregate Deduction") when calculating its
aggregate Net Sales during each Royalty Period under
this Licence and each of the Other Licenses which
provide for royalty payments. In respect of the first
and last Royalty Period of the duration of this
Agreement the said Aggregate Deduction shall be reduced
in proportion to the extent to which such Royalty
Period falls short of the relevant six month period;
provided, however, this shall in no way offset
Christie's agreement to pay the Minimum Royalty as
provided in subclause 6(c) hereof.
(g) For the purposes of this Agreement the term "Net Sales"
shall mean the ex-works invoice price of Goods shipped
by Christie in an arms-length sale, less actual trade
discounts including standard cash discounts, if any,
not exceeding five percent (5%), and less returns and
the cost of freight, insurance, packaging and any Value
Added or other similar tax and any duty. No deduction
shall be made for other discounts or uncollectable
accounts or for any costs incurred by Christie in the
manufacture, sale or distribution of the Goods.
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<PAGE>
6.2 The said royalties are payable by Christie to Simmons U.S.A
Corporation within sixty (60) days after the end of each six month
period ending on 30th June and 31st December (each such six month
period is referred to as the "Royalty Period") in each year during the
life of this Agreement.
6.3 (a) The said royalties are payable by Christie from London, England
and are to be transferred by Christie in U.S. dollars for the
credit of Simmons U.S.A. Corporation's account number 8800291992
at Trust Company Bank, Atlanta, Georgia, U.S.A.
(b) Simultaneously with transferring each payment, Christie shall
telex Simmons U.S.A. Corporation details of the amount in U.S.
dollars sent and the date of sending.
(c) Simmons U.S.A. Corporation may by notice in writing to Christie
vary the place and manner of payment and may require payments to
be made on behalf of Christie by any one of Christie's subsidiary
companies which shall be able to do so.
6.4 Christie shall pay any taxes, levies and other charges as are required
by English law to be withheld from Simmons and shall submit to Simmons
receipts for the monies so paid or withheld.
6.5 It shall be the responsibility of Christie to make all reasonable
efforts to obtain any necessary government or other official
permission for the transmission of such royalty payments to Simmons.
6.6 If Christie shall be, at the time of any payment due to Simmons,
prevented by the laws and regulations then in force in England from
remitting any amount due to Simmons, Christie shall pay the amount due
to a bank
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<PAGE>
account in England in the name of Simmons U.S.A. corporation and such
payment shall be a full discharge of Christie's obligation to make
payment hereunder.
7. Reports, Records and Access
---------------------------
7.1 Christie shall, within sixty (60) days after the end of each Royalty
Period deliver to Simmons U.S.A Corporation:
(a) a written report stating the aggregate invoice price charged
by Christie in respect of Goods falling within Clauses
6.1(b)(i) and 6.1(b)(ii) above respectively in that Royalty
Period, and
(b) the amount of royalties due and owing under Clause 6 above.
7.2 Christie shall keep full, true and accurate records, vouchers and
books of account containing all particulars which may be necessary for
the purpose of calculating the amounts payable to Simmons U.S.A.
Corporation by way of royalties as aforesaid. Such books and the
supporting data shall be open at all reasonable times and upon
reasonable notice for two (2) years following the end of the Royalty
Period to which they pertain to the inspection of an independent
chartered accountant retained by Simmons U.S.A. Corporation at the
sole option and at the cost of Simmons U.S.A. Corporation for the
purpose of verifying the royalty calculations of Christie, and such
accountant shall be entitled at Simmons U.S.A. Corporation's expense
to take and remove copies of such books and supporting data and
Christie shall on the request by or on behalf of Simmons U.S.A.
Corporation provide full and true information and explanations in
writing of and concerning all matters and questions
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<PAGE>
appearing in or arising in relation to the said accounts. Simmons
U.S.A. Corporation hereby agrees that such information shall be the
confidential property of Christie and that such accountant shall not
disclose the same nor any part thereof save the amount of any error
to any person, firm or company other than in confidence to Simmons
U.S.A. Corporation's professional advisers or unless such disclosure
is required by a court of competent jurisdiction or otherwise
required by law.
7.3 Once annually, within sixty (60) days after the end of the audit in
respect to each of its financial years, Christie shall furnish a
statement setting out the Goods which it has sold during that
preceding financial year together with a calculation of the royalties
due thereon.
8. Other Territories
-----------------
8.1 Save as may specifically be agreed to in the Other Licenses or in
writing between the parties, Christie agrees as follows:
(a) not to manufacture, advertise, or knowingly sell or supply for
export to any market outside the EEC any Goods manufactured in
accordance with any one or more of the patents in the Patent
Portfolio and/or on which any of the Marks is or is to be applied
or used.
(b) not to manufacture any Goods outside the Territory in any country
where the inventions employed in the manufacture of such Goods,
or the Goods themselves so manufactured, are protected in such
country by patents corresponding to the patents in the Patent
Portfolio owned by or registered or applied for in the name of
Simmons or Simmons
- 18 -
<PAGE>
International Ltd. or any entity which has been notified to
Christie as being controlled by or under common control with
Simmons.
(c) not actively to seek customers for the Goods nor to advertise the
Goods nor to establish any branch or distribution depot handling
the Goods outside the Territory in any other member state of the
EEC where the inventions employed in the manufacture of such
Goods, or the Goods themselves so manufactured, are protected in
such member state by patents corresponding to the patents in the
Patent Portfolio owned by or registered or applied for in the
name of Simmons or Simmons International Ltd. or any entity which
has been notified to Christie as being controlled by or under
common control with Simmons.
(d) not to apply or use on the Goods outside the Territory in any
member state of the EEC any Mark being a trade mark which is
owned by or registered or applied for in the name of Simmons or
Simmons International Ltd. or any entity which has been notified
to Christie as being controlled by or under common control with
Simmons in that member state in respect of the Goods on which
such Mark is to be applied or used.
9. Use and Maintenance of the Patents and Marks
--------------------------------------------
9.1 Christie agrees that while the rights granted under this Agreement are
exclusive in the country concerned and subject to being advised
pursuant to clause 9.3 below, it will use its reasonable endeavors in
all circumstances to exploit the Goods covered by the Patent Portfolio
and to use the Marks and the Non-Registered Marks.
- 19 -
<PAGE>
9.2 Christie shall, while the rights granted under this Agreement are
exclusive in the country concerned and subject to being advised
pursuant to clause 9.3 below, for the duration of this Agreement, pay
such application and renewal fees and do such acts and things as may
be necessary to complete the Applications and to maintain and keep on
foot the patents in the Patent Portfolio and the Marks and shall so
far as it is able produce to Simmons the receipt for such application
and renewal fees seven days at the least before the last day for
paying any of them (excluding periods allowing an extension of the
time limit for renewing) and in default shall recognize the right of
Simmons to pay the same and to be credited with the cost thereof.
9.3 Simmons shall procure that Christie be advised in writing of any
applications in respect of the Patent Portfolio and for any renewal
and renewal fees in respect of the Marks. Forthwith upon receipt by
Simmons of such applications Simmons shall at Christie's request and
expense while the rights granted under this Agreement are exclusive,
do all such acts, matters and things as may be reasonably necessary to
complete the Applications and to maintain and keep on foot the Patent
Portfolio and the Marks or any of them.
9.4 Christie and Simmons mutually undertake for the duration of this
Agreement (a) while the rights granted under this Agreement are
exclusive, not to abandon or allow to lapse any Applications, or
Marks, (b) not to amend the specification of any such patent or the
specification accompanying any application for letters patent within
the scope of this Agreement for the duration of this Agreement,
without the consent of the other party but such consent shall not be
unreasonably withheld.
- 20 -
<PAGE>
9.5 Simmons shall in relation to any of the Patent Portfolio or the Marks
in respect of which Christie is paying the application or renewal fees
notify Christie of, and at the expense and direction of Christie while
the rights granted under this Agreement are exclusive, defend, every
proceeding or application in the Patent Office, the Court or elsewhere
for opposition to the grant of or for revocation of the Patent
Portfolio or the cancellation of the Marks or any of them, provided
always that if Christie shall elect not to defend the same Simmons may
do so at its own expense and Christie shall at the request and expense
of Simmons do all such acts, matters and things as Simmons considers
in its absolute discretion to be desirable in connection with such
defense.
9.6 Simmons undertakes that it will at the direction and expense of
Christie apply for registration of the Marks or any of them and use
its reasonable endeavors to prosecute such applications and any
Applications for Improvement Patents in the Territory.
9.7 The Goods distributed or sold by Christie under or in connection with
the Marks and Non-Registered Marks shall be at least generally the
same as the quality of the Subsidiaries' present product line, the
quality of which has been approved by Simmons. Material changes to
the Goods which are likely to result in a substantial decrease in the
quality thereof shall not be made without the prior written approval
of Simmons, which approval will not be withheld unless such decrease
in quality is likely to materially impair the goodwill attached to the
Marks and Non-Registered Marks or any other marks owned by Simmons.
Any such disapproval shall indicate the specific reasons therefor and
shall be made in a reasonable time of Christie's request for such
approval. Such approval shall not be withheld for changes of quality
which are
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<PAGE>
at a level comparable to that maintained by Christie's principal
competitors if the markets in which they may from time to time compete with
Christie.
9.8 All packaging and advertising of the Goods in connection with the
Marks and Non-Registered Marks shall be consistent with the standards
maintained during the two (2) years prior to this Agreement by the
Subsidiaries, Simmons having approved said standards, and/or at a
level comparable to that maintained by Christie's principal
competitors in the markets in which they may from time to time
compete.
9.9 The Marks and Non-Registered Marks may be used by Christie only in
connection with the sale, marketing and distribution of the Goods and
for no other purposes.
9.10 Simmons shall have the right, during the term of this Agreement, to
inspect the portions(s) of the premises of Christie wherein the Goods
are manufactured, work-in-progress, and finished products to be sold
under any of the Marks and Non-Registered Marks within the Territory
during normal business hours and upon reasonable notice solely for the
purpose of assuring that the requirements set forth in paragraphs
9.7., 9.8 and 9.9 are fulfilled.
9.11 Christie shall upon request furnish the Licensor with samples of all
labels on which any of the Marks or Non-Registered Marks are utilized
and any and all promotional materials and advertisements.
9.12 Christie undertakes that it will render all assistance which it may
reasonably re required to render to Simmons in the prosecution of
Applications in the
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<PAGE>
Territory in relation to the Goods at the cost of Simmons. Simmons
will keep Christie informed of the progress of the Applications.
9.13 Christie shall as between the parties hereto be responsible for
observing all relevant laws of the respective countries in which the
Goods are marketed regarding the marking of goods as patented or as
sold under a trade mark duly registered in that country.
9.14 Christie acknowledges that the Marks and the Non-Registered Marks are
the sole property of Simmons, that use thereof by Christie owns no
interest in the Marks and the Non-Registered Marks except its licence
herein and the Other Licences, and that performance of this Agreement
shall in no way create any rights in the Marks and the Non-Registered
Marks in Christie that would survive the termination of this
Agreement.
9.15 Christie shall cooperate with Simmons in maintaining trademark rights
of Simmons by executing such documents prepared at Simmons' expense as
may reasonably be required by Simmons to obtain or maintain new
trademark registrations.
9.16 Christie shall observe, comply with and perform all rules,
restrictions and conditions imposed by statute or regulations on the
use of the Marks and Non-Registered Marks and not by any abuse,
misuse, trafficking device, evasion, act or omission, knowingly
prejudicially affect or endanger Simmons' registrations of or rights
to the Marks.
9.17 Christie shall not have any right except so far as expressly permitted
hereunder and under the Other Licences to use the Marks or the Non-
Registered Marks (or any other trademarks which so nearly resemble any
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<PAGE>
of the Marks or the Non-Registered Marks as to be likely to deceive
or cause confusion) in connection with any goods other than the Goods.
10. Infringement and Defence
------------------------
10.1 Christie and Simmons hereby mutually agree forthwith to give notice in
writing by telex or telecopier to the other of any infringement or
suspected or threatened infringement in the Territory of any patent in
the Patent Portfolio or of any Mark or Non-Registered Mark which shall
at any time come to their knowledge.
10.2 (a) If Simmons shall become aware that any patent in the Patent Portfolio
or any Mark or Non-Registered Mark is being infringed by a
third party, then Simmons shall have the option within thirty (30)
days after receipt of such notice to take measures by suit or other
undertaking to prevent infringement by the said third party of the
said patent and/or Mark and to recover damages for such infringements.
Should Simmons exercise such option, all costs, disbursements and
expense of [illegible] suit or other undertaking shall be borne by
Simmons and Simmons shall have the sole choice in the selection of
legal representation, shall control and be solely responsible for the
conduct of such suit or other undertaking. Any damages recovered
from such suit or other understanding shall be credited to Simmons.
Christie, at its own expense, may be represented in any such suit or
other undertaking commenced by Simmons.
(b) If however, Simmons shall not exercise its option within such thirty
(30) day period, then Christie may upon the giving of notice to
Simmons, at Christie's own expense and in its own name commence a
suit or other undertaking to prevent
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<PAGE>
infringement by the said third party of the said patent and/or Mark
and recover damages for such infringements. All costs, including all
costs, disbursements and expenses of such suit or other undertaking
commenced by Christie shall be borne by Christie and Christie shall
have the sole choice in the selection of legal representation, shall
control and be solely responsible for the conduct of such suit or such
other undertaking. Any damages recovered from such suit or other
undertaking shall be for the credit of Christie. Simmons may, at its
own expense, be represented in any such suit or other undertaking
commenced by Christie.
(c) If in any proceedings brought by one part (the "First Party") under
the provisions of this Clause it is necessary to join the other party
hereto as a nominal party, such other party hereby agrees that it will
permit itself to be joined as a nominal party and will sign all
necessary papers and will fully cooperate with the First Party and
cause its employees and other persons under its control to cooperate
with the First Party in the prosecution of such suits or other
undertaking provided that all costs, claims, damages and expenses of
such other party incurred by or as a result of such joinder shall be
borne by the First Party.
10.3 Simmons and Christie and each of them hereby agree that each shall
cooperate in the prosecution of any suit or undertaking commenced by
the other under sub-clause 10.2 hereof in all respects as the party
bringing such suit or undertaking may reasonably require and at the
expense of that party.
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<PAGE>
11. Third Party Claims
------------------
11.1 If any proceedings are threatened or commenced by a third party
against either Christie or any of its customers or Simmons in any
country of the Territory either on the ground that the Goods sold by
Christie under this Agreement or the Other Licence Agreements infringe
any patent monopoly right or trademark vested in such third party the
party so threatened or sued shall inform the other forthwith upon
becoming aware of such threat or action.
11.2 If Christie or both parties shall decide on good commercial grounds
that such proceedings shall be defended, Christie shall have sole
control of the proceedings and shall bear the whole costs thereof and
shall pay any damages and costs awarded (whether awarded against
Christie or Simmons) in favour of such third party. If Simmons only
shall decide that such proceedings shall be defended and Christie
shall decide in good faith not to defend such proceedings or Simmons
wishes to control the defence thereof, Simmons shall pay its own costs
and expenses and shall pay any damages and costs awarded (whether
against Christie or Simmons) in favour of such third party. If one
party only shall decide that such proceedings shall be defended, the
other to this Agreement shall render to the party so defending all
assistance that it reasonably can at the requesting party's cost if so
requested.
12. Product Liability
-----------------
12.1 Christie agrees to defend, indemnify and hold Simmons harmless from
and against any and all product liability claims of third parties (and
liabilities, judgements, penalties, losses, costs, damages, and
expenses
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<PAGE>
therefrom including reasonable attorneys' fees) arising from
Christie's manufacture, sale or distribution of the Goods.
12.2 Simmons agrees to promptly notify Christie of any product
liability claim asserted against it with respect to Christie's
manufacture, sale or distribution of the Goods. Once Christie has
taken reasonable steps to defend against such claim, and so notified
Simmons, any further expenses incurred by Simmons, including
attorneys' fees, shall be for its own account unless Christie
discontinues taking such reasonable steps.
12.3 Christie shall maintain an amount of product liability insurance as is
customary in the Territory for conducting the business of
manufacturing and selling the Goods. In the event Christie
discontinues any such insurance, it shall give Simmons at least ten
(10) days notice before such insurance lapses or in the event that
any such insurance lapses for any other reason, Christie shall
promptly notify Simmons of such event.
13. Improvement Patents
-------------------
13.1 Simmons hereby agrees to grant to Christie in respect of Improvement
Patents granted to Simmons the like licence as is agreed to be granted
herein under the Existing Patents (at no additional royalty) and to
execute a formal licence or licences therefor substantially as set
forth in the Fourth Schedule hereto.
14. Transmission of Rights
----------------------
14.1 Notwithstanding the other subclauses in this clause 14, Simmons shall
have an unfettered right to assign the right to receive royalties
under this Agreement to any person or entity.
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<PAGE>
14.2 This Agreement and the rights licensed or to be licensed hereunder may
not be Transferred (as hereafter defined) by Simmons except (i) to any
entity under common control with Simmons or (ii) to a third party in
connection with the sale, transfer or other disposition of
substantially all of its business in the Goods and may not be
otherwise dealt in by Simmons.
14.3 This Agreement and the rights licensed or to be licensed hereunder may
not be assigned or in any other manner conveyed or transferred
including without limitation by means of a change of control
(collectively a "Transfer") by Christie except upon written notice to
Simmons (i) to any entity controlled by or under common control with
Christie or (ii) to a third party in connecting with the sale,
transfer or other disposition of Christie, Compagnie Continentale
Simmons S.A. ("Compagnie") and/or Sleepeezee Limited ("Sleepeezee")
together with substantially all of its respective business and assets
or substantially all of the business and assets of Christie, Compagnie
and/or Sleepeezee as carried on as of the date hereof; provided that
such third party is not a Simmons' competitor in the bedding industry
in the markets in which Simmons competes in North America. Prior to
any such Transfer, Christie shall obtain the written consent of any
such third party to assume all the obligations of Christie under this
Agreement.
14.4 If either party shall Transfer the benefit of this entire Agreement to
a third party (other than Simmons' right to receive the royalty
payments hereunder), that party shall agree with the other that it
will at the request of that other forthwith enter into a new agreement
with such new party which agreement shall be co-terminous with this
Agreement and otherwise upon the terms of this Agreement and will
release that other
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<PAGE>
from all obligations and liabilities hereunder in respect of anything
arising after the date of such Transfer.
14.5 Each party agrees that if the other shall deal with the rights granted
to it hereunder such party will do all such acts, matters and things,
including the execution of any document, including in particular and
without prejudice to the generality of the foregoing, any licence or
Registered User Agreement as may reasonably be necessary to give
effect to the same. The provisions of this sub-clause shall survive
termination of this Agreement.
15. Duration.
--------
Other than a termination of this Agreement pursuant to clause 16, this
Agreement shall be co-terminus with the Technology Agreement. On
termination of this Agreement (other than a termination pursuant to
clause 16), Simmons shall forthwith grant to Christie exclusive
licence on the same terms and conditions as this Agreement insofar as
applicable of all the rights to which Christie is entitled hereunder or
under the Technology Agreement for the life of the relevant rights.
16. Termination
-----------
Either party shall have the right to terminate this Agreement and the
licences hereunder forthwith by notice in writing to the other upon the
happening of any of the following events:
(i) if that other fails to perform or observe any of the terms
hereof or of any of the Other Licenses on that other's part
to be performed
- 29 -
<PAGE>
and observed and fails to remedy such breach within 90 days
of a notice from the first party to remedy the same.
(ii) If Christie has a receiver appointed of the whole or any
substantial part of its assets, or if any order is made or a
resolution is passed for the winding up of Christie (except
where such winding up is for the purposes of amalgamation or
reconstruction such that the company resulting (if a
different legal entity) shall effectively agree to be bound
by or assume the obligations of this Agreement and such
company is one to which Simmons cannot reasonably object).
(iii) Simmons shall have the right to terminate this Agreement and
any Licences granted hereunder forthwith by notice in
writing to Christie if Christie, its business or undertaking
shall compete with Simmons in the bedding industry in the
markets in which Simmons competes in North America.
17. Effect of Termination
---------------------
17.1 Any termination of this Agreement shall be without prejudice to the
rights of either party against the other which may have accrued up to
the date of such termination and shall (subject as hereinafter
provided) be without prejudice to the right of Christie for a period
of six months following the date of termination to dispose of stocks
of the Goods within the Territory whether assembled or in course of
assembly at the date of termination.
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<PAGE>
17.2 Where this Agreement terminates under any of the provisions of clause
16 hereof all relevant licences shall on expiry of the notice of
termination themselves terminate and Christie shall not thereafter be
concerned in any of the Goods which would infringe any of the Patent
Portfolio or the Marks which shall not then be licensed hereunder in
the Territory, and Christie hereby specifically agrees that it shall
not use any of the Non-Patented Technology and Non-Registered Marks
in the Territory, whether by way of manufacture, use, exercise or
vending or otherwise.
18. Sales to International Hotel Chains in Europe
---------------------------------------------
(a) Simmons hereby agrees not to solicit any business relating to the
Goods in the Territory during the term of this Agreement.
(b) Where inquiries or orders for Goods for delivery in the Territory
are received by Simmons, Simmons will use its reasonable
endeavors to persuade the potential buyer to place the contract
with Christie or a permitted Licencee except for orders in
subclause (c) below.
(c) Where inquiries or orders are for Goods containing pocketed coil
mattresses assembled under the Technology (as defined in the
Existing Licenses) for supply to West Germany, Austria and Spain
(other than hotel groups referred to in clause 6.1(d) hereof),
the parties hereby specifically agree that Simmons may refer such
inquiries or orders to its licensees under the Existing
Licenses.
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<PAGE>
(d) Where Christie makes sales of Goods either as a result of
direct approach from a potential buyer or an inquiry
referred from Simmons, such sales shall be royalty bearing
to the extent provided herein.
(e) If Christie's sales efforts generate orders for Goods which
Simmons manufactures outside the Territory or Simmons fails
to persuade any buyer referred to in subclause (b) above to
buy from Christie or a permitted sublicensee of Christie
hereunder (other than those specified in subclause (c)
above) then Simmons will pay Christie a five percent (5%)
commission on the Net Sales (as defined herein) if Simmons
accepts such orders.
19. Notices
-------
(1) All notices and other communications to be sent by either party
to the other shall be in writing and shall be sent to the other
party at the address for that party set out below, or such other
address (if any) as that party may have notified in writing to
the party serving the notice as its address for service
hereunder.
(2) Notice may be given by air mail letter or by telex, telemessage,
fax or cable confirmed by air mail letter, and each letter
containing or confirming notice will be sent by registered air
mail addressed to the other party at the address for service and
will be deemed to have been received on the earlier of the tenth
(10) day (not including Sundays or public holidays) after
dispatch of the notice or the date of receipt of confirmation
of delivery of such notice:
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<PAGE>
To Simmons:
Simmons USA Corporation Inc
6 Executive Park Drive
Atlanta, Georgia 30329, USA
Attention: Mr. Robert A. Magnusson
with copy to:
Messrs. Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
Attention: Mr. William Morton
To Christie:
Christie-Tyler plc
Brynmenyn
Bridgend
Mid Glamorgan CF32 9LN
Wales
Attention: Mr. Kevin O'Sullivan
with copy to:
Messrs. Herbert Smith
Watling House
35 Cannon Street
London EC4M 5SD
Attention: Mrs. Margaret Mountford
20. Jurisdiction and Choice of Law
------------------------------
This Agreement shall be governed by English law in every particular
including formation and shall be deemed to have been made in England and be
subject to the non-exclusive jurisdiction of the English courts.
21. Severance and Notification
--------------------------
21.1 This Agreement shall be construed in a manner to avoid violation of,
or invalidity under, any applicable law, including the Treaty of Rome
and EEC Regulations. Should any provision of this Agreement
nevertheless be or become invalid, illegal or unenforceable under any
- 33 -
<PAGE>
applicable law, then subject to subclause 2 of this clause the other
provisions of this Agreement shall not be affected and, to the extent
permissible, the parties will negotiate and agree to a lawful
alternative which in practical terms secures the same commercial
result as the invalid, illegal or unenforceable provision.
21.2 The parties have agreed at their own expense to notify this Agreement
to the Commission of the EEC pursuant to Articles 2 and 4 of Council
Regulation 17/62 and subject to clause 21.1 herein hereby agree to
renegotiate in good faith the commercial terms of this Agreement in
the light of all such modifications as may be required by the
Commission of the EEC as conditions precedent either to the granting
of a negative clearance or to the application of Article 85(3) of the
Treaty of Rome to this Agreement.
22. Joint Obligations of Simmons.
----------------------------
Simmons U.S.A. Corporation, Simmons Company and Info Establishment hereby
agree that the liabilities and obligations of Simmons under this Agreement
shall be construed as liabilities and obligations of them jointly, each of
them singly and any two or more of them together.
- 34 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date
first above written.
SIMMONS U.S.A. CORPORATION
BY: /s/
-----------------------------
Vice President
SIMMONS COMPANY
BY: /s/ Robert A. Magnusson
-----------------------------
Robert A. Magnusson
President
INFO ESTABLISHMENT
BY: /s/
-----------------------------
Vice President
CHRISTIE-TYLER plc
BY: /s/
-----------------------------
<PAGE>
THE SECOND SCHEDULE
-------------------
("The Marks")
-------------
AUSTRIA
- -------
Registration Expiration
Number Date
------------ ----------
Beautyrest 376582 10/02/90
Beautyrest 77705 03/26/94
Hide-A-Bed 77464 05/31/94
S with House Design 72383 09/01/92
Simmons 77706 04/10/94
SPAIN
- -----
Registration Expiration
Number Date
------------ ----------
Beautyrest 254465 07/02/92
Beautyrest 260809 02/10/93
Beautyrest 376582 10/02/90
Simmons 76184 10/11/89
Simmons 250916 07/14/93
Hida-A-Bed 374849 12/02/90
S with Design 354862 01/21/89
<PAGE>
WEST GERMANY
- ------------
Registration Expiration
Number Date
------------ ----------
Beautyrest 376583 10/02/90
Beautyrest 720255 02/16/96
Hide-A-Bed 374849 12/02/90
S with Design 354862 01/21/90
Simmons 1084209 08/14/95
Contour-Flex AP 441778/20
Hide-A-Bed 822376 04/22/95
House of Simmons 1092423 03/01/95
S & House Design 903726 03/27/93
<PAGE>
THE FIRST SCHEDULE
------------------
PART 1
("The Patents")
SPAIN
- -----
Number Date Filed
----------
Patent
------
Method and Apparatus for
Manufacturing Inner Spring
Construction 543688 07/01/86
Inner Spring Construction 541116 06/16/86
WEST GERMANY
- ------------
Apparatus for Making Assemblies
of Pocketed Springs 0060146 01/02/86
Inner Spring Construction 0154076 10/09/84
<PAGE>
PART 2
("The Applications")
SPAIN
- -----
Number Date Filed
----------
Patent
------
Inner Spring Construction 551378 01/29/86
WEST GERMANY
- ------------
Number Date Filed
----------
Patent
------
Method and Apparatus for
Manufacturing Inner
Spring Constructions 85301642 03/08/85
Ultrasonic Separation
Apparatus 84303338 05/17/84
<PAGE>
THE THIRD SCHEDULE
------------------
PART 1
("The Technology")
The Technology consists of the technology described in the following patent
applications and patents without regard to the country in which such patent
applications and patents were filed:
Patent Country Date
Description of Technology Number of Filing Filed
------------------------- -------- --------- -----
Ultrasonic Separation Apparatus 0144114 United Kingdom 05/17/84
Method and Apparatus for
Manufacturing Inner
Spring Constructions 0155158 United Kingdom 10/09/84
Inner Spring Construction 0154076 United Kingdom 10/09/84
Ultrasonic Pocketing Machine 2389573 France 11/11/83
Pocketed Spring Assembly 8005062 United Kingdom 04/20/82
_______________
*Denotes patent application number.
PART II
("The Non-Registered Marks")
The marks consist of the following: *
____________________________
* See attached sheets.
<PAGE>
THIS IS A LISTING OF "THE MARKS"
REFERRED TO IN PART II OF THE THIRD SCHEDULE
BEAUTYREST
MAXIPEDIC
HIDE-A-BED
CONTOUR-FLEX
SIMMONS [LOGO]
[LOGO] [LOGO]
SIMMONS
<PAGE>
THE FOURTH SCHEDULE
-------------------
(Clause 2.2)
("The Formal Patent Licence"
BY THIS LICENCE,________________________________________________________
(hereinafter called the "Licensor") of _______________________________
HEREBY GRANT to of
----------------------------------------------------
- ---------------------------------------------------------------- (hereinafter
called "the Licensee") in respect of each of the following letters patent, of
which we are Proprietors, that is to say Nos. _________ (hereinafter called "the
Patents").
WITNESSETH that the Licensor hereby grants to the Licensee a non-exclusive
license in respect of the Patents upon the terms and conditions of an Agreement
dated ______ April 1987 and made between the parties hereto.
Signed by
on behalf of
_________________________
Authorized Signatory
<PAGE>
THE FIFTH SCHEDULE
------------------
LICENCE AGREEMENT
-----------------
Dated this _______day of ______________1987.
Parties:
_______________________________________________________________________, a
company incorporated in the ____________________________________, whose
principal place of business is situate at
_________________________________________________________________, (the
"Licensor") (1) and __________________________________, a company incorporated
in __________, whose registered office is situate at____________________________
_______, (the "Licensee") (2).
1. Definitions The "Marks" are the trade marks registered at
the Registry as follows:
Trademark Number Class Registration Date
--------- ------ ----- -----------------
2. The Licensor hereby grants to the Licensee a non-exclusive licence in
respect of the Marks upon the terms and conditions of an Agreement dated
______ April 1987 and made between the parties hereto.
Signed by
on behalf of
_______________________________
Authorized Signatory
Signed by
on behalf of
_______________________________
Authorized Signatory
<PAGE>
THE FIFTH SCHEDULE
------------------
LICENCE AGREEMENT
-----------------
Dated this _______day of ______________1987.
Parties:
_______________________________________________________________________, a
company incorporated in the ____________________________________, whose
principal place of business is situate at
_________________________________________________________________, (the
"Licensor") (1) and __________________________________, a company incorporated
in _________________, whose registered office is situate at ____________________
_______________, (the "Licensee") (2).
1. Definitions The "Marks" are the trade marks registered at
the Registry as follows:
Trademark Number Class Registration Date
--------- ------ ----- -----------------
2. The Licensor hereby grants to the Licensee a non-exclusive licence in
respect of the Marks upon the terms and conditions of an Agreement dated
______ April 1987 and made between the parties hereto.
Signed by
on behalf of
_______________________________
Authorized Signatory
Signed by
on behalf of
_______________________________
Authorized Signatory
<PAGE>
DATED AS OF THE 9TH OF APRIL, 1987
----------------------------------------------------------------------------
SIMMONS U.S.A. CORPORATION,
SIMMONS COMPANY
AND
CHRISTIE-TYLER plc
----------------------------------------------------------------------------
INDUSTRIAL PROPERTY
LICENCE AGREEMENT
Bahrain, Dubai, Israel, Jordan, Kuwait
Qatar, Saudi Arabia, Sudan and the
United Arab Emirates
Area 4
----------------------------------------------------------------------------
Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
<PAGE>
AREA 4
------
INDEX TO CLAUSES:
- -----------------
Number Page
------ ----
Definitions 1 3
Licence Under Patents 2 5
License Under Marks 3 6
License for Intellectual Property Rights 4 7
Exclusivity 5 8
Royalties and Payments 6 9
Reports, Records and Access 7 12
Other Territories 8 14
Use and Maintenance of the Patents and Marks 9 15
Infringement and Defence 10 19
Third Party Claims 11 21
Product Liability 12 22
Improvement Patents 13 22
Transmission of Rights 14 23
Termination 15 24
Effect of Termination 16 26
Notices 17 26
Jurisdiction and Choice of Law 18 27
Joint Obligations of Simmons 19 28
The Patents and Applications Schedule 1
The Marks Schedule 2
The Technology and
the Non-Registered Marks Schedule 3
The Formal Patent Licence Schedule 4
The Registered User Agreement Schedule 5
<PAGE>
THIS AGREEMENT is made as of the 9th April, 1987
BETWEEN:
(1) SIMMONS U.S.A. CORPORATION and SIMMONS COMPANY, each a company, organized
and existing under the laws of the State of Delaware in the United States
of America and having its principal place of business at Six Executive Park
Drive, Atlanta, Georgia 30329 (collectively referred to as "Simmons"); and
(2) CHRISTIE-TYLER plc, a company incorporated in England and having its
registered office situate at Brynmenyn, Bridgend, Mid Glamorgan CF3 29LN
("Christie");
RECITALS:
(A) Simmons and others have entered into an Agreement with Christie for the
acquisition by Christie of Sleepeezee Limited, Compagnie Continentale
Simmons S.A. and Compagnia Italiana Simmons SpA (respectively, "the
Acquisition Agreement" and "the Subsidiaries").
(B) Simmons is the beneficial owner of the Letters Patent short particulars of
which are set forth in Part I of the First Schedule hereto ("the Patents")
and is the Applicant for Letters Patent short particulars of which are set
out in Part II of the First Schedule hereto and any applications
corresponding thereto anywhere in the Territory ("the Applications") all
relating to bedding products and/or their manufacture.
(C) Simmons is the beneficial owner of the trademarks short particulars of
which are set out in the Second Schedule hereto and the goodwill associated
therewith ("the Marks").
-1-
<PAGE>
(D) In the premises the parties hereto have agreed on the grant of licence
rights in respect of the said Patents and Applications for Patents and
the Marks in favor of Christie on the terms herein set forth.
(E) In the premises the parties hereto have agreed on the grant of certain
rights in respect of the technology set forth in Part I of the Third
Schedule hereto together with all the goodwill and the like rights
associated therewith in the Territory (the "Non-Patented Technology") and
the trademarks set forth in Part II of the Third Schedule hereto (the
"Non-Registered Marks") (collectively, the "Intellectual Property Rights").
(F) Contemporaneously herewith, the parties have executed four additional
licence agreements in respect of corresponding patents, patent applications
and trademarks in the following territories: (i) Eire, France, Italy,
Monaco, the United Kingdom and the Channel Islands ("Area 1"); (ii)
Andorra, Belgium, Denmark, Finland, Gibraltar, Greece, Iceland,
Liechtenstein, Luxembourg, Netherlands, Norway, Portugal, Sweden,
Switzerland and Turkey ("Area 2"); (iii) Austria, Spain and West Germany
("Area 3"); and (iv) Congo, Gabon, Ivory Coast, Senegal, Sierra Leone,
Zaire and the islands located in the Caribbean ("Area 5"). (All such
additional license agreements are hereafter referred to as the "Other
License Agreements.")
(G) Contemporaneously herewith, Simmons U.S.A. Corporation and Christie
executed a Technology Agreement which provides for the exchange of various
ideas and provides assistance to Christie in connection with the use and
exploitation of the patents in the Patent Portfolio and the Non-Patented
Technology (the "Technology Agreement").
-2-
<PAGE>
IT IS AGREED AS follows:
INTERPRETATION
--------------
1. Definitions
-----------
1.1 In this Agreement and in the Schedules:
(a) the following definitions apply:
"Existing Patents" shall mean the Patents
and any patents granted
in accordance with the
Applications.
"Improvement Invention" shall mean an invention
development modification
or improvement relating
to the Goods made during
the life of this Agreement.
"Improvement Patent" shall mean letters patent
and other protection
granted in the Territory
in respect of any
Improvement Invention and
any application therefor.
"Territory" shall mean Bahrain, Dubai,
Israel, Jordan, Kuwait,
Qatar, Saudi Arabia, Sudan and
the United Arab Emirates.
-3-
<PAGE>
"Patent Portfolio" shall mean the Existing
Patents and any Improvement
Patents in the Territory.
"Goods" means beds, mattresses,
box springs, upholstered
and padded furniture,
convertibles, water beds,
bedroom furniture and all
materials and all
component parts thereof,
and any and all
developments, modifica-
tions and improvements
thereof.
"Process" means any and all
processes and methods of
working which have been
or may hereafter be
developed or acquired by
Simmons and relating to
or in respect of or for
the manufacture of the
Goods and shall include
any improvements thereto
developed after the date
of this Agreement.
(b) unless the context otherwise requires:
(i) words in the singular include the plural and vice versa;
(ii) words importing any gender include all genders;
-4-
<PAGE>
(iii) a reference to a person includes a reference
to a body corporate and to an unincorporated
body of persons; and
(iv) all dates in the Schedules hereto are in U.S. format.
(c) a reference to a clause, sub-clause or Schedule
(or any part thereof) is to a clause, sub-clause
or Schedule (or any part thereof) (as the case may
be) of or to this Agreement.
(d) the headings are for convenience only and do not affect
interpretation.
1.2 The designations adopted in the recitals and introductory statements
preceding this clause apply throughout this Agreement.
2. Licence Under Patents
---------------------
2.1 Simmons hereby agrees to grant to Christie forthwith a nonexclusive
right, license and privilege to use the Existing Patents in connection
with the use, sale, distribution, advertising and promotion of the
Goods in the Territory for the full life of the relevant rights.
2.2 Simmons shall execute a licence or several licences as the case may
require in such form as may be appropriate in respect of the Existing
Patents, such licence or licences to be substantially in the form set
forth in the Fourth Schedule hereto or so near thereto as may be
appropriate. It is agreed that this Agreement shall not itself be
registered unless required by a court of competent jurisdiction or
otherwise required by law. Any such formal license shall operate
subject to the terms of this Agreement, and the terms of the said
formal licence or licences shall be deemed to be
-5-
<PAGE>
incorporated into this Agreement. Simmons shall in addition do all
such acts, matters or things as may be necessary to grant the
licences required to be given hereunder and to procure the
registration of the same at the relevant Patent Offices in the
Territory.
2.3 Simmons does not warrant that any letters patent of the Patent
Portfolio is or will be valid or that the Non-Patented Technology can
be the subject of a valid patent or that dealing in the Goods or the
use of the Goods is not an infringement of the rights of third parties
but is not aware of any such third party rights which may be infringed
by such dealing or of any claim of such infringement. The parties
hereby acknowledge and agree for the purpose of this Agreement that
the term "aware" in the preceding sentence is limited to the knowledge
of Robert A. Magnusson, John P. Peterken and Eugene S. Zimmer (Mr.
Zimmer is associated with the law firm of Jones and Askew in Atlanta,
Georgia) as of the date hereof.
3. License under Marks
-------------------
3.1 Simmons hereby agrees to grant to Christie a nonexclusive right,
licence and privilege to use the Marks in connection with the use,
sale, distribution, advertising and promotion of the Goods in the
Territory.
3.2 Simmons and Christie hereby agree forthwith to do all things
reasonably necessary or desirable for the preservation of the Marks to
effect the recordal respectively of the Licences hereby granted or
agreed to be granted at the relevant Trade Mark Registry in the
Territory in respect of Goods for which the Marks are registered.
To this effect the parties hereby agree that Licences in the form set
out in the Fifth Schedule hereto or so near thereto as may be
appropriate in each case shall be executed contemporaneously herewith
by Simmons and Christie.
<PAGE>
3.3 Simmons does not warrant that any of the Marks are or will be
registered or capable of registration or that dealing in the Goods is
not an infringement of the rights of third parties but is not aware of
any such third party rights which may be infringed by such dealing or
of any claim of such infringement. The parties hereby acknowledge and
agree that for the purposes of this Agreement the term "aware" in the
preceding sentence is limited to the knowledge of Robert A. Magnusson,
John P. Peterken and Eugene S. Zimmer (Mr. Zimmer is associated with
the law firm of Jones and Askew in Atlanta, Georgia) as of the date
hereof.
4. License for Intellectual Property Rights
----------------------------------------
4.1 Simmons grants to Christie a nonexclusive right, license and privilege
to use the Non-Patented Technology in connection with the use,
sale, distribution, advertising and promotion of the Goods in those
countries in the Territory in which there is no patent application,
patent or registration with respect to the Non-Patented Technology
(the "Non-Patented Territory") until such time as a patent application
is filed in the Non-Patented Territory with respect to any portion of
such Non-Patented Technology, in which case the portion of such Non-
Patented Technology which is the subject of such patent application
filed in the Non-Patented Territory shall be considered part of the
Patent Portfolio for purposes of this Agreement and the First Schedule
hereto shall be so amended.
4.2 Simmons grants to Christie a nonexclusive right, license and privilege
to use the aforementioned Non-Registered Marks in those countries in
the Territory in which there is no registration with respect to the
Non-Registered Marks (the "Non-Registered Territory") in connection
with the use, sale, distribution, advertising and promotion of the
Goods in such Non-Registered Territory until such time as a
registration
-7-
<PAGE>
for a Non-Registered Mark is effected in any of such Non-Registered
Territory, in which case such Non-Registered Mark shall be considered
to be a Mark for purposes of this Agreement and the First Schedule
hereto shall be so amended.
4.3 Christie hereby acknowledges and agrees that Simmons shall at all
times during the life of this Agreement be permitted to file patent
applications as the registered proprietor thereof with respect to the
Non-Patented Technology in the Non-Patented Territory and register the
Non-Registered Marks in its own name in the Non-Patented Territory,
provided, however, Christie shall have the right and Simmons shall
cooperate, at the expense of Christie, to file such patent
applications which designate Simmons in its own name at its own cost
with respect to the Non-Patented Technology in the Non-Patented
Territory and register the Non-Registered Marks which registration
designates Simmons as the registered proprietor thereof in the Non-
Registered Territory subject always and in each case to Simmons
granting to Christie a non-exclusive license of the rights under the
relevant application and any patents or registered trademarks which
result from such applications under the terms of this Agreement.
5. Exclusivity
-----------
Simmons covenants that it has not granted and will not grant any licence
and will not itself do or cause or procure to be done anything which
derogates from or conflicts with the rights granted to Christie hereunder.
-8-
<PAGE>
6. Royalties and Payments
----------------------
6.1 (a) From the date of this Agreement, Christie shall pay to
Simmons U.S.A. Corporation royalties in respect of all Goods
sold by Christie during the life of this Agreement.
(b) The said royalties shall be:
(i) in the case of Goods (other than convertible sofas and
slatted bases) the sale of which in the part of the
Territory in which such sale takes place would have
infringed any one of the patents in the Patent
Portfolio were it not for this Licence Agreement, two
percent (2%) of Net Sales save that on the sale of a
mattress together with other Goods royalty shall only
be paid (insofar as that mattress and those other goods
fall within the claims of any of the Patent Portfolio)
on the Net Sales of such mattress; provided,
however, for purposes of this royalty payment only, the
Patent Portfolio shall be deemed to consist of the Non-
Patented Technology within the Non-Patented Territory
and the expiration of such Non-Patented Technology
shall be deemed to be fourteen years from the date
hereof (i.e., as if a valid patent with a life of
fourteen years from the date hereof existed with
respect to all of the Non-Patented Technology in the
Non-Patented Territory);
-9-
<PAGE>
(ii) in respect of Goods (other than convertible sofas and slatted bases)
not covered by sub-clause (i) above and sold under one or more of the
Marks or the Non-Registered Marks, one percent (1%) of Net Sales; and
(iii) in respect of Goods consisting of convertible sofas and slatted base
foundations, nil royalty.
It is hereby agreed that if any of the Goods shall be liable to bear
royalty under one or more of the Other Licences, only a single payment of
royalty shall be due and payable in respect of such Goods and such payment
shall be of the highest amount of royalty due and payable in respect of
such Goods pursuant to each of such Other Licenses and this Agreement.
(c) For the purpose of calculating royalties, Net Sales shall be converted into
pounds sterling and then into U.S. dollars at the rate of exchange
announced by National Westminster Bank plc (or if such rate of exchange is
unavailable at National Westminster Bank plc, at another major institution
of national standing in London, England) as at close of business on the
last day of each Royalty Period (as defined below).
(d) Christie may deduct the sum of 125,000 pounds sterling (the "Aggregate
Deduction") when calculating its aggregate Net Sales during each Royalty
Period under this License and each of the Other Licenses which provide for
royalty payments. In respect of the first
-10-
<PAGE>
and last Royalty Period of the duration of this Agreement the
said Aggregate Deduction shall be reduced in proportion to the
extent to which such Royalty Period falls short of the relevant
six month period.
(e) For the purposes of this Agreement the term "Net Sales" shall
mean the ex-works invoice price of Goods shipped by Christie in
an arms-length sale, less actual trade discounts including
standard cash discounts, if any, not exceeding five percent (5%),
and less returns and the cost of freight, insurance, packaging
and any Value Added or other similar tax and any duty. No
deduction shall be made for other discounts or uncollectable
accounts or for any costs incurred by Christie in the
manufacture, sale or distribution of the Goods.
6.2 The said royalties are payable by Christie to Simmons U.S.A.
Corporation within sixty (60) days after the end of each six
month period ending on 30th June and 31st December (each six
month period is referred to as the "Royalty Period") in each
year during the life of this Agreement.
6.3 (a) The said royalties are payable by Christie from London, England
and are to be transferred by Christie in U.S. dollars for the
credit of Simmons U.S.A. Corporation's account number 8800291992
at Trust Company Bank, Atlanta, Georgia, U.S.A.
-11-
<PAGE>
(b) Simultaneously with transferring each payment, Christie shall
telex Simmons U.S.A. Corporation details of the amount in U.S.
dollars sent and the date of sending.
(c) Simmons U.S.A. Corporation may by notice in writing to
Christie vary the place and manner of payment and may require
payments to be made on behalf of Christie by any one of
Christie's subsidiary companies which shall be able to do so.
6.4 Christie shall pay any taxes, levies and other charges as are required
by English law to be withheld from Simmons and shall submit to Simmons
receipts for the monies so paid or withheld.
6.5 It shall be the responsibility of Christie to make all reasonable
efforts to obtain any necessary government or other official
permission for the transmission of such royalty payments to
Simmons.
6.6 If Christie shall be, at the time of any payment due to Simmons,
prevented by the laws and regulations then in force in England from
remitting any amount due to Simmons, Christie shall pay the amount due
to a bank account in England in the name of Simmons U.S.A. Corporation
and such payment shall be a full discharge of Christie's obligation to
make payment hereunder.
7. Reports, Records and Access
---------------------------
7.1 Christie shall, within sixty (60) days after the end of
each Royalty Period deliver to Simmons U.S.A. Corporation:
-12-
<PAGE>
(a) a written report stating the aggregate invoice price charge by
Christie in respect of Goods falling within Clauses 6.1(b)(i) and
6.1(b)(ii) above respectively, in that Royalty Period, and
(b) the amount of royalties due and owing under Clause 6 above.
7.2 Christie shall keep full, true and accurate records, vouchers and books of
account containing all particulars which may be necessary for the purpose
of calculating the amounts payable to Simmons U.S.A. Corporation by way of
royalties as aforesaid. Such books and the supporting data shall be open
at all reasonable times and upon reasonable notice for two (2) years
following the end of the Royalty Period to which they pertain to the
inspection of an independent chartered accountant retained by Simmons
U.S.A. Corporation at the sole option and at the cost of Simmons U.S.A.
Corporation for the purpose of verifying the royalty calculations of
Christie, and such accountant shall be entitled at Simmons U.S.A.
Corporation's expense to take and remove copies of such books and
supporting data and Christie shall on the request by or on behalf of
Simmons U.S.A. Corporation provide full and true information and
explanations in writing of and concerning all matters and questions
appearing in or arising in relation to the said accounts. Simmons U.S.A.
Corporation hereby agrees that such information shall be the confidential
property of Christie and that such accountant shall not disclose the same
nor any part thereof save the amount of any error to any person, firm or
company other than in confidence to Simmons U.S.A. Corporation's own
professional advisers or unless such disclosure is required by a court of
competent jurisdiction or otherwise required by law.
-13-
<PAGE>
7.3 Once annually, within sixty (60) days after the end of the audit in
respect to each of its financial years, Christie shall furnish a
statement setting out the Goods which it has sold during that
preceding financial year together with a calculation of the royalties
due thereon.
8. Other Territories
-----------------
8.1 Save as may specifically be agreed to in the Other Licenses or in
writing between the parties, Christie agrees as follows:
(a) not to manufacture, advertise, or knowingly sell
or supply for export to any market outside the EEC
any Goods manufactured in accordance with any one
or more of the patents in the Patent Portfolio
and/or on which any of the Marks is or is to be
applied or use.
(b) not to manufacture any Goods within or outside the Territory
in any country where the inventions employed in the manufacture
of such Goods, or the Goods themselves so manufactured, are
protected in such country by patents corresponding to the
patents in the Patent Portfolio owned by or registered or
applied for in the name of Simmons or Simmons International Ltd.
or any entity which has been notified to Christie as being
controlled by or under common control with Simmons.
(c) not actively to seek customers for the Goods nor to
advertise the Goods nor to establish any branch or distribution
depot handling the Goods outside the Territory or in any member
state of the EEC where the inventions employed in the
manufacture of such Goods, or the Goods themselves so
manufactured, are protected in such member state
-14-
<PAGE>
by patents corresponding to the patents in the Patent
Portfolio owned by or registered or applied for in the name
of Simmons or Simmons International Ltd. or any entity
which has been notified to Christie as being controlled by
or under common control with Simmons.
(d) not to apply or use on the Goods outside the Territory or in any
member state of the EEC any Mark being a trade mark which is
owned by or registered or applied for in the name of Simmons or
Simmons International Ltd. or any entity which has been notified
to Christie as being controlled by or under common control
with Simmons in that member state in respect of the Goods on
which such Mark is to be applied or used.
9. Use and Maintenance of the Patents and Marks.
--------------------------------------------
9.1 Simmons shall, for the duration of this Agreement, pay such
application and renewal fees and do such acts and things as may be
necessary to complete the Applications and to maintain and keep on
foot the patents in the Patent Portfolio and the Marks. In the event
Simmons fails to fulfill its obligations in the preceding sentence,
Simmons shall recognize the right of Christie to pay the same and to
be credited with the cost thereof against the royalty payment under
this Agreement.
9.2 Simmons shall procure that Christie be advised in writing of any
applications in respect of the Patent Portfolio and for any renewal
and renewal fees in respect of the Marks. Forthwith upon receipt by
Christie of such applications Christie shall at Simmons' request and
expense do all such acts, matters
-15-
<PAGE>
and things as be reasonably. necessary to complete the Applications and to
maintain and keep on foot the Patent Portfolio and the Marks or any of
them.
9.3 Christie and Simmons mutually undertake for the duration of this Agreement
not to amend the specification of any such patent or the specification
accompanying any application for letters patent within the scope of this
Agreement for the duration of this Agreement, without the consent of the
other party but such consent shall not be unreasonably withheld.
9.4 Simmons shall in relation to any of the Patent Portfolio or the Marks in
respect of which Christie is paying the application or renewal fees notify
Christie of, and at the expense and direction of Christie defend, every
proceeding or application in the Patent Office, the Court or elsewhere for
opposition to the grant of or for revocation of the Patent Portfolio or the
cancellation of the Marks or any of them, provided always that if Christie
shall elect not to defend the same Simmons may do so at its own expense and
Christie shall at the request and expense of Simmons do all such acts,
matters and things as Simmons considers in its absolute discretion to be
desirable in connection with such defence.
9.5 Christie undertakes that it will at the direction and expense of Simmons
apply for registration of the Marks or any of them and use its reasonable
endeavours to prosecute such applications and any applications for
Improvement Patents in the Territory.
9.6 The Goods distributed or sold by Christie under or in connection with the
Marks and Non-Registered Marks shall be at least generally the same as the
quality of the Subsidiaries' present product line, the quality of which has
been approved by Simmons. Material changes
-16-
<PAGE>
to the Goods which are likely to result in a substantial decrease in the
quality thereof shall not be made without the prior written approval of
Simmons, which approval will not be withheld unless such decrease in
quality is likely to materially impair the goodwill attached to the Marks
and Non-Registered Marks or any other marks owned by Simmons. Any such
disapproval shall indicate the specific reasons therefor and shall be made
in a reasonable time of Christie's request for such approval. Such
approval shall not be withheld for changes of quality which are at a level
comparable to that maintained by Christie's principal competitors in the
markets in which they may from time to time compete with Christie.
9.7 All packaging and advertising of the Goods in connection with the Marks and
Non-Registered Marks shall be consistent with the standards maintained
during the two (2) years prior to this Agreement by the Subsidiaries,
Simmons having approved said standards, and/or at a level comparable to
that maintained by Christie's principal competitors in the markets in which
they may from time to time compete.
9.8 The Marks and Non-Registered Marks may be used by Christie only in
connection with the sale, marketing and distribution of the Goods and for
no other purposes.
9.9 Simmons shall have the right, during the term of this Agreement, to inspect
the portion(s) of the premises of Christie wherein the Goods are
manufactured, work-in-progress, and finished products to be sold under any
of the Marks and Non-Registered Marks outside the Territory for sale within
the Territory, during normal business hours and upon reasonable notice
solely for the purpose of assuring that the requirements set forth in
paragraphs 9.6, 9.7 and 9.8 are fulfilled.
-17-
<PAGE>
9.10 Christie shall upon request furnish the Licensor with samples of all labels
on which any of the Marks or Non-Registered Marks are utilized and any and
all promotional materials and advertisements.
9.11 Christie undertakes that it will render all assistance which it may
reasonably be required to render to Simmons in the prosecution of
Applications in the Territory in relation to the Goods at the cost of
Simmons. Simmons will keep Christie informed of the progress of the
Applications.
9.12 Christie shall as between the parties hereto be responsible for observing
all relevant laws of the respective countries in which the Goods are
marketed regarding the marking of goods as patented or as sold under a
trade mark duly registered in that country.
9.13 Christie acknowledges that the Marks and the Non-Registered Marks are the
sole property of Simmons that use thereof by Christie shall inure to the
benefit of Simmons, that Christie owns no interest in the Marks and the
Non-Registered Marks except its licence herein and the Other Licences, and
that performance of this Agreement shall in no way create any rights in the
Marks and the Non-Registered Marks in Christie that would survive the
termination of this Agreement.
9.14 Christie shall cooperate with Simmons in maintaining trademark rights of
Simmons by executing such documents prepared at Simmons' expense as may
reasonably be required by Simmons to obtain or maintain new trademark
registrations.
9.15 Christie shall observe, comply with and perform all rules, restrictions and
conditions imposed by statute or regulations on the use of the Marks and
Non-Registered Marks and not by any abuse, misuse,
-18-
<PAGE>
trafficking device, evasion, act or omission, knowingly
prejudicially affect or endanger Simmons' registrations of or rights
to the Marks.
9.16 Christie shall not have any right except so far as expressly permitted
hereunder and under the Other Licences to use the Marks or the Non-
Registered Marks (or any other trademarks which so nearly resemble
any of the Marks or the Non-Registered Marks as to be likely to
deceive or cause confusion) in connection with any goods other than
the Goods.
9.17 Notwithstanding the other subclauses of this clause 9, such subclauses
of this clause 9 shall not in any way create any obligation of Simmons
to take any action with respect to the Non-Registered Marks and the
Non-Patented Patents.
10. Infringement and Defence
------------------------
10.1 Christie and Simmons hereby mutually agree forthwith to give notice in
writing by telex or telecopier to the other of any infringement or
suspected or threatened infringement in the Territory of any patent in
the Patent Portfolio or of any Mark or Non-Registered Mark which shall
at any time come to their knowledge.
10.2 (a) If Simmons shall become aware that any patent in the Patent
Portfolio or any Mark or Non-Registered Mark is being infringed
by a third party, then Simmons shall have the option within thirty
(30) days after receipt of such notice to take measures by suit
or other undertaking to prevent infringement by the said third
party of the said patent and/or Mark and to recover damages for
such infringements. Should Simmons exercise such option, all
costs, disbursements and expense of such suit or other
undertaking shall be borne by
-19-
<PAGE>
Simmons and Simmons shall have the sole choice in the selection of legal
representation, shall control and be solely responsible for the conduct of
such suit or other undertaking. Any damages recovered from such suit or
other understanding shall be credited to Simmons. Christie, at its own
expense, may be represented in any such suit or other undertaking commenced
by Simmons.
(b) If, however, Simmons shall not exercise its option within such thirty (30)
day period, then Christie may, upon the giving of notice to Simmons, at
Christie's own expense and in its own name commence a suit or other
undertaking to prevent infringement by the said third party of the said
patent and/or Mark and recover damages for such infringements. All
costs, including all costs, disbursements and expenses of such suit or
other undertaking commenced by Christie shall be borne by Christie and
Christie shall have the sole choice in the selection of legal
representation, shall control and be solely responsible for the conduct of
such suit or such other undertaking. Any damages recovered from such suit
or other undertaking shall be for the credit of Christie. Simmons may, at
its own expense, be represented in any such suit or other undertaking
commenced by Christie.
(c) If in any proceedings brought by one party (the "First Party") under the
provisions of this Clause it is necessary to join the other party hereto as
a nominal party, such other party hereby agrees that it will permit itself
to be joined as a nominal party and will sign all necessary papers and will
fully cooperate with the First Party and cause its employees and other
persons under its control to cooperate with the First Party in the
-20-
<PAGE>
prosecution of such suits or other undertaking provided that all
costs, claims, damages and expenses of such other party incurred
by or as a result of such joinder shall be borne by the First
Party.
10.3 Simmons and Christie and each of them hereby agree that each shall
cooperate in the prosecution of any suit or undertaking commenced by
the other under sub-clause 10.2 hereof in all respects as the party
bringing such suit or undertaking may reasonably require and at the
expense of that party.
11. Third Party Claims
------------------
11.1 If any proceedings are threatened or commenced by a third party
against either Christie or any of its customers or Simmons in any
country of the Territory either on the ground that the Goods sold by
Christie under this Agreement or the other Licence Agreements infringe
any patent monopoly right or trademark vested in such third party the
party so threatened or sued shall inform the other forthwith upon
becoming aware of such threat or action.
11.2 If Christie or both parties shall decide on good commercial grounds
that such proceedings shall be defended, Christie shall have sole
control of such proceedings and shall bear the whole costs thereof and
shall pay any damages and costs awarded (whether awarded against
Christie or Simmons) in favour of such third party. If Simmons only
shall decide that such proceedings shall be defended and Christie
shall decide in good faith not to defend such proceedings or Simmons
Wishes to control the defence thereof, Simmons shall pay its own costs
and expenses and shall pay any damages and costs awarded (whether
against Christie or Simmons) in favour of such third party. If one
party
-21-
<PAGE>
only shall decide that such proceedings shall be defended, the other
to this Agreement shall render to the party so defending all
assistance that it reasonably can at the requesting party's cost if so
requested.
12. Product Liability
-----------------
12.1 Christie agrees to defend, indemnify and hold Simmons harmless from
and against any and all product liability claims of third parties (and
liabilities, judgments, penalties, losses, costs, damages, and
expenses therefrom including reasonable attorneys' fees) arising from
Christie's sale or distribution of the Goods.
12.2 Simmons agrees to promptly notify Christie of any product liability
claim asserted against it with respect to Christie's sale or
distribution of the Goods. Once Christie has taken reasonable steps
to defend against such claim, and so notified Simmons, any further
expenses incurred by Simmons, including attorneys' fees, shall be
for its own account unless Christie discontinues taking such
reasonable steps.
12.3 Christie shall maintain an amount of product liability insurance as is
customary in the Territory for conducting the business of selling the
Goods. In the event Christie discontinues any such insurance, it shall
give Simmons at least ten (10) days notice before such insurance
lapses or in the event that any such insurance lapses for any other
reason, Christie shall promptly notify Simmons of such event.
13. Improvement Patents
-------------------
13.1 Simmons hereby agrees to grant to Christie in respect of Improvement
Patents granted to Simmons the like licence as is agreed to be granted
herein under the
-22-
<PAGE>
Existing Patents (at no additional royalty) and to execute a formal
licence or licences therefor substantially as set forth in the Third
Schedule hereto.
14. Transmission of Rights
----------------------
14.1 Notwithstanding the other subclauses in this Clause 14, Simmons shall
have an unfettered right to assign the right to receive royalties
under this Agreement to any person or entity.
14.2 This Agreement and the rights licensed or to be licensed hereunder may
not be Transferred (as hereafter defined) by Simmons except (i) to any
entity under common control with Simmons or (ii) to a third party in
connection with the sale, transfer or other disposition of
substantially all of its business in the Goods and may not be
otherwise dealt in by Simmons.
14.3 This Agreement and the rights licensed or to be licensed hereunder may
not be assigned or in any other manner conveyed or transferred
including without limitation by means of a change of control
(collectively a "Transfer") by Christie except upon written notice to
Simmons (i) to any entity controlled by or under common control with
Christie or (ii) to a third party in connection with the sale,
transfer or other disposition of Christie, Compagnie Continentale
Simmons S.A. ("Compagnie") and/or Sleepeezee Limited ("Sleepeezee")
together with all of its respective business and assets or
substantially all of the business and assets of Christie, Compagnie
and/or Sleepeezee as carried on as of the date hereof; provided that
such third party is not a Simmons' competitor in the bedding industry
in the markets in which Simmons competes in North America. Prior to
any
-23-
<PAGE>
such Transfer, Christie shall obtain the written consent of any such
third party to assume all the obligations of Christie under this
Agreement.
14.4 If either party shall Transfer the benefit of this entire Agreement to
a third party (other than Simmons' right to receive the royalty
payments hereunder), that party shall agree with the other that it
will at the request of that other forthwith enter into a new agreement
with such new party which agreement shall be co-terminous with this
Agreement and otherwise upon the terms of this Agreement and will
release that other from all obligations and liabilities hereunder
in respect of anything arising after the date of such Transfer.
14.5 Each party agrees that if the other shall deal with the rights granted
to it hereunder such party will do all such acts, matters and things,
including the execution of any document, including in particular and
without prejudice to the generality of the foregoing, any licence or
Registered User Agreement as may reasonably be necessary to give
effect to the same. The provisions of this sub-clause shall
survive termination of this Agreement.
15. Termination
-----------
Either party shall have the right to terminate this Agreement and the
licences hereunder forthwith by notice in writing to the other upon the
happening of any of the following events:
(i) if that other fails to perform or observe any of the terms
hereof or of any of the Other Licenses on that other's part
to be performed
-24-
<PAGE>
and observed and fails to remedy such breach within 90 days of a
notice from the first party to remedy the same.
(ii) If Christie has a receiver appointed of the whole or any substantial
part of its assets, or if any order is made or a resolution is passed
for the winding up of Christie (except where such winding up is for the
purposes of amalgamation or reconstruction such that the company
resulting (if a different legal entity) shall effectively agree to be
bound by or assume the obligations of this Agreement and such company is
one to which Simmons cannot reasonably object).
(iii) Simmons shall have the right to terminate this Agreement and any
Licences granted hereunder forthwith by notice in writing to Christie
if Christie, its business or undertaking shall compete with Simmons in
the bedding industry in the markets in which Simmons competes in North
America.
(iv) Either Party shall have the right to terminate this Agreement and the
Licences granted hereunder in any one or more of the countries of the
Territory by not less than 90 days' notice given to the other, such notice
specifying the country or countries in respect of which termination shall
take place provided that any such termination shall not prejudice
Christie's or its permitted sub licensees' entitlement to carry out any
contractual obligations to third parties for a period of one year
following the effective date of termination of this Agreement if such
-25-
<PAGE>
obligations were incurred by Christie prior to receipt by
Christie of the notice of termination.
16. Effect of Termination
---------------------
16.1 Any termination of this Agreement shall be without prejudice to
the rights of either party against the other which may have
accrued up to the date of such termination and shall (subject as
hereinafter provided) be without prejudice to the right of
Christie for a period of six months following the date of
termination to dispose of stocks of the Goods within the
Territory.
16.2 Where this Agreement terminates under any of the provisions of
clause 15 hereof all relevant licences shall on expiry of the
notice of termination themselves terminate and Christie shall not
thereafter be concerned in any of the Goods which would infringe
any of the Patent Portfolio or the Marks which shall not then be
licensed hereunder in the Territory, and Christie hereby
specifically agrees that it shall not use any of the Non-Patented
Technology and Non-Registered Marks in the Territory, whether by
way of manufacture, use, exercise or vending or otherwise.
17. Notices
-------
(1) All notices and other communications to be sent by either party
to the other shall be in writing and shall be sent to the other
party at the address for that party set out below, or such other
address (if any) as that party may have notified in writing to
the party serving the notice as its address for service
hereunder.
-26-
<PAGE>
(2) Notice may be given by air mail letter or by telex, telemessage, fax or
cable confirmed by air mail letter, and each letter containing or
confirming notice will be sent by registered air mail addressed to the
other party at the address for service and will be deemed to have been
received on the earlier of the tenth (10) day (not including Sundays or
public holidays) after dispatch of the notice or the date of receipt of
confirmation of delivery of such notice:
To Simmons:
Simmons USA Corporation Inc
6 Executive Park Drive
Atlanta, Georgia 30329, USA
Attention: Mr. Robert A. Magnusson
with copy to:
Messrs. Lane & Partners
46/47 Bloomsbury Square
London WC1A 2RU
Attention: Mr. William Morton
To Christie:
Christie-Tyler plc
Brynmenyn
Bridgend
Mid Glamorgan CF32 9LN
Wales
Attention: Mr. Kevin O'Sullivan
with copy to:
Messrs. Herbert Smith
Watling House
35 Cannon Street
London EC4M 5SD
Attention: Mrs. Margaret Mountford
-27-
<PAGE>
18. Jurisdiction and Choice of Law
------------------------------
This Agreement shall be governed by English law in every particular
including formation and shall be deemed to have been made in England and be
subject to the non-exclusive jurisdiction of the English courts.
19. Joint Obligations of Simmons.
----------------------------
Simmons U.S.A. Corporation and Simmons Company hereby agree that the
liabilities and obligations of Simmons under this Agreement shall be
construed as liabilities and obligations of them jointly and each of them
singly.
-28-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date
first above written.
SIMMONS U.S.A. CORPORATION
BY: /s/
----------------------------
Vice President
SIMMONS COMPANY
BY: /s/ Robert A. Magnusson
-----------------------------
Robert A. Magnusson
President
CHRISTIE-TYLER plc
BY: /s/
------------------------------
<PAGE>
THE FIRST SCHEDULE
------------------
PART 1
("The Patents")
SAUDI ARABIA
- ------------
Patent
Number Date Filed
------ ----------
ISRAEL
- ------
Patent
Number Date Filed
------ ----------
BAHRAIN
- -------
Patent
Number Date Filed
------ ----------
DUBAI
- -----
Patent
Number Date Filed
------ ----------
JORDAN & SUDAN
- --------------
Patent
Number Date Filed
------ ----------
<PAGE>
PART 2
("The Applications")
SAUDI ARABIA
- ------------
Patent
Number Date Filed
------ ----------
ISRAEL
- ------
Patent
Number Date Filed
------ ----------
BAHRAIN
- -------
Patent
Number Date Filed
------ ----------
DUBAI
- -----
Patent
Number Date Filed
------ ----------
JORDAN & SUDAN Patent
- -------------- Number Date Filed
------ ----------
<PAGE>
THE SECOND SCHEDULE
-------------------
("The Marks")
-------------
SAUDI ARABIA
- ------------
Registration Expiration
Number Date
------------ ----------
ISRAEL Registration Expiration
- ------ Number Date
------------ ----------
S & House Design 35243 03/30/93
BAHRAIN Registration Expiration
- ------- Number Date
------------ ----------
DUBAI
- -----
Registration Expiration
Number Date
------------ ----------
RAS AL-KHAIMAH
- --------------
Registration Expiration
Number Date
------------ ----------
Beautyrest (Application) 61951
Hide-A-Bed (Application) 61952
S & House Design (Class 10) 133969 10/18/89
S & House Design (Class 20) 133968 10/18/89
JORDAN & SUDAN
- --------------
Registration Expiration
Number Date
------------ ----------
<PAGE>
THE THIRD SCHEDULE
------------------
PART 1
("The Technology")
The Technology consists of the technology described in the following patent
applications and patents without regard to the country in which such patent
applications and patents were filed:
Patent Country Date
Description of Technology Number of Filing Filed
- ------------------------- ------ --------- -----
Ultrasonic Separation Apparatus 0144114 United Kingdom 05/17/84
Method and Apparatus for
Manufacturing Inner
Spring Constructions 0155158 United Kingdom 10/09/84
Inner Spring Construction 0154076 United Kingdom 10/09/84
Ultrasonic Pocketing Machine 2389573 France 11/11/83
Pocketed Spring Assembly 8005062 United Kingdom 04/20/82
- ---------------
* Denotes patent application number.
PART II
( "The Non-Registered Marks" )
The marks consist of the following: *
- ----------------------------
* See attached sheets.
<PAGE>
THIS IS A LISTING OF "THE MARKS"
REFERRED TO IN PART II OF THE THIRD SCHEDULE
BEAUTYREST
MAXIPEDIC
HIDE-A-BED
CONTOUR-FLEX
S I M M O N S [S I M M O N S L O G O]
[S I M M O N S L O G O] [S I M M O N S L O G O]
<PAGE>
THE FOURTH SCHEDULE
--------------------
(Clause 2.2)
("The Formal Patent Licence")
BY THIS LICENCE, of
-----------------------------------------------
(hereinafter
- ------------------------------------------------------------
called the "Licensor") HEREBY GRANT to of
----------------------------- --------
(hereinafter called "the Licensee") in respect of each of the following letters
patent, of which we are Proprietors, that is to say Nos. (hereinafter
------
called "the Patents").
WITNESSETH that the Licensor hereby grants to the Licensee a non-exclusive
license in respect of the Patents upon the terms and conditions of an Agreement
dated ____ April 1987 and made between the parties hereto.
Signed by
on behalf of
---------------------------
Authorized Signatory
<PAGE>
THE FIFTH SCHEDULE
------------------
LICENCE AGREEMENT
-----------------
Dated this day of 1987.
-------- ------------
Parties:
, a
- ----------------------------------------------------------------------------
company incorporated in the ,
---------------------------------------------------
whose principal place of business is situate at
-------------------------------
(the "Licensor") (1) and
- ------------------------------------------------ ------
, a company incorporated in whose registered office is situate at (the
---- -----
"Licensee") (2).
1. Definitions The "Marks" are the trade marks
registered at the Registry as follows:
Trademark Number Class Registration Date
--------- ------ ----- -----------------
2. The Licensor hereby grants to the Licensee an exclusive
licence in respect of the Marks upon the terms and
conditions of an Agreement dated _____ April 1987 and made
between the parties hereto.
Signed by
on behalf of
-------------------------
Authorized Signatory
Signed by
on behalf of
-------------------------
Authorized Signatory
EXHIBIT 10.62
[JDEDWARDS LOGO]
Software License Agreement
for
SIMMONS COMPANY
250 USERS
[WORLD SOFTWARE ARCHITECTURE LOGO]
<PAGE>
[JDEDWARDS LOGO] 8055 E. Tufts Avenue
Denver, Colorado 80237
MEMORANDUM OF UNDERSTANDING
Customer: Simmons Company A/B #2026418
Address: One Concourse Parkway, N.E., Suite 600
Atlanta, Georgia 30328-5369
This Memorandum of Understanding ("Memorandum") is by and between Customer and
J.D. Edwards & Company, a Colorado corporation, ("JDE").
The parties to this Memorandum understand and acknowledge that the documents
indicated below, which are attached hereto, comprise the entire transaction of
the parties.
(Please mark each document included.)
/x/ Software License
Agreement Software License Fees $ 874,261.50
---------------
/ / Attachment A Software License Fees $
---------------
/ / Attachment B Software License Fees $
---------------
/ / Attachment C Software License Fees $
---------------
/x/ Attachment E
/x/ Amendment or Addendum
/ / ___________
/ / ___________
/x/ Software Services Software Services Fees $ 26,000.00
Agreement ---------------
Software Services Fees $
/ / Attachment S ---------------
/ / Engagement Letter
/x/ Addendum &
----------
Exhibit 2
---------
/x/ Software Update Software Update Fees $ 161,959.50
Agreement ---------------
Prepaid Software Update $
/ / Attachment U Fees ---------------
/x/ Addendum
--------
/x/ Non-Disclosure
Agreement
/x/ Addendum
--------
/x/ Exhibit
-------
/ / Sizing Letter
/ / _____________
TOTAL $ 1,062,221.00
---------------
Accepted by J.D. Edwards & Company and By execution, signer certifies that
effective as of ____________________, signer is duly authorized to execute
19__. this Agreement on behalf of Customer
J.D. EDWARDS & COMPANY CUSTOMER
By:__________________________________ By:/s/ J.C. Daiker
(Authorized Signature) ----------------------
(Authorized Signature)
__________________________________
(Print or Type Name)
J.C. Daiker
----------------------
__________________________________ (Print or Type Name)
(Title)
Exec. V.P.- C.F.O.
----------------------
(Title)
<PAGE>
[JDEDWARDS LOGO] 8055 E. Tufts Avenue
Denver, Colorado 80237
SOFTWARE LICENSE AGREEMENT
Customer: Simmons Company A/B #2026418
Address: One Concourse Parkway, N.E., Suite 600
Atlanta, Georgia 30328-5369
LICENSE GRANT - J.D. Edwards & Company ("JDE") grants to Customer, a ______ / /
corporation / / _______________, and Customer accepts, subject to the terms and
conditions set out in this Software License Agreement ("Agreement"), a
non-exclusive and non-transferable perpetual limited license to use ("License")
the Licensed Products indicated below:
<TABLE>
<S> <C> <C>
Designated Processor: IBM AS/400tm Model: ________ Serial Number: __________ 250 Users
Licensed Products (1) (Please mark Software Applications selected):
<CAPTION>
Software Applications Prerequisites (2) License Fee
<S> <C> <C> <C> <C>
/x/ 1. WorldCASE/Foundation Environment(3) $ 65,300.00
---------
/x/ 2. WorldCASE/Development Environment(4) 1 65,300.00
---------
/ / 3. Distributed Data Processing 1 ---------
/ / 4. WorldPrint (5,6) 1 ---------
/ / 5. WorldVision (5,7) 1 ---------
/x/ 10. Accounts Receivable 1,12 49,000.00
---------
/x/ 11. Accounts Payable 1,12 49,000.00
---------
/x/ 12. General Ledger & Basic Financials 1 130,200.00
---------
/x/ 13. Financial Report Writer (FASTR) 1,12 32,500.00
---------
/x/ 14. Financial Modeling, Budgeting &
Allocations 1,12 49,000.00
/ / 15. Cash Basis Accounting 1,12 ---------
/ / 16. Currency Conversion 1,12 ---------
/ / 17. Fixed Assets 1,12 ---------
/ / 18. Job Cost Accounting 1,12 ---------
/ / 20. Payroll(8) 1,21 ---------
/ / 21. Labor Distribution 1 ---------
/ / 22. Human Resources Management 1,21 ---------
/x/ 30. Inventory Management 1 97,700.00
---------
/x/ 31. Purchase Order Processing (9) 1,11,12,30 49,000.00
---------
/x/ 32. Sales Order Management 1,30 97,700.00
---------
/ / 33. Basic Equipment Maintenance (10) 1,12,17,21,64 ---------
/ / 34. Advanced Warehouse Management 1,30 ---------
/ / 35. Configuration Management 1,30,32 ---------
/x/ 36. Forecasting 1,30,32 32,500.00
---------
/x/ 37. Electronic Commerce (5,11) 1 86,400.00
---------
/x/ 50. Product Data Management 1,30 97,700.00
---------
/x/ 51. Shop Floor Control 1,30,50 97,700.00
---------
/x/ 52. Requirements Planning(12) 1,30,31,50,51,53 97,700.00
---------
/x/ 53. Enterprise Facilities Planning 1,30,31,32,50,51,52 49,000.00
---------
/ / 54. Capacity Requirements Planning 1,30,31,50,51,52 ---------
/ / 60. Contract Management 1,12 ---------
/ / 61. Contract Billing 1,10,12,21,64,65 ---------
/ / 62. Project Change Management 1,12,18 ---------
/ / 63. Property Management 1,10,11,12 ---------
/ / 64. Work Orders 1,12 ---------
/ / 65. Service Billing 1,10,12,21,64 ---------
/x/ ADVANCED PRICING ________ 49,000.00
------------------- ---------
(Notes are on Second Page) Base Software License $ 1,194,700.00
Fee
Additional CPU Fee
(Development) 5,000.00
---------
Software License Fee $ 1,199,700.00
Total
Less Premenos Credit (20,000.00)
Less Sales Incentive (354,925.00)
-----------
Total Software License $ 824,775.00
Fee
Taxes @ 6% 49,486.50
Total $ 874,261.50
-----------
</TABLE>
This Agreement, including its terms and conditions, is the complete and entire
understanding of the parties unless otherwise stated hereon. THIS AGREEMENT
SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY AN AUTHORIZED
REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is authorized to execute this
Agreement on behalf of Customer.
, 19 .
- ---------------- ---
J.D. EDWARDS & COMPANY CUSTOMER
By: By:/s/ J.C. Daiker
--------------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
J.C. DAIKER
--------------------------------- ------------------------------------
(Print or Type Name) (Print or Type Name)
Exec. V.P.- CFO
--------------------------------- ------------------------------------
(Title) (Title)
/ / JDE Initials / / Customer Initials
Page 1/4
<PAGE>
SOFTWARE LICENSE AGREEMENT
Terms and Conditions
1. LICENSE USE The Licensed Products are to be used by Customer on a single
-----------
serial-numbered computer processing unit. The Licensed Products are not to be
copied by Customer or used by others without the written permission of JDE
except for Customer's production, backup, archival, and disaster recovery
purposes. The Licensed Products may be used only by Customer and entities under
common control and ownership with Customer, but not for commercial timesharing
or service bureau or other rental or sharing arrangements. The Licensed
Products may be used only in the country in which they are first installed and
may only be moved to another country with the prior written permission of JDE.
2. LIMITED WARRANTY (A) JDE warrants to Customer that it has full power and
----------------
authority to grant this License. JDE further warrants that for a period of
six (6) months following the date of this License, the Licensed Products will
perform substantially in accordance with the JDE published product
specifications in effect at the date of this Agreement. JDE further warrants
that the JDE published product specifications are accurate in all material
respects; however, the Licensed Products are subject to continued revision and
may, at times, be at variance with such published product specifications and may
contain minor defects or errors. (B) JDE warrants that its products are in use
by its customers with apparent satisfaction, however, Customer is ultimately
responsible for the adequacy of the Licensed Products in Customer's intended
application and use. (C) During the warranty period, JDE agrees to correct all
substantive errors in the unmodified Licensed Products as reported in writing by
Customer and Customer will be entitled to all corrections and/or enhancements to
the unmodified Licensed Products, at no charge. Such corrections and/or
enhancements shall be part of the Licensed Products. (D) JDE shall have no
responsibility for problems in the Licensed Products caused by alterations or
modifications thereto, arising out of the malfunction of Customer's equipment or
other software products not supplied by JDE, or for delays or interruptions in
the delivery, installation or operation of the Licensed Products caused by
events beyond the reasonable control of JDE. (E) Customer shall have six (6)
months following delivery of the Licensed Products to Customer's first
designated site to verify that the Licensed Products substantially conform with
JDE published product specifications. Upon receipt of Customer's written notice
of any material nonconformance, JDE shall correct such nonconformance or provide
a mutually acceptable plan for correction by the later of: six (6) months
following delivery; or thirty (30) days following the receipt of Customer's
notice by JDE. Should JDE fail to provide such correction or plan by such date,
Customer's sole and exclusive remedy shall be to terminate this Agreement by
written notice, and notwithstanding the payment provisions hereof, receive a
refund of the Software License Fees paid. Such notice of termination must be
received by JDE within ten (10) days following the date for correction or plan
provision and shall be in accordance with the termination provisions hereof.
(F) THIS AGREEMENT IS A LICENSE AND IS NOT A SALE OF GOODS AND EXCEPT AS
EXPRESSLY SET FORTH HEREIN, THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. (G) JDE makes no warranties regarding any
third party products licensed on an Attachment C; however, JDE shall assign to
Customer any warranties received by JDE from such third party. (H) Sizing is
the process of estimating the amount of computer equipment and types of hardware
and software features needed to execute the Licensed Products on the Designated
Processor under particular circumstances and to achieve certain performance
goals. JDE will perform a sizing only upon Customer's request and using the
Customer's own data and estimates. Customer has all, and that JDE in no way has
any, responsibility for the choice of the Designated Processor, its features,
and the use of the Licensed Products to achieve any performance goals. EXCEPT
AS MAY BE EXPRESSLY PROVIDED HEREIN, JDE MAKES NO WARRANTY AS TO THE ADEQUACY
OR CAPACITY OF THE DESIGNATED PROCESSOR OR THE PERFORMANCE OF THE LICENSED
PRODUCTS ON THE DESIGNATED PROCESSOR.
3. MANAGEMENT, CONTROL AND IMPLEMENTATION JDE will provide assistance to
--------------------------------------
Customer for implementation and installation in accordance with the terms of
this Agreement; however, Customer shall be responsible for the management,
internal control, and implementation of the Licensed Products, including
acquiring adequate computer hardware, insuring proper machine configuration and
program installation. JDE recommends as part of the implementation of the
Licensed Products that Customer operate the Licensed Products in parallel with
the Customer's existing systems and procedures until Customer has completed the
implementation.
4. PROPRIETARY RIGHTS (A) Customer recognizes that the Licensed Products
------------------
provided under this Agreement have substantial monetary value and are considered
TRADE SECRET, PROPRIETARY and/or CONFIDENTIAL material of JDE, and that JDE
retains ownership of all rights, title and interest to its Licensed Products.
All enhancements and modifications made by JDE will remain proprietary to JDE;
however, JDE grants to Customer a non-exclusive license to use such enhancements
and modifications without additional payment. The Licensed Products bear a
copyright legend which in no way reduces the trade secret, proprietary, and/or
confidential nature of the Licensed Products. Each Licensed Product consists
of source and object code for application programs and control language
procedures but source code for operations control and utility programs,
including report writers, and for any third party provided Licensed Products
will be withheld for security reasons. Customer agrees to exercise due care to
prevent disclosure of the Licensed Products, and the terms and conditions of
this Agreement, utilizing the same safeguards afforded its own confidential
information. Confidential information shall not include information in the
public domain, information already in the possession of Customer, information
obtained from other sources without obligations of confidentiality, information
independently developed, or information required by court or government order.
Further, Customer agrees: (i) not to reverse engineer the Licensed Products or
any part thereof, provided, however, that if the Licensed Products are located
in a Member State of the European Community such activities shall be permitted
solely to the extent, if any, permitted by Article 6 of the Council Directive
of 14 May 1991 on the Legal Protection of Computer Programs and any
implementing legislation thereof; (ii) not to distribute the Licensed Products
or any part thereof; (iii) to take all reasonable steps to insure that the
Licensed Products, and the trade secret, confidential and proprietary
information contained therein, are not disclosed to any person other than
Customer's employees, consultants or agents who have a need for access in order
to use them; and (iv) not to remove the copyright, trade secret or other
proprietary protection legends or notices which appear on or in the Licensed
Products. (B) JDE HAS INSTALLED DISABLING PROCEDURES IN THE LICENSED PRODUCTS.
IF THERE OCCURS ANY UNAUTHORIZED USE OF THE LICENSED PRODUCTS, SUCH DISABLING
PROCEDURES WOULD RENDER THE LICENSED PRODUCTS INOPERABLE. (C) Customer agrees
to notify JDE immediately of any unauthorized possession, use or knowledge of
any Licensed Products. Customer shall promptly furnish JDE with full details of
such situation and assist in preventing any recurrence thereof and cooperate at
JDE's expense in any litigation or other proceedings reasonably necessary to
protect JDE's rights.
/ / JDE Initials / / Customer Initials
Page 3/4
<PAGE>
[JDEDWARDS LOGO] 8055 E. Tufts Avenue
Denver, Colorado 80237
ADDENDUM TO SOFTWARE LICENSE AGREEMENT
Customer: Simmons Company
Address: One Concourse Parkway, N.E., Suite 600
Atlanta, Georgia 30328-5369
This Addendum is made by and between J.D. Edwards & Company ("JDE"), and
Customer in consideration of their mutual promises and subject to its Terms and
Conditions.
This Addendum amends the Software License Agreement, ("Agreement"), by and
between JDE and Customer by its Terms and Conditions.
Note (1) to the Software License Agreement is deleted and replaced with the
following:
"The "Licensed Products" include selected Software Applications, as referenced
on the face of the Agreement and any subsequent Attachment A's and/or Attachment
C's, the media in which the Software Applications are delivered, and the
associated documentation, including the JDE published product specifications."
Note (8) to the Software License Agreement is deleted and replaced with the
following language in its entirety:
"Payroll requires PAYROLLTAX(TradeMark) to be licensed directly from Vertex
Systems, Inc. for an additional fee. THE UNMODIFIED PAYROLL AND HUMAN
RESOURCES MANAGEMENT SOFTWARE APPLICATIONS ARE INTENDED FOR USE IN COMPLYING
WITH THE UNITED STATES FEDERAL LAW AND MAY NOT SUPPORT LOCAL GOVERNMENT
REQUIREMENTS OR EMPLOYMENT PRACTICES WITHOUT MODIFICATIONS BY CUSTOMER."
Section 1. LICENSE USE, is amended by the addition of the following at the end
-----------
thereof:
"This Agreement may not be assigned by either party except according to the
following provisions, and any attempted assignment which does not adhere to
these provisions shall be voidable.
(A) Either party may, upon written notice to the other party, assign this
Agreement to any other entity under common control and ownership, such common
control and ownership being defined as the ownership of at least 50% of the
voting equity of the entity or ownership if securities to which are attached
voting rights capable of electing at least 50% of the entity's board of
directors, but any such assignment shall not relieve the assigning party of all
of its obligations and duties hereunder.
(B) JDE may assign this Agreement in the event of the sale of all or
substantially all of its assets or equity.
(C) In the case of the sale of all or substantially all of the assets or equity
of Customer, Customer must give thirty (30) days prior written notice to JDE of
the requested assignment of this agreement, including the name, address, and
contact person name for the entity to which the requested assignment is intended
to be made. The permission of JDE to make the requested assignment shall not be
unreasonably withheld if:
(i) Customer has no balances due to JDE;
(ii) the purchased business will be operated as a continuation of the
business of Customer for the same purposes and functions and the
software will continue to be used for the same purposes;
(iii) the purchaser of the business is not a competitor or an affiliate
of a competitor of JDE;
(iv) the Software Applications will not be used to develop products to
compete with JDE's products; and
(v) the credit history of the purchaser of the business is acceptable
to JDE; such acceptance by JDE shall not be unreasonably
withheld."
Section 2. LIMITED WARRANTY, Subsection (A) the second sentence is deleted and
----------------
replaced with the following:
"JDE further warrants that for a period of six (6) months following the date of
the Agreement, the Licensed Products will perform substantially in accordance
with the JDE published product specifications in effect at the date of this
Agreement. During the six (6) month warranty period, JDE agrees to provide
Response Line Services at no additional charge. Response Line Services provide
unlimited telephone support during Response Line hours (6:00 AM - 6:00 PM
Mountain Time Zone, Monday-Friday). This support includes at no additional
charge telephone and research time performed by the Response Line staff,
incoming WATTS line within the U.S. and outgoing long distance charges. All
software or data delivered by the Response Line become part of the Licensed
Products."
Section 2. LIMITED WARRANTY, Subsection (C) is deleted and replaced with the
----------------
following:
<PAGE>
"During the six (6) month warranty period, JDE agrees to correct all substantive
errors in the unmodified Licensed Products as reported in writing by Customer
and Customer will be entitled to all corrections and/or enhancements to the
unmodified Licensed Products, at no charge. Such corrections and/or
enhancements shall be a part of the Licensed Products ("Software Updates")."
<PAGE>
Section 2. LIMITED WARRANTY, Subsection (E) is deleted and replaced with the
----------------
following:
"JDE additionally warrants that Customer will have twelve (12) months from the
date of the Agreement at Customer's first designated site to verify that the
Licensed products substantially conform with JDE published product
specifications. Upon receipt of Customer's written notice of any material
nonconformance, JDE shall correct such nonconformance or provide a mutually
acceptable plan for correction by the later of: twelve (12) months following
the date of the Agreement; or thirty (30) days following the receipt of
Customer's notice of defect or nonconformance by JDE. Should JDE fail to
provide such correction or plan by such date, Customer's sole and exclusive
remedy shall be to terminate this Agreement by written notice and,
notwithstanding the payment provisions hereof, receive a refund of the Software
License Fees paid. Such notice of termination must be received by JDE within
ten (10) days following the date for correction or plan provision and shall be
in accordance with the termination provisions hereof."
Section 6. PAYMENT, Subsection (A), the second sentence is deleted in its
-------
entirety and replaced with the following:
"Customer agrees to pay $330,000.00 towards the Software License Fees and
$10,400.00 towards the Solution Assurance Fees and $49,486.50 for State sales
tax, for a total of $389,886.50 due upon execution of the Agreement, $164,925.00
towards the Software License Fees and $5,200.00 towards the Solution Assurance
Fees for a total of $170,125.00 due on January 15, 1996; $164,925.00 towards the
Software License Fees and $5,200.00 towards the Solution Assurance Fees for a
total of $170,125.00 due on March 15, 1996; and the remaining $164,925.00 of
the Software License Fees and the remaining $5,200.00 for the Solution Assurance
Fees, for a total of $170,125.00 due on May 15, 1996.
JDE agrees that as long as Customer's account is maintained under the User Based
Pricing scenario, Customer may utilize any single serial numbered IBM AS/400
Designated Processor so long as the number of users accessing the JDE Licensed
Products on the Designated Processor does not exceed the number of users
licensed by JDE.
Customer may add additional Computer Processing Units ("CPU's") under the terms
of this agreement for the following additional CPU fees. IBM AS/400 9402 and
9404 cabinets at a price of $5,000.00 per CPU and the IBM AS/400 9406 cabinet at
a price of $15,000.00 per CPU. For a period of three (3) years following the
date of this Agreement, JDE agrees to limit the increase on the additional CPU
fees to Customer for the IBM AS/400 9402, 9404 and 9406 cabinets to the lesser
of ten percent (10%) or the national rate of inflation for the preceding twelve
(12) consecutive month period as measured by the United States Bureau of Labor
Statistics for the national Consumer Price Index.
JDE agrees to allow Customer a twenty-five percent (25%) discount off of the
then current list price for a period of twelve (12) months on the licensing of
additional JDE Software Applications.
JDE agrees to provide Customer with a $20,000.00 credit for the funds that were
paid to PREMENOS. This credit will be used as a reduction of the License Fee
for the Electronic Commerce Software Application."
Section 8. ARBITRATION the second sentence is deleted and replaced with the
-----------
following:
"The location of the arbitration hearing will be Atlanta, Georgia."
Section 8. ARBITRATION, is amended by the addition of the following at the end
-----------
of this Section:
"Customer and JDE agree that neither party to any action under this Agreement
will be required to provide more than ten (10) depositions."
Section 9. TERMINATION, the first sentence is amended by the addition of the
-----------
following language at the end of this sentence:
"without affecting any of such party's legal rights or remedies."
Section 10. LIMITED LIABILITY is deleted and replaced with the following:
-----------------
"Section 10. INDEMNIFICATION
---------------
JDE warrants that, except, for third-party products for which JDE acts as a
sales agent, it owns and possesses all rights and interests in the Products
necessary to enter into this Agreement. JDE further warrants that, except for
third-party products for which JDE acts as a sales agent, Customer's use of the
Products will not infringe upon the United States copyrights, patent rights,
trade secrets or other rights of any third party.
JDE agrees to indemnify, defend and hold Customer harmless from and against any
loss, cost, damage, liability, or expense (including attorney's fees and other
reasonable litigation expenses) suffered or incurred by Customer in connection
with any such infringement claim by any third party, provided however that
Customer permits JDE to defend, compromise or settle said claim of infringement
and provides JDE all available information, assistance and authority to enable
JDE to do so.
<PAGE>
Section 10. INDEMNIFICATION (CONTINUED):
---------------------------
JDE further warrants that if Customer is enjoined from using the Products due to
an actual or claimed infringement of any United States patent right or copyright
or other property right or for any other reason, then at JDE's option, JDE shall
promptly either:
(i) procure for Customer, at JDE's expense, the right to continue to use
the Products;
(ii) replace or modify the Products, at JDE's expense, so that the Products
become non-infringing; or
(iii) terminate the Agreement and return Customer's license fees in the
event that neither (i) or (ii) are reasonably feasible.
Section 10.1 LIMITED LIABILITY
-----------------
Customer and JDE each agree to indemnify the other from and against all costs
and liabilities including reasonable legal fees which each may be required to
pay arising out of injuries to persons or damage to property (including data)
pertaining to this Agreement, whatsoever and howsoever caused, except where the
same shall be caused by the negligence or willful misconduct of the other party,
its agents, or employees; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL: (i) THIS
AGREEMENT BE CONSTRUED SO AS TO REDUCE THE PROPRIETARY RIGHTS OF JDE; OR (ii)
EITHER PARTY BE LIABLE TO ANY PERSON (EXCEPT FOR FAILURE TO COMPLY WITH THE
PROPRIETARY RIGHTS PROVISIONS OF SECTION 4(A)) FOR: (a) A MONETARY AMOUNT
GREATER THAN THE SINGLE LIMIT LIABILITY INSURANCE COVERAGE PER OCCURRENCE AS
SPECIFIED IN THIS AGREEMENT FOR AN EVENT INVOLVING BODILY INJURY AND/OR PROPERTY
DAMAGE, EXCLUDING DAMAGE TO DATA; (b) ANY MONETARY AMOUNT GREATER THAN THE
AMOUNTS PAID HEREUNDER FOR COST AND LIABILITIES OTHER THAN THOSE ARISING OUT OF
BODILY INJURY AND/OR PROPERTY DAMAGE, BUT INCLUDING DATA; AND (c) ANY LOSS OR
INJURY TO EARNINGS, PROFITS OR GOODWILL, OR FOR ANY PUNITIVE, OR CONSEQUENTIAL
DAMAGES OF ANY PERSON, WHATSOEVER AND WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES."
Section 11. GENERAL is deleted and replaced with the following:
-------
"(A) The waiver of one breach hereunder shall not constitute the waiver of any
other or subsequent breach. (B) All notices shall be in writing and sent by
certified mail, postage prepaid, return receipt requested to the address written
above or such other address as notified to the other party and such notice shall
be deemed to be made on the fifth (5th) day after such mailing. (C) No
amendments, modifications or supplements to this Agreement shall be binding
unless in writing and signed by both parties. (D) No action, regardless of form
arising out of this Agreement may be brought by either party more than eighteen
(18) months after the cause of arbitration or action arose. (E) JDE's
Authorized Affiliate is not an employee of JDE and is an independent entity and
has no express or implied authority to bind JDE, nor is JDE liable for any acts
of Authorized Affiliate which are outside the scope of its agency. JDE's
Authorized Affiliate is an independent business entity which is authorized by
JDE to: (i) represent JDE as a sales agent or distributor, but with no
authority to enter into or execute agreements on behalf of JDE; or (ii) provide
software updates, qualified support, and other services to Customer or (iii)
both. At Customer's request JDE will: (i) identify or confirm the identity of
Authorized Affiliates; (ii) define or clarify the scope of the authority of any
Authorized Affiliate; and if appropriate, (iii) ratify the acts within the
scope of the authority of an Authorized Affiliate. (F) All future licenses of
additional software by Customer shall come under the terms and conditions herein
subject to the then current prices and each party shall have the same rights,
duties and privileges with respect to such subsequent transaction as is
established by the terms of this Agreement. (G) If any provision of this
Agreement or the application of any such provision to any individual or entity,
or circumstance is held to be invalid, unenforceable or void, such decision
shall not have the effect of invalidating or avoiding the remainder of this
Agreement, it being the intent and agreement of the parties that this Agreement
shall be deemed amended by modifying such provision to the extent necessary to
render it valid, legal and enforceable while preserving its intent, or, if such
modification is not possible, by substituting therefore another provision that
is valid, legal and enforceable and that achieves the same objective. (H) This
Agreement shall be executed in two identical counterparts. (I) All monetary
amounts are in United States dollars, payable in ready funds through a United
States bank. (J) In the event Customer issues a purchase order or other
instrument covering the subject matter of this Agreement, such purchase order is
for Customer's internal use and shall not affect this Agreement. (K) THIS
AGREEMENT, INCLUDING ITS ATTACHMENTS AND AMENDMENTS, IF ANY, WHICH ARE A PART
HEREOF, IS A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE
PARTIES, WHICH SUPERSEDES ALL PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS,
WHETHER ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES
RELATING TO ITS SUBJECT MATTER (L)(A) JDE makes no commitment to continue to
provide Response Line services for Licensed products requiring the AS/400 and
OS/400 platform and generated in native RPG after the earlier of:
(i) December 31, 1999, or
(ii) December 31 of the first year after IBM discontinues
offering maintenance services for OS/400.
<PAGE>
(B) JDE makes no commitment to continue to provide Software Updates services
for Licensed products requiring the AS/400 and OS/400 platform and generated in
RPG after the earlier of:
(i) December 31, 1997, or
(ii) December 31 of the first year IBM discontinues offering maintenance
services for OS/400.
(C) JDE makes no commitment to continue to provide Response Line and Software
Updates services for Licensed Products which are operated on a platform other
than the AS/400 and OS/400 platform or which are not generated in RPG after the
later of December 31 of the:
(i) third year after the manufacturer discontinues the sales of new
hardware platforms, or
(ii) the first year after the manufacturer discontinues offering
maintenance services for the operating system of the platform.
<PAGE>
Section 11. GENERAL (CONTINUED)
-------------------
(M) During the term of this Agreement, both JDE and Customer shall maintain in
effect the following minimum levels of insurance coverage:
(1) Single limit liability insurance in the amount of one million dollars
($1,000,000.00) per occurrence for bodily injury and property damage caused
by negligent acts or omissions of JDE , its employees or agents.
(2) Comprehensive automobile liability insurance in the amounts of one
million dollars ($1,000,000.00), per occurrence combined single limit
liability.
(3) Workers compensation and employers liability insurance in amounts
sufficient to satisfy the requirements of the jurisdictions in which this
Agreement shall be performed.
A certificate of insurance evidencing the above coverage will be provided by JDE
upon request by Customer.
(N) For the purpose of this Agreement or any of the Attachments hereto,
whenever a "list", "then-current", "standard" or "applicable" fee, price or
charge is referred to with respect to a particular product or service, such fee
or charge shall mean that being charged to JDE's customers generally in that
geographical area.
(O) "Substantive Errors" are failures to perform a material function of the
Licensed Products in accord with JDE's published product specifications, not
including minor errors for which there are reasonable work around unless, in the
aggregate, the total number of minor errors constitute a failure to perform a
material function of the Licensed Product in accord with JDE's published product
specifications. "Critical Problem" means that a material function of Licensed
Products is:
(i) inoperable and cannot be restarted;
(ii) subject to intermittent failures occurring so frequently as to render
the function inoperable;
(iii) generating consistently wrong results; or
(iv) generating wrong results intermittently so frequently as to render the
function inoperable.
JDE shall prioritize error reports and service requests based upon the severity
of their impact to Customer and to JDE's overall client base. JDE utilizes a
Software Action Request ("SAR") system to record and manage problem/requests.
The SAR system tracks the nature of a problem, who reported it, and severity.
Severity levels are as follows:
(i) Critical, meaning a Substantive Error which is also a Critical
Problem;
(ii) High, meaning a Substantive Error which is not a Critical Problem
(iii) Low, meaning other reported errors which are not Substantive Errors;
and
(iv) Desired Enhancements."
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL
PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND
ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS ADDENDUM AND THE AGREEMENT. Notwithstanding anything to the contrary in
the Agreement, in the event of a conflict between the terms and conditions of
this Addendum and those contained within the Agreement, the terms and conditions
of this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of , 19 signer is duly authorized to execute
------ -- this Agreement on behalf of Customer.
J.D. EDWARDS & COMPANY CUSTOMER
/s/ J.C. Daiker
- ---------------------------------- ---------------------------------------
(Authorized Signature) (Authorized Signature)
J.C. Daiker
- ---------------------------------- ---------------------------------------
(Printed Name) (Printed Name)
Exec. V.P. - CFO
- ---------------------------------- ----------------------------------------
(Title) (Title)
<PAGE>
JDEdwards ATTACHMENT E TO SOFTWARE LICENSE AGREEMENT 8055 E. Tufts Avenue
Denver, Colorado 80237
User Based Pricing
CUSTOMER SIMMONS COMPANY A/B #2026418
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
ATLANTA, GEORGIA 30328-5369
This Attachment E to Software License Agreement -- User Based Pricing
("Attachment") is by and between J.D. Edwards & Company ("JDE") and Customer in
consideration of their mutual promises and, by its Terms and Conditions, amends
the Software License Agreement, ("Agreement"), dated by and
-------------
between JDE and Customer.
CURRENT LICENSED CLASS (If Applicable): 3
-------
NEW/UPGRADED LICENSE CLASS
-------
UPGRADE FEE: $
------------
Users included in Licensed Class Base Fee: 250
-----
Previously Licensed Incremental Users 0
-----
(If Applicable):
Additional Incremental Users: $ X = $
------------ ------------- ------------
(Incremental (Minimum of 10
User Fee) or Group)
Total Licensed Users
(Must equal Installations, below): 250
-----
Number of Additional CPU(S): 1 X $ 5,000.00 = $ 5,000.00
-------- ----------- -----------
(Additional CPU Fee)
Base License Fees (From Attachment A or Agreement): $ 1,194,700.00
----------------
Total User Based Licensed Fees: $ 1,199,700.00
----------------
(Plus Taxes Where Applicable)
Installations
(If same software to be
installed at each site): Designated CPU Licensed Users
Install Location Model/Serial Number for this CPU
1. Atlanta, Georgia /
-------------------------- ------------------- --------------
2. Atlanta, Georgia /(Development)
-------------------------- ------------------- --------------
3.
-------------------------- ------------------- --------------
4.
-------------------------- ------------------- --------------
5.
-------------------------- ------------------- --------------
6.
-------------------------- ------------------- --------------
7.
-------------------------- ------------------- --------------
8.
-------------------------- ------------------- --------------
9.
-------------------------- ------------------- --------------
10.
-------------------------- ------------------- --------------
Total Licensed Users: 250
--------------
THIS ATTACHMENT, INCLUDING THE TERMS AND CONDITIONS ON ITS REVERSE SIDE, AND THE
AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL PRIOR OR CONCURRENT
PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND ALL OTHER
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS
ATTACHMENT AND THE AGREEMENT. Notwithstanding anything to the contrary in the
Agreement, in the event of a conflict between this Addendum and the Agreement,
this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ATTACHMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED
BY AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is authorized to execute
this Agreement on behalf of
Customer.
,19
- ------------------------ --
J.D. EDWARDS & COMPANY CUSTOMER
By By /s/ J.C. DAIKER
-------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
/s/ J.C. DAIKER
-------------------------------- ---------------------------------
(Print or Type Name) (Print or Type Name)
/s/ Exec. V.P. - CFO
-------------------------------- ---------------------------------
(Title) (Title)
<PAGE>
JDEdwards 8055 E. Tufts Avenue
Denver, Colorado 80237
ADDENDUM TO ATTACHMENT E TO SOFTWARE LICENSE AGREEMENT
CUSTOMER SIMMONS COMPANY
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
ATLANTA, GEORGIA 30328-5369
This Addendum is made by and between J.D. Edwards & Company("JDE"), and Customer
in consideration of their mutual promises and subject to its Terms and
Conditions.
This Addendum amends the Attachment E to Software License Agreement,
("Agreement"), by and between JDE and Customer by its Terms and Conditions.
Section 12. OTHER PRICING, is deleted and replaced with the following language:
-------------
"Customer may migrate to a different pricing structure offered by JDE from time
to time. In such event Customer shall be entitled to a credit equal to the sum
of all Software License Fees paid (Base License Fees, Incremental User Fees and
Additional CPU Fees) toward the then current list price for the specific pricing
structure selected. If the new pricing structure results in a lower license
fee, any Software License Fees which have been paid or become due will not be
adjusted or refunded. All fee adjustments are effective and due the date of the
change."
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL
PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND
ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS ADDENDUM AND THE AGREEMENT. Notwithstanding anything to the contrary in
the Agreement, in the event of a conflict between the terms and conditions of
this Addendum and those contained within the Agreement, the terms and conditions
of this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to
execute Agreement on behalf of
Customer.
,19
- ---------------------- --
J.D. EDWARDS & COMPANY CUSTOMER
/S/ J.C. DAIKER
-------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
/S/ J.C. DAIKER
-------------------------------- ---------------------------------
(Printed Name) (Printed Name)
/S/ Exec. V.P. - C.F.O.
-------------------------------- ---------------------------------
(Title) (Title)
<PAGE>
JDEdwards 8055 E. Tufts Avenue
Denver, Colorado 80237
SOFTWARE SERVICES AGREEMENT
CUSTOMER SIMMONS COMPANY
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
ATLANTA, GEORGIA 30328-5369
J.D. EDWARDS SERVICE PHILOSOPHY
- -------------------------------
WHEREAS, J.D. Edwards & Company ("JDE"), desires Customer become as independent
and self-sufficient as possible in the use of Licensed Products and Developed
Software.
THEREFORE, during the installation of the Licensed Products and Developed
Software, JDE urges that the Customer use the services with the following
priorities:
/ / SOLUTION ASSURANCE: JDE'S direct involvement at critical implementation
and review steps in the Customer's installation of each License Product
insures that JDE's product knowledge is most effectively leveraged by
Customer;
/ / EDUCATION: The most effective way to transfer knowledge to Customer's
personnel;
/ / ON-SITE CONSULTING: On a full time basis during the Conference Room Pilot,
and afterwards on a part time (full time) basis following the Conference
Room Pilot;
/ / RESPONSE LINE: Available during implementation under a limited warranty,
but is best utilized after Customer's personnel have a basic understanding
and knowledge of the Licensed Products and Developed Software through both
training courses and on-the-job coaching by JDE consultants. Response Line
is available for error correction and problem resolution and not as a
substitute for education; and
/ / CUSTOM MODIFICATIONS: A last alternative for an appropriate business need
and when no other reasonable alternative is available.
RE: SOFTWARE LICENSE AGREEMENT dated:
--------------------
SERVICES PROVIDED:
J.D. Edwards & Company ("JDE"), a Colorado corporation, provides to Customer, a
/ / corporation / / , and Customer
- ------------------- ---------------------
accepts, subject to the terms and conditions of this Software Services Agreement
("Agreement"), the Services indicated below:
SERVICES (Please mark Services selected):
/ / 1. General Consulting Services: (Installation assistance, including
Conference Room Pilot, custom design and computer programming services
provided on a time and materials basis. Consulting rates vary per
hour depending upon the consultant's expertise and product
certification level.)
Fees(1)
/ / 2. Training: Regular scheduled classes . . . . . . . $
----------------
(One or more students from Customer will
attend a standard, scheduled JDE class,
offered to multiple JDE clients, and
usually held at a JDE location.)
Regular scheduled classes, group attendance . . . . $
----------------
(Five or more students from Customer will
attend a standard, scheduled JDE class,
offered to multiple JDE clients, and
usually held at a JDE location.)
Custom classes and/or training . . . . . . . . . . $
----------------
(One to eight students will attend a class
scheduled and conducted solely for Customer,
at either JDE's or Customer's location.)
/ / 3. Specific Consulting Services . . . . . . . . . . . $
----------------
(Consulting Services according to
Exhibit I, attached.)
/x/ 4. Solution Assurance . . . . . . . . . . . . . . . . $ 26,000.00
----------------
(JDE has identified certain milestones or
checkpoints during the implementation process
which are critical planning or review activities
which require JDE's direct involvement to
achieve the most effective implementation.)
5. . . . . . . . . . . . . . . . . . . . . . . . . . . .$
----------------
TOTAL(1) $ 26,000.00
----------------
--------
(Plus Taxes where applicable)
(1) Fees are quoted net of expenses
unless otherwise indicated in writing.
This Agreement, including its Terms and Conditions, is the complete and entire
understanding of the parties unless otherwise stated hereon. THIS AGREEMENT
SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY AN AUTHORIZED
REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. EDWARDS & COMPANY and By execution, signer certifies
effective as of________________, 19___ that signer is authorized to
execute this Agreement on behalf
of Customer.
J.D. EDWARDS & COMPANY CUSTOMER
By By /s/ J. C. Daiker
- --------------------------------------- -----------------------------------
(Authorized Signature) (Authorized Signature)
/s/ J. C. Daiker
- --------------------------------------- -----------------------------------
(Print or Type Name) (Print or Type Name)
EXEC. V.P. - CFO
- -------------------------------------- -----------------------------------
(Title) (Title)
/ / JDE INITIALS / / Customer Initials
<PAGE>
SOFTWARE SERVICES AGREEMENT
5. CONFIDENTIALITY
---------------
(A) To further the business relationship between the parties, it is
necessary and desirable that each party to this Agreement may furnish
the other party to this Agreement with certain proprietary information.
The party disclosing such proprietary information shall be the
"Discloser", and the party receiving such proprietary information
shall be the "Recipient". Such proprietary information will be
designated as confidential information, when presented in printed,
written, graphic or photographic or other tangible form marked as
"Confidential", "Proprietary" or "Discloser Private", and, when
presented in oral form, recorded as written minutes or notes of such
oral presentations, which minutes or notes must be marked (such tangible
materials and oral presentations so minuted shall be "Confidential
Information").
(B) Recipient will use the same care and discretion to avoid disclosure,
publication or dissemination of Confidential Information as it uses with
its own similar confidential information that it does not wish to
disclose, publish or disseminate. The Confidential Information,
including any TRADE SECRET, CONFIDENTIAL and/or PROPRIETARY information
contained therein is not to be disclosed to any persons other than the
employees and consultants or agents of the Recipient (if any), who
have a need to know and who have also executed a nondisclosure
agreement. A certified copy or an original of such executed
nondisclosure agreement shall be supplied to either party to this
Agreement upon request.
(C) Except as expressly provided by the licenses granted in this Agreement,
Recipient shall not use Confidential Information in any manner, nor use
it to the benefit of anyone but Discloser, nor circulate it within its
own organization or otherwise, except to the extent necessary for
negotiations, discussions and consultations with personnel or authorized
representatives of Discloser or for any purpose Discloser may authorize
in writing.
(D) The obligations of Recipient with respect to any particular portion of
Confidential Information shall terminate or shall not attach, as the
case may be, when any of the following occurs: (i) It was in the public
domain at the time of Discloser's communication thereof to Recipient.
(ii) It entered the public domain through no fault of Recipient
subsequent to the time of Discloser's communication thereof to
Recipient; (iii) It was in Recipient's possession free of any obligation
of confidence at the time of Discloser's communication thereof to
Recipient; (iv) It was independently developed by recipient; or (v) Its
disclosure is required by court or government order and Discloser has
been given notice of such order.
(E) All such confidential information shall remain the exclusive property of
Discloser, including without limit, source and object programs,
technical documentation, processing techniques and/or report and video
formats. The confidentiality obligations shall survive any termination
of this Agreement and shall continue for so long as the Confidential
Information is proprietary property of Discloser or for as long as
otherwise permitted by law.
(F) Neither this Agreement nor any disclosure of Discloser's Confidential
Information grants the Recipient any license or rights to any trade
secrets or under any patents or copyrights.
6. RIGHT TO MODIFY
---------------
Customer has the right to modify the Licensed Products, the modifications
and enhancements, and the Developed Software without the consent of JDE;
however, JDE MAKES NO WARRANTY, EXPRESSED OR IMPLIED, REGARDING ANY
MODIFICATIONS OR ENHANCEMENTS OR ANY MODIFIED PORTIONS OF THE LICENSED
PRODUCTS AND THE DEVELOPED SOFTWARE and that no modifications, including the
Developed Software, shall reduce JDE's ownership of the Licensed Products,
the modifications and enhancements, or the Developed Software.
7. PAYMENT
-------
(A) As compensation for performing Services, Customer agrees to pay JDE on a
time basis per hour for the actual hours expended or, in the case of
Training, JDE's list prices. JDE's standard hourly rates vary,
depending on the individual assigned. Schedule changes for Services and
Training must be made by Customer two (2) weeks in advance, otherwise,
JDE may charge for time it cannot reschedule.
(B) JDE reserves the right to revise its fee schedules on January 1 and July
1, while not changing the total estimated cost for the Services outlined
in any Exhibit I.
<PAGE>
(C) Customer agrees to reimburse JDE for all out-of-pocket expenses JDE
incurs in providing Services hereunder including, but not limited to,
transportation costs, airfare, rental vehicles, lodging, meals, travel
time and incidental charges, which are reimbursable expenses and not
part of JDE's total estimate for the Services provided under this
Agreement.
(D) In addition to the charges due under this Agreement, and even if
Customer shall provide a tax exemption number or affidavit of
exemption, Customer shall be responsible for all taxes including sales,
use, property, excise, value added, gross receipts or other taxes levied
on this Agreement or the Licensed Products, except taxes based on JDE's
net income.
(E) Customer agrees to pay for all uncontested amounts due under this
Agreement within thirty (30) days after the date of invoice. Customer
shall have thirty (30) days after the invoice date to contest in good
faith the amounts and items charged. Past due uncontested amounts will
bear interest of one and one-half percent (1-1/2 %) per month from the
due date, or the highest rate permitted by law if less. If uncontested
amounts remain unpaid for thirty (30) days or more, JDE may place
Customer on "credit hold" until such amounts are paid.
(F) Detailed billings are issued on a monthly basis for services rendered.
8. EMPLOYEE RECRUITING
-------------------
Customer acknowledges that JDE's employees are critical to the servicing of
JDE's customers. Customer agrees not to employ or otherwise engage JDE's
employees for a period of six (6) months following any employee's service to
Customer. Should Customer violate this provision, Customer will pay JDE
fifty percent (50%) of the former employee's annual compensation in addition
to JDE's other rights and remedies.
9. ARBITRATION
-----------
All disputes involving this Agreement, except actions arising under the
copyright provision of Title 17 of the U.S. Code, shall be determined under
the law of the state of Colorado and shall be submitted to an arbitrator
appointed and operating under the Uniform Arbitration Act and the procedural
rules of the American Arbitration Association. The location of the
arbitration hearing will be chosen by the party not initiating the
arbitration or action. The written decision of the arbitrator shall be
final, binding and convertible to a court judgment in any appropriate
jurisdiction.
10. TERMINATION
-----------
If either party materially breaches this Agreement, the other party may give
written notice of its desire to terminate and the specific grounds for
termination. If such breach is capable of cure and if the party in default
fails to cure the default within thirty (30) days of the notice, the other
party may terminate this Agreement. Confidentiality obligations shall
survive this Agreement.
11. LIMITED LIABILITY
-----------------
(A) JDE will indemnify Customer from any claim (including reasonable legal
fees) of other persons or entities of infringement of United States
Patents, copyrights, trade secrets or proprietary rights by use of the
unmodified Licensed Products in accordance with JDE's published program
specifications, so long as Customer promptly notifies JDE of such
claims.
/ / JDE Initials / / Customers Initials
<PAGE>
JD EDWARDS' 8055 E. Tufts Avenue
Denver, Colorado 80237
ADDENDUM TO SOFTWARE SERVICES AGREEMENT
CUSTOMER SIMMONS COMPANY
-----------------------------------------------------------------------
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
- --------------------------------------------------------------------------------
ATLANTA, GEORGIA 30328-5369
- --------------------------------------------------------------------------------
This Addendum is made by and between J.D. Edwards & Company ("JDE"), and
Customer in consideration of their mutual promises and subject to its Terms and
Conditions.
This Addendum amends the Software Services Agreement, ("Agreement"), by and
between JDE and Customer by its Terms and Conditions.
SERVICES PROVIDED, Specific Consulting Services is amended by deleting the
statement "Consulting Services according to Exhibit I, attached." and replacing
it with the statement "Consulting Services according to Engagement Letter."
Section 1. SERVICE PROVISION, Subsection (A) is deleted and replaced with the
------------------
following:
"JDE and Customer agree that JDE will provide Services for Customer on a time
and materials basis or at JDE's list prices in the case of Training or as
outlined in a mutually agreed Engagement Letter. Such Engagement Letter, an
example of which is attached as Exhibit 1, will be provided by JDE to Customer
upon Customer's request for implementation or other services under this
Agreement."
Section 1. SERVICE PROVISION, Subsection (B) is amended by deleting the phrases
-----------------
"EXHIBIT I" and "EXHIBIT I's" and replacing them with the phrases "ENGAGEMENT
LETTER" and "ENGAGEMENT LETTER'S".
Section 1. SERVICE PROVISION, Subsection (D) the third sentence is deleted and
-----------------
replaced with the following:
"If JDE's consultants must travel out of their country of origin to Customer's
location, Customer will provide JDE written approval of said consultant, and
Customer agrees to be charged for said consultant's time on a portal to portal
basis.
Section 1. SERVICE PROVISION, Subsection (E) is amended by the addition of the
-----------------
following language between the second and third sentences:
"JDE's R.E.P. Methodology (Revised 12/94) is a set of guidelines to help assist
the Customer in their implementation objectives."
Section 1. SERVICE PROVISION, Subsection (E) is amended by the addition of the
-----------------
following at the end of this Subsection: ", at JDE's then-current standard
rates."
Section 2. LIMITED WARRANTY, Subsection (A) is deleted and replaced with the
----------------
following language:
"Any software developed hereunder by JDE for Customer shall be performed in
accordance with the mutually agreed upon written design specifications in a
professional and workmanlike manner. JDE warrants to Customer that the
unmodified Developed Software shall operate substantially in conformance with
the written, mutually agreed upon specification for such Developed Software
contained in the detailed design specification from the date of completion of
the Developed Software by JDE for a period of ninety (90) days. During the
warranty period, JDE agrees to correct all substantive nonconformances of the
Developed Software as are reported in writing by Customer at no charge.
Section 3. MANAGEMENT CONTROL, IMPLEMENTATION, AND OBLIGATIONS, Subsection (E)
----------------------------------------------------
is deleted and replaced with the following:
"JDE recommends that Customer create a detailed project plan and provide for
scheduling internal and external resources necessary to achieve the plan's goals
and time schedules."
Section 3. MANAGEMENT CONTROL, IMPLEMENTATION, AND OBLIGATIONS, Subsection (F)
---------------------------------------------------
is deleted and replaced with the following language in its entirety:
"JDE also recommends that Customer create a project team to provide most of the
decision making, direction and effort required to implement the JDE software.
JDE consultants will work with this team, as required, to transfer knowledge to
the team."
Section 5. CONFIDENTIALITY, Subsections (A), (B), (C), (D), (E) and (F) are
---------------
deleted.
Section 7. PAYMENT, Subsection (C) is amended by inserting the word "reasonable"
-------
in front of the phrase "out-of-pocket expenses" in the first sentence.
<PAGE>
Section 7. PAYMENT, Subsection (B) is deleted and replaced with the following:
-------
"JDE reserves the right to revise its fee schedules on January 1 and July 1,
while not changing the total estimated cost for the Services outlined in any
Engagement Letter. JDE further agrees for a period of four (4) years following
the date of this Agreement, to limit the increase on the total fees charged to
Customer for Consulting and Training Services to the lesser of ten percent (10%)
or the national rate of inflation for the preceding twelve (12) consecutive
month period as measured by the United States Bureau of Labor Statistics for the
national Consumer Price Index."
Section 7. PAYMENT, Subsection (C) is amended by inserting the word "reasonable"
--------
in front of the phrase "out-of-pocket expenses" in the first sentence.
Section 7. PAYMENT, Subsection (E) the last sentence is amended by the addition
--------
of the following:
", but no finance charge shall apply to any amount in dispute until such dispute
is settled."
Section 9. ARBITRATION, is amended in accordance with Section 8. ARBITRATION, of
----------- -----------
the addendum to the Software License Agreement.
Section 10. TERMINATION, is amended in accordance with Section 9. TERMINATION,
----------- -----------
of the Addendum to the Software License Agreement.
Section 11. LIMITED LIABILITY, is deleted and amended in accordance with Section
-----------------
10. INDEMNIFICATION and Section 10.1 LIMITED LIABILITY of the Addendum to the
--------------- -----------------
Software License Agreement.
Section 15. GENERAL, is deleted and amended in accordance with Section 11.
--------
GENERAL, of the Addendum to the Software License Agreement.
- -------
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL
PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND
ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS ADDENDUM AND THE AGREEMENT. Notwithstanding anything to the contrary in
the Agreement, in the event of a conflict between the terms and conditions of
this Addendum and those contained within the Agreement, the terms and conditions
of this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to execute
________________________, 19______. this Agreement on behalf of Customer.
J.D. EDWARDS & COMPANY CUSTOMER
/s/ J.C. Daiker
- ----------------------------------- ------------------------------------
(Authorized Signature) (Authorized Signature)
/s/ J.C. Daiker
- ----------------------------------- ------------------------------------
(Printed Name) (Printed Name)
Exec. V.P. - C.F.O.
- ----------------------------------- ------------------------------------
(Title) (Title)
<PAGE>
EXHIBIT 2
J.D. Edwards
October 1, 1990
Mr. William B. Jones
President
Progressive Corporation
123 Main Street
Anywhere, USA 12345
Dear Mr. Jones:
Congratulations on your purchase of J.D. Edwards software and welcome to the
J.D. Edwards family of clients using J.D. Edwards application software. We hope
you will find it to be a lasting investment of great value to your company.
Over the past weeks, we have held a number of discussions with your personnel
regarding how we can provide you with effective client service and assist you
with the implementation of your software. This letter is to confirm these
discussions and arrange for the services of J.D. Edwards consultants during your
implementation project.
PROJECT SCOPE
From your preliminary investigation, you have determined that the J.D. Edwards
core systems, including accounts receivable and accounts payable, can be
implemented without change in the following locations:
1. A Subsidiary, Inc. -- Monroe, LA
2. B Branch -- Denver, CO
3. Holding Company, Inc. -- Houston, TX
You have arranged for a common conference room pilot to be conducted over a two-
week period in Houston, Texas, which would attempt to develop a common approach
for the three locations. After the conference room pilot is completed, further
implementation would be divided into three separate projects, with JDE
involvement limited to Denver and Houston.
While the entire project will involve the implementation of the software at all
three locations, this engagement is limited to the analysis of your system
requirements, the development of the Conference Room Pilot (CRP) Plan, set-up
for the CRP and the processing of your data through a Conference Room Pilot
simulating your business cycles on JDE software.
The present scope assumes no custom design or reprogramming of our software. We
do, however, anticipate that some custom design and programming will be required
in connection with conversion of your present data files after the Conference
Room Pilot. You are planning to rely on J.D. Edwards personnel for leadership,
direction, and most of the detail work in data file conversion.
- --------------------------------------------------------------------------------
Rev. 3/92 IM A - 3
<PAGE>
EXHIBIT 2
Project Objectives
You have indicated to us that the primary motivation for acquiring the J.D.
Edwards software standardize procedures and provide information to management
within 10 days following the end of each month. Given that your present closing
schedule requires 45 days, there will be considerable effort involving
streamlining your procedures and business practices, going well beyond the
improvement provided by core accounting systems.
Project Risks
We have worked with you to identify and assess the risks in this implementation
project. Most identified are currently at an acceptable level. Areas that
are still of concern to J.D. Edwards include:
- The lack of experience of your project manager
- The degree of procedural changes that will be required
You have recognized our concerns and have accepted these risks.
J.D. Edwards Service Philosophy
In all of our customer services activities at J.D. Edwards, it is our desire to
help each client to become as independent and self-sufficient as possible. We
also recognize that the extensive experience of our personnel in installing the
software in other companies can always be useful to our clients to handle
specialized problems. We prefer to be on call after the software is implemented
working with an adequate base of internal competence to maintain and enhance
your company's investment.
During the implementation of your software, we would urge that you use our
services in the following priorities:
1. Training
2. On-site consulting
3. Support line
4. Custom modification
We put training first, because our training is the most cost-effective way to
transfer knowledge to your personnel and place them in a leadership and project
management role during the installation. The training schedule is attached.
We normally supplement your personnel with on-site consulting. During the
conference room pilot our personnel are usually on-site on a full-time basis.
After the pilot, they are usually required on a fill-in basis. In some cases,
this may mean that they would be on your site for only a few hours per day, or a
few days per week.
While our support line is available during the installation, it is more useful
after your personnel have a basic understanding and knowledge about the
software, as a result of both the training courses and on-the-job coaching by
our consultants.
- --------------------------------------------------------------------------------
IM A-4 Rev.3/92
<PAGE>
EXHIBIT 2
The more your personnel learn about our software, the easier it is to use the
package without custom modifications. We, therefore, look to custom
modifications as a last resort, the service that we would hope to apply on a
limited basis only where there is no reasonable alternative.
The judicious use of JDE's consulting and custom programming resources can make
a considerable contribution to the success of your project. At J.D. Edwards, we
want to give you the technical assistance, training, and support for our
software, as you need it to make your installation successful. At the same
time, we try not to furnish peak-load services to supplement what your personnel
can do in-house, for example procedures writing. While this is a peak-load
resource problem, it is not directly related to our software expertise.
YOUR RESPONSIBILITY
The Progressive Corporation's leadership and full-time commitment of adequate
resources will be the key ingredient in successful implementation of the JDE
software. The Progressive Corporation's responsibility is to gain a sufficient
understanding of the JDE software, to successfully manage and execute the
implementation project.
It is our understanding the Progressive Corporation is assuming full project
management responsibility under the leadership of John A. Smith, Vice President.
You have formed a project team, led on a full-time basis by Able Baker,
Assistant Controller. We understand that the team consists of four other full-
time Progressive Corporation personnel, including two from the information
processing group and two from accounting.
Success or failure of the project, then, is dependent upon leadership of this
project team: they will provide most of the decision making, direction, and
effort required to implement the J.D. Edwards software. Our consultants will
work with this team to transfer our knowledge under their direction.
PROJECT PLAN AND APPROACH
Using the standard J.D. Edwards work programs for general accounting, accounts
receivable, and accounts payable, a tentative work program for your project was
agreed upon with your project team, using the conference room pilot approach.
Major milestones in this work program are as follows:
1. Classroom Project Team Training
2. Requirement Analysis and Set-up Recommendation
3. Conference Room Pilot
4. Project Review and Scope Redefinition
5. Data Conversion
6. Implementation and Testing
Working with your project team, a tentative schedule was determined which would
complete the initial training in one month, and the conference room pilot within
two months after the start of the project. Further implementation would then
take approximately four to five months, depending upon the outcome of the
conference room pilot.
This schedule assumes that the software will be installed without program
modifications. If program modifications are determined as a result of the
conference room pilot, this schedule may be further extended.
- --------------------------------------------------------------------------------
Rev. 3/92 IM A-5
<PAGE>
EXHIBIT 2
The tentative work program developed and agreed to with your project team is
attached. Most of the later steps in the work program (after completion of the
conference room pilot) do not require as much detail. These will be filled in
as a result of what the team learns in the conference room pilot. At that point
it will be necessary to reestablish the remaining effort.
J.D. EDWARDS STAFFING
As noted in our J.D. Edwards service philosophy, we will provide you with the
consulting assistance you need to complete your project, on a coaching basis,
with your personnel providing the majority of the day-to-day coordination, so
that our personnel are on your job only at planned times or as needed by your
project team.
Jim Johnson, a regional consulting manager, has overall responsibility for your
account. We have assigned Julie Anderson, Consulting Manager, to your account.
She will coordinate all of the day-to-day work of J.D. Edwards consultants. A
J.D. Edwards core systems specialist has been assigned to help analyze your
requirements and develop a pilot plan. We also plan to assign one J.D. Edwards
staff consultant to your account four days a week for 5 weeks to coach your
project team through set-up in preparation for the pilot along with a J.D.
Edwards specialist for the equivalent of 2 days per week. The J.D. Edwards
staff consultant will then be assigned to your account full time for the two
weeks scheduled to execute the conference pilot. A JDE programmer and
specialist have also been assigned for three days each during the pilot
execution.
Estimate of Time and Fees
Based upon the tentative work program, we estimate that we will provide you with
consulting services through the completion of your conference room pilot for a
period of approximately two months. If elapsed time were to be greater than two
months, you would be advised by both your project manager and our consulting
manager, as soon as we were in a position to anticipate delays.
Our charges will be based upon our regular published rates in effect at the time
the service is rendered. We estimate that the fees for our involvement in this
phase of the implementation of the J.D. Edwards application systems noted above
will range between $30,000 and $40,000 plus training (estimated at $15,000),
travel time, and out-of-pocket expenses. We will bill you monthly for services
rendered at our regular daily rates, which are due upon receipt.
We have assisted your project team in making preliminary estimates based upon
our knowledge of the software, our understanding of your project team's
knowledge of your company's environment and their time committed to the project.
Many factors can account for changes in the time and cost of installing
J.D. Edwards systems, which could lengthen the project and, therefore, require
more consulting services from J.D. Edwards than originally estimated. These
factors can include changes in the information needs, inaccurate descriptions of
existing data, and others. After the analysis of your system requirements and
after the conference room pilot is completed, we will meet with you and the
project team to discuss any proposed changes before proceeding. Another letter
will be developed to cover our support for the remainder of the implementation
project.
- --------------------------------------------------------------------------------
IM A-6 Rev. 3/92
<PAGE>
EXHIBIT 2
Out-of-pocket expenses will be reimbursed in accordance with standard J.D.
Edwards policy. If our consultants spend less than a full day on your account,
or if they are required to travel out-of-town, we bill for travel time on an
hourly basis at the standard travel rate, currently $50 per hour.
This arrangement is supplementary to, but does not replace, your software
license with your company.
Sincerely,
J.D. Edwards & Company
BY:___________________________ BY:__________________________________
Regional Consulting Manager Sales Manager
Approved:
BY:________________________________
Authorized Executive
Progressive Corporation
- --------------------------------------------------------------------------------
Rev. 3/92 IM A-7
<PAGE>
SOFTWARE UPDATE AGREEMENT
J.D.EDWARDS 8055 E. Tufts Avenue
Denver, Colorado 80237
CUSTOMER SIMMONS COMPANY A/B#2026418
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
ATLANTA, GEORGIA 30328-5369
SOFTWARE UPDATES PROVISION - J.D. Edwards & Company ("JDE") provides to
Customer, Customer is a ________________________________/ / corporation
/ / _______________________; and Customer accepts, subject to the terms and
conditions of this Software Update Agreement ("Agreement"), the Response
Line/Software Updates Services indicated below:
DESIGNATED PROCESSOR: IBM AS/400TM MODEL: 250 USERS
-----------------
RE: SOFTWARE LICENSE AGREEMENT DATED:
---------------------
LICENSED PRODUCTS: The Licensed Products shall be defined as all of and only
the Licensed Products under the Software License Agreement and its Attachments
and Addenda for which JDE has expressly agreed to offer a warranty that the
Licensed Products will perform substantially in accordance with the JDE
published specifications.
Start Date: Upon Expiration of the Warranty Period
--------------------------------------
PERIOD OF COVERAGE: One (1) year(s) plus initial pro-rated partial year if
checked / /. The period of Coverage is the time during which the Response
Line/Software Updates Services shall be available under this Agreement. PREMIER
Maintenance, if chosen, is also available for a Period of Coverage, which is the
same as the Period of Coverage for Response Line/Software Updates services
unless otherwise indicated in writing. Unless canceled by either party by
written notice no less than thirty (30) days prior to the end of the Period of
Coverage or extended by written agreement of both parties effective no later
than the end of the Period of Coverage, this Agreement and the Period of
Coverage shall automatically extend for one (1) year at the then current prices.
Reinitiation Charge . . . . . . . . . . . $
--------------
Software Update Fee . . . . . . . . . . . $ 161,959.50
--------------
PREMIER Maintenance Fee: . . . . . . . . . $
------------------------ ---------------
Updates Total: . . . . . . . . . . . . . . $ 161,959.50
--------------
Tax:(or Exemption Number) . . . . . . . . $
--------------
TOTAL: . . . . . . . . . . . . . $ 161,959.50
--------------
This Agreement, including its Terms and Conditions, is the complete and entire
understanding of the parties unless otherwise stated hereon. THIS AGREEMENT
SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY AN AUTHORIZED
REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is authorized to execute
___________________________, 19___ this Agreement on behalf of Customer
J.D. EDWARDS & COMPANY CUSTOMER
By By /s/ J.C. DAIKER
___________________________________ ______________________________
(Authorized Signature) (Authorized Signature)
/s/ J. C. DAIKER
___________________________________ ______________________________
(Print or Type Name) (Print or Type Name)
EXECUTIVE V.P. - C.F.O.
___________________________________ _____________________________
(Title) (Title)
/ / JDE Initials / / Customer Initials
<PAGE>
J.D.EDWARDS LOGO 8055 E. Tufts Avenue
Denver, Colorado 80237
MUTUAL NONDISCLOSURE AGREEMENT
This Mutual Nondisclosure Agreement ("Agreement") is made by and between J.D.
Edwards & Company ("JDE"), a Colorado corporation and SIMMONS COMPANY,
(" "), a having a place of business at
---------- ---------
ONE CONCOURSE PARKWAY, N.E., Suite 600,
ATLANTA, GEORGIA 30328-5369.
To further the business relationship between the parties, it is necessary and
desirable that each party to this Agreement may furnish the other party to this
Agreement with certain proprietary information. The party disclosing such
proprietary information shall be the "Discloser", and the party receiving such
information shall be the "Recipient", but either of the parties may be
"Company". Such proprietary information will be designated as confidential
information, when presented in printed, written, graphic or photographic or
other tangible form marked as "Confidential", "Proprietary" or "Company Private"
by the Discloser, and, when presented in oral form, recorded as written minutes
or notes of such oral presentations, which minutes or notes must be marked (such
tangible materials and oral presentations so minuted shall be "Confidential
Information"). In consideration of each party to this Agreement receiving the
other's Confidential Information, each party agrees, by its signature below, to
use such Confidential Information only as agreed herein unless otherwise agreed
to in a written instrument signed by both parties.
1. Recipient will use the same care and discretion to avoid disclosure,
publication or dissemination of Confidential Information as it uses with its own
similar confidential information that it does not wish to disclose, publish or
disseminate. The Confidential Information, including any TRADE SECRET,
CONFIDENTIAL AND PROPRIETARY information contained therein is not to be
disclosed to any persons other than the employees; and consultants or agents of
the Recipients (if any), who have a need to know and who have also executed a
nondisclosure agreement, substantially in the form of this Agreement. An
original of such executed nondisclosure agreement shall be supplied to either
party to this Agreement upon request.
2. Recipient shall not use Confidential Information in any manner, nor use it
to the benefit of anyone but Discloser, nor circulate it within its own
organization or otherwise, except to the extent necessary for negotiations,
discussions and consultations with personnel or authorized representatives of
Discloser or for any purpose Discloser may authorize in writing.
3. The obligations of Recipient with respect to any particular portion of
Confidential Information shall terminate or shall not attach, as the case may
be, when any of the following occurs: (a) It was in the public domain at the
time of Discloser's communication thereof to Recipient. (b) It entered the
public domain through no fault of Recipient subsequent to the time of
Discloser's communication thereof to Recipient. (c) It was in Recipient's
possession free of any obligation of confidence at the time of Discloser's
communication thereof to Recipient. (d) It was independently developed by
Recipient. (e) Its disclosure is required by court or government order and
Discloser has been given notice of such order.
4. All materials furnished by Discloser or Recipient, which are designated in
writing to be the property of Discloser, or which are or contain Confidential
information, shall remain the property of Discloser and shall be returned to
Discloser promptly at its request with all copies made thereof.
5. This Agreement shall govern disclosures and all communications between
Discloser and Recipient relating to its subject matter that are made during the
period from the date of this Agreement to the earlier of the date on which
either party receives from the other party written notice that subsequent
disclosures shall not be so governed, or for a period of two (2) years following
the earlier of the last act of disclosure hereunder or the termination of this
Agreement.
6. Neither this Agreement nor any disclosure of Discloser's Confidential
Information grants the Recipient any license or rights to any trade secrets or
under any patents or copyrights.
7. Upon written notice to Discloser, Recipient may designate an individual as
its coordinator for the receipt, on its behalf, of all Confidential Information
pursuant to this Agreement. Recipient may change its designated coordinator
upon written notice to Discloser.
8. Discloser understands that Recipient may currently or in the future be
developing information internally, or receiving information from other parties,
that may be similar to Discloser's information. Accordingly, nothing to this
Agreement shall be construed as a representation or inference that Recipient
will not independently develop products, for itself or for others, that compete
with the products or systems contemplated by Discloser's information.
<PAGE>
9. Neither party shall publicly announce or disclose the existence of this
Agreement or its terms and conditions, or advertise or release any publicity
regarding this Agreement, without the prior written consent of the other party.
This provision shall survive the termination of this Agreement.
10. Recipient agrees that it will not knowingly (1) export or re-export,
directly or indirectly, any technical data (as defined by the U.S. Export
Administration regulations) received under this Agreement to, (2) disclose such
technical data for use in, or (3) export or re-export, directly or indirectly,
as any direct product of such technical data to, any destination to which such
export or re-export is restricted or prohibited by U.S. law, without obtaining
prior authorization from the U.S. Department of Commerce. This provision shall
survive termination or cancellation of this Agreement.
11. DISCLOSER PROVIDES CONFIDENTIAL INFORMATION ON AN "AS IS" BASIS. Discloser
will not be liable for any damages arising out of use of Confidential
Information. Disclosure of Confidential Information containing business plans
is for planning purposes only. Discloser may change or cancel its plans at any
time. Therefore, use of Confidential Information is at Recipient's own risk.
12. This Agreement shall be construed in accordance with the laws of the State
of Colorado. The parties agree that a breach of the confidentiality obligations
by Recipient shall cause immediate and irreparable monetary damage to Discloser
and shall entitle Discloser to seek injunctive relief in addition to all other
remedies.
This Agreement is the complete and entire understanding of the parties with
respect to its subject matter. THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL
EXECUTED BY BOTH PARTIES; JDE's EXECUTION IS VALID ONLY IF MADE BY AN AUTHORIZED
REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to execute
___________________________, 19___ this Agreement on behalf of Customer
J.D. EDWARDS & COMPANY CUSTOMER
By By /s/ J. C. DAIKER
________________________________ ______________________________
(Authorized Signature) (Authorized Signature)
/s/ J. C. DAIKER
________________________________ ______________________________
(Print or Type Name) (Print or Type Name)
EXECUTIVE V.P. - C.F.O.
_________________________________ _____________________________
(Title) (Title)
<PAGE>
J.D.EDWARDS LOGO 8055 E. Tufts Avenue
Denver, Colorado 80237
ADDENDUM TO MUTUAL NONDISCLOSURE AGREEMENT
CUSTOMER SIMMONS CORPORATION
ADDRESS One Concourse Parkway, N.E. Suite 600
Atlanta, Georgia 30328-5369
This Addendum is made by and between J.D. Edwards & Company ("JDE"), and
Customer in consideration of their mutual promises and subject to its Terms and
Conditions.
This Addendum amends the MUTUAL NONDISCLOSURE AGREEMENT, ("Agreement"), by and
between JDE and Customer by its Terms and Conditions.
The first (unnumbered) paragraph is amended by the addition of the following
language at the end of the third sentence thereof: "provided, however, that the
types of information contained on Exhibit I attached hereto shall be considered
Confidential Information of Simmons Company, without need of such marking."
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL
PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND
ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS ADDENDUM AND THE AGREEMENT. Notwithstanding anything to the contrary in
the Agreement, in the event of a conflict between the terms and conditions of
this Addendum and those contained within the Agreement, the terms and conditions
of this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies
and effective as of that signer is duly authorized to
execute this Agreement on behalf
_____________________________, 19____. of Customer.
J.D. EDWARDS & COMPANY CUSTOMER
/s/ J.C. DAIKER
_____________________________________ _________________________________
(Authorized Signature) (Authorized Signature)
/s/ J. C. DAIKER
_____________________________________ _________________________________
(Printed Name) (Printed Name)
EXECUTIVE V.P. - C.F.O.
_____________________________________ _________________________________
(Title) (Title)
<PAGE>
JDEdwards' E. Tufts Avenue
Colorado 80237
ADDENDUM TO SOFTWARE UPDATE AGREEMENT
CUSTOMER SIMMONS COMPANY
ADDRESS ONE CONCOURSE PARKWAY, N.E., SUITE 600
ATLANTA, GEORGIA 30328-5369
This Addendum is made by and between J.D. Edwards & Company ("JDE"), and
Customer in consideration of their mutual promises and subject to its Terms and
Conditions.
This Addendum amends the Software Update Agreement, ("Agreement"), by and
between JDE and Customer by its Terms and Conditions.
Section 6. PAYMENT. Subsection (A) is amended by the addition of the
-------
following:
"For a period of four (4) years from the execution of the Agreement, JDE agrees
to limit the increase on the total annual fee charged to Customer for Software
Updates on the currently Licensed Products, and/or JDE Software Applications
that would be licensed by Customer under this Agreement, to the lesser of ten
percent (10%) or the national rate of inflation for the preceding twelve (12)
consecutive month period as measured by the United States Bureau of Labor
Statistics for the National Consumer Price Index."
Section 8. ARBITRATION, is amended in accordance with Section 8. ARBITRATION, of
----------- -----------
the Addendum to the Software License Agreement.
Section 9. TERMINATION, is amended in accordance with Section 9. TERMINATION, of
----------- ------------
the Addendum to the Software License Agreement.
Section 10. LIMITED LIABILITY, is deleted and amended in accordance with
-----------------
Section 10 INDEMNIFICATION and Section 10.1 LIMITED LIABILITY of the Addendum
--------------- -----------------
to the Software License Agreement.
Section 11. GENERAL is deleted and amended in accordance with Section 11.
-------
GENERAL of the Addendum to the Software License Agreement.
- -------
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH SUPERSEDES ALL
PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER ORAL OR WRITTEN, AND
ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF
THIS ADDENDUM AND THE AGREEMENT. Notwithstanding anything to the contrary in
the Agreement, in the event of a conflict between the terms and conditions of
this Addendum and those contained within the Agreement, the terms and conditions
of this Addendum shall prevail. All other terms and conditions remain unchanged
and are ratified hereby.
THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND ACCEPTED BY
AN AUTHORIZED REPRESENTATIVE OF JDE AT ITS PRINCIPAL PLACE OF BUSINESS.
Accepted by J.D. Edwards & Company By execution, signer certifies that
and effective as of signer is duly authorized to execute
this Agreement on behalf of Customer.
___________________________,19____.
J.D. EDWARDS & COMPANY CUSTOMER
/s/ J.C. DAIKER
__________________________________ _____________________________________
(Authorized Signature) (Authorized Signature)
/s/ J. C. DAIKER
__________________________________ _____________________________________
(Printed Name) (Printed Name)
EXECUTIVE V.P. - C.F.O.
__________________________________ _____________________________________
(Title) (Title)
<PAGE>
EXHIBIT 1 TO THE MUTUAL NONDISCLOSURE AGREEMENT
The following information in any form (whether information of or concerning
Simmons Company or a subsidiary of Simmons Company) shall be considered
confidential, whether or not designated "confidential" or "proprietary".
o Products Manufactured by Simmons Company
o Processes used by Simmons Company
o Apparatus and maintenance of said apparatus of Simmons Company
o Research of Simmons Company
o Research programs of Simmons Company
o Computer Software of Simmons Company
o Manufacturing Techniques of Simmons Company
o Manufacturing processes of Simmons Company
o Program files of Simmons Company
o Developments for experimental work by Simmons Company
o Flow Charts of Simmons Company
o Drawings of Simmons Company
o Techniques of Simmons Company
o Source and executable code of Simmons Company
o Standards of Simmons Company
o Specifications of Simmons Company
o Improvements of Simmons Company
o Inventions of Simmons Company
o Customer lists of Simmons Company
o Sales Plans and sales and marketing information of Simmons Company
EXHIBIT 10.63
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Simmons Company, a Delaware corporation (the
"Company") and Zenon S. Nie (the "Executive"), dated as of the 15th day of
November, 1993.
1. Employment Period. The Company hereby agrees to continue the
-----------------
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the date hereof and ending on the third anniversary of such
date (the "Employment Period"); provided, however, that unless previously
terminated, the Employment Period shall be automatically extended so as to
terminate three years from each ensuing day, unless the Company shall give
notice to the Executive that the Employment Period shall not be so extended, in
which event the Employment Period shall terminate on the third anniversary of
such notice.
2. Terms of Employment. (a) Position and Duties. (i) Commencing
------------------- -------------------
on the date hereof and for the remainder of the Employment Period, the Executive
shall be Chief Executive Officer of the Company and shall have such duties,
responsibilities, and authority as shall be consistent therewith. Commencing on
January 1, 1994, the Executive shall be Chairman of the Board of Directors of
the Company. From and after the date hereof, the Executive shall serve on the
Company's Board of Directors.
(ii) During the Employment Period, and excluding any periods of
vacation, permitted leaves of absence and sick leave to which the Executive is
entitled, the Executive agrees to devote full attention and time, effort and
skill, to the business and affairs of the Company and to use the Executive's
best efforts to perform faithfully and efficiently such responsibilities, except
that Executive shall have the right to make passive investments in businesses or
entities not related to, and which do not directly or indirectly compete with,
the business of the Company and its subsidiaries.
(b) Compensation. (i) Base Salary. During the Employment Period,
------------ -----------
the Executive shall receive an annual base salary ("Annual Base Salary") of
$375,000. The Annual Base Salary shall be paid in accordance with the Company's
normal payroll practices. During the Employment Period, the Annual Base Salary
shall be reviewed (for purposes of increases only) by the Board of Directors
from time to time as they determine. Any increase in Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive under this
Agreement.
<PAGE>
(ii) Annual Bonus. In addition to Annual Base Salary, the
------------
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") based on the Company's achievement
of its annual financial plan approved by the Board of Directors as follows:
% of Plan Bonus as % of Salary
--------- --------------------
< 90 0
at least 90 but < 100 37.5
at least 100 but < 110 50
at least 110 but < 120 75
120 or more 100
To the extent that the percentage of plan achieved falls between the
amounts described above, the bonus as a percentage of salary shall be equitably
pro rated. Notwithstanding the foregoing, the Executive shall be entitled to a
bonus with respect to 1993 of $30,000 and a minimum bonus with respect to 1994
of 37.5% of his Annual Base Salary. Each such Annual Bonus shall be paid in
accordance with the Company's normal payroll practices, but in no event later
than April 1 of the respective years.
(iii) Stock Options. The Executive shall be granted on the date
-------------
hereof a nonqualified stock option to acquire 350,000 shares of the Company's
common stock at a price of $2.75 per share and will be granted no later than
April 30, 1994 an additional option to acquire 350,000 shares at a price equal
to the fair market value of the Company's Common Stock on December 31, 1993 as
determined by Houlihan, Lokey, Howard & Zukin (together, the "Options"). The
Options shall vest and become exercisable with respect to 20% of the shares
subject to the Options upon grant, and with an additional 20% vesting on each
anniversary of the date of grant. In the event of a Change of Control (as
defined below), all Options will vest immediately. For purposes of this
Agreement, a "Change of Control" means either (i) a sale of all of the stock or
substantially all of the assets of the Company whether by merger or otherwise,
or (ii) a transaction following which Merrill Lynch Capital Partners, Inc. and
its affiliates cease to be in the aggregate the largest stockholders of the
Company other than the Simmons Company Employee Stock Ownership Plan. The
Options shall be evidenced by one or more option agreements in substantially the
form attached hereto as Exhibit A.
------- --
-2-
<PAGE>
(iv) Savings and Retirement Plans. During the Employment
----------------------------
Period, the Executive shall be eligible to participate in all savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company.
(v) Welfare Benefit Plans. During the Employment Period, the
---------------------
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, and where applicable, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company. The Company shall provide the Executive
with term life insurance in an amount equal to four times his Annual Base
Salary.
(vi) Expenses. During the Employment Period, the Executive
--------
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred on behalf of the Company by the Executive, which expenses
shall be accounted for and evidenced in accordance with the Company's normal
policies.
(vii) Fringe Benefits. During the Employment Period, the
---------------
Executive shall be entitled to payment of dining and country club dues and
membership fees, and an automobile of his choice and and payment of related
expenses.
(viii) Vacation. During the Employment Period, the Executive
--------
shall be entitled to four weeks of paid vacation.
3. Termination of Employment. (a) Death or Disability. The
------------------------- -------------------
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 8(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive
-3-
<PAGE>
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the continued failure of the Executive to perform substantially
the Executive's duties with the Company, after a written demand for
substantial performance is delivered to the Executive by the Board which
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in felonious illegal
conduct or gross misconduct or other conduct materially injurious to the
Company, or
(iii) a material breach of this Agreement; which is not cured by the
Executive within a reasonable period after the Company has provided him
with notice of such breach.
(c) Good Reason. The Executive's employment may be terminated by the
-----------
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties materially
inconsistent with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 2(a) of this Agreement, or any other action by
the Company which results in a material diminution in such position,
authority, duties or responsibilities, excluding for this purpose an action
not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(ii) any material failure by the Company to comply with any of the
provisions of Section 2(b) of this Agreement, other than a failure not occurring
in bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) any material breach of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
---------------------
or by the Executive for Good Reason, shall
-4-
<PAGE>
be communicated by Notice of Termination to the other party hereto given in
accordance with Section 8(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provided a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
The failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
-------------------
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
4. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other Than for Cause, Death or Disability.
------------------------------------------------------
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay to the Executive the aggregate of the
following amounts:
A. within 30 days after the Date of Termination, the sum of (1)
the Executive's Annual Base Salary through the Date of Termination to
the extent not theretofore paid, (2) a pro rata Annual bonus for the
year in which the Date of Termination occurs based on the Company's
annualized actual performance, (3) any compensation previously
deferred by the Executive (together with any accrued interest or
earnings thereon) to the extent not theretofore paid and (4) any
expenses for dining and country club
-5-
<PAGE>
dues and membership fees described in Section 2(b) (vii) that have
been incurred before the Date of Termination and cannot be eliminated
by resignation promptly following the Date of Termination (the sum of
the amounts described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. Executive's Annual Base Salary for three years after the
Date of Termination payable when Annual Base Salary would have been
paid if the Executive were still employed by the Company;
(ii) all Options shall become immediately exercisable and vested;
(iii) for three years after the Executive's Date of Termination, the
Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 2(b) (v) of this Agreement if the Executive's employment had not
been terminated;
(iv) the Company shall, at its sole expense as incurred, provide the
Executive with outpatient services the scope and provider of which shall be
selected by the Executive in his sole discretion provided that the total
cost of such services shall not exceed fifteen percent of the Annual Base
Salary as in effect immediately before the Date of Termination;
(v) until the later of (A) the third anniversary of the Date of
Termination or the expiration of the lease of the automobile provided
pursuant to Section 2(b) (vii) or (B) the 180th day after the Date of
Termination, the Company shall continue to provide such automobile and pay
the related expenses; and
(vi) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is entitled to
receive under any plan, program, policy or practice or contract or
agreement of the Company (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of
-----
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under
-6-
<PAGE>
this Agreement, other than for (i) payment of Accrued Obligations, (ii) the
timely payment or provision of Other Benefits and (iii) for six (6) months after
the Executive's death, the continuation of benefits to the Executive's family at
least equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Section 2(b) (v) of
this Agreement if the Executive's employment had not been terminated. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
(c) Disability. If the Executive's employment is terminated by
----------
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for (i) payment of Accrued Obligations,(ii) the timely payment or provision
of Other Benefits, and (iii) to the extent not provided through Other Benefits,
cash disability benefits from the Disability Effective Date through the date on
which the Executive would attain the age of 65 equal, on an annualized basis, to
66-2/3 percent of the Executive's Annual Base Salary as in effect immediately
before the Disability Effective Date. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
(d) Cause, Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (x) his Annual base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Executive, together with any accrued interest or earnings thereon, and (z) Other
Benefits, in each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits. In such case, all Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. Upon a termination of the Executive's employment for Cause by
the Company or by the Executive without Good Reason, the Executive shall forfeit
all Options that are not vested on the Date of Termination.
5. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company and for which the Executive
may
-7-
<PAGE>
qualify. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
6. Confidential Information and Noncompetition.
-------------------------------------------
(a) The Executive recognizes and acknowledges that all information
pertaining to the affairs, business, clients, customers or other relationships
of the Company is confidential and is a unique and valuable asset of the
Company. Access to and knowledge of this information are essential to the
performance of the Executive's duties under this Agreement. The Executive will
not during the Employment Period, except to the extent reasonably necessary in
the performance of the duties under this Agreement, or after the Employment
Period, give to any person, firm, association, corporation or governmental
agency any information concerning the affairs, business, clients, customers or
other relationships of the Company except (i) as required by law, (ii) if and
to the extent reasonable or necessary (including to employees and agents of the
Company), to perform his duties hereunder, and (iii) in the event such
information becomes publicly available other than as a result of Executive's
breach of this Section 6(a). The Executive will not make use of this type of
information for his own purposes or for the benefit of any person or
organization other than the Company. The Executive will also use his best
efforts to prevent the disclosure of this information by others. All records,
memoranda, and other information or materials relating to the business of the
Company (whether created by the Executive or otherwise coming into his
possession) are confidential and will remain the property of the Company.
(b) The Executive agrees that during the Employment Period and (i) in
the case of a termination of the Executive's employment for Cause, for the
period of twelve (12) months following the Date of Termination and (ii) in the
case of any other termination of the Executive's employment with the Company,
for the period of thirty-six months following such termination (the
"Noncompetition Period"), he will not engage in any activity that is competitive
in any material respect with the business conducted by, or that would have an
adverse impact on the business or prospects of, the Company or, to the extent
that any affiliate or associate of the Company is engaged in the business of the
Company, the business or prospects of any affiliate or associate of the Company.
Such prohibited activity shall include, but not be limited to, any management,
ownership or distribution
- 8 -<PAGE>
activity connected with or related to any business engaged in by the Company.
The Executive will not, during such period, solicit any members of the then-
current customers or suppliers of the Company. During the Noncompetition Period,
the Executive shall not, and shall cause any person or entity with which he is
affiliated not to, solicit or induce, or attempt to solicit or induce, any
employee of the Company or any of its subsidiaries to leave the employment of
the Company or of any of its subsidiaries to work for the Executive or any
person or entity with which he is affiliated. During the Noncompetition Period,
the Executive shall not, and shall cause any person or entity with which he is
affiliated not to, solicit or induce, or attempt to solicit or induce, any
person who was employed by the Company or any of its subsidiaries on a full-time
basis during the 90 days immediately prior to the termination of the Executive's
employment to accept employment with the Executive or with any person or entity
with which he is affiliated.
(c) The Company's obligations under the terms of this Agreement will
cease upon any violation of the provisions of this Section 6 by the Executive.
(d) The parties desire that the provisions of this Section 6 be
enforced to the fullest extent permissible under the laws and public policies
applied in the jurisdictions in which enforcement is sought. If any portion of
this Section 6 is judged to be invalid or unenforceable, this Section 6 will be
deemed to be amended to the extent necessary to ensure that this Section 6 will
be enforceable to the maximum extent permissible under applicable law.
7. Successors. (a) This Agreement is personal to the Executive
----------
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which
- 9 -<PAGE>
assumes and agrees to perform this Agreement by operation of law, or otherwise.
8. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
-------------------
Zenon S. Nie
8490 Sentinae Chase Drive
Roswell, Georgia 30076
If to the Company:
-----------------
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or
- 10 -<PAGE>
any other provision of this Agreement or the failure to assert any right the
Executive or the Company may have hereunder shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Company agrees to reimburse the Executive for all reasonable
legal fees incurred by him in the negotiation and preparation of this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
ZENON S. NIE
_____________________
SIMMONS COMPANY
By __________________
- 11 -<PAGE>
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
--------------------
This AMENDMENT NO. 1 dated as of October 5, 1995, to that certain
---------
Employment Agreement by and between Simmons Company, a Delaware corporation (the
"Company") and Zenon S. Nie (the "Executive"), dated as of the 15th day of
November, 1993 (the "Agreement").
The Agreement is hereby amended to the extent set forth below. All other
provisions of the Agreement shall remain in full force and effect.
A. "3. Termination of Employment. (a) Death or Disability" is hereby
------------------------- -------------------
amended in its entirety to read as follows:
"The Executive's employment shall terminate automatically upon the
Executive's death during the Employment Period. If the Company
determines in good faith that a Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written
notice in accordance with Section 8(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the inability of the Executive to perform as
an executive officer on a pert-time or full-time basis for 180 days
within any twelve (12) month period as a result of mental or physical
illness or due to an accident or accidents, and which incapacity is
determined by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative."
B. A new subsection 2(c) is hereby added to "Section 2. Terms of
--------
Employment" to read in its entirety as follows:
- ----------
(c) Relocation. The Executive shall not be required to relocate more
----------
than seventy-five (75) miles from the Atlanta, Georgia metropolitan
area; provided, however,
<PAGE>
that the Executive shall be required to travel as the reasonable needs
of the business requires.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused this
Amendment to be executed in its name on its behalf, all as of the day and year
first above written.
ZENON S. NIE
/s/ Zenon S. Nie
_____________________
SIMMONS COMPANY
/s/ Ken Barton
By: _________________
EXHIBIT 23.1
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4
(File No. 333-04841) of Simmons Company of our report, dated March 13, 1996,
except for Notes 8 and 15 which are as of March 22, 1996, which includes an
explanatory paragraph discussing the acquisition of the Company, on our audit of
the consolidated financial statements of Simmons Company and subsidiaries as of
December 30, 1995 and for the year then ended. We also consent to the reference
to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Atlanta, Georgia
July 30, 1996
EXHIBIT 23.2
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we agree to the inclusion in this
Registration Statement on Form S-4 of Simmons Company and Subsidiaries of our
report dated March 17, 1995 (except with respect to Notes 6 and 14 which are as
of May 4, 1995 [not presented herein]) related to the financial statements of
the Simmons Company and Subsidiaries as of and for the years ended December 31,
1994 and 1993. It should be noted that we have not audited any financial
statements of the Company subsequent to December 31, 1994 or performed any audit
procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Atlanta, Georgia
July 30, 1996
