<PAGE>
As filed with the Securities and Exchange Commission on April 21, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
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>
Delaware 2512 06-1007444
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification Number)
of incorporation or
organization)
</TABLE>
----------------
One Concourse Parkway
Atlanta, Georgia 30328
(770) 512-7700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
Jonathan C. Daiker
Simmons Company
One Concourse Parkway
Atlanta, Georgia 30328
(770) 512-7700
(Address, including zip code, and telephone number, including area code, of
agent for service)
----------------
copy to:
<TABLE>
<S> <C>
Lauren I. Norton, Esq. Lizanne Thomas, Esq.
Patrick O'Brien, Esq. Jones, Day Reavis & Pogue
Ropes & Gray 3500 SunTrust Plaza
One International Place 303 Peachtree Street, N.E.
Boston, Massachusetts 02110 Atlanta, Georgia 30308-3242
(617) 951-7000 (404) 521-3939
</TABLE>
----------------
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. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [_]
<TABLE>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of each Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit(1) Offering Price Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/4% Series B Senior
Subordinated Notes due 2009.... $150,000,000 100% $150,000,000 $41,700
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the Registration Fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933 based upon
the book value of the Notes as of April 21, 1999.
----------------
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, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated April , 1999
PROSPECTUS
[LOGO OF SIMMONS COMPANY APPEARS HERE]
Simmons Company
Offer to Exchange All Outstanding
10 1/4% Senior Subordinated Notes Due 2009
($150,000,000 Aggregate Principal Amount Outstanding)
for
10 1/4% Series B Senior Subordinated Notes Due 2009
We are offering to exchange our 10 1/4% Series B Senior Subordinated Notes due
2009, the exchange notes, for all of our outstanding 10 1/4% Senior
Subordinated Notes due 2009, the notes. We are making this exchange offer on
the terms and conditions set forth in this prospectus and the accompanying
letter of transmittal. We have registered the exchange notes under the
Securities Act of 1933 but we have not registered the notes. The form and terms
of the exchange notes and the notes are identical in all material respects,
except for transfer restrictions and registration rights relating to the notes.
We will accept for exchange all outstanding notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on , 1999, unless we
extend this exchange offer. Although our offer is subject to certain customary
conditions, it is not conditioned upon any minimum principal amount of notes
being tendered for exchange.
Information about the exchange notes:
. The exchange notes will mature on March 15, 2009.
. We will pay interest on the exchange notes every six months on March 15
and September 15.
. We may redeem the exchange notes at any time after March 15, 2004.
. Before March 15, 2002, we may redeem up to 35% of the aggregate principal
amount of the exchange notes with the net proceeds of certain public
offerings of common equity by us or our parent corporation.
. If we sell certain assets or experience specific kinds of changes in
control, we must offer to repurchase all or a portion of the exchange notes.
. The exchange notes are subordinated to all of our current and future
indebtedness (other than trade payables), except indebtedness that expressly
provides otherwise.
We will not receive any proceeds from the issuance of the exchange notes. We
will pay all the expenses incurred by us in connection with this exchange offer
and issuance of the exchange notes.
You should carefully review the "Risk Factors" beginning on page 18 in
connection with this exchange offer and an investment in the exchange notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of our offer of the exchange notes or
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is , 1999
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements regarding, among other
things, our plans, strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations reflected in or
suggested by these forward-looking statements are reasonable, we can give no
assurance that we will achieve or realize these plans, intentions or
expectations. Forward-looking statements are inherently subject to risks,
uncertainties and assumptions. Important factors that could cause actual
results to differ materially from the forward-looking statements we make in
this prospectus are set forth below under the caption "Risk Factors" and
elsewhere in this prospectus. We expressly qualify all forward-looking
statements attributable to us or persons acting on our behalf in their entirety
by these cautionary statements. We will not update these forward-looking
statements even though our situation will change in the future.
----------------
This exchange offer is not being made to, and we will not accept surrenders
for exchange from, holders of the outstanding notes in any jurisdiction in
which the exchange offer or its acceptance would not comply with the securities
or blue sky laws of that jurisdiction.
All resales must be made in compliance with state securities or blue sky
laws. This compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
----------------
TRADEMARKS AND TRADENAMES
SIMMONS(R), BEAUTYREST(R), BACKCARE(R), CONNOISSEUR COLLECTION(R) and
MAXIPEDIC(R) are federally registered United States trademarks and are the
property of Simmons Company or its subsidiaries. POCKETED COIL(TM) and FIVE
ZONES FOR YOUR BONES(TM) are also trademarks owned by Simmons Company.
i
<PAGE>
SUMMARY
This summary contains basic information about Simmons and it likely does not
contain all the information regarding Simmons that is important to you. You
should read the more detailed information and financial statements, including
the accompanying notes, appearing elsewhere in this prospectus before making an
investment decision. References in this prospectus to "Simmons", the "Company",
"our Company", "we" and "us" refer collectively to Simmons Company and its
wholly-owned subsidiaries, unless otherwise indicated. All references in this
prospectus to a fiscal year or a year refer to the 52 or 53 weeks ended on the
last Saturday in December of the year referenced. Unless otherwise indicated,
we have based all references to industry or market data upon information
compiled and published by the International Sleep Products Association ("ISPA")
and we have based all references to market share data upon information
published in issues of Furniture/Today(R).
Simmons Company
Founded in 1871, Simmons is a leading manufacturer and distributor of
premium branded bedding products in the United States and the world leader in
Pocketed Coil(TM) innerspring technology. We manufacture and license a broad
range of mattresses and related sleep products under well-recognized brand
names including:
. Simmons(R)
. Beautyrest(R)
. BackCare(R)
. Connoisseur Collection(R)
. Maxipedic(R)
Our Beautyrest(R) line has been our flagship product since its introduction
in 1925. While we provide a full range of conventional bedding products, we
focus on higher-end market segments, emphasizing retail price points from $699
to $2,999 per queen set. In 1998, we derived approximately 54% of our net sales
from products sold at these price points which we believe offer more attractive
growth prospects and higher gross margins than lower-end products. For the year
ended December 26, 1998, we generated:
. net sales of $600.8 million, an increase of 9.2% over 1997; and
. Adjusted EBITDA of $62.3 million, an increase of 6.6% over 1997.
We believe that our net sales combined with the sales of third party
licensees make Simmons(R) the largest selling bedding products brand in the
world.
We sell to a diversified nationwide base of over 2,700 customers,
representing more than 5,500 retail outlets. We support our sales to furniture
stores, specialty sleep shops, department stores and warehouse showrooms with
significant local and national brand advertising and promotional spending as
well as extensive customer support services. We operate 18 strategically
located manufacturing facilities across the United States and in Puerto Rico.
Unlike most of our competitors, which operate as associations of independent
licensees, we are one of two national industry participants that operates each
of its manufacturing facilities, allowing us greater quality control and
standardization of best manufacturing practices.
Since 1995, we have invested approximately $28 million in re-engineering our
manufacturing operations and updating our information systems to improve our
cost structure, manufacturing productivity and operational controls. We believe
our substantial annual research and development investments enable us to be an
industry
1
<PAGE>
leader in the development of innovative and new products. In summary, we
believe that our national distribution, extensive brand advertising, customer
support services and captive manufacturing create significant advantages over
smaller regional manufacturers as well as those national competitors that
operate as associations of independent licensees. Our business plan will be
executed by an experienced and proven senior management team averaging over 19
years of experience in the bedding industry and led by Chairman, Chief
Executive Officer and President Zenon Nie.
Industry Overview
The domestic wholesale bedding industry generated sales of over $3.8 billion
in 1998. Although fragmented with approximately 800 manufacturers, the industry
is mature and stable, and has enjoyed a long track record of consistent growth
and profitability.
Consistent Growth. From 1978 to 1998, the domestic wholesale bedding
industry experienced a compound annual growth rate of 6.6%, with sales volumes
increasing in all but one of those 20 years. Similarly, average unit selling
prices increased every year over the same period and grew at an annual compound
rate of 3.6%. In addition, we believe the bedding industry offers attractive
growth prospects to larger, well-positioned competitors like us that have the
ability to offer differentiated, branded products, effective national and
regional promotion, just-in-time product delivery and significant levels of
customer support services.
Stability and Profitability. In each year since 1986, the bedding industry
has demonstrated highly consistent gross margins ranging between 29% and 32%.
We attribute this consistent profitability to the high variable cost structure
of the manufacturing process and the high retail margins associated with
bedding products relative to other products. Bedding manufacturing is largely
an assembly operation with raw materials and labor accounting for approximately
80% of total cost of goods sold. In addition, bedding products are generally
manufactured to order. Bedding also offers an estimated 45% gross margin to
retailers as well as some of the highest sales per square foot and return on
inventory of all retail furniture products. Consequently, even in circumstances
of fluctuating demand, bedding manufacturers are able to control inventory
levels and variable costs while retailers continue to promote strongly sales of
bedding products. Finally, the stability of the bedding market is further
supported by the fact that over 70% of bedding sales result from replacement
purchases.
Favorable Demographics. In recent years, favorable demographic trends have
supported industry growth across all bedding price points. In particular, we
believe that Simmons will benefit from the increased demand for larger sized
(queen and king) and higher priced, premium bedding. In 1997, king and queen
sized bedding accounted for 39% of wholesale bedding sales, compared to 30% in
1990. We believe the key demographic trends driving this growth for larger
sized, premium bedding products include:
. the rapidly growing 45-64 year old population category, a group with
higher levels of disposable income and which historically has been more
likely to purchase premium bedding;
. the increasing consumer awareness of the health-related benefits of
proper rest; and
. the increasing number and size of bedrooms in homes.
Competitive Strengths
Consumers generally have limited knowledge of specific bedding products and,
on average, shop for bedding only once every seven to eight years. As a result,
consumers rely heavily on brand awareness and the retail salesperson in making
their purchase decision. We believe that the most successful bedding
2
<PAGE>
manufacturers are those that are best able to meet retailers' needs by offering
broad, differentiated product lines with recognizable brand names and
substantial sales force product education programs, as well as strong marketing
and customer support services. We believe that the following competitive
strengths are the principal success factors underlying our position as a leader
in the bedding products industry:
Superior Brand Recognition. We enjoy strong brand recognition through our
well-established brand names, including: Simmons(R), Beautyrest(R),
BackCare(R), Connoisseur Collection(R) and Maxipedic(R). We believe the
strength of our brands is an important factor in maintaining existing and
establishing new retail and end-user customers. We also continue to seek to
strengthen our brand recognition through national advertising, such as our
award-winning "Do Not Disturb" campaign. We believe that the consolidation of
the bedding industry will continue to favor strong branded companies such as
ours, as many retailers are focusing on promoting leading brands while reducing
their number of suppliers.
Strong Competitive Positioning. We believe we are well-positioned for
continued profitability and growth due to our premium product focus,
recognizable brand names and reputation for innovation and quality, all of
which have contributed to our strong market share. Our emphasis on premium,
name brand products, such as Beautyrest(R), BackCare(R) and Connoisseur
Collection(R), enables us to take advantage of the current demographic trends
driving demand for larger sized, higher priced premium bedding products which
typically carry a higher margin. Our product positioning emphasizes retail
price points from $699 to $2,999 per queen set. While approximately one-half of
our net sales is derived from beds priced in this range, industry-wide sales in
this same price range amount to approximately one-third of total sales. As a
result of our focus on premium bedding, our gross margin in 1998 was
approximately 42% compared to an industry average of 32% in recent years.
High Quality and Diverse Customer Base. Our reputation for high quality
products, innovation and customer service, together with the highly attractive
retail margins associated with bedding products, has enabled us to establish a
strong nationwide customer base. Our current customer base represents over
5,500 retail outlets, and we have had on average a 27 year relationship with
our top 10 customers. Our 2,700 customers reflect our significant presence in
all major bedding distribution channels, including furniture stores, specialty
sleep shops, department stores and warehouse showrooms. We believe our
extensive customer support programs, which include cooperative local
advertising, merchandising and marketing assistance and customer sales staff
training and incentive programs, are the key to maintaining our strong customer
relationships.
Focused Research and Development. In order to maintain and improve our
strong industry position, we invest substantially in developing new products,
enhancing existing products and improving our operating processes. For example,
we developed our BackCare(R) product line to address consumer demand for
products in the health conscious segment of the bedding market. BackCare(R) is
quickly gaining market acceptance. We believe that our strong research and
development capabilities will enable us to continually introduce new and
innovative products and product improvements and further enhance our retail
customer relationships. We also seek to reduce costs and improve productivity
by continually developing more efficient manufacturing and distribution
processes.
Experienced Management Team with Exceptional Track Record. Since 1993,
industry veteran and Simmons Chairman, Chief Executive Officer and President,
Zenon Nie, has led a highly experienced management team with exceptional sales,
marketing and manufacturing expertise. Our top 11 executive officers have over
210 years of combined experience in the bedding industry and over 150 years of
combined experience with Simmons and are highly focused on increasing sales as
well as profitability. From 1994 to 1998, our management team:
. achieved sales growth of 8.1% versus an industry average growth rate of
6.1%;
. improved our gross margin from 38.7% to 41.9%; and
. increased our Adjusted EBITDA margin from 8.3% to 10.4%.
3
<PAGE>
Business Strategy
Continue to Build Brand Equity. We plan to continue to support and leverage
our significant brand equity. Brand recognition is critical in the bedding
industry, in which strong brand names influence both customer preferences and
retailer floor space allocation. Our regional promotional and national
advertising programs are targeted to increase sales of our core Beautyrest(R)
and BackCare(R) product lines. In particular, we have recently followed our
award-winning "Do Not Disturb" advertising campaign with a sequel commercial
entitled "Leap of Faith" to support the Beautyrest(R) line and we recently
launched our "Five Zones For Your Bones" campaign to provide first time
national marketing support for our BackCare(R) line. We believe that such
consistent investments in our brands will result in continued growth.
Enhance Customer Base. We have a targeted sales and marketing campaign
directed at increasing the profitability and size of our customer base. We
continuously analyze and rationalize our account base to ensure that both
existing and new customer opportunities meet our profitability guidelines. For
example, in the spring of 1997, we decided to end our supply relationship with
Mattress Discounters, Inc. because it no longer met our minimum profit
requirements. We believe that our ability to attract new customers is primarily
attributable to our highly effective advertising campaigns, superior levels of
customer service and extensive customer support programs. Through our
approximately 200 direct sales representatives, we have targeted a significant
number of potential new accounts with the objective of profitably increasing
our revenues and market share. In particular, we intend to target certain
national specialty sleep shops, the fastest growing retail bedding distribution
channel.
Strengthen Current Customer Relationships. We are focused on increasing
sales to existing accounts by introducing new and innovative products,
emphasizing more profitable product lines and continually enhancing customer
support services. We believe that our product lines are among our retail
customers' most profitable products and that our customers typically allocate a
significant share of floor space to Simmons(R) products. To continue to
strengthen our customer relationships, we will continue to invest in and
improve our extensive customer support programs, which include cooperative
local advertising, merchandising assistance and customer sales staff training
and incentive programs.
Improve Operating Productivity and Efficiency. We intend to continue to
invest in focused programs to reduce costs and improve productivity and
operating efficiencies. We have largely completed initiatives that we began in
1995 to re-engineer our manufacturing processes and to upgrade our information
systems. These initiatives have contributed to the increase in our Adjusted
EBITDA margin from 8.6% in 1995 to 10.4% in 1998. Our productivity enhancement
initiatives were implemented in eleven of our 18 manufacturing facilities as of
the end of 1998. Our average manufacturing productivity, measured by pieces per
person-hour, increased approximately 8.0% between 1995 and 1998. We expect to
realize additional operating efficiencies and cost savings in the near term as
these programs are completed.
Pursue Selected Complementary Acquisitions. We regularly evaluate potential
acquisition opportunities to support and strengthen our business. In general,
we intend to explore acquisitions in order to broaden our product lines and
geographic distribution and achieve additional operating efficiencies. We have
no agreements with respect to any particular acquisition or joint venture at
this time.
4
<PAGE>
Fenway Partners
Founded in 1994, Fenway Partners, Inc. is a New York-based private
investment firm dedicated to building long-term value through direct investment
in leading middle market companies. The firm manages over $1.3 billion of
capital raised over two funds. Fenway focuses on acquiring companies, in
partnership with management, with established franchises, meaningful market
share and strong brands with significant opportunities for growth. Fenway
provides management with strategic guidance and the necessary resources to
exploit these opportunities and to improve the operating and financial
performance of their businesses. In addition to supporting sales and earnings
growth through improvements in core operations, Fenway's portfolio companies
also realize growth through selective strategic add-on acquisitions. Fenway's
current investments include Aurora Foods, Inc., Central Tractor Farm & Country,
Inc., Delimex Holdings, Inc., Decorative Concepts, Inc., New Creative
Enterprises, Inc., Iron Age Corporation, FNX Limited, MW Windows Inc. and Blue
Capital Management. Fenway's investment in Simmons is its largest single
investment to date.
The Transactions
On October 29, 1998, we and our parent company Simmons Holdings, Inc.
("Simmons Holdings"):
(1) consummated the Merger and the ESOP Repurchase (each as defined
below) in which, among other things, Simmons Holdings, LLC ("Fenway
Investment LLC"), an entity controlled by funds managed by Fenway and other
investors associated with Fenway (the "Fenway Funds"), acquired
approximately 75.1% of the outstanding shares of Simmons Holdings, and
members of our management, our Employee Stock Ownership Trust (the "Simmons
ESOP") and affiliates of or investors arranged by INVESTCORP S.A. retained
5.9%, 13.7% and 5.3%, respectively, of the outstanding shares of Simmons
Holdings;
(2) placed funds in escrow for the redemption for cash (the
"Redemption") of all of the Previously Existing Notes (as defined below),
which Redemption was subsequently completed;
(3) effected a refinancing (the "Refinancing") by entering into and
borrowing under the New Senior Credit Agreement (as defined below) and
repaying indebtedness outstanding under our Previous Credit Agreement (as
defined below);
(4) entered into a bridge loan agreement in which West Street Fund I,
L.L.C., an affiliate of Goldman Sachs ("West Street"), and UBS A.G.,
Stamford Branch ("UBS"), an affiliate of Warburg Dillon Read, provided
bridge loans in an aggregate principal amount of $75.0 million (the "Senior
Bridge Financing"); and
(5) entered into a securities purchase agreement with Fenway Investment
LLC under which we issued junior subordinated notes (the "Junior Simmons
Notes") in an aggregate principal amount of $30.0 million and Simmons
Holdings issued junior subordinated notes (the "Junior Holdings PIK Notes")
in an aggregate principal amount of $10.0 million (collectively, the
"Junior Bridge Financing"). We have accounted for the Merger as a
recapitalization. We collectively refer to the Merger, the ESOP Repurchase,
the Redemption, the Refinancing, the Senior Bridge Financing, the Junior
Bridge Financing and issuance of certain warrants described below as the
"Transactions".
5
<PAGE>
The Original Offering
On March 16, 1999, we sold the notes in a transaction exempt from the
registration requirements of the Securities Act, the original offering. As set
forth in the table below, we used the proceeds from the original offering to:
(1) repay the indebtedness represented by the Senior Bridge Financing,
the Junior Simmons Notes and accrued interest;
(2) repay the amounts outstanding under our revolving credit facility
under the New Senior Credit Agreement;
(3) prepay a portion of the amounts outstanding under our term loan
facility under the New Senior Credit Agreement and accrued interest; and
(4) pay expenses incurred in connection with the original offering.
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C>
Sources:
Proceeds of the original offering........................ $150.0
Uses:
Repayment of Senior Bridge Financing..................... 75.4
Repayment of Junior Simmons Notes........................ 31.1
Repayment of revolving credit facility................... 15.0
Prepayment of portion of term loan facility.............. 23.7
Fees and expenses of the original offering............... 4.8
------
Total.................................................. $150.0
======
</TABLE>
See "The Transactions and the Original Offering", "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources".
6
<PAGE>
The Exchange Offer
The exchange offer relates to the exchange of up to $150,000,000 aggregate
principal amount of our outstanding 10 1/4% Senior Subordinated Notes due 2009
for an equal aggregate principal amount of our new 10 1/4% Series B Senior
Subordinated Notes due 2009. The exchange notes will be obligations of Simmons
entitled to the benefits of the indenture governing the outstanding notes.
Registration Rights You are entitled to exchange your notes for
Agreement.................. exchange notes with terms that are identical in
all material respects. The exchange offer is
intended to satisfy these rights. After the
exchange offer is complete, you will no longer be
entitled to the benefits of the exchange or
registration rights granted under the
registration rights agreement which we entered
into as part of the original offering.
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of exchange notes which have been
registered under the Securities Act for each
$1,000 principal amount of notes which were
issued on March 16, 1999 in a transaction exempt
from registration under the Securities Act in
accordance with Rule 144A. Each of your notes
must be properly tendered and accepted in order
to be exchanged. We will exchange all notes that
are properly tendered and not validly withdrawn.
As of this date, there are $150,000,000 in
aggregate principal amount of notes outstanding.
We will issue the exchange notes on or promptly
after the expiration of the exchange offer.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, unless we decide
to extend the exchange offer.
Conditions to the Exchange The exchange offer is subject to the condition
Offer...................... that it does not violate applicable law or staff
interpretations of the Commission. If we
determine that applicable federal law does not
permit the exchange offer, we may terminate the
offer. The exchange offer is not conditioned upon
any minimum principal amount of notes being
tendered. The holders of notes have rights under
the registration rights agreement should we fail
to consummate the exchange offer.
Resale of the Exchange Based on an interpretation by the staff of the
Notes...................... Commission set forth in no-action letters issued
to third parties, we believe that you may offer
for resale, resell or otherwise transfer without
compliance with the registration and prospectus
delivery provisions of the Securities Act the
exchange notes in exchange for your notes,
provided that:
. you are acquiring the exchange notes in the
ordinary course of business;
. you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate,
7
<PAGE>
in the distribution of the exchange notes issued
to you pursuant to the exchange offer;
. you are not a broker-dealer who purchased your
outstanding notes directly from us for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act; and
. you are not an "affiliate" of ours within the
meaning of Rule 405 under the Securities Act.
If our belief is inaccurate and you transfer any
exchange note issued to you pursuant to the
exchange offer in violation of the prospectus
delivery provisions of the Securities Act or
without an exemption from registration, you may
incur liability under the Securities Act. We do
not assume, or indemnify you against, any such
liability.
Each broker-dealer to which we issue exchange
notes pursuant to the exchange offer for its own
account in exchange for notes which such broker-
dealer acquired as a result of market-making or
other trading activities must acknowledge that it
will deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resale of such exchange notes. The
letter of transmittal states that a broker-dealer
who makes this acknowledgment and delivers such a
prospectus will not be deemed to admit that it is
an "underwriter" within the meaning of the
Securities Act. A broker-dealer may use this
prospectus for an offer to resell, resale or
other retransfer of the exchange notes issued to
it pursuant to the exchange offer. We have agreed
that, for a period of one year after the date
that we complete the exchange offer, we will make
this prospectus and any amendment or supplement
to this prospectus available to any such broker-
dealer for use in connection with any such
resales. We believe that no registered holder of
the outstanding notes is an affiliate of Simmons
within the meaning of Rule 405 under the
Securities Act.
We are not offering to, nor will we accept
surrenders for exchange from, holders of
outstanding notes in any jurisdiction in which
the exchange offer or its acceptance would not
comply with the securities or blue sky laws of
such jurisdiction. Furthermore, persons who
acquire the exchange notes are responsible for
compliance with these securities or blue sky laws
regarding resales. We assume no responsibility
for compliance with these requirements.
Accrued Interest on the
Exchange Notes and the
Outstanding Notes..........
Each exchange note will bear interest from its
issuance date. The holders of notes that we
accept for exchange will receive, in cash,
accrued interest on such notes to, but not
including, the issuance date of the exchange
notes. We will pay such interest with the first
interest payment on the exchange notes. Interest
on the notes accepted for exchange will cease to
accrue upon issuance of the
8
<PAGE>
exchange notes. Consequently, those holders who
exchange their outstanding notes for exchange
notes will receive the same interest payment on
September 15, 1999 (the first interest payment
date with respect to the notes and the exchange
notes to be issued pursuant to the exchange
offer) that they would have received had they not
accepted the exchange offer.
Procedures for Tendering If you wish to tender your notes for exchange
Notes...................... pursuant to the exchange offer, you must transmit
to SunTrust Bank, Atlanta, as exchange agent, on
or prior to the expiration date, either:
. a properly completed and duly executed copy of
the letter of transmittal accompanying this
prospectus, or a facsimile of such letter of
transmittal, together with your outstanding
notes and any other documentation required by
such letter of transmittal, at the address set
forth on the cover page of the letter of
transmittal; or
. if you are effecting delivery by book-entry
transfer, a computer-generated message
transmitted by means of the Automated Tender
Offer Program System of The Depository Trust
Company in which you acknowledge and agree to
be bound by the terms of the letter of
transmittal and which, when received by the
exchange agent, forms a part of a confirmation
of book-entry transfer.
In addition, you must deliver to the exchange
agent on or prior to the expiration date:
. if you are effecting delivery by book-entry
transfer, a timely confirmation of book-entry
transfer of your outstanding notes into the
account of the exchange agent at The Depository
Trust Company pursuant to the procedures for
book-entry transfers described in this
prospectus under the heading "The Exchange
Offer--Procedures for Tendering" or
. if necessary, the documents required for
compliance with the guaranteed delivery
procedures described in this prospectus under
the heading "The Exchange Offer--Guaranteed
Delivery Procedures".
By executing and delivering the accompanying
letter of transmittal or effecting delivery by
book-entry transfer, you are representing to us
that, among other things:
. the person receiving the exchange notes
pursuant to the exchange offer, whether or not
such person is the holder, is receiving them in
the ordinary course of business;
. neither the holder nor any other person has an
arrangement or understanding with any person to
participate in the distribution of such
exchange notes and that such holder is not
engaged in, and does not intend to engage in, a
distribution of the exchange notes; and
9
<PAGE>
. neither the holder nor any other person is an
"affiliate" of ours within the meaning of Rule
405 under the Securities Act.
Special Procedures for
Beneficial Owners..........
If you are a beneficial owner of notes and your
name does not appear on a security listing of The
Depository Trust Company as the holder of such
notes or if you are a beneficial owner of notes
that are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender such notes in the
exchange offer, you should promptly contact the
person in whose name your notes are registered
and instruct such person to tender on your
behalf. If you, as a beneficial holder, wish to
tender on your own behalf you must, prior to
completing and executing the letter of
transmittal and delivering your outstanding
notes, either make appropriate arrangements to
register ownership of the outstanding notes in
your name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time.
Guaranteed Delivery If you wish to tender your notes and time will
Procedures................. not permit the letter of transmittal or any of
the documents required by the letter of
transmittal to reach the exchange agent by the
expiration date, or the procedure for book-entry
transfer cannot be completed on time or
certificates for your notes cannot be delivered
on time, you may tender your notes pursuant to
the guaranteed delivery procedures described in
this prospectus under the heading "The Exchange
Offer--Guaranteed Delivery Procedures".
Shelf Registration If any changes in law or of the applicable
Statement.................. interpretation of the staff of the Commission do
not permit us to effect the exchange offer or
upon the appropriate request of any holder of the
notes, we have agreed to register the notes on a
shelf registration statement and use our best
efforts to cause such shelf registration
statement to be declared effective by the
Commission. We have agreed to maintain the
effectiveness of the shelf registration statement
for, under certain circumstances, at least two
years from the date of the original issuance of
the notes to cover resales of such notes held by
such holders.
Withdrawal Rights........... You may withdraw the tender of your outstanding
notes, at any time prior to 5:00 p.m., New York
City time, on the expiration date.
Acceptance of Notes and
Delivery of Exchange
Notes...................... Subject to certain conditions, we will accept for
exchange any and all outstanding notes which are
properly tendered and not validly withdrawn. The
exchange notes issued pursuant to the exchange
offer will be delivered promptly following the
expiration date.
Certain U.S. Federal Income
Tax Consequences...........
The exchange of notes for the exchange notes
should not be a taxable exchange for United
States federal income tax purposes. See "Certain
United States Federal Tax Considerations".
10
<PAGE>
Use of Proceeds............. We will not receive any proceeds from the
issuance of the exchange notes. We will pay all
of our expenses relating to the exchange offer.
Exchange Agent.............. SunTrust Bank, Atlanta is serving as exchange
agent in connection with the exchange offer. The
exchange agent can be reached at 25 Park Place,
24th Floor, Atlanta, Georgia 30303-2900. For more
information with respect to the exchange offer,
please contact the exchange agent at (404) 588-
7067 or send your questions by facsimile to the
exchange agent at (404) 588-7335.
11
<PAGE>
The Exchange Notes
General..................... The form and terms of the exchange notes are
identical in all material respects to the form
and terms of the outstanding notes except that:
. the exchange notes will bear a Series B
designation;
. we will have registered the exchange notes
under the Securities Act and, therefore, they
will generally not bear legends restricting
their transfer; and
. the holders of exchange notes will not be
entitled to rights under the registration
rights agreement.
The exchange notes will evidence the same debt as
the outstanding notes and will be entitled to the
benefits of the indenture under which the notes
were issued.
Issuer...................... Simmons Company
Total Amount of Exchange
Notes Offered..............
$150.0 million in principal amount of 10 1/4%
Series B Senior Subordinated Notes due 2009.
Maturity.................... March 15, 2009.
Interest.................... Annual fixed rate--10 1/4%.
Payment frequency--every six months on March 15
and September 15. First interest payment--
September 15, 1999.
Ranking..................... The exchange notes are senior subordinated debts.
They rank behind all of our current and future
indebtedness (other than trade payables), except
indebtedness that expressly provides that it is
not senior to the exchange notes.
As of March 27, 1999, we estimate that the
exchange notes:
. will be subordinated to $184.4 million of
senior debt; and
. will rank equally with $16.3 million of other
debt and trade payables.
Optional Redemption......... On or after March 15, 2004, we may redeem some or
all of the exchange notes at any time at the
redemption prices listed in the "Description of
Exchange Notes" section under the heading
"Optional Redemption".
Before March 15, 2002, we may redeem up to 35% of
the aggregate principal amount of the exchange
notes with the proceeds of certain public
offerings of our common equity or of our direct
parent corporation at the price listed in the
"Description of Exchange Notes" section under the
heading "Optional Redemption".
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<PAGE>
Mandatory Offer to If we sell certain assets under certain
Repurchase................. circumstances, or experience specific kinds of
changes of control, we must offer to repurchase
the exchange notes at the prices listed in the
"Description of Exchange Notes" section under the
heading "Repurchase at the Option of Holders".
Basic Covenants of We will issue the exchange notes under an
Indenture.................. indenture with SunTrust Bank, Atlanta. The
indenture will, among other things, restrict our
ability and the ability of our subsidiaries to:
. borrow money;
. pay dividends on stock or repurchase stock;
. make investments;
. use assets as security in other transactions;
and
. sell certain assets or merge with or into other
companies.
For more details, see the section "Description of
the Exchange Notes" under the heading "Certain
Covenants".
13
<PAGE>
Summary Condensed Consolidated Financial Data
(dollars in thousands)
Set forth below are (a) our summary condensed consolidated financial data
for 1996 combined, 1997 and 1998, (b) our summary condensed consolidated
statement of operations data for 1998, as adjusted assuming that we had
consummated the Transactions and the original offering as of the beginning of
the period presented and eliminating certain non-recurring charges incurred in
connection with the Transactions, and (c) our summary condensed consolidated
balance sheet data for 1998, as adjusted assuming that we had consummated the
original offering at the end of the period presented. We derived the summary
condensed consolidated financial data for 1996 combined, 1997 and 1998 and as
of December 26, 1998 from our consolidated financial statements. You should
read the information contained in this table along with "Selected Historical
Consolidated Financial and Other Data", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated
financial statements and accompanying notes and other financial information
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
Combined Actual As Adjusted
Dec. 28, Dec. 27, Dec. 26, Dec. 26,
1996(1) 1997 1998 1998
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Net sales......................... $530,301 $550,085 $600,773 $600,773
Cost of products sold............. 320,757 319,074 348,842 348,842
-------- -------- -------- --------
Gross profit...................... 209,544 231,011 251,931 251,931
Selling, general and
administrative expenses.......... 171,608 183,556 202,213 202,213
ESOP expense(2)................... 5,000 6,230 6,453 6,453
Amortization of intangibles....... 6,974 7,679 7,629 7,629
Interest expense, net(3).......... 16,766 19,088 22,454 30,953 (4)
Other expense, net(5)............. 1,653 1,571 17,544 2,684 (6)
-------- -------- -------- --------
Income (loss) before taxes and
extraordinary item............... $ 7,543 $ 12,887 $ (4,362) $ 1,999
======== ======== ======== ========
Net income (loss)................. $ 873 $ 6,362 $(19,019) $ (200)(7)
======== ======== ======== ========
Other Data:
Adjusted EBITDA(8)................ $ 48,476 $ 58,420 $ 62,264 $ 62,264
Adjusted EBITDA margin............ 9.1% 10.6% 10.4% 10.4%
Gross margin...................... 39.5% 42.0% 41.9% 41.9%
Adjusted capital expenditures(9).. $ 4,726 $ 7,616 $ 8,989 $ 8,989
Depreciation and amortization..... 11,316 13,549 16,593 16,593
Cash interest expense(10)......... 15,994 18,731 21,566 29,563
Total interest expense............ 16,921 19,344 22,638 31,137
Ratio of Adjusted EBITDA to cash
interest expense................. 2.1x
Ratio of Adjusted EBITDA to total
interest expense................. 2.0x
Ratio of total debt, net, to
Adjusted EBITDA(11).............. 5.0x
Ratio of earnings to fixed
charges(12)...................... 1.4x 1.6x -- 1.1x
</TABLE>
<TABLE>
<CAPTION>
As of December 26, 1998
---------------------------
Actual As Adjusted
----------- --------------
<S> <C> <C>
Balance Sheet Data:
Working Capital(13)................................ $ 46,567 $ 46,567
Total assets....................................... 400,061 400,061
Total debt, including current maturities........... 313,469 319,445
Total debt, net, including current maturities(11).. 307,465 313,441
Total common stockholders' deficit................. (12,301) (12,301)
</TABLE>
14
<PAGE>
Notes to Summary Condensed Consolidated Financial Data
(except as otherwise indicated, dollars in thousands)
(1) As a result of the Investcorp Acquisition, our assets and liabilities were
adjusted to reflect their estimated fair values as of March 22, 1996. In
addition, we entered into new financing arrangements and changed its
capital structure. Accordingly, the results for periods subsequent to the
Investcorp Acquisition are not comparable to the prior historical periods
presented. 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
December 28, 1996) and is not indicative of results that would have been
obtained had the Investcorp Acquisition occurred on December 31, 1995. For
information regarding these periods separately, see our consolidated
financial statements and accompanying notes appearing elsewhere in this
prospectus.
(2) Represents the non-cash charge resulting from the allocation of shares held
by the Simmons ESOP to participant accounts as they are earned. See "The
Simmons ESOP" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
(3) Interest expense, net includes the amortization of deferred debt issuance
costs of $605, $613 and $777 for 1996 combined, 1997 and 1998,
respectively, and is net of interest income of $155, $256 and $184 for the
same periods, respectively.
(4) Reflects the following net increase in interest expense resulting from the
Transactions and the original offering:
<TABLE>
<S> <C>
Elimination of historical interest expense for refinanced debt.. $(21,258)
Interest resulting from the Term Loan Facility:
Tranche A--$30,976 at 7.75%................................. 2,401
Tranche B--$70,000 at 8.25%................................. 5,775
Tranche C--$50,000 at 8.50%................................. 4,250
Interest resulting from the issuance of the notes at 10.25%..... 15,375
Commitment fee resulting from the portion of the Revolving
Credit Facility assumed to be unused........................... 382
Amortization of the $12,018 deferred financing costs related to
the above...................................................... 1,574
--------
Net Increase.................................................. $ 8,499
========
</TABLE>
As of December 26, 1998, we had no amounts outstanding under the Revolving
Credit Facility. Immediately prior to the original offering, we had
borrowings outstanding under the Revolving Credit Facility and the Term
Loan Facility of approximately $15.0 million and $189.7 million,
respectively. We used a portion of the proceeds of the original offering
to repay all amounts outstanding under the Revolving Credit Facility and
to prepay approximately $23.6 million of principal amounts under the Term
Loan Facility as well as approximately $0.1 million of accrued interest.
We applied $21.4 million, $1.1 million and $1.1 million of prepayments to
the Tranche A, Tranche B and Tranche C Term Loans, respectively, which
resulted in a total outstanding amount under the Term Loan Facility of
approximately $166.1 million.
Interest rates assumed for the New Senior Credit Agreement loans are based
upon a LIBOR borrowing rate of 5.0% plus the applicable margin. If the
interest rates assumed above increased by 0.25%, our total interest
expense would increase by $377 for 1998.
(5) For the components of other expense, net for 1996 combined through 1998,
see Note 9 to our consolidated financial statements.
(6) Reflects the following net decrease:
<TABLE>
<S> <C>
Elimination of certain non-recurring expenses associated with the
Transactions..................................................... $(15,235)
Increase in the annual management fee............................. 375
--------
$(14,860)
========
</TABLE>
15
<PAGE>
(7) Reflects a decrease in provision for income taxes as a result of
adjustments to interest expense and other expense, at an assumed tax rate
of 40%. See Notes (4) and (6) above. Also excludes the extraordinary loss
of $15,002, net of income tax benefit of $7,079, representing the remaining
unamortized debt issuance costs related to the repayment of certain long-
term obligations in connection with the Transactions of $4,184 (net of
income tax benefit of $1,974) and the payment of the premium of $10,818
(net of income tax benefit of $5,105) related to the Redemption.
(8)Items added back to EBITDA to arrive at Adjusted EBITDA are as follows:
<TABLE>
<CAPTION>
Year Ended
--------------------------------------
Combined Actual As Adjusted
Dec. 28, Dec. 27, Dec. 26, Dec. 26,
1996 1997 1998 1998
-------- -------- -------- -----------
<S> <C> <C> <C> <C>
EBITDA(a)............................ $ 42,433 $ 53,581 $ 58,866 $ 58,866
SWIFT/UNITE expense(b)............... 4,107 2,347 2,208 2,208
Strategic management initiatives(c).. -- 1,693 418 418
Inventory written up to fair market
value(d)............................ 1,000 -- -- --
Discontinued product line(e)......... 936 799 772 772
-------- -------- -------- --------
Adjusted EBITDA(a)................... $ 48,476 $ 58,420 $ 62,264 $ 62,264
======== ======== ======== ========
</TABLE>
(a) EBITDA represents earnings before interest expense, income tax
expense, extraordinary item, depreciation and amortization, ESOP
expense, management fees and other non-operating charges. We believe
that EBITDA is a widely accepted financial indicator of a company's
ability to service or incur debt and a similar measure is utilized for
purposes of the covenants contained in the indenture. EBITDA and
Adjusted EBITDA are not measurements of operating performance
calculated in accordance with generally accepted accounting principles
and should not be considered substitutes for operating income, net
income, cash flows from operating activities or other statement of
operations or cash flow data prepared in accordance with generally
accepted accounting principles, or as measures of profitability or
liquidity. EBITDA and Adjusted EBITDA may not be indicative of our
historical operating results, nor are they meant to be predictive of
potential future results. In addition, EBITDA and Adjusted EBITDA as
defined in this note are not presentations accepted by the Commission.
Accordingly, any presentation of EBITDA or Adjusted EBITDA or any
information concerning EBITDA or Adjusted EBITDA which may be included
in a future registration statement filed with the Commission may be
substantially different than the presentation included herein. Our
measures of EBITDA and Adjusted EBITDA may not be comparable to those
recorded by other companies.
(b) Reflects reduction in expenses related to our substantially completed
SWIFT/UNITE (each as defined herein) productivity enhancement
programs.
(c) Reflects non-recurring consulting and other expenses related to
strategic initiatives.
(d) Reflects non-recurring write up to fair market value in connection
with the Investcorp Acquisition.
(e) Reflects non-recurring losses attributable to a discontinued product
line.
(9) Adjusted capital expenditures are exclusive of expenditures related to
(a) our substantially completed SWIFT and UNITE programs of $7,575,
$3,786, $2,808 and $2,808 for 1996 combined, 1997, 1998 and the year
1998 as adjusted, respectively; and
(b) new plant facilities of $2,612, $4,299, $3,756 and $3,756 for the same
periods, respectively.
(10) Cash interest expense is defined as interest expense less amortization of
debt issuance costs and other non-cash interest expense. We believe that
the ratio of Adjusted EBITDA to cash interest expense and the ratio of
Adjusted EBITDA to total interest expense are widely accepted as useful
information regarding a company's ability to service and/or incur debt.
16
<PAGE>
(11) Total debt, net is calculated as total debt less cash.
(12) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before taxes and fixed charges. Fixed charges
consist of interest expense, which includes the amortization of deferred
debt issuance costs and the interest portion of our rent. Earnings were
insufficient to cover fixed charges for 1998 by $4,362.
(13) Represents total current assets (excluding cash and equivalents) less
total current liabilities (excluding current maturities of long-term debt
and capital lease obligations).
17
<PAGE>
RISK FACTORS
You should carefully consider the following factors in addition to the
other information set forth in this prospectus before investing in the
exchange notes.
Substantial Leverage--Our substantial indebtedness could adversely affect our
financial health and prevent us from fulfilling our obligations under the
exchange notes.
As a result of the Transactions and the original offering, we have a
significant amount of indebtedness. As of March 27, 1999, our total
indebtedness was approximately $334.5 million and our ratio of earnings to
fixed charges was 1.1 to 1.
Our substantial indebtedness could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations under the exchange
notes;
. increase our vulnerability to general adverse economic and industry
conditions;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, which would reduce the amount
of cash flow available to fund working capital, capital expenditures,
research and development efforts and other general corporate
requirements;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
. place us at a competitive disadvantage compared to our competitors that
have less debt; and
. limit our ability to borrow additional funds. In addition, it will subject
us to financial and other restrictive covenants, and failure to comply
with those covenants could result in an event of default which, if not
cured or waived, could have a material adverse effect on us.
See "Other Indebtedness--New Senior Credit Agreement".
Additional Borrowings Available--Despite current indebtedness levels, we and
our subsidiaries may still be able to incur substantially more debt.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of the indenture do not fully prohibit
us or our subsidiaries from doing so. The New Senior Credit Agreement permits
additional borrowings under the Revolving Credit Facility of up to
approximately $79.3 million as of March 27, 1999 and all of those borrowings
would be senior to the exchange notes. If new debt is added to our current
debt levels, the related risks that we face could intensify. See
"Capitalization", "Selected Historical Consolidated Financial and Other Data"
and "Other Indebtedness--New Senior Credit Agreement".
Ability to Service Debt--To service our indebtedness, we will require a
significant amount of cash. Our ability to generate cash depends on many
factors beyond our control.
Our ability to make payments on and to refinance our indebtedness,
including the exchange notes, and to fund planned capital expenditures and
research and development efforts will depend on our ability to generate cash
in the future. Our ability to generate cash is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available
cash and available borrowings under our New Senior Credit Agreement will be
adequate to meet our future liquidity needs for at least the next few years.
We cannot assure you, however, that our business will generate sufficient
cash flow from operations, that we will realize currently anticipated cost
savings and operating improvements on schedule or at all or that future
borrowings will be available to us under our New Senior Credit Agreement in
amounts sufficient to
18
<PAGE>
enable us to pay our indebtedness, including the exchange notes, or to fund
our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including the exchange notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness,
including our New Senior Credit Agreement and the exchange notes, on
commercially reasonable terms or at all.
Subordination--Your right to receive payments on the exchange notes is junior
to certain of our existing indebtedness and possibly to all of our future
borrowings.
The exchange notes rank behind all of our existing indebtedness (other than
trade payables) and all of our future borrowings (other than trade payables),
except any future indebtedness that expressly provides that it ranks equal
with, or is subordinated in right of payment to, the exchange notes. As a
result, upon any distribution to our creditors in a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or our property, the
holders of our senior debt will be entitled to be paid in full in cash before
any payment may be made with respect to the exchange notes.
In addition, all payments on the exchange notes will be blocked in the
event of a payment default on our senior debt and may be blocked for up to 179
of 360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our company, holders of the exchange notes will
participate with trade creditors and all other holders of our subordinated
indebtedness in the assets remaining after we have paid all of the senior
debt. However, because the indenture requires that amounts otherwise payable
to holders of the exchange notes in a bankruptcy or similar proceeding be paid
to holders of senior debt instead, holders of the exchange notes may receive
less, ratably, than holders of trade payables in any such proceeding. In any
of these cases, we may not have sufficient funds to pay all of our creditors,
and holders of exchange notes may receive less, ratably, than the holders of
senior debt.
As of March 27, 1999, after giving effect to the exchange offer, we
estimate that the exchange notes will be subordinated to approximately $184.4
million of senior debt and we will have approximately $79.3 million available
for borrowing as additional senior debt under our Revolving Credit Facility.
The indenture will permit us to incur substantial additional indebtedness,
including senior debt, in the future.
Control by Fenway--Fenway has effective control of Simmons. They may have
different interests from yours.
Fenway and its affiliates own approximately 75% of the outstanding voting
stock of our parent company and hold the Junior Holdings PIK Notes. See
"Principal Stockholders" and "The Transactions and the Original Offering--
Securities Purchase Agreement".
Based on its stock ownership, Fenway has the power to:
. elect a majority of the directors of our parent company;
. control all matters submitted to stockholders of our parent company; and
. exercise control over the business, policies and affairs of our parent
company.
Fenway, as our parent company's majority equity holder and as holder of the
Junior Holdings PIK Notes, may have different interests than those of holders
of the exchange notes.
Financing Change of Control Offer--We may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indenture.
Upon the occurrences of specific kinds of change of control events, we will
be required to offer to repurchase all outstanding notes. However, we may not
have sufficient funds at the time of the change of
19
<PAGE>
control to make the required repurchase of exchange notes or restrictions in
our New Senior Credit Agreement or other senior debt may not allow such
repurchases. In addition, certain important corporate events, such as
leveraged recapitalizations that would increase the level of our indebtedness,
would not constitute a "Change of Control" under the indenture. See
"Description of Exchange Notes--Repurchase at the Option of Holders--Change of
Control".
Dependence on Key Customers--We rely upon a small number of customers for a
significant portion of our business. If we lose their business, our financial
health may suffer.
We currently derive a significant portion of our sales from a small number
of customers and expect similar customer concentration to continue in the
future. In 1998, our ten largest customers accounted for approximately 38% of
our net sales. Heilig-Meyers Company and its subsidiaries, including Rhodes,
Inc., accounted for approximately 11.8% of our 1998 net sales. If we lose all
or a significant portion of our business with Heilig-Meyers Company and its
subsidiaries or any of our other significant customers, our financial
condition or results of operations may suffer materially.
We try to actively monitor the creditworthiness of our customers, and when
necessary, try to minimize our dependence upon any single customer. We cannot,
however, eliminate the risk that important customers may experience financial
difficulties or become bankrupt. In 1997, two of our ten largest customers,
Montgomery Ward & Co. and Levitz Furniture, Inc., filed for protection under
Chapter 11 of the United States Bankruptcy Code. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Significant
Customer Developments".
Risk of Fluctuations in the Cost of Raw Materials--If raw material costs
increase, our financial health may suffer.
The major raw materials that we purchase are wire, spring components,
lumber, cotton, insulator pads, innersprings, fabrics and roll goods
consisting of foam, fiber, ticking and non-wovens. The price and availability
of these raw materials may change depending upon market conditions. If prices
increase and we are unable to pass on the increase in our costs to our
customers, then our financial condition or results of operations may be
materially and adversely affected. See "Business--Suppliers".
Dependence on Key Suppliers--If we experience difficulty with a major
supplier, we may have difficulty finding alternative sources. This could
adversely affect our business.
We purchase substantially all of our conventional bedding raw materials
centrally to obtain volume discounts and achieve economies of scale. We obtain
a large percentage of our raw materials from a small number of suppliers. In
1998, we bought approximately 86% of our raw materials from ten suppliers.
Supplier concentration is common in the bedding industry.
We have long-term supply agreements with Leggett & Platt, Incorporated,
Foamex International Inc. and Amoco Fabrics and Fiber Company. With the
exception of Leggett & Platt, we believe that we can readily replace our other
suppliers, if necessary, because we have already identified and begun to use
alternate sources.
Leggett & Platt supplies the majority of certain bedding components to the
bedding industry, including spring components, insulator pads, wire, fiber,
quilt backing and flange material. In 1998, we bought approximately one-third
of our raw materials from Leggett & Platt. We expect that in 1999 we will buy
a comparable portion of our raw materials from Leggett & Platt. Under our
agreements with Leggett & Platt, we are required to buy a majority of our
requirements of certain components from them, such as grid tops, innersprings
and wire. Those agreements generally expire in 2010. Because we may not be
able to find alternative sources on terms as favorable to us for some of these
components, our business, financial condition and results of operations could
be materially and adversely affected if we lose Leggett & Platt as a supplier.
See "Business--Suppliers".
20
<PAGE>
Dependence on Key Personnel--The loss of Mr. Nie's services may adversely
affect our business.
Our success will continue to depend upon our management team, and in
particular upon Zenon Nie, the Chairman of our Board of Directors, our Chief
Executive Officer and President. The loss of Mr. Nie's services could
materially and adversely affect our business and future operations. In October
1998, we entered into a three-year employment agreement with Mr. Nie (which
renews automatically on a daily basis, subject to three years' notice of
termination). We also maintain a $10.0 million key man life insurance policy
covering Mr. Nie, of which we are the beneficiary. See "Management--Employment
Arrangements".
Competition--Our competitors may have important advantages over us that could
result in our losing market share or profitability.
The bedding industry is intensely competitive. There are approximately 800
bedding manufacturers in the United States. We, along with Sealy Corporation
and Serta, Inc., currently have a significant portion of the industry's
wholesale revenues. Although we believe we are well-positioned to compete
because of our brand name recognition and strong customer base, we could
experience increased future competition resulting in price reductions, reduced
margins or loss of market share. Any of these could have an adverse effect on
our operating results or financial condition. In addition, some of our
principal competitors may be less highly-leveraged, have greater access to
financial or other resources, have lower cost operations, have greater
vertical integration, and be better able to withstand market conditions. See
"Business--Competition".
Environmental, Health and Safety Regulation--We are subject to regulations
that may be materially burdensome or expensive to comply with.
We are subject to various federal, state and local laws and regulations
relating to occupational health and safety, pollution and environmental
protection. It is possible that, despite our efforts, we may fail to be in
complete compliance with all of the applicable regulations.
We are currently evaluating our potential liability for the clean-up of
environmental contamination in and around our leased manufacturing facilities
in San Leandro, California.
Our efforts to comply with environmental regulations do not remove the risk
that we may be held liable, and that the amount of liability may be material,
for releases of hazardous substances occurring on or coming from our
properties or any associated offsite disposal location, or for contamination
discovered at any of our properties from activities conducted by previous
occupants. This risk is common for manufacturers in general.
We have recorded a reserve to reflect our potential liability for
environmental matters. The costs of environmental remediation are uncertain,
and we may incur costs in excess of our recorded reserves. See "Business--
Regulatory Matters".
Acquisition Integration--Difficulties in integrating potential acquisitions
could adversely affect our business.
We regularly evaluate potential acquisition opportunities to support and
strengthen our business. We cannot assure you that we will be able to locate
suitable acquisition candidates, acquire candidates on acceptable terms or
integrate acquired businesses successfully.
Future acquisitions may require us to incur additional debt and contingent
liabilities, which may materially and adversely affect our business, operating
results and financial condition. In addition, the process of effectively
integrating acquired businesses involves the following risks:
. assimilating operations and products may be unexpectedly difficult;
. management's attention may be diverted from other business concerns;
. we may enter markets in which we have limited or no direct experience;
and
. we may lose key employees of the acquired business.
21
<PAGE>
We do not currently have any agreements relating to acquisitions or joint
ventures.
Labor Relations--While our labor relations have historically been good, we
cannot assure you that this will continue.
At nine of our 18 manufacturing facilities, at least one of the following
unions represents our employees:
. the Upholstery Division of the United Steelworkers;
. the Teamsters;
. the United Furniture Workers;
. the Longshoremen; and
. the International Association of Machinists and Aerospace Workers.
Most of our labor contracts expire in 2001. Union contracts are typically
for four-year terms.
Our labor relations have historically been good. We have not experienced
any labor-related work stoppage in over 20 years. Since 1980, we have opened
nine new plants, none of which are unionized. It is possible, however, that
labor union efforts to organize employees at those facilities may be
successful. It is also possible that we may experience labor-related work
stoppages in the future. Either of these possible developments could have a
material adverse effect on our financial condition or results of operations.
See "Business--Employees".
Year 2000 Issue--We cannot assure you that we have eliminated our exposure to
the Year 2000 issue or related adverse consequences to our business.
We continue to evaluate the possibility of disruption to our computer and
other systems upon the turn of the century as a result of the widely-known
dating flaw inherent in many systems known as the year 2000 issue. We are in
the process of upgrading and modifying our existing systems to address the
year 2000 issue. While we believe that we will upgrade or modify our systems
in time to remedy the year 2000 issue, a failure to complete the upgrades or
modifications in a timely manner may disrupt our operations.
We have relationships with suppliers, customers, banks, insurers and other
significant entities, such as public utilities, that may not have adequately
addressed the year 2000 issue with respect to their equipment or information
systems. Although we are attempting to assess the extent of their compliance
efforts, we have not received any written assurances and, accordingly, cannot
determine the risk to our business.
In the event that we are unable to complete planned upgrades or implement
replacement systems prior to December 31, 1999, or that the parties with whom
we have relationships have not adequately addressed the year 2000 issue, we
may experience significant disruptions or delays in our operations. This could
result in our business, financial condition or results of operations suffering
a material adverse effect. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Impact of the Year 2000 Issue".
Reliance on Intellectual Property--We cannot assure you that our protection
of our intellectual property is adequate to prevent harm to our business.
We hold over 200 trademarks registered in the United States. We believe
these trademarks have significant value and are important in marketing our
products to retailers and end-consumers. Our principal trademarks are
registered or pending registration in over 90 foreign countries. We own
numerous United States and foreign patents and have patent applications
pending domestically and abroad. We also own United States and foreign
registered trade names and service marks and have pending applications for the
registration of trade names and service marks domestically and abroad. In
addition, we own a variety of unpatented proprietary technology and know-how
which is important to the design and manufacture of our products.
22
<PAGE>
To compete effectively with other companies, we must maintain the
proprietary nature of our owned and licensed intellectual property. Despite our
efforts, we cannot eliminate the following risks:
. others may circumvent our trademarks;
. our trademarks may, now or in the future, violate the proprietary rights
of others;
. we may be prevented from using our own trademarks if challenged;
. we may be unable to afford to enforce or defend our trademarks;
. our patents may not sufficiently protect us;
. our pending patent applications may not result in patents being issued;
and
. we may be unable to protect our technological advantages when our patents
expire.
Although we do not believe that our overall success is dependent upon any
particular intellectual property rights, an inability to maintain the
proprietary nature of our intellectual property may materially and adversely
affect our financial condition or results of operations. For example, any
challenge to the use of our trademarks could have a material adverse effect on
our financial condition or results of operations, either through a negative
ruling with respect to our use, the validity or enforceability of our
trademarks or through the time consumed and legal costs involved in defending
against a challenge. See "Business--Patents, Trademarks and Licenses".
Fraudulent Conveyance Matters--Federal and state statutes allow courts, under
specific circumstances, to invalidate the exchange notes and require
noteholders to return payments received from us.
Federal bankruptcy law and comparable provisions of state fraudulent
transfer laws allow courts to invalidate the exchange notes, or to subordinate
claims in respect of the exchange notes to all of our other debts if, among
other things, at the time we incurred the indebtedness evidenced by the
exchange notes, we:
. received less than reasonably equivalent value or fair consideration for
the incurrence of that indebtedness and were insolvent or rendered
insolvent by reasons of that incurrence; or
. were engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or
. intended to incur, or believed that we would incur, debts that we could
not pay as they matured.
In addition, courts could invalidate any payments we make pursuant to the
exchange notes and require such payments to be returned to us, or to a fund for
the benefit of our creditors.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, courts would consider
us insolvent if:
. the sum of our debts, including contingent liabilities, was greater than
the fair saleable value of all of our assets; or
. the present fair saleable value of our assets was less than the amount that
would be required to pay our probable liability on existing debts,
including contingent liabilities, as they became absolute and mature; or
. we could not pay our debts as they became due.
23
<PAGE>
On the basis of historical financial information, recent operating history
and other factors, we believe that, after giving effect to the indebtedness
incurred in connection with the original offering and the Transactions, we:
. will not be insolvent;
. will not have unreasonably small capital for our business; and
. will not have incurred debts that we cannot pay as they mature.
We cannot assure you, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
No Prior Market for Exchange Notes--We cannot assure you that an active
trading market will develop for the exchange notes. Further, resales of the
exchange notes must comply with applicable state securities laws.
The exchange notes are new securities for which there currently is no
market. Although Goldman, Sachs & Co., Warburg Dillon Read LLC, Fleet
Securities, Inc. and U.S. Bancorp Libra, the initial purchasers of the
outstanding notes, have informed us that they intend to make a market in the
exchange notes, they are not obligated to do so and they may discontinue any
such market making at any time without notice. Accordingly, we cannot assure
you as to the development or liquidity of any market for the exchange notes.
We expect the exchange notes to be eligible for trading by qualified buyers in
the PORTAL market. We do not intend to apply for listing of the exchange notes
on any securities exchange or for quotation through The Nasdaq National
Market.
In addition, changes in the overall market for high yield securities and
changes in our financial performance or prospects or in the prospects for
companies in our industry generally may adversely affect the liquidity of the
trading market in the exchange notes, and the market price quoted for the
exchange notes. See "Description of Exchange Notes" and "The Exchange Offer".
All resales must be made in compliance with state securities or blue sky
laws. Such compliance may require that the exchange notes be registered or
qualified in a state or that the resales be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. We
assume no responsibility with regard to compliance with these requirements.
Your failure to exchange your notes in the exchange offer will restrict your
ability to resell them.
Untendered outstanding notes that you do not exchange for the registered
exchange notes pursuant to the exchange offer will remain restricted
securities, subject to the following restrictions on transfer:
.you may resell only if registered pursuant to the Securities Act or if an
exemption from registration is available;
.the notes will bear a legend restricting transfer in the absence of
registration or an exemption; and
.a holder of the notes who wants to sell or otherwise dispose of all or any
part of its notes under an exemption from registration under the
Securities Act, if requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to us, that such exemption is
available.
Except under limited circumstances, we have no obligation to register any
notes not tendered in the exchange offer.
24
<PAGE>
THE TRANSACTIONS AND THE ORIGINAL OFFERING
The Transactions
On or about July 16, 1998, we entered into a recapitalization agreement (as
amended to date, the "Merger Agreement") with Simmons Holdings and REM
Acquisition, Inc., a transitory Delaware merger corporation ("REM") sponsored
by Fenway. The Merger Agreement provided for REM to merge with and into Simmons
Holdings (the "Merger"), with Simmons Holdings being the surviving corporation.
On October 29, 1998, the Merger was consummated. In connection with the
Merger, the following transactions occurred:
(1) REM purchased the outstanding shares of our Series A preferred stock
owned by the Simmons ESOP that had been allocated as of that time to its
participants (the "Allocated Shares") for an aggregate purchase price of
$15.4 million (the "ESOP Repurchase"), and the Simmons ESOP exchanged its
remaining outstanding shares of our Series A preferred stock for shares of
capital stock of Simmons Holdings;
(2) certain stockholders and option holders of Simmons Holdings who are
affiliates of or investors arranged by INVESTCORP S.A. ("Investcorp" and,
collectively with affiliates of or investors arranged by Investcorp, the
"Investcorp Group") received an aggregate amount of cash equal to
approximately $193.4 million, and certain stockholders and option holders
of Simmons Holdings who are members of our management (the "Management
Investors") received an aggregate amount of cash equal to approximately
$14.0 million;
(3) the Simmons ESOP retained shares of stock of Simmons Holdings with
an estimated fair value of $23.4 million (the "ESOP Equity Rollover");
(4) the Investcorp Group retained shares of stock of Simmons Holdings
with an estimated fair value of $9.0 million (the "Investcorp Equity
Rollover");
(5) the Management Investors retained shares of stock and options to
purchase stock of Simmons Holdings with an estimated fair value of $16.5
million (the "Management Equity Rollover");
(6) we placed funds in escrow for the Redemption of our Previously
Existing Notes (as described below); and
(7) we effected the Refinancing by entering into the New Senior Credit
Agreement (as described below) and repaying indebtedness outstanding under
our Previous Credit Agreement (as described below).
As a result of the Merger and related transactions, Fenway Investment LLC
acquired 75.1% of the outstanding shares of Simmons Holdings, and the
Management Investors, the Simmons ESOP and the Investcorp Group retained
approximately 5.9%, 13.7% and 5.3%, respectively, of the outstanding shares of
Simmons Holdings.
Financing for the Merger, the related transactions, and the fees and
expenses incurred therewith, consisted of the following:
(1) $128.1 million of equity capital provided by Fenway Investment LLC;
(2) the $16.5 million Management Equity Rollover, the $9.0 million
Investcorp Equity Rollover and the $23.4 million ESOP Equity Rollover
(collectively, the "Rollover Equity");
(3) $190.0 million of term loan borrowings by us under the Term Loan
Facility of the New Senior Credit Agreement (as described below);
(4) $10.0 million of revolving borrowings by us under the Revolving
Credit Facility of the New Senior Credit Agreement (as described below);
25
<PAGE>
(5) West Street and UBS provided Senior Bridge Financing in the
aggregate principal amount of $75.0 million; and
(6) we issued the Junior Simmons Notes to Fenway Investment LLC in the
aggregate principal amount of $30.0 million, and Simmons Holdings issued
the Junior Holdings PIK Notes to Fenway Investment LLC in the aggregate
principal amount of $10.0 million.
The following table sets forth the sources and uses of funds in connection
with the Transactions as of October 29, 1998:
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C>
Sources:
New Senior Credit Agreement
Term Loan Facilities................................... $190.0
Revolving Credit Facility.............................. 10.0
Senior Bridge Financing.................................. 75.0
Junior Simmons Notes..................................... 30.0
Junior Holdings PIK Notes................................ 10.0
Rollover Equity.......................................... 48.9
Cash Equity Proceeds..................................... 128.1
------
Total Sources........................................ $492.0
======
Uses:
Payments in respect of outstanding common stock from
existing shareholders................................... $207.4
ESOP Repurchase.......................................... 15.4
Redemption of Previously Existing Notes.................. 115.9
Repayment of borrowings under Existing Credit Agreement.. 69.9
Accrued Interest......................................... 1.5
Rollover Equity.......................................... 48.9
Transaction Fees and Expenses............................ 31.4
Working Capital Increase................................. 1.6
------
Total Uses........................................... $492.0
======
</TABLE>
The Original Offering
On March 16, 1999, we sold the notes in the original offering. As set forth
in the table below, we used the $150.0 million of proceeds from the original
offering to:
(1) repay the indebtedness represented by the Senior Bridge Financing,
the Junior Simmons Notes and accrued interest;
(2) repay the amounts outstanding under our revolving credit facility
under the New Senior Credit Agreement;
(3) prepay a portion of the amounts outstanding under our term loan
facility under the New Senior Credit Agreement and accrued interest; and
(4) pay expenses incurred in connection with the original offering.
26
<PAGE>
<TABLE>
<CAPTION>
Amount
-------------
(in millions)
<S> <C>
Sources:
Proceeds of the original offering.......................... $150.0
Uses:
Repayment of Senior Bridge Financing....................... 75.4
Repayment of Junior Simmons Notes.......................... 31.1
Repayment of Revolving Credit Facility..................... 15.0
Prepayment of portion of Term Loan Facility................ 23.7
Fees and expenses of the original offering................. 4.8
------
Total.................................................... $150.0
======
</TABLE>
See "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".
Redemption of Previously Existing Notes
The Merger constituted a "change of control" under the terms of the
previously existing indenture (the "Previously Existing Note Indenture") for
our $100.0 million of 10.75% Senior Subordinated Notes due 2006 (the
"Previously Existing Notes"). Under the Previously Existing Note Indenture, we
had the right to redeem the Previously Existing Notes at a redemption price
equal to 100% of the principal amount plus accrued and unpaid interest, if any,
to the date of redemption plus an applicable premium. Concurrently with the
consummation of the Transactions, we called the Previously Existing Notes for
Redemption and placed a portion of the proceeds from the Transactions in trust
with the trustee under the Previously Existing Note Indenture to satisfy and
discharge our obligations under that indenture. In November 1998, we completed
the Redemption.
Refinancing of Previous Credit Agreement
Our previously existing credit facility (the "Previous Credit Agreement")
was terminated in connection with the Transactions. The Previous Credit
Agreement provided for a $40.0 million revolving credit facility and a term
loan facility of $75.0 million. Borrowings under the Previous Credit Agreement
were repaid with proceeds from borrowings under the New Senior Credit
Agreement. See "Other Indebtedness--New Senior Credit Agreement".
New Senior Credit Agreement
In connection with the Transactions, we entered into a new senior secured
credit agreement, as amended (the "New Senior Credit Agreement") with
institutional lenders and affiliates of the initial purchasers of the notes,
including Goldman Sachs Credit Partners L.P., an affiliate of Goldman Sachs, as
joint lead arranger, syndication agent and lender, Warburg Dillon Read, as
joint lead arranger, UBS A.G., an affiliate of Warburg Dillon Read, as
administrative agent and lender, Fleet National Bank, an affiliate of Fleet
Securities as co-agent and lender, and U.S. Bank N.A., an affiliate of U.S.
Bancorp Libra, as co-agent and lender. The New Senior Credit Agreement provides
for loans of up to $270.0 million, consisting of three term loan facilities of
$190.0 million in the aggregate (the "Term Loan Facility") and an $80.0 million
revolving credit facility (the "Revolving Credit Facility"). We distributed a
portion of the proceeds of the Term Loan Facility and our initial borrowings
under the Revolving Credit Facility to Holdings to provide a portion of the
funds necessary to consummate the Transactions.
On March 16, 1999, with proceeds from the original offering, we repaid the
$15.0 million then outstanding under the Revolving Credit Facility. In
addition, we prepaid approximately $23.6 million of principal amounts
outstanding under the Term Loan Facility as well as approximately $0.1 million
of accrued interest.
27
<PAGE>
Our indebtedness under the New Senior Credit Agreement bears interest at a
floating rate, is guaranteed by Simmons Holdings and one of our current
domestic subsidiaries and is secured by substantially all of our assets as well
as the assets of Simmons Holdings and such domestic subsidiary. The New Senior
Credit Agreement will also be guaranteed, subject to certain exceptions, by all
of our future material subsidiaries. The New Senior Credit Agreement requires
us to maintain financial ratios, including fixed-charge, cash interest coverage
and leverage ratios. The New Senior Credit Agreement also contains covenants
which, among other things, limit capital expenditures, the incurrence of
additional indebtedness, investments, dividends, transactions with affiliates,
asset sales, mergers and consolidations, prepayments of other indebtedness,
including the exchange notes, liens and encumbrances and other matters
customarily restricted in such agreements. See "Other Indebtedness--New Senior
Credit Agreement".
Senior Bridge Loan Agreement
In connection with the Transactions, we entered into a bridge loan agreement
(the "Senior Bridge Loan Agreement") with West Street and UBS. The Senior
Bridge Loan Agreement provided for $75.0 million in aggregate principal amount
of Senior Subordinated Increasing Rate Bridge Loans (the "Senior Bridge
Financing"). On March 16, 1999, with proceeds from the original offering, we
repaid the $75.0 million of Senior Bridge Financing as well as approximately
$0.4 million of accrued interest.
Securities Purchase Agreement
In connection with the Transactions, we and Simmons Holdings entered into a
securities purchase agreement (the "Securities Purchase Agreement") with Fenway
Investment LLC. Pursuant to the Securities Purchase Agreement, we issued the
Junior Simmons Notes in the aggregate principal amount of $30.0 million and
Simmons Holdings issued the Junior Holdings PIK Notes in the aggregate
principal amount of $10.0 million.
On March 16, 1999, with proceeds from the original offering, we repaid the
$30.0 million of indebtedness under the Junior Simmons Notes as well as
approximately $1.1 million of accrued interest.
The maturity date of the Junior Holdings PIK Notes is October 29, 2011. The
Junior Holdings PIK Notes initially bore interest at 15.0% through December 30,
1998, which rate increased to 15.5% on December 31, 1998 and which will
increase by 0.5% for every three-month period thereafter up to a maximum rate
of 17.5%. Interest on the Junior Holdings PIK Notes is payable in kind by
Simmons Holdings by capitalizing such interest through September 2010.
Under the Securities Purchase Agreement, Simmons Holdings also issued:
(1) a warrant to purchase 601,346.63 shares of common stock of Simmons
Holdings at an initial exercise price of $6.7315 per share to Fenway
Investment LLC (the "Fenway Warrant"); and
(2) warrants to purchase an aggregate of 2,104,713.22 shares of common
stock of Simmons Holdings to be held in escrow which may be exercisable at
either $0.01 per share or $6.7315 per share, depending upon the
circumstances (the "Escrow Warrants" and, together with the Fenway
Warrants, the "Warrants").
Under certain circumstances, the Escrow Warrants may be released to Fenway
Investment LLC.
28
<PAGE>
THE SIMMONS ESOP
In January 1989, the Simmons ESOP was established to purchase all of our
then outstanding common stock. We loaned the Simmons ESOP $241.5 million for
the purchase of all of our common stock then outstanding (the "ESOP Loan"). As
of December 26, 1998, the ESOP Loan had been reduced to approximately $39.4
million, in part due to forgiveness in 1992 of a substantial portion of the
internal obligation.
We 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 to us the
internal ESOP Loan. As a result, there is no cash cost to us associated with
the contributions to the Simmons ESOP. As the internal ESOP Loan is repaid, a
portion of the ESOP Equity Rollover 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 three years, all shares of ESOP
Equity Rollover held by the Simmons ESOP will have been allocated to plan
participants. See "Management--Retirement Plans--Simmons ESOP".
Approximately 1,700 of our current and former employees are participants in
the Simmons ESOP. The Simmons ESOP agreed to sell to REM, immediately prior to
the Merger, the Allocated Shares (representing all the shares held by the
Simmons ESOP that had been allocated to plan participants as of such date) for
approximately $15.4 million in the aggregate, which amount was reinvested in
diversified investments at the direction of the individual plan participants in
the Simmons ESOP. The Simmons ESOP received a fairness opinion from its
financial advisor to the effect that the consideration received for the
Allocated Shares under the ESOP Agreement was fair to the ESOP from a financial
point of view. See "Management--Retirement Plans--Simmons ESOP".
29
<PAGE>
USE OF PROCEEDS
There will be no proceeds from the issuance of the exchange notes.
CAPITALIZATION
The following table sets forth our cash and cash equivalents and our actual
capitalization as of December 26, 1998 and as adjusted to give effect to the
original offering and the application of proceeds from the original offering as
described in "The Transactions and the Original Offering". You should read this
table along with the "Selected Historical Consolidated Financial and Other
Data", "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and accompanying notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 26, 1998
--------------------------
As Adjusted
for the Original
Actual Offering
-------- ----------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents.......................... $ 6,004 $ 6,004
======== ========
Long-term debt obligations, including current
portion:
New Senior Credit Agreement
Revolving Credit Facility(1)................... $ -- $ --
Term Loan Facility(1).......................... 190,000 150,976
Industrial revenue bonds(2)...................... 14,700 14,700
Other, including capital leases.................. 3,769 3,769
Senior Bridge Financing.......................... 75,000 --
Notes............................................ -- 150,000
Junior Simmons Notes............................. 30,000 --
Total long-term debt......................... 313,469 319,445
Redemption obligation--Simmons ESOP, net of related
unearned compensation of $11,400.................. 12,084 12,084
Common stockholders' deficit....................... (12,301) (12,301)
-------- --------
Total capitalization......................... $313,252 $319,228
======== ========
</TABLE>
- --------
(1) See "The Transactions and the Original Offering--New Senior Credit
Agreement" for a description of the Revolving Credit Facility and Term Loan
Facility under the New Senior Credit Agreement. As of December 26, 1998, we
had no borrowings outstanding under the Revolving Credit Facility and
$190.0 million was outstanding under the Term Loan Facility. Immediately
prior to the original offering, we had borrowings outstanding under the
Revolving Credit Facility and the Term Loan Facility of approximately $15.0
million and $189.7 million, respectively. We used a portion of the proceeds
of the original offering to repay all amounts outstanding under the
Revolving Credit Facility and to prepay approximately $23.6 million under
the Term Loan Facility as well as approximately $0.1 million of accrued
interest. The prepayment of the Term Loan Facility resulted in an
outstanding amount under the Term Loan Facility of approximately $166.1
million. As of March 27, 1999, we had no borrowings outstanding under the
Revolving Credit Facility. See "The Transactions and the Original
Offering".
(2) Includes $9.7 million of 7.00% industrial revenue bonds due in 2017 and
$5.0 million of variable rate industrial revenue bonds due in 2016.
30
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(dollars in thousands)
Set forth below are our selected historical consolidated financial data. We
derived our historical Statements of Operations and Balance Sheet Data for
1994, 1995, 1996 combined, 1997 and 1998 from our consolidated financial
statements. The data for the combined year ended December 28, 1996 represents
the mathematical addition of the short Predecessor and Successor Periods in
that year. You should read the information presented below along with
"Capitalization", "Management's Discussion and Analysis of Financial Condition
and Results of Operations", our consolidated financial statements and
accompanying notes and other financial information appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Predecessor Successor
------------------------------- ------------------------------
Period from Period from
Dec. 31, Combined March 22,
Year Ended 1995 Year 1996 Year Year
------------------ through Ended through Ended Ended
Dec. 31, Dec. 30, March 21, Dec. 28, Dec. 28, Dec. 27, Dec. 26,
1994 1995 1996 1996(1) 1996 1997 1998
-------- -------- ----------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $439,689 $489,815 $106,431 $530,301 $423,870 $550,085 $600,773
Cost of products sold... 269,741 292,825 66,630 320,757 254,127 319,074 348,842
-------- -------- -------- -------- -------- -------- --------
Gross profit............ 169,948 196,990 39,801 209,544 169,743 231,011 251,931
Selling, general and
administrative
expenses............... 137,791 161,202 35,846 171,608 135,762 183,556 202,213
ESOP expense(2)......... 4,463 4,533 1,203 5,000 3,797 6,230 6,453
Amortization of
intangibles............ 5,753 5,753 1,324 6,974 5,650 7,679 7,629
Interest expense,
net(3)................. 8,197 8,185 1,489 16,766 15,277 19,088 22,454
Other expense, net(4)... 2,517 400 96 1,653 1,557 1,571 17,544
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
taxes and extraordinary
item................... $ 11,227 $ 16,917 $ (157) $ 7,543 $ 7,700 $ 12,887 $ (4,362)
======== ======== ======== ======== ======== ======== ========
Net income (loss)....... $ 7,994 $ 9,411 $ (439) $ 873 $ 1,312 $ 6,362 $(19,019)
======== ======== ======== ======== ======== ======== ========
Other Data:
Adjusted EBITDA(5)...... $ 36,498 $ 42,153 $ 5,739 $ 48,476 $ 42,737 $ 58,420 $ 62,264
Adjusted EBITDA margin.. 8.3% 8.6% 5.4% 9.1% 10.1% 10.6% 10.4%
Gross margin............ 38.7% 40.2% 37.4% 39.5% 40.0% 42.0% 41.9%
Adjusted capital
expenditures(6)........ $ 4,496 $ 3,021 $ 523 $ 4,726 $ 4,203 $ 7,616 $ 8,989
Depreciation and
amortization........... 9,249 9,780 2,198 11,316 9,118 13,549 16,593
Cash interest
expense(7)............. 7,095 6,488 1,119 15,994 14,875 18,731 21,566
Total interest expense.. 9,042 8,347 1,525 16,921 15,396 19,344 22,638
Ratio of earnings to
fixed charges(8)....... 1.9x 2.4x -- 1.4x 1.4x 1.6x --
Balance Sheet Data (end
of period):
Working capital(9)...... $ 23,077 $ 20,171 $ -- $ -- $ 42,414 $ 37,133 $ 46,567
Total assets............ 249,891 254,492 -- -- 367,849 375,125 400,061
Total debt, including
current maturities..... 109,435 93,768 -- -- 196,815 184,443 313,469
Total common
stockholders' equity
(deficit).............. 41,936 44,372 -- -- 86,291 92,614 (12,301)
</TABLE>
- --------
(1) As a result of the Investcorp Acquisition, our assets and liabilities were
adjusted to reflect their estimated fair values as of March 22, 1996. In
addition, we entered into new financing arrangements and changed our
capital structure. Accordingly, the results for periods subsequent to the
Investcorp Acquisition are not comparable to the prior historical periods
presented. 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
December 28, 1996) and is not indicative of results that would have been
obtained had the Investcorp Acquisition occurred on December 31, 1995. For
information regarding these periods separately, see our consolidated
financial statements and accompanying notes appearing elsewhere in this
prospectus.
31
<PAGE>
(2) Represents the non-cash charge resulting from the allocation of shares held
by Simmons ESOP to participant accounts as they are earned. See "The
Simmons ESOP" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
(3) Interest expense, net includes the amortization of deferred debt issuance
costs of $835, $679, $84, $605, $521, $613 and $777 for 1994, 1995, the
period from December 31, 1995 through March 21, 1996, 1996 combined, the
period from March 22, 1996 through December 28, 1996, 1997 and 1998,
respectively, and is net of interest income of $845, $162, $36, $155, $119,
$256 and $184 for the same periods, respectively.
(4) For the components of other expense, net for 1996 combined through 1998,
see Note 9 of our consolidated financial statements. Other expense, net
consisted of
(a) other non-operating expense of $642 and $400 for 1994 and 1995,
respectively; and
(b) gain on sale of land of $948 and loss on sale of an idle facility of
$2,823 in 1994.
(5) Items added back to EBITDA to arrive at Adjusted EBITDA are as follows:
<TABLE>
<CAPTION>
Predecessor Successor
----------------------------- -----------------------------
Period from Period from
Dec. 31, Combined March 22,
Year Ended 1995 Year 1996 Year Year
----------------- through Ended through Ended Ended
Dec. 31, Dec. 30, March 21, Dec. 28, Dec. 28, Dec. 27, Dec. 26,
1994 1995 1996 1996 1996 1997 1998
-------- -------- ----------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA(a)............... $36,498 $39,977 $4,865 $42,433 $37,568 $53,581 $58,866
SWIFT/UNITE expense(b).. -- 1,815 640 4,107 3,467 2,347 2,208
Strategic management
initiatives(c)......... -- -- -- -- -- 1,693 418
Inventory written-up to
fair market value(d)... -- -- -- 1,000 1,000 -- 7
Discontinued product
line(e)................ 361 234 936 702 799 772
------- ------- ------ ------- ------- ------- -------
Adjusted EBITDA(a)..... $36,498 $42,153 $5,739 $48,476 $42,737 $58,420 $62,264
======= ======= ====== ======= ======= ======= =======
</TABLE>
(a) EBITDA represents earnings before interest expense, income tax expense,
extraordinary item depreciation and amortization, ESOP expense,
management fees and other non-operating charges. We believe that EBITDA
is a widely accepted financial indicator of a company's ability to
service or incur debt and a similar measure is utilized for purposes of
the covenants contained in the indenture. EBITDA and Adjusted EBITDA
are not measurements of operating performance calculated in accordance
with generally accepted accounting principles and should not be
considered substitutes for operating income, net income, cash flows
from operating activities or other statement of operations or cash flow
data prepared in accordance with generally accepted accounting
principles, or as measures of profitability or liquidity. EBITDA and
Adjusted EBITDA may not be indicative of our historical operating
results, nor are they meant to be predictive or potential future
results. In addition, EBITDA and Adjusted EBITDA as defined in this
note are not presentations accepted by the Commission. Accordingly, any
presentation of EBITDA or Adjusted EBITDA or any information concerning
EBITDA or Adjusted EBITDA which may be included in a future
registration statement filed with the Commission may be substantially
different than the presentation included herein. Our measures of EBITDA
and Adjusted EBITDA may not be comparable to those recorded by other
companies.
(b) Reflects reduction in expenses related to our substantially completed
SWIFT/ UNITE (each as defined herein) productivity enhancement
programs.
(c) Reflects non-recurring consulting and other expenses related to
strategic initiatives.
(d) Reflects non-recurring write up to fair market value in connection with
the Investcorp Acquisition.
(e) Reflects non-recurring losses attributable to a discontinued product
line.
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<PAGE>
(6) Adjusted capital expenditures are exclusive of expenditures related to
(a) our SWIFT and UNITE programs of $2,813, $1,044, $7,575, $6,531, $3,786
and $2,808 for 1995, the period from December 31, 1995 through March
21, 1996, 1996 combined, the period from March 22, 1996 through
December 28, 1996, 1997 and 1998, respectively; and
(b) new plant facilities of $0, $0, $2,612, $2,612, $4,299 and $3,756 for
the same periods, respectively.
(7) Cash interest expense is defined as interest expense less amortization of
debt issuance costs and other non-cash interest expense. Management
believes that the ratio of Adjusted EBITDA to cash interest expense and the
ratio of Adjusted EBITDA to total interest expense are widely accepted as
useful information regarding a company's ability to service and/or incur
debt.
(8) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes, extraordinary item and
fixed charges. Fixed charges consist of interest expense, which includes
the amortization of deferred debt issuance costs and the interest portion
of our rent expense. Earnings were insufficient to cover fixed charges for
the period from December 31, 1995 through March 21, 1996 and the year ended
December 26, 1998 by $157 and $4,362, respectively.
(9) Represents total current assets (excluding cash and equivalents) less total
current liabilities, (excluding current maturities of long-term debt and
capital lease obligations).
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion along with the "Selected
Historical Consolidated Financial and Other Data" and our consolidated
financial statements and the accompanying notes included elsewhere in this
prospectus.
General
Simmons is a leading manufacturer and distributor of premium branded
bedding products in the United States and is the world leader in Pocketed
Coil(TM) innerspring technology. We design, manufacture, distribute and
license a broad range of mattresses, box springs, bedding frames and sleep
accessories under well recognized brand names including Simmons(R),
Beautyrest(R), BackCare(R), Connoisseur Collection(R), and Maxipedic(R). While
we provide a full range of conventional bedding products, our focus is on the
higher-end market segments, emphasizing retail price points from $699 to
$2,999 per queen set. We believe that these products offer more attractive
growth prospects and higher gross margins than lower-end products.
On October 29, 1998, we and Simmons Holdings
(1) consummated the Merger and the ESOP Repurchase whereby, among other
things, Fenway Investment LLC acquired 75.1% of the outstanding shares of
Simmons Holdings and the Management Investors, the Simmons ESOP and the
Investcorp Group retained 5.9%, 13.7% and 5.3%, respectively, of the
outstanding stock of Holdings;
(2) placed funds in escrow for the Redemption for cash all of the
Previously Existing Notes;
(3) effected the Refinancing through which we entered into and borrowed
under the New Senior Credit Agreement and repaid indebtedness outstanding
under the Previous Credit Agreement;
(4) entered into the Senior Bridge Loan Agreement under which West
Street and UBS provided the Senior Bridge Financing; and
(5) entered into the Securities Purchase Agreement under which we issued
the Junior Simmons Notes and Simmons Holdings issued the Junior Holdings
PIK Notes to Fenway Investment LLC.
We accounted for the Merger as a recapitalization.
On March 16, 1999, we sold the notes in the original offering. We used the
net proceeds from the original offering of approximately $145.2 million to:
(1) repay the indebtedness under the Senior Bridge Financing and the
Junior Simmons Notes and accrued interest;
(2) repay the amounts outstanding under the Revolving Credit Facility;
and
(3) prepay a portion of the amounts outstanding under the Term Loan
Facility and accrued interest.
On March 22, 1996, Simmons Holdings, a company organized on behalf of the
Investcorp Group and the Simmons ESOP, management and other investors,
acquired 100% of our outstanding common stock (the "Investcorp Acquisition").
We employed the purchase method of accounting for the Investcorp Acquisition
effective March 22, 1996. As a result of the required purchase accounting
adjustments, the post-Investcorp Acquisition financial statements (the
"Successor Financials") are not comparable to the financial statements for the
periods prior to the Investcorp Acquisition (the "Predecessor Financials").
Results of Operations
For purposes of the discussion below, the results of operations for the
year ended December 28, 1996 represent the mathematical addition of the
historical amounts for the predecessor period (December 31, 1995
34
<PAGE>
through March 21, 1996) and the successor period (March 22, 1996 through
December 28, 1996) and are not indicative of the results that would actually
have been obtained if the Investcorp Acquisition had occurred on December 30,
1995.
The following table sets forth some components of our consolidated statement
of operations data expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Fiscal Year
-------------------
1996 1997 1998
----- ----- -----
<S> <C> <C> <C>
Net sales................................................ 100.0% 100.0% 100.0%
Cost of products sold.................................... 60.5 58.0 58.1
----- ----- -----
Gross margin............................................. 39.5 42.0 41.9
Selling, general and administrative expenses............. 32.4 33.4 33.7
----- ----- -----
Operating income before ESOP expense and amortization of
intangibles............................................. 7.1% 8.6% 8.2%
===== ===== =====
Adjusted EBITDA margin................................... 9.1% 10.6% 10.4%
===== ===== =====
</TABLE>
Fiscal 1998 as Compared to Fiscal 1997
Net Sales. Net sales increased 9.2%, or $50.7 million, from $550.1 million
in 1997 to $600.8 million in 1998. We attribute $29.2 million of this increase
to a 5.3% increase in our bedding unit sales volume and $21.5 million of it to
a 3.9% increase in our bedding average unit selling price. The growth in
bedding unit sales volume resulted primarily from increased BackCare(R) product
shipments and an increase in open coil contract bedding sales in the last three
quarters of 1998. Bedding average unit selling price increased due to a shift
in our product mix to higher priced products, particularly in the Beautyrest(R)
and BackCare(R) lines.
Cost of Products Sold. As a percentage of net sales, cost of products sold
for 1998 remained stable at approximately 58.1% as compared to the same time
period a year ago. Our gross margins for 1998 reflect an increase in unit sales
of certain premium products with gross margins lower than our average, offset
by raw material cost efficiencies together with higher levels of procurement.
Gross margins during 1998 also benefited from the increase in bedding average
unit selling price described above.
Selling, General and Administrative Expenses. As a percentage of net sales,
selling, general and administrative expenses increased from 33.4% in 1997 to
33.7% in 1998. We attribute this increase to an increase in marketing
expenditures and to higher depreciation expense, offset, in part, by increased
royalty income, a lower bad debt provision and reduced discretionary
expenditures. Marketing expenditures increased due to higher cooperative
advertising and promotion costs. Depreciation increased due to the amortization
of the systems upgrade project.
ESOP Expense. ESOP expense increased slightly from $6.2 million in 1997 to
$6.5 million in 1998. We attribute this slight increase to an increase in the
appraised value of the shares subject to the Simmons ESOP in 1998.
Amortization of Intangibles. Amortization of intangibles for 1998 remained
relatively stable at approximately $7.6 million.
Interest Expense, Net. Interest expense, net increased $3.4 million from
$19.1 million in 1997 to $22.5 million in 1998 due primarily to increased
indebtedness and higher interest rates primarily in the fourth quarter of 1998.
Other Expense, Net. Other expense, net increased $15.9 million from $1.6
million in 1997 to $17.5 million in 1998. We attribute the increase to various
non-recurring expenses incurred in connection with the Transactions.
35
<PAGE>
Provision for Income Taxes. Our effective tax rates for 1997 and 1998
differ from the federal statutory rate primarily because of non tax-deductible
amortization of goodwill.
Extraordinary Item. In 1998, we recorded a $15.0 million extraordinary
charge representing the remaining unamortized debt issuance costs related to
the repayment of certain long-term obligations repaid and the Redemption of
the Previously Existing Notes in connection with the Transactions.
Net Income. For the reasons set forth above, we incurred a net loss of
$19.0 million as compared to net income of $6.4 million for 1997.
Fiscal 1997 As Compared to Fiscal 1996
Net Sales. Net sales increased 3.7%, or $19.8 million, from $530.3 million
in 1996 to $550.1 million in 1997. $22.8 million of this increase was due
primarily to a 4.4% increase in our bedding average unit selling price and the
balance of the increase was due to a relatively slight increase in our unit
sales volume. We attribute the strong improvement in bedding average unit
selling price to an increase in Beautyrest(R) sales as a percentage of total
sales and to sales of higher-priced BackCare(R) products. Unit sales volume
increased only slightly in 1997 due to the following:
(1) a substantial sales decline resulting from our spring, 1997 decision
to discontinue our supply relationship with Mattress Discounters, Inc., our
largest customer in 1996, when the terms of the relationship did not meet
our account profitability expectations;
(2) the repositioning of the BackCare(R) product line to be consistent
with our overall marketing strategy; and
(3) lost sales volume during the bankruptcy proceedings of Montgomery
Ward & Co. and Levitz Furniture, Inc. However, due to the breadth of
penetration and continued consumer acceptance of our Beautyrest(R) and
BackCare(R) product lines, we were able to replace revenues lost as a
result of our decision to discontinue our relationship with Mattress
Discounters, Inc.
The bankruptcy filings and the Mattress Discounters, Inc. decision have not
had, and we do not expect them to have, any material adverse effect on our
financial condition.
Cost of Products Sold. As a percentage of net sales, cost of products sold
decreased 2.5 percentage points from 60.5% in 1996 to 58.0% in 1997. We
attribute this improvement to the following:
(1) an increase in sales of Beautyrest(R) products as a percentage of
total sales;
(2) relatively stable raw material costs; and
(3) improved operating efficiencies due to the effect of the completed
implementation of our UNITE reengineering program; and
(4) writing up, as required by the principles of purchase accounting,
the cost of products sold in 1996 reflecting the sale of finished goods
inventory to net realizable value as of the date of the Investcorp
Acquisition.
Selling, General and Administrative Expenses. As a percentage of net sales,
selling, general and administrative expenses increased 1.0% from 32.4% in 1996
to 33.4% in 1997. We attribute this to the following:
(1) higher consulting fees and other expenditures associated with
strategic initiatives we undertook;
(2) additional expenses, as well as a partial year of amortization
expense related to the rollout of SWIFT, our systems upgrade project;
(3) an increase in selling expenses related to competitive sales
promotion programs and additional sales personnel;
(4) an increase in distribution costs due to contractual increases and
expansion into outlying territories; and
(5) a higher provision for uncollectible accounts.
36
<PAGE>
ESOP Expense. ESOP expense increased by $1.2 million from approximately $5.0
million in 1996 to $6.2 million in 1997 due primarily to an increase in the
number of eligible participants.
Amortization of Intangibles. Amortization of intangible assets increased
$0.7 million from $7.0 million in 1996 to $7.7 million in 1997 due primarily to
a full year of amortization relating to the increase in goodwill resulting from
purchase accounting adjustments made in connection with the Investcorp
Acquisition.
Interest Expense, Net. Interest expense, net increased $2.3 million from
$16.8 million in 1996 to $19.1 million in 1997 due primarily to a full year of
interest expense which resulted from financing in connection with the
Investcorp Acquisition. See Note 8 to our consolidated financial statements.
Other Expense, Net. Other expense, net remained relatively stable,
decreasing $.08 million from $1.65 million in 1996 to $1.57 million in 1997.
Provision for Income Taxes. Our effective tax rates for 1996 and 1997 differ
from the federal statutory rate primarily because of non tax-deductible
amortization of goodwill.
Net Income. For the reasons set forth above, we earned net income of $6.4
million in 1997 as compared to net income of $0.9 million in 1996.
Liquidity and Capital Resources
Our principal source of cash to fund liquidity needs is net cash provided by
operating activities and availability under the New Senior Credit Agreement.
Our primary use of funds consists of payments of principal and interest, and
capital expenditures.
Our operating activities used cash of $14.0 million in 1998 compared to cash
generated of $32.3 million in 1997. The difference is due primarily to the cash
expenses incurred in 1998 in connection with the Transactions, as well as the
timing of accounts receivable collections and the timing of payments of
accounts payable and accrued liabilities.
Our capital expenditures totaled $15.5 million for 1998. These capital
expenditures consisted primarily of normal recurring capital expenditures in
the amount of $9.0 million, capital expenditures relating to the construction
of new manufacturing facilities in the amount of $3.8 million and capitalized
expenditures related to our systems upgrade project in the amount of $2.8
million. See "--Impact of the Year 2000 Issue". We have budgeted $9.0 million
for 1999 capital expenditures. We believe that annual capital expenditure
limitations in the New Senior Credit Agreement and the indenture will not
significantly inhibit us from meeting our ongoing capital needs.
In connection with the Investcorp Acquisition, we entered into the Previous
Credit Agreement, which provided for a $40.0 million revolving credit facility
and a $75.0 million term loan facility. On April 18, 1996, we completed a
refinancing, which consisted of the sale of $100.0 million of the Previously
Existing Notes.
As of December 26, 1998, we had no borrowings and $76.5 million available
under our Revolving Credit Facility in the New Senior Credit Agreement and as
of March 27, 1999, we had no borrowings and $79.3 million available under our
Revolving Credit Facility. As of December 26, 1998, we were in compliance with
the financial covenants contained in the New Senior Credit Agreement and the
Senior Bridge Loan Agreement.
In connection with the Transactions, we incurred substantial additional
indebtedness. We used borrowings under the New Senior Credit Agreement and the
Senior Bridge Financing to repay borrowings under the Previous Credit Agreement
and the Previously Existing Notes, to finance the ESOP Repurchase, and to pay
the necessary distributions to Simmons Holdings to effect the Recapitalization.
37
<PAGE>
We used the net proceeds from the original offering to:
(1) repay the indebtedness under the Senior Bridge Financing and the
Junior Simmons Notes and accrued interest;
(2) repay the amounts outstanding under the Revolving Credit Facility
and accrued interest; and
(3) prepay a portion of the amounts outstanding under the Term Loan
Facility and accrued interest.
After the consummation of the exchange offer, one of our primary uses of
cash will be to make interest payments on the exchange notes and interest and
principal payments under the New Senior Credit Agreement.
The New Senior Credit Agreement provides for loans of up to $270.0 million,
consisting of the Term Loan Facility of $190.0 million and the Revolving Loan
Facility of $80.0 million. We distributed a portion of the proceeds of the
Term Loan Facility and our initial borrowings under the Revolving Credit
Facility to Simmons Holdings to provide a portion of the funds necessary to
consummate the Merger. Following the prepayments made from the proceeds of the
original offering, the Term Loan Facility was reduced to approximately
$166.1 million and such facility will require no principal amortization
payments in 1999 and will require aggregate annual principal amortization
payments of $0.5 million in 2000 and $3.5 million in 2001. Interest rates are
variable and, based on current interest rates, we estimate annual interest
expense under the New Senior Credit Agreement to be $13.6 million. Our
indebtedness under the New Senior Credit Agreement bears interest at a
floating rate, is guaranteed by Simmons Holdings and one of our current
domestic subsidiaries and is collateralized by substantially all of our assets
as well as the assets of Holdings and such domestic subsidiary. The New Senior
Credit Agreement will also be guaranteed by all of our future material
subsidiaries. See "The Transactions and the Original Offering--New Senior
Credit Agreement" and "Other Indebtedness--New Senior Credit Agreement".
The New Senior Credit Agreement and the indenture contain covenants and
restrictions on actions by us and our subsidiaries that will, among other
things, limit our ability and the ability of our subsidiaries to incur
additional indebtedness and issue stock, pay dividends or distributions, make
investments, make other payments, enter into transactions with affiliates,
dispose of certain assets, incur liens and engage in mergers and
consolidations. In addition, the New Senior Credit Agreement requires that we
comply with specified financial ratios and tests described therein, including
a maximum ratio of indebtedness to cash flow and a minimum fixed-charge
coverage ratio.
We regularly evaluate potential acquisition opportunities to support and
strengthen our business, although there are no binding agreements with respect
to any particular acquisition or joint venture at this time. We cannot assure
you that in the future we will be able to acquire suitable acquisition
candidates on acceptable terms or that future acquisitions, if completed, will
be successful. Moreover, we cannot assure you that we will be able to find
adequate sources of capital to finance these acquisitions. We may need to
incur additional debt and contingent liabilities, which could have a material
adverse effect on our business, operating results and financial condition in
order to effect future acquisitions. The success of any completed acquisition
will depend on our ability to integrate effectively the acquired business. The
process of integrating acquired businesses involves numerous risks, including
difficulties in the assimilation of operations and products, the diversion of
management's attention from other business concerns, risks of entering markets
in which we have limited or no direct prior experience and the potential loss
of key employees of the acquired businesses. See "Risk Factors--Acquisition
Integration".
Our ability to make scheduled payments of principal of, or to pay the
interest or liquidated damages, if any, on, or to refinance our indebtedness
(including the exchange notes), or to fund planned capital expenditures and
research and development, will depend on our future performance. Our future
performance is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Based
upon our current level of operations, we believe that cash flow from
operations and available cash, together with available borrowings under the
New Senior Credit Agreement, will be adequate to meet our
38
<PAGE>
future liquidity needs for at least the next several years. However, we cannot
assure you that our business will generate sufficient cash flow from
operations, that anticipated revenue growth and operating improvements will be
realized or that future borrowings will be available under the New Senior
Credit Agreement in an amount sufficient to enable us to service our
indebtedness, including the exchange notes, or to fund our other liquidity
needs. If our business does not generate sufficient cash flow, we may not be
able to effect any refinancing of our existing indebtedness on commercially
reasonable terms or at all. See "Risk Factors".
Seasonality
Our volume of sales is somewhat seasonal, with sales generally lower during
the first quarter of each year than in the remaining three quarters of the
year. Historically, our working capital borrowings have increased during the
first half of each year and have decreased in the second half of each year. We
also experience a seasonal fluctuation in profitability, with our gross profit
percentage during the first quarter of each year slightly lower than the margin
percentages obtained in the remaining part of the year. We believe that
seasonality of profitability is a factor that affects the conventional bedding
industry generally and that it 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. These two factors
together result in lower profit margins.
Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the accounting
for derivative instruments, including certain derivative instruments embedded
in other contracts, by requiring that an entity recognize those items as assets
or liabilities in the statement of financial position and measure them at fair
value. This statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Financial statements for prior periods need not
be restated. We are currently reviewing the provisions of SFAS No. 133 and do
not believe that our financial statements will be materially impacted by the
adoption of this provision.
Significant Customer Developments
During the year ended December 27, 1997, Montgomery Ward & Co. and Levitz
Furniture Inc., two of our ten largest customers, filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. As of December 27, 1997 and the date of
each of the bankruptcy filings, we had the reserves necessary to cover our
estimated exposure. For a period prior to the filings under the bankruptcy
code, we halted shipments to Montgomery Ward & Co. and Levitz Furniture Inc. to
minimize our exposure. Subsequent to the filing, after taking further steps to
minimize exposure we recommenced shipments to the retailers. These situations
have not had a material adverse effect on our financial position or results of
operation.
Impact of the Year 2000 Issue
Issues relating to the year 2000 are the result of computer programs and
certain embedded-chip systems being written or developed using two digits
rather than four to define the applicable year. Any of our computer programs or
embedded-chip systems that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, obtain raw
materials, manufacture or ship products, generate invoices, or engage in
similar normal business activities.
We have formed a committee consisting of personnel from all of our major
disciplines to address risks associated with the year 2000 issue. The committee
has developed a list of all of our information systems and is investigating
each system to determine its year 2000 readiness.
39
<PAGE>
With the upgrade of our enterprise wide information system we undertook in
1995, which is nearly complete today, our information systems are largely year
2000 compliant. However, certain of our computer systems are not year 2000
compliant. We will complete a year 2000 upgrade of these remaining systems that
are not year 2000 compliant by the third quarter of 1999. We currently expect
costs to complete the year 2000 upgrade will include internal data processing
resources, as well as some external consultant fees to assist in the effort.
The cost of this initiative through December 26, 1998 was approximately $0.5
million. We anticipate that additional costs to bring all of our systems into
year 2000 compliance will be approximately $2.4 million. Our internal resources
to address the Year 2000 issue consist of approximately five full-time
employees.
We believe that our main system hardware and operating systems, networking
operating systems and office productivity software are all year 2000 compliant.
We also use manufacturing processes that include computer controlled equipment.
We are currently in the process of reviewing this equipment to determine if it
is year 2000 compliant. We expect to complete this review by the end of the
second quarter of 1999.
Our facilities staff is also currently investigating the status of our non-
information systems with respect to year 2000 compliance. These non-information
systems include phones, voicemail, heating/air conditioning, electricity and
security systems. We expect to complete an assessment of the readiness of our
non-information systems by the end of the second quarter of 1999.
In addition to reviewing our internal systems, we have polled our
significant suppliers, customers and freight carriers to determine whether they
are year 2000 compliant and, if not, the extent to which our operations may be
adversely affected as a result of their failure to be year 2000 compliant. We
have completed our assessment of suppliers' and customers' year 2000 readiness.
Although we have received assurances from some of our suppliers, customers and
freight carriers we cannot determine the extent to which our operations may be
adversely affected by the failure of our suppliers to be year 2000 compliant.
The costs of our year 2000 initiatives and their completion dates are based
upon best estimates and derived using various assumptions of future events
including the continued availability of resources, third party statements of
compliance and other factors. However, we cannot guarantee that these estimates
will be achieved and actual results could differ materially from these plans.
See "Risk Factors--Year 2000 Issue".
40
<PAGE>
BUSINESS
Simmons
We are a leading manufacturer and distributor of premium branded bedding
products in the United States and the world leader in Pocketed Coil(TM)
innerspring technology. Our well-recognized mattress and related sleep products
brand names include:
. Simmons(R)
. Beautyrest(R)
. BackCare(R)
. Connoisseur Collection(R)
. Maxipedic(R)
Although we provide a full range of conventional bedding products, we focus
on higher-end market segments, emphasizing retail price points from $699 to
$2,999 per queen set. In 1998, we derived approximately 54% of our net sales
from products sold at these price points, which we believe offers more
attractive growth prospects and higher gross margin than lower-end products. We
sell to a diversified nationwide base of over 2,700 customers, representing
more than 5,500 retail outlets.
Since 1995, we have invested approximately $28 million to re-engineering and
update our information systems. We believe our substantial annual research and
development investments enable us to be an industry leader in the development
of innovative products.
In summary, we believe that the following create significant advantages over
smaller regional manufacturers as well as those national competitors that
operate as associations of independent licensees:
. our national distribution;
. our extensive brand advertising;
. our customer support services; and
. our captive manufacturing
Industry Overview
The domestic wholesale bedding industry generated sales of over $3.8 billion
in 1998. Although fragmented with approximately 800 manufacturers, the industry
is mature and stable, and has enjoyed the attributes described below.
41
<PAGE>
Consistent Growth. From 1978 to 1998, the domestic wholesale bedding
industry experienced a compound annual growth rate of 6.6%, with sales volumes
increasing in all but one of those 20 years. Similarly, average unit selling
prices increased every year over the same period and grew at an annual rate
of 3.6%.
[GRAPH APPEARS HERE]
Domestic Wholesale Bedding Sales
(dollars in billions)
<TABLE>
<CAPTION>
77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$1.0 $1.1 $1.2 $1.3 $1.4 $1.4 $1.6 $1.7 $1.8 $1.9 $2.1 $2.3 $2.3 $2.3 $2.4 $2.6 $2.8 $3.0 $3.2 $3.3 $3.6
</TABLE>
Stability and Profitability. In each year since 1986, the bedding industry
has demonstrated highly consistent gross margins ranging between 29% and 32%.
Bedding also offers an estimated 45% gross margin to retailers as well as some
of the highest sales per square foot and return on inventory of all retail
furniture products. Consequently, even in circumstances of fluctuating demand
retailers continue to strongly promote sales of bedding products. Finally, the
stability of the bedding market is further supported by the fact that over 70%
of bedding sales result from replacement purchases.
[GRAPH APPEARS HERE]
Industry Gross Profit Margin
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percent 32% 31% 30% 30% 29% 30% 30% 30% 31% 32% 32%
</TABLE>
42
<PAGE>
Favorable Demographics. We believe that key demographic trends are driving
growth in the demand for larger sized, premium bedding products including:
. the rapidly growing 45-64 year old population category, a group with
higher levels of disposable income and which historically has been more
likely to purchase premium bedding;
. the increasing consumer awareness of the health related benefits of
proper rest; and
. the increasing number and size of bedrooms in homes.
[GRAPH APPEARS HERE]
Competitive Strengths
Consumers generally have limited knowledge of specific bedding products and,
as a result, rely heavily on brand awareness and the retail salesperson in
making their purchase decision.
Superior Brand Recognition. We enjoy strong brand recognition through our
well-established brand names, including Simmons(R), Beautyrest(R), BackCare(R),
Connoisseur Collection(R) and Maxipedic(R).
Strong Competitive Positioning. Our emphasis on premium, name brand
products, such as Beautyrest(R), BackCare(R) and Connoisseur Collection(R),
enables us to take advantage of the current demographic trends driving demand
for larger sized, higher priced premium bedding products which typically carry
a higher margin.
High Quality and Diverse Customer Base. Our reputation for high quality
products, innovation and customer service, together with the highly attractive
retail margins associated with bedding products, has enabled us to establish a
strong nationwide customer base.
Focused Research and Development. We invest substantially in developing new
products, enhancing existing products and improving our operating processes.
Experienced Management Team with Exceptional Track Record. Since 1993,
industry veteran and Simmons Chairman, Chief Executive Officer and President,
Zenon Nie, has led a highly experienced management team with over 210 years of
combined experience in the bedding industry and over 150 years of combined
experience with us. From 1994 to 1998, this management team:
. achieved sales growth of 8.1% versus an industry average growth rate of
6.1%;
. improved our gross margin from 38.7% to 41.9%; and
. increased our Adjusted EBITDA margin from 8.3% to 10.4%.
43
<PAGE>
Business Strategy
In order to execute our business strategy, we must:
. continue to build our brand equity;
. enhance our customer base;
. strengthen our current customer relationships;
. improve our operating productivity and efficiency; and
. pursue selected complementary acquisitions.
Products
We provide our customers with a full range of mattress products that cover
the breadth of the market price points. Our strategic focus is on premium
bedding products sold at retail price points between $699 and $2,999. We derive
approximately 54% of our net sales from products sold at these price points.
We believe that the higher end market segment is attractive to bedding
retailers who are increasingly focused on branded products to enhance and
differentiate their business as well as to increase profitability. We further
believe that the rapidly growing 45-64 year old population category (a group
with increased levels of disposable income), an increasing consumer awareness
of the health-related benefits of proper rest and an increasing number and size
of bedrooms in homes should support an increasing consumer shift towards
larger, higher priced and technologically advanced mattresses.
We employ two different base manufacturing technologies in our mattresses,
the pocketed coil and the open coil, and market our products under a variety of
well known brands. Most of our products are based on our patented Pocketed
Coil(TM) technology, which we believe offers a substantially better sleep
experience than our competitors' products. Pocketed Coil(TM) products such as
the Beautyrest(R) line account for the majority of our sales, as well as our
retail floor presence and brand image.
Our Beautyrest(R) and Connoisseur Collection(R) lines employ Pocketed
Coil(TM) manufacturing technology. Pocketed Coil(TM) mattresses are designed to
be the most comfortable and durable 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(TM) innersprings are constructed so that each
row of innerspring coils is joined to adjacent rows of coils in the center
third of the fabric pocket enclosing each coil. This permits the top and bottom
of each coil to respond independently to pressure applied to the surface of the
mattress. Pocketed Coil(TM) design is unique to us. It enables the mattress to
contour to the user's body, reduces lateral transmission of movement in the
mattress and provides exceptional comfort.
Beautyrest(R). Beautyrest(R), our flagship premium product, has been our
primary focus for 74 years and we expect it to continue to generate the
majority of sales. Beautyrest(R) has employed Pocketed Coil(TM) technology
since its introduction in 1925. The Beautyrest(R) line is available to end-
users through a broad range of distribution channels including furniture
stores, major department stores, specialty sleep shops and warehouse showrooms.
Connoisseur Collection(R). We introduced the Connoisseur Collection(R) line
to capitalize on the accelerating growth in the premium bedding segment. The
Connoisseur Collection(R) line combines the benefits of Pocketed Coil(TM)
technology with variable pressure foam for maximum comfort and support. The
Connoisseur Collection(R) product line is primarily available through selected
major department stores and specialty sleep shops.
BackCare(R). We introduced BackCare(R), a second flagship brand, in 1995.
The BackCare(R) line was created to meet the needs of health conscious
consumers, as well as chronic back pain sufferers. We are
44
<PAGE>
positioning BackCare(R) as another of our premium bedding products. BackCare(R)
has received an endorsement from the National Foundation for Spinal Health.
BackCare(R) employs five zone construction designed through each element of the
sleep set. Anatomic foam provides support under the lower back and thighs while
offering comfort under the calves, upper shoulders and buttocks. Anatomic foam
also allows the back to better assume a natural position ensuring proper spinal
alignment and comfort.
We expect increasing consumer concerns for comfort and health to help
support increased retail penetration of the BackCare(R) product line. To ensure
continued retail penetration, we have developed a BackCare(R) national
television advertising campaign entitled "Five Zones for Your Bones". We have
also hired BackCare(R) sales managers who will focus exclusively on the
BackCare(R) product line.
Maxipedic(R). Maxipedic(R) provides our customers with a superior open coil
product. The Maxipedic(R) mattress features non-skid quilting and a variety of
high quality foam components. The matching foundation features a steel grid
that anchors the coils, reducing lateral motion and providing uniform firmness.
This product is intended to provide customers with a high quality, moderately
priced, open coil product.
Customers
Our strong brand name and reputation for high quality products, innovation
and service to our customers, together with the highly attractive retail
margins associated with bedding products, have enabled us to establish a strong
customer base throughout the United States and across all major distribution
channels, including furniture stores, specialty sleep shops, department stores
and warehouse showrooms. We manufacture and supply conventional bedding to over
5,500 retail outlets, representing more than 2,700 customers. Furthermore, our
sales to specialty sleep shops, the fastest growing channel of retail bedding
distribution, has been increasing.
We also distribute branded products on a contract sale basis directly to
commercial users of bedding products such as hotels, motels, and commercial
centers. Major commercial accounts include Westin Hotel Limited Partnership,
Hyatt Corporation, Marriott International, Inc. and The Walt Disney Company.
We have enjoyed on average, a 27 year relationship with our top ten
customers. Our 10 largest customers accounted for approximately 38% of 1998 net
sales, while sales to Heilig-Meyers Company and its subsidiaries, including
Rhodes, Inc., represented approximately 11.8% of 1998 net sales.
As a result of our strong brand names, national manufacturing, distribution
capabilities and broad product line, we have been able to successfully
capitalize on the trend of retailers moving toward sole-source vendors. For
example, the Heilig-Meyers Company, after a test market program, decided to
carry only Simmons bedding products at its Heilig-Meyers furniture stores.
Sales, Marketing and Advertising
Our products are sold by approximately 200 local field sales
representatives, backed by sales management centralized at each of our 18
manufacturing facilities, as well as national account representatives. This
selling infrastructure provides retailers with coordinated national marketing
campaigns as well as local support that is tailored to the competitive
environment of the local market.
Our marketing strategy focuses on two areas: (1) cooperative promotional
advertising and other retailer support programs designed to complement
individual retailers' marketing programs and (2) national advertising designed
to establish and build brand awareness with consumers. We spend approximately
88% of our promotional budget on regional and local retailer programs. We
develop advertising and retail sales incentive packages specifically for each
individual retailer. Point-of-sale materials including mattresses and box
springs that we design and supply highlight the differentiating features of our
products. In addition, we offer training for retail sales people through our
Mattress Business Academy programs. We believe that our sales training and
45
<PAGE>
consumer education programs are the most extensive in the bedding industry. We
have designed these programs, delivered on-site at our retailers' facilities or
at our research and education center, to teach retail floor salespeople how to
match customers with their mattress comfort preference by improving the retail
floor salespersons' product knowledge and sales skills. We seek to improve our
retailers' unit sales as well as increase sales of bedding in the higher price
segment. We also establish individual incentive programs for our customers and
their sales personnel. Our sales force is trained extensively in advertising,
merchandising and salesmanship which increases the value of the marketing
support they provide to retailers. We believe that our focus on the training of
sales representatives and our customers' retail floor salespeople
differentiates us from most of our largest competitors.
Regionally, we conduct advertising on a cooperative basis and reimburse up
to 50% of some advertising costs of our retailers subject to minimum sales
volume requirements. We believe cooperative advertising fosters strong
relationships with retailers, who exert significant influence on the consumer's
purchasing decision.
We spend approximately 12% of our promotional budget on activities to build
national brand awareness, primarily in the form of national advertising. We
seek to build long-term brand awareness through regular national advertising
and to achieve short-term sales objectives through local and regional
television and radio programming and print advertising. We have developed a
strong reputation for innovative advertising campaigns. We launched the "Do Not
Disturb" campaign, one of our most successful, in the spring of 1995. The "Do
Not Disturb" campaign was created to build awareness of how our Beautyrest(R)
mattress facilitates independent motion. As testimony to the effectiveness of
the "Do Not Disturb" campaign, retailers indicated that their customers ask for
the Beautyrest(R) "bowling ball mattress". We have created a sequel commercial
in the "Do Not Disturb" campaign entitled "Leap of Faith", which has recently
been introduced to the market. In addition, we recently developed a national
campaign for our BackCare(R) product line entitled "Five Zones for Your Bones".
Launched in April 1998, the campaign identifies how the BackCare(R) product
provides proper spinal support. Additionally, we regularly retain market
research firms and sponsor market research in order to measure the
effectiveness of our advertising. Research indicates that since 1995, the year
the "Do Not Disturb" campaign first aired, the percentage of consumers aware of
our Beautyrest(R) products and the percentage of consumers indicating that they
intended to purchase a Simmons(R) product have doubled.
We also utilize a proprietary system for analyzing marketing data in order
to assist both ourselves and our customers more effectively market products.
The Simmons Market Analysis of Retail Trends ("SMART") system combines
geographically-organized sales and demographic data with bedding consumer
demographic and lifestyle data to provide valuable bedding sales at the retail
level. This computerized system improves retail sales by analyzing sales,
demographic and lifestyle data to identify target customers' geographic areas
with strong sales potential. We use this data to help determine plant location
and analyze sales territories and retailers use the data to help optimize store
location and advertising planning.
Manufacturing Facilities
We operate 18 manufacturing facilities in 16 states and Puerto Rico. These
manufacturing facilities have a combined capacity of over 25,000 units per day,
assuming two eight-hour shifts daily. In 1998, we produced a daily average of
17,150 bedding units per day. We believe that, on average, our facilities are
presently operating at approximately 70% of capacity. Currently, 14 of our 18
facilities operate two shifts a day and four facilities operate a single shift.
We have recently completed a 77,500 square-foot facility in Salt Lake City,
Utah, to manufacture and distribute products for customers in Utah and
surrounding states.
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. We receive
most raw materials inventory through "just-in-time" delivery from our major
suppliers. We minimize finished goods inventory through made-to-order
production, with most orders being scheduled, produced and shipped within 24 to
72 hours of receipt.
46
<PAGE>
In 1995, with the assistance of a nationally recognized management
consulting firm, we undertook a project to improve manufacturing productivity
by 20%. The project is internally referred to as UNITE ("Utilizing New Ideas to
Excel"). We are re-engineering both the lay-out of the factory floor and the
basis on which manufacturing employees are paid. Our manufacturing processes
are being reorganized into cell configurations to take advantage of new
conveyor systems and a just-in-time raw materials replenishment system. In
addition, we are implementing a compensation system under which manufacturing
employees are paid on a team incentive basis rather than on individual
piecework. The programs are expected to be implemented in each of our
manufacturing facilities. Through 1998, we have reconfigured 11 plants. We have
also implemented the new compensation system in 11 of our plants. We expect to
complete implementation of the UNITE programs in 1999. We expect to realize
increased operating efficiencies and cost savings in the near term as we
complete the UNITE implementation and optimize our re-engineered processes.
Research, Engineering and Development
We invest substantially in new product development, enhancement of existing
products and improved operating processes. We believe new product development
and product enhancements are crucial to maintaining our strong industry
position. We maintain close contact with bedding industry developments through
sleep research conducted by industry groups and by our engineering department,
as well as through participation in the Better Sleep Council, an industry
association that promotes awareness of sleep issues, and ISPA. Our marketing
and manufacturing departments work closely with the engineering staff to
develop and test new products for marketability and durability.
We also seek to reduce costs and improve productivity by continually
developing more efficient manufacturing and distribution processes. In 1995, we
completed the construction of the Simmons Institute of Technology and Education
("SITE"), a state-of-the-art 38,000 square foot research and education center
in Atlanta, Georgia. Approximately 36 engineers and technicians are employed
full-time at SITE. These employees ensure that we maintain high quality
products by conducting product and materials testing, designing manufacturing
facilities and equipment and improving process engineering and development. We
believe that our engineering staff gives us a competitive advantage over some
of our competitors who do not have significant in-house engineering
departments.
Suppliers
We purchase substantially all of our conventional bedding raw materials
centrally in order to maximize economies of scale and volume discounts. The
major raw materials that we purchase are wire, spring components, lumber,
cotton, insulator pads, innersprings, fabrics and roll goods consisting of
foam, fiber, ticking and non-wovens. We obtain a large percentage of our
required raw materials from a small number of suppliers. In 1998, we bought
approximately 86% of our raw material needs from 10 suppliers. Supplier
concentration is common in the bedding industry.
We have long-term supply agreements with Leggett & Platt, Incorporated
("L&P"), Foamex International Inc. and Amoco Fabrics and Fiber Company. With
the exception of L&P, we believe that we can readily replace our other
suppliers because we have already identified and begun to use alternative
sources. L&P supplies the majority of certain components, including spring
components, insulator pads, wire, fiber, quilt backing and flange material, to
the bedding industry. In 1998, we bought approximately one-third of our raw
materials from L&P. We expect that in 1999 we will buy a comparable portion of
our raw materials from L&P. To ensure a long-term adequate supply of certain
components, we have entered into agreements with L&P, generally expiring in the
year 2010, for the supply of grid tops, innersprings and wire. Among other
things, these agreements generally require us to purchase a majority of our
requirements of certain components from L&P. See "Risk Factors--Dependence on
Key Suppliers".
47
<PAGE>
Upgrade of Information Management System
In 1995, we undertook the implementation of a new enterprise wide
information management system, known internally as SWIFT ("Simmons Working
Intelligently for Tomorrow"). Implemented in all of our facilities other than
in Puerto Rico, the SWIFT system improved the information management systems of
nearly all of our operational areas. The SWIFT system provides a uniform
hardware and software system throughout Simmons and has largely improved data
reliability. The system provides new and more detailed operating and financial
information and greatly improves our ability to analyze product line and
customer profitability, administer customer support and advertising programs
and allocate manufacturing resources.
Competition
There are approximately 800 bedding manufacturers in the United States, with
three companies, Simmons, Sealy Corporation, and Serta, Inc. accounting for a
significant portion of the industry's wholesale revenues. We believe we
principally compete against these two primary competitors on the basis of brand
recognition, product quality and the quality of customer support programs,
which include cooperative advertising, sales force training and marketing
assistance. We believe we compare favorably to our primary competitors in each
of these areas. In addition, only Simmons and Sealy Corporation have national,
company operated manufacturing and distribution capabilities.
The rest of the United States conventional bedding market consists of
approximately seven smaller national manufacturers and nearly 800 independent
local and regional manufacturers. These local and regional manufacturers
generally focus on the sale of lower price point products. While we primarily
manufacture high margin, differentiated bedding products, we also offer a full
line of bedding products to our retailer base in order for these retailers to
maintain their competitive positioning. See "Risk Factors--Competition".
Warranties; Product Returns
Our conventional bedding products generally offer 10 year limited warranties
against manufacturing defects, while certain promotional products carry one
year warranties. We believe that our warranty terms are generally consistent
with those of our primary national competitors. The historical costs to us of
honoring warranty claims have been immaterial. We have also experienced non-
warranty returns for reasons generally related to order entry errors and
shipping damage. We resell our non-warranty returned products primarily through
as-is furniture vendors or outlets.
Patents, Trademarks and Licenses
We own many trademarks, including Simmons(R), Beautyrest(R), BackCare(R),
Connoisseur Collection(R), Maxipedic(R) and Pocketed Coil(TM), most of which
are registered in the United States and in many foreign countries. We protect
our manufacturing equipment and processes as trade secrets and through patents.
We possess several patents on the equipment used to manufacture our Pocketed
Coil(TM) innersprings. While we do not consider our overall success to be
dependent upon any particular intellectual property rights, we cannot assure
you that the degree of protection offered by the various patents will be
sufficient, that patents will be issued in respect of pending patent
applications, or that we will be able to protect our technological advantage
upon the expiration of our patents. If we were unable to maintain the
proprietary nature of our intellectual property, our financial condition or
results of operations could be materially adversely affected.
Through the early 1990s, we disposed of certain of our foreign operations
and secondary domestic lines of business. As a result, we now license the
Simmons(R) name and many of our trademarks, processes and patents on an
exclusive basis to third-party manufacturers abroad to produce and distribute
conventional bedding products within their designated territories and to third-
party manufacturers in the U.S. to manufacture and distribute juvenile bedding
and non-bedding upholstered furniture, primarily on perpetual or automatically
renewable terms. In addition, we have licensed the Simmons(R) name and other
trademarks, generally for limited terms, for domestic use to third-party
manufacturers of adjustable beds, down comforters, pillows, bed pads, blankets,
futons, airbeds and waterbeds.
48
<PAGE>
Employees
As of March 27, 1999, we had approximately 2,800 employees. Approximately
1,200 of these were represented by labor unions. Employees at nine of our 18
manufacturing facilities are represented by at least one of the following
unions: the Upholstery Division of the United Steelworkers, the Teamsters, the
United Furniture Workers, the Longshoremen and the International Association of
Machinists and Aerospace Workers. Union contracts typically are negotiated for
four-year terms. A majority of our current contracts expire in 2001. Labor
relations historically have been good. We have had no labor-related work
stoppages in over 20 years. Since 1980, we have opened nine new plants, none of
which are unionized. Approximately 1,700 of our current and former employees
are participants in the Simmons ESOP.
Regulatory Matters
As a manufacturer of bedding and related products, we use and dispose of a
number of substances, such as glue, lubricating oil, solvents, and other
petroleum products that may subject us to regulation under numerous federal and
state statutes governing the environment. Among other statutes, we are 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 regulations. We
have made and will continue to make capital and other expenditures to comply
with environmental requirements. As is the case with manufacturers in general,
if a release of hazardous substances occurs on or from our properties or any
associated offsite disposal location, or if contamination from prior activities
is discovered at any of our properties, we may be held liable and the amount of
such liability could be material. We are currently evaluating our potential
liability with respect to the cleanup of environmental contamination at and in
the vicinity of our leased manufacturing facilities in San Leandro, California.
We have recorded a reserve to reflect our potential liability for
environmental matters. Because of the uncertainties associated with
environmental remediation, we cannot assure you that the costs incurred with
respect to the potential liabilities will not exceed the recorded reserves.
Our conventional bedding and other product lines are subject to various
federal and state laws and regulations relating to flammability, sanitation and
other standards. We believe that we are in material compliance with all such
laws and regulations.
49
<PAGE>
Properties
Our corporate offices are located at One Concourse Parkway, Suite 600,
Atlanta, Georgia 30328. The following table sets forth selected information
regarding manufacturing and other facilities we operated as of March 27, 1999:
<TABLE>
<CAPTION>
Year of
Date Lease Square Union
Location Occupied Expiration Footage Affiliation
-------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Manufacturing
Facilities:
Atlanta, Georgia...... 1992 2007 148,300 United Steelworkers of America
Charlotte, North
Carolina............. 1993 2003 144,180 None
Columbus, Ohio........ 1988 1999 190,000 United Steelworkers of America,
International Association of
Machinists and Aerospace Workers
Dallas, Texas......... 1998 2008 140,981 United Steelworkers of America
Denver, Colorado...... 1998 2008 129,000 None
Fredericksburg,
Virginia............. 1995 2010 128,500 None
Honolulu, Hawaii...... 1993 2003 58,530 International Longshoremen's
and Warehousemen's Union
Jacksonville,
Florida.............. 1973 2003 205,729 United Steelworkers of America
Janesville,
Wisconsin............ 1982 Owned 288,700 None
Shawnee, Kansas....... 1997 Owned 130,000 United Steelworkers of America
Los Angeles,
California........... 1982 1999 223,382 International Brotherhood of Teamsters,
United Steelworkers of America
Phoenix, Arizona...... 1997 2007 103,408 None
Piscataway, New
Jersey............... 1988 2003 264,908 International Association of Machinists
and Aerospace Workers,
United Steelworkers of America
Salt Lake City, Utah.. 1998 2008 77,500 None
San Leandro,
California........... 1964 2007 260,500 United Furniture Workers of America
Seattle, Washington... 1992 2002 133,610 None
Springfield,
Massachusetts........ 1988 2006 129,000 None
Trujillo Alto, Puerto
Rico................. 1998 Owned 50,000 None
---------
Subtotal............ 2,806,228
Other Facilities (Atlan-
ta, Georgia):
Corporate
Headquarters......... 1992 2003 37,500 None
SITE Research and
Development Center... 1994 2005 38,000 None
Consumer Service
Center............... 1977 2003 30,960 None
---------
Total Square
Footage............ 2,912,688
</TABLE>
Legal Proceedings
From time to time, we have been involved in various legal proceedings. We
believe that all of this litigation is routine in nature and incidental to the
conduct of our business, and that none of this litigation, if determined
adversely to us, would have a material adverse effect on our financial
condition or results of our operations.
50
<PAGE>
MANAGEMENT
The following table sets forth the name, age as of March 27, 1999 and
position of each of our directors, executive officers and other key employees.
Each of our directors will hold office until the next annual meeting of our
shareholders or until his successor has been elected and qualified. Our
officers are elected by our Board of Directors and serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<C> <C> <S>
Zenon S. Nie..................... 48 Chairman of the Board of Directors,
Chief Executive Officer and President
Jonathan C. Daiker............... 51 Executive Vice President--Finance and
Administration, Chief Financial
Officer and Director
Martin R. Passaglia.............. 50 Senior Executive Vice President,
Secretary and Director
Peter Lamm....................... 47 Director
Richard C. Dresdale.............. 43 Director
Andrea Geisser................... 56 Director
Gregory P. Meredith.............. 41 Director
William L. Ayers, IV............. 53 Executive Vice President--Marketing and
Sales
Joseph Ulicny.................... 55 Executive Vice President--Market
Development
Robert K. Barton................. 58 Senior Vice President--Human Resources
Leo T. Brennan................... 63 Vice President--Materials Management
Roger W. Franklin................ 43 Vice President--Finance and Treasurer
James P. Maher................... 63 Divisional President
Cleve B. Murphy.................. 48 Divisional President
Gary G. Pleasant................. 56 Divisional President
</TABLE>
Zenon S. Nie joined Simmons in 1993 as Chief Executive Officer, has served
as a Director since 1993 and was appointed Chairman of the Board of Directors
in 1994. Prior to joining Simmons, Mr. Nie served as President of the Consumer
Home Fashions Division of The Bibb Company from 1991 to 1993. From 1981 through
1991, Mr. Nie held several senior management positions at Serta, Inc. including
President, Executive Vice President, Chief Operating Officer, Senior Vice
President--Manufacturing, Finance and Administration and Vice President--
Strategic Planning. Mr. Nie's previous experience includes several marketing
positions at Sealy Corporation. Mr. Nie is a director of LADD Furniture, Inc.
Jonathan C. Daiker joined Simmons in 1995 as Executive Vice President--
Finance and Administration, Chief Financial Officer and a Director. Prior to
joining Simmons, Mr. Daiker held a number of directorships in the corporate
offices of Philips Electronics North America Corporation, as well as operating
positions within its divisional structure from 1981 to 1995, including Senior
Vice President and Chief Financial Officer for Philips Lighting Company. Prior
to 1981, he was a senior manager with Price Waterhouse, a predecessor to
PricewaterhouseCoopers LLP. Mr. Daiker is a Certified Public Accountant.
Martin R. Passaglia joined Simmons in 1973 and has served as Senior
Executive Vice President and a Director since 1994. Prior to 1994, Mr.
Passaglia held various positions including Regional Sales Manager, Vice
President and General Manager--Hawaii, Executive Vice President--Account
Development, and Executive Vice President--Marketing and Sales.
Peter Lamm became a director of Simmons in 1998 in connection with the
Merger. Mr. Lamm is Chairman and Chief Executive Officer and a founding partner
of Fenway, a New York-based direct investment
51
<PAGE>
firm for institutional investors with a primary objective of acquiring leading
middle-market companies. From February 1982 to April 1994, Mr. Lamm was a
member of Butler Capital Corporation, a private investment firm, most recently
as Senior Direct Investment Officer and Managing Director. Mr. Lamm currently
serves as a director of Aurora Foods, Inc., Central Tractor Farm & Country,
Inc., Iron Age Corporation, Delimex Holdings, Inc., New Creative Enterprises,
Inc. and Blue Capital Management.
Richard C. Dresdale became a director of Simmons in 1998 in connection with
the Merger. Mr. Dresdale is President and a founding partner of Fenway. From
June 1985 until March 1994, Mr. Dresdale was a member of Clayton, Dubilier &
Rice, Inc. a private investment firm, most recently as a Principal. Mr.
Dresdale currently serves as a director of Aurora Foods, Inc., Central Tractor
Farm & Country, Inc., Delimex Holdings, Inc., MW Windows Inc., and Blue Capital
Management.
Andrea Geisser became a director of Simmons in 1998 in connection with the
Merger. Mr. Geisser is a Managing Director and a founding partner of Fenway.
From February 1989 to June 1994, Mr. Geisser was a Managing Director of Butler
Capital Corporation. From 1986 to 1989, Mr. Geisser served as a Managing
Director of Onex Investment Corporation, the largest Canadian leveraged buyout
company. Mr. Geisser currently serves as a director of Aurora Foods, Inc., Iron
Age Corporation, New Creative Enterprises, Inc. and Decorative Concepts, Inc.
Gregory P. Meredith became a director of Simmons in 1998 in connection with
the Merger. Mr. Meredith has been a Managing Director of Fenway since 1997.
From 1993 to 1996, Mr. Meredith was employed by NationsBanc Capital Markets,
Inc., most recently as Managing Director and Head of Leveraged Finance. Prior
to 1993, Mr. Meredith was employed by Salomon Brothers Inc, most recently as a
Senior Trader in the High Yield Group in charge of trading distressed
securities and special situations. Mr. Meredith currently serves as a director
of MW Windows Inc., Decorative Concepts, Inc. and FNX Limited.
William L. Ayers, IV joined Simmons in 1973 and has served as Executive Vice
President--Sales and Marketing since 1994. Prior to 1994, Mr. Ayers held
several sales management positions including Vice President and General
Manager--Los Angeles and Divisional Executive Vice President.
Joseph Ulicny joined Simmons in 1992 and assumed his current position as
Executive Vice President--Market Development in 1995. From 1992 until 1995, Mr.
Ulicny served as Executive Vice President--Finance and Chief Financial Officer.
Prior to joining Simmons, Mr. Ulicny worked at The Dannon Company, Inc., a
yogurt wholesaler, from 1985 to 1992.
Robert K. Barton joined Simmons in 1982 and has served as Senior Vice
President--Human Resources since 1990. Prior to assuming his current position,
Mr. Barton served as Vice President--Human Resources, Vice President--
Administration, Vice President--Dealer Financial Services and Director of
Dealer Financial Services.
Leo T. Brennan joined Simmons in 1978 and has served as Vice President--
Materials Management since 1985. Prior to assuming his current position, Mr.
Brennan served as Director of Purchasing.
Roger W. Franklin joined Simmons in 1986 and has served as Vice President--
Finance and Treasurer since 1990. Mr. Franklin served as Vice President--
Controller and Director of Taxes prior to assuming his current position. Prior
to joining Simmons, Mr. Franklin was a manager with Price Waterhouse, a
predecessor to PricewaterhouseCoopers LLP, in both the audit and tax areas from
1978 to 1986. Mr. Franklin is a Certified Public Accountant.
James P. Maher joined Simmons in 1989 and has served as Divisional President
since January 1997. Prior to assuming his current position, Mr. Maher served as
Divisional Executive Vice President, Vice President and General Manager--
Jacksonville, and Vice President and General Manager--San Leandro. Before
joining Simmons, Mr. Maher held senior management positions with Nachman
Corporation, a wire and bedding components manufacturer, Leggett & Platt,
Incorporated, a manufacturer of bedding components, and May & Company, a
bedding manufacturer.
52
<PAGE>
Cleve B. Murphy joined Simmons in 1995 and has served as Divisional
President since January 1997. Prior to assuming his current position, Mr.
Murphy served as Divisional Executive Vice President. Mr. Murphy's background
includes twelve years at Sealy Corporation where he started as Sales Manager
and became one of four Regional Vice Presidents, from 1983 to 1995. Prior to
his employment with Sealy Corporation, Mr. Murphy served eight years as General
Manager for Englander, a bedding manufacturer, from 1975 to 1983 and held
various positions with Serta, Inc. from 1973 to 1975.
Gary G. Pleasant rejoined Simmons in 1991 and has served as Divisional
President since January 1997. Prior to assuming his current position, Mr.
Pleasant served as Divisional Executive Vice President and Vice President and
General Manager--Seattle. Mr. Pleasant was previously employed by Simmons 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.
Director Compensation
We pay no additional remuneration to our employees or to executives of
Fenway 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 our Chief Executive Officer and each of our other four most
highly compensated executive officers. The compensation arrangements for each
of these officers that are currently in effect are described under the caption
"-- Employment Arrangements" below.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------ Number of Securities All Other
Name and Principal Salary Bonus Underlying Long-Term Compensation
Position Year ($) ($)(1) Compensation Options (#)(2) ($)(3)
------------------ ---- -------- ---------- --------------------------- ------------
<S> <C> <C> <C> <C> <C>
Zenon S. Nie............ 1998 $579,792 $5,116,125 -- $15,276
Chairman, Chief
Executive 1997 517,500 586,366 -- 32,853
Officer and President 1996 501,458 876,823 1,800,000 31,551
Martin R. Passaglia..... 1998 267,500 295,573 -- 11,074
Senior Executive Vice
President 1997 267,500 211,325 -- 29,133
1996 267,500 234,063 64,237 161,721
Jonathan C. Daiker...... 1998 226,917 496,053 -- 10,175
Executive Vice
President-- 1997 213,000 169,060 -- 27,008
Finance &
Administration, Chief 1996 205,750 230,031 156,338 30,741
Financial Officer
Robert K. Barton........ 1998 202,417 276,102 -- 11,722
Senior Vice President--
Human 1997 180,000 143,517 -- 29,329
Resources 1996 171,750 150,281 63,667 147,447
Joseph Ulicny........... 1998 190,417 161,389 -- 11,988
Executive Vice
President--Market 1997 180,000 142,793 -- 28,600
Development 1996 172,483 150,923 30,000 27,028
</TABLE>
- --------
(1) Includes amounts paid in connection with the Transactions and the
Investcorp Acquisition in 1998 and 1996, respectively. Also includes
amounts earned in the year shown but paid in the subsequent year.
(2) These amounts show the number of shares underlying options granted in 1996.
In 1996, in connection with the Investcorp Acquisition, all options then
outstanding were purchased. Messrs. Nie, Passaglia, Daiker, Barton and
Ulicny received $1,812,800, $364,496, $117,435, $363,867 and $308,856,
respectively, for their options.
53
<PAGE>
(3) These amounts consist of (i) our contributions to our ESOP in 1997 and
1996, respectively, in the amounts of $18,571 and $17,192 for Mr. Nie,
$18,614 and $17,192 for Mr. Passaglia, $18,571 and $17,192 for Mr. Daiker,
$18,614 and $17,192 for Mr. Barton, and $18,571 and $17,192 for Mr. Ulicny,
respectively; the amount of our contribution to our ESOP for 1998 has not
been determined; (ii) premiums for term life insurance and long-term
disability insurance in 1998, 1997 and 1996, respectively, in the amounts
of $13,276, $14,282 and $14,359 for Mr. Nie, $9,074, $10,519 and $11,185
for Mr. Passaglia, $8,175, $8,437 and $8,321 for Mr. Daiker, $9,722,
$10,715 and $11,908 for Mr. Barton, $9,988, $10,029 and $9,836 for Mr.
Ulicny, respectively; (iii) payments of benefits under non-qualified ESOP
in 1996, in the amount of $133,344 and $118,347 for Mr. Passaglia and Mr.
Barton, respectively; (iv) relocation assistance in 1996 in the amount of
$5,228 for Mr. Daiker; and (v) $2,000 per named executive officer in 1998
for financial planning services.
Aggregated Option Exercises
The table below sets forth information concerning the exercise of stock
options during 1998 and the value of unexercised stock options at the end of
1998 for our Chief Executive Officer and each of our other four most highly
compensated executive officers.
Aggregated Option Exercises in
Fiscal 1998 and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-
Options at Money Options
Fiscal Year End (#) (3) at Fiscal Year End ($) (2)
----------------------- --------------------------
Number of
Shares
Exercised
Underlying Value
Name Options (#) (1) Realized ($) (2) Exercisable Exercisable
- ---- --------------- ---------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Zenon S. Nie............ 1,128,911 $4,552,716 752,608 $3,035,146
Martin R. Passaglia..... 34,429 132,251 51,642 198,371
Jonathan C. Daiker...... 40,479 163,572 121,439 490,724
Robert K. Barton........ 29,086 112,251 54,017 208,467
Joseph Ulicny........... 17,649 66,727 26,473 100,088
</TABLE>
- --------
(1) Reflects options to purchase common stock of Simmons Holdings that were
redeemed for cash by us in connection with the Transactions. See
"Management--Management Stock Incentive Plan."
(2) There was no public trading market for our common stock as of October 29,
1998 and December 27, 1998. These values have been calculated on the basis
of the per share consideration paid in connection with the Transactions
less the applicable exercise price.
(3) Reflects options to purchase common stock of Simmons Holdings retained as a
portion of the Management Equity Rollover. See "Management--Management
Stock Incentive Plan."
Retirement Plans
We maintain several single employer retirement plans including a single
employer defined benefit plan and two single employer defined contribution
plans, the Simmons ESOP and a 401(k) Plan (the "Simmons Retirement Savings
Plan"), which are intended to be qualified under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code"). We also participate in a number of multi-
employer pension plans, from which we have no present intention to withdraw. In
the aggregate, these plans cover substantially all permanent employees.
54
<PAGE>
Simmons Retirement Savings Plan. The Simmons Retirement Savings Plan, formed
in 1987, 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. Generally employees covered by collective
bargaining agreements are not permitted to participate in the plan, unless the
collective bargaining agreement expressly provides for participation.
Presently, approximately 500 employees participate in this plan.
Participants 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. We did not
make any contributions to the plan during plan year 1998 (other than the pre-
tax deferrals mentioned above).
Simmons ESOP. The Simmons ESOP, formed in 1989, 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 for which State Street Bank & Trust
Company (the "ESOP Trustee") serves as trustee. The Simmons ESOP covers
otherwise eligible employees of Simmons who are 21 or older and who have
completed at least one year of service for Simmons. Generally, employees
covered by collective bargaining agreements are not permitted to participate,
unless the collective bargaining agreement expressly provides for
participation. As of March 27, 1999, approximately 1,700 of our current and
former employees were participants in the Simmons ESOP.
The Simmons ESOP provides benefits to each participating employee based on
the value of the 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.
The Simmons ESOP is a leveraged ESOP. Leveraged ESOPs differ from other
defined contribution employee pension benefit plans in that they can 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, Simmons'
stock acquired by the Simmons ESOP is held by the ESOP Trustee in a suspense
account. In connection with the establishment of the Simmons ESOP in 1989, the
Simmons ESOP borrowed funds from us for the purpose of acquiring Simmons'
stock. As of December 26, 1998, the borrowed amount outstanding was
approximately $39.4 million. As of December 27, 1997, the Simmons ESOP was
indebted to us in the approximate principal amount of $51.2 million. Prior to
March 22, 1996, the date of the Investcorp Acquisition, the Simmons ESOP held
11,671,663 shares of our common stock. On the closing of the Investcorp
Acquisition, the Simmons ESOP sold 6,001,257 shares, representing all shares
previously allocated to participants' ESOP accounts, to Simmons Holdings for
approximately $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 Investcorp Acquisition, the
remaining 5,670,406 shares, representing all unallocated shares held in the
suspense account, were converted into our Series A preferred stock. Prior to
the Transactions, if converted into common stock of Simmons or capital stock of
Simmons Holdings, this Series A preferred stock would have represented direct
or indirect ownership of 15.1% of our common stock, after giving effect to such
conversion (exclusive of outstanding stock options).
On July 22, 1998, we entered into the ESOP Stock Sale and Exchange Agreement
with Simmons Holdings, the ESOP Trustee and REM (the "ESOP Agreement").
Pursuant to the ESOP Agreement, immediately prior to the Merger, REM purchased
the Allocated Shares for an aggregate purchase price of approximately
$15.4 million. In addition, immediately prior to the Merger, the Simmons ESOP
exchanged its remaining outstanding shares of our Series A preferred stock for
3,482,036 shares of common stock of Simmons Holdings, constituting the ESOP
Equity Rollover. The Simmons ESOP received a fairness opinion from its
financial advisor to the effect that the consideration received for the
Allocated Shares under the ESOP Agreement was fair to the Simmons ESOP from a
financial point of view.
55
<PAGE>
We 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 this cash to repay the internal ESOP
Loan to us. As a result, there is no cash cost to us associated with the
contributions to the Simmons ESOP. As the internal ESOP Loan is repaid, a
portion of the ESOP Rollover Equity 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. When the internal ESOP Loan is
repaid in full (in approximately three years), all shares of ESOP Equity
Rollover 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), or 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. A participant
entitled to a distribution is entitled under law to have our 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 us to purchase such
shares at fair market value over an approximately two year period.
Defined Benefit Plan. We also sponsor 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 120
participants. The monthly benefit for these participants upon normal retirement
is generally determined as the sum of:
(1) 0.75% of monthly earnings as of January 1, 1963 multiplied by
specified credited service as of May 1, 1963;
(2) 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
(3) 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 will incur no additional liability. None of the named executive officers
benefits under the plan.
Nonqualified Employee Stock Ownership Plan. In 1989, we instituted a
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 1042 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 us, retirement, death or
permanent disability. The nonqualified plan provides for bookkeeping entries to
be provided on account of each designated employee, to be credited with the
shares of stock which would have been allocated to the designated employee'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
56
<PAGE>
provisions apply as are described in the Simmons ESOP. We charged
approximately $184,000 and $64,000 to expense for 1998 and 1997, respectively.
The accrued benefits under the nonqualified plan were $373,000 and $189,000 at
December 26, 1998 and December 27, 1997, respectively, and are included in
other long term liabilities in the accompanying balance sheets. We have
continued the nonqualified plan after the consummation of the Transactions.
Retiree Health Coverage. We provide 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, there is a $20,000 lifetime
maximum benefit for participants age 65 and over. We also provide life
insurance to all retirees who retired before 1979. These plans are unfunded.
Employment Arrangements
Zenon Nie, Chairman of the Board of Directors and Chief Executive Officer,
has entered into a three-year employment agreement with us that renews
automatically on a daily basis (subject to termination upon three years'
notice). Pursuant to his employment agreement, Mr. Nie is entitled to receive:
(1) a base salary, currently $600,000 per year, subject to further
increases approved by our Board of Directors;
(2) an annual cash bonus based upon our achievement of our annual
financial plan approved by the Board of Directors and to participate in all
of our other compensation and employee benefit programs; and
(3) specified fringe benefits, including reimbursement of country club
dues and provision of an automobile.
If we terminate Mr. Nie's employment other than for death, disability or
cause, Mr. Nie will be entitled to:
(1) payment of his base salary then in effect for three years following
the date of termination;
(2) payment of an annualized bonus equal to a percentage of his base
salary then in effect based upon our performance for a period of one year
following the date of termination; and
(3) participate in health and welfare benefit programs for three years
following the date of termination.
Mr. Nie is entitled to receive an additional bonus from us based upon our
future performance. If any payments by us to Mr. Nie constitute "excess
parachute payments" within the meaning of Section 280G of the Code, we must
reimburse Mr. Nie for any resulting excise tax liability plus any income tax
liability related to such reimbursement.
The named executive officers Jonathan Daiker, Executive Vice President--
Finance and Administration and Chief Financial Officer, Martin Passaglia,
Senior Executive Vice President, Joseph Ulicny, Executive Vice President--
Market Development and Robert Barton, Senior Vice President--Human Resources
have also entered into employment agreements with us, which commenced on June
29, 1998. The employment agreements for Messrs. Daiker, Passaglia and Barton
initially run for two years and automatically extend one year on a daily basis
beginning on the first anniversary of the commencement of the employment term,
subject to termination upon one year's notice. Mr. Ulicny's agreement
initially runs for one year, automatically extending for one year on a daily
basis (subject to termination upon one year's notice). Pursuant to these
agreements, Messrs. Daiker, Passaglia, Ulicny and Barton are entitled to
receive a base annual salary, currently $236,000, $267,500, $197,000 and
$209,000, respectively, subject to further increases approved by our Board of
Directors. Each of these executives is eligible to receive an annual cash
bonus based upon achievement of our annual financial plan approved by the
Board of Directors and to participate in all of our other compensation
57
<PAGE>
and fringe benefit programs. If we terminate any of these executives without
cause, such executive shall be entitled to payment of his base salary, an
annualized bonus equal to 42.5% of his base salary then in effect and
participation in health and welfare benefit programs for (1) in the case of
Messrs. Daiker, Passaglia and Barton, the longer of (a) the remainder of the
initial two year employment term or (b) one year, and (2) in the case of Mr.
Ulicny, one year.
Portions of bonuses paid in connection with the Transactions are subject to
repayment if the executive officer terminates his employment in the two year
period ending October 28, 2000.
Management Stock Incentive Plan
Simmons Holdings has also adopted a Management Stock Incentive Plan (the
"Incentive Plan") to provide incentives to our employees and directors and to
the employees and directors of Simmons Holdings by granting them awards tied to
the common stock of Simmons Holdings. The Incentive Plan is administered by a
committee of the Board of Directors of Simmons Holdings (the "Compensation
Committee"), which has broad authority in administering and interpreting the
Incentive 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 Incentive 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 Incentive 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 Simmons.
Upon the closing of the Transactions, there were outstanding under the
Incentive Plan options to purchase an aggregate of 1,639,077 shares of Simmons
Holdings common stock issued to 47 individuals with a weighted average exercise
price of $2.825 per share. All such options are exercisable in full
immediately.
In connection with the Transactions, management received cash for certain
shares of stock owned by them and also received with respect to certain
outstanding options, an amount equal to the difference between the per share
merger consideration and the exercise price per share. See "Certain
Relationships and Related Transactions".
58
<PAGE>
PRINCIPAL STOCKHOLDERS
After the consummation of the Transactions on October 29, 1998, we had one
class of issued and outstanding common stock and Simmons Holdings owned all of
it.
After the consummation of the Transactions, Simmons Holdings had
25,343,075.80 shares of issued and outstanding common stock. The following
table describes the beneficial ownership of each class of issued and
outstanding equity securities of Simmons Holdings by each of our directors and
executive officers, our directors and executive officers as a group and each
person who beneficially owns more than 5% of the outstanding shares of any
class of equity securities of Simmons Holdings as of March 27, 1999.
<TABLE>
<CAPTION>
Number of Percent of
Name Shares(a) Class(a)
---- ------------- ----------
<S> <C> <C>
Fenway Investment LLC(b).......................... 19,631,477.81 75.67%
c/o Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Simmons ESOP(c)................................... 3,482,036.00 13.74%
c/o State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
SH Investment Limited, a Cayman Islands
corporation(d)................................... 1,336,997.62 5.28%
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands BWI
Zenon S. Nie(e)................................... 1,032,608.00 3.96%
Martin R. Passaglia(f)............................ 223,100.00 *
Jonathan C. Daiker(g)............................. 162,061.00 *
Robert K. Barton(h)............................... 194,198.00 *
Joseph Ulicny(i).................................. 102,161.00 *
Peter Lamm(j)..................................... 19,631,477.81 75.67%
Richard C. Dresdale(j)............................ 19,631,477.81 75.67%
Andrea Geisser(j)................................. 19,631,477.81 75.67%
Gregory P. Meredith(j)............................ 19,631,477.81 75.67%
All Directors and executive officers as a group (9
persons)(k)...................................... 21,345,605.81 79.20%
</TABLE>
- --------
* Less than 1%.
(a) As used in this table, beneficial ownership has the meaning set forth in
Rule 13d-3(d)(1) of the Exchange Act.
(b) Includes 601,346.63 shares of common stock that may be acquired upon
exercise of an outstanding warrant dated October 29, 1998 held by Fenway
Investment LLC. Fenway Partners Capital Fund, L.P. ("FPCF") and Fenway
Partners Capital Fund II, L.P. ("FPCFII") together hold a majority of the
voting interests of Fenway Investment LLC, and may therefore be deemed to
have the power to vote or dispose of the shares of common stock held
directly by Fenway Investment LLC. The FPCF and FPCFII disclaim beneficial
ownership of any such shares in which they do not have pecuniary interests.
Does not include 2,104,713.22 shares of common stock that may be acquired
upon the exercise of the Escrow Warrants.
(c) Represents shares not allocated to any participant account.
(d) The entity that holds the Investcorp Equity Rollover.
(e) Includes 752,608.00 shares of common stock that may be acquired upon
exercise of outstanding options that are currently fully vested and
exercisable and were retained as a portion of the Management Equity
Rollover. See "Management--Management Stock Incentive Plan".
59
<PAGE>
(f) Includes 51,642.00 shares of common stock that may be acquired upon
exercise of outstanding options that are currently fully vested and
exercisable and were retained as a portion of the Management Equity
Rollover. See "Management--Management Stock Incentive Plan".
(g) Includes 121,439.00 shares of common stock that may be acquired upon
exercise of outstanding options that are currently fully vested and
exercisable and were retained as a portion of the Management Equity
Rollover. See "Management--Management Stock Incentive Plan".
(h) Includes 54,017.00 shares of common stock that may be acquired upon
exercise of outstanding options that are currently fully vested and
exercisable and were retained as a portion of the Management Equity
Rollover. See "Management--Management Stock Incentive Plan".
(i) Includes 26,473.00 shares of common stock that may be acquired upon
exercise of outstanding options that are currently fully vested and
exercisable and were retained as a portion of the Management Equity
Rollover. See "Management--Management Stock Incentive Plan".
(j) Includes the 19,030,131.18 shares of common stock and warrant to acquire
601,346.63 shares of common stock (see note (b) above) held by Fenway
Investment LLC. FPCF and FPCFII together hold a majority of the voting
interests of Fenway Investment LLC, and may therefore be deemed to have the
power to vote or dispose of the shares of common stock held directly by
Fenway Investment LLC. Messrs. Lamm, Dresdale, Geisser and Meredith are
managing directors of Fenway Partners, Inc., limited partners and members
of the general partners of FPCF and FPCFII, Fenway Partners, L.P. and
Fenway Partners II, LLC, respectively, and accordingly may be deemed to
beneficially own shares of common stock held by Fenway Investments LLC.
Does not include 379,119.07 shares of Class B common stock, representing
all of the issued and outstanding shares of Class B common stock, held by
Fenway Partners, Inc., of which Messrs. Lamm, Dresdale, Geisser and
Meredith may be deemed to have beneficial ownership. Messrs. Lamm,
Dresdale, Geisser and Meredith disclaim beneficial ownership of any such
shares of common stock or Class B common stock in which they do not have
pecuniary interests. Does not include 2,104,713.22 shares of common stock
that may be acquired upon the exercise of the Escrow Warrants.
(k) Includes a total of 1,006,179.00 shares of common stock that may be
acquired upon exercise of outstanding options that are currently fully
vested and exercisable and were retained as a portion of the Management
Equity Rollover. Also includes 19,631,477.81 shares of common stock
attributed to Messrs. Lamm, Dresdale, Geisser and Meredith (see note (j)
above).
Stockholders Agreements
In connection with the Transactions, we entered into an agreement with
Simmons Holdings, Fenway Investment LLC, the Simmons ESOP, and the Investcorp
Group (the "Stockholders Agreement"). In addition, we entered into an agreement
with Fenway Investment LLC, Simmons Holdings and certain members of management
(the "Management Stockholders Agreement" and, collectively with the
Stockholders Agreement, the "Stockholders Agreements"). The Stockholders
Agreements provide, among other things, for tag-along rights, drag-along
rights, registration rights, certain put rights in favor of management and
restrictions on the transfer of shares held by parties to the Stockholders
Agreements.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Merger and Related Agreements
Pursuant to the Merger Agreement, an aggregate consideration of
approximately $222.9 million in cash was paid to certain stockholders and
option holders of Simmons Holdings. Certain members of management retained the
Management Equity Rollover and the Investcorp Group retained the Investcorp
Equity Rollover. In connection with the Merger, and pursuant to the
subscription agreements entered into in connection therewith, Fenway Investment
LLC purchased 19,030,131.18 shares of common stock of Simmons Holdings for
$128.1 million. Management received aggregate consideration of approximately
$14.0 million in cash in the Merger, including approximately $7.8 million in
respect of an aggregate of 1,151,508 shares of stock of Simmons Holdings owned
by management and approximately $6.2 million in respect of the cancellation of
an aggregate of 1,571,463 options to purchase stock of Simmons Holdings. Under
the subscription agreement with Fenway Investment LLC, Holdings agreed to
indemnify and pay certain expenses of the Fenway Funds and its affiliates and
their advisors and consultants under certain circumstances. Pursuant to the
ESOP Agreement, immediately prior to the Merger, REM purchased the Allocated
Shares from the Simmons ESOP for the aggregate purchase price of $15.4 million.
In addition, in connection with the Merger, and subject to certain conditions,
the Simmons ESOP retained the ESOP Rollover Equity. See "The Transactions and
the Original Offering".
Certain members of senior management received $12,601,019 pursuant to the
Merger Agreement in exchange for the cancellation of certain options and the
exchange of shares of stock in connection with the Merger. Of this amount, Mr.
Nie received $7,379,946, Mr. Passaglia received $901,694, Mr. Daiker received
$254,717, Mr. Barton received $620,358 and Mr. Ulicny received $406,385.
In connection with the Transactions, Fenway Investments LLC entered into the
Securities Purchase Agreement and purchased the Junior Simmons Notes and the
Junior Holdings PIK Notes. Under the Securities Purchase Agreement, we issued
the Warrants. See "Transactions" and "Other Indebtedness--Securities Purchase
Agreement". On March 16, 1999, with proceeds from the original offering, we
repaid the $30.0 million of indebtedness under the Junior Simmons Notes as well
as approximately $1.1 million of accrued interest.
Fenway Advisory Agreement
We, Simmons Holdings and Fenway entered into a management agreement (the
"Fenway Advisory Agreement") effective upon consummation of the Transactions
pursuant to which Fenway agreed to provide strategic advisory services to
Simmons Holdings and us. In exchange for such services, Simmons Holdings and we
agreed to pay Fenway (i) annual management fees of 0.25% of net sales for the
prior fiscal year (estimated to be $1.5 million), (ii) fees in connection with
the consummation of any acquisition transactions for Fenway's assistance in
negotiating such transactions and (iii) certain fees and expenses, including
legal and accounting fees and any out-of-pocket expenses incurred by Fenway in
connection with providing services to Simmons Holdings and us. The annual
management fees are subject to increase in the event of certain acquisitions.
Simmons Holdings and we also agreed to indemnify Fenway under certain
circumstances. In addition, pursuant to the Fenway Advisory Agreement, upon the
consummation of the Merger, Fenway received $5.1 million and approximately
379,000 shares of Simmons Holdings' Class B common stock in connection with the
Transactions.
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OTHER INDEBTEDNESS
New Senior Credit Agreement
On October 29, 1998, in conjunction with the Transactions, we entered into
the New Senior Credit Agreement with institutional lenders and affiliates of
the initial purchasers of the notes, including Goldman Sachs Credit Partners
L.P., an affiliate of Goldman Sachs, as joint lead arranger, syndication agent
and lender, Warburg Dillon Read as joint lead arranger, UBS A.G., an affiliate
of Warburg Dillon Read, as administrative agent and lender, Fleet National
Bank, an affiliate of Fleet Securities, as co-agent and lender, and U.S. Bank
N.A., an affiliate of U.S. Bancorp Libra, as co-agent and lender. We
distributed a portion of the proceeds of the Term Loan Facility and our initial
borrowings under the Revolving Credit Facility to Simmons Holdings to provide a
portion of the funds necessary to consummate the Transactions.
The New Senior Credit Agreement provides for loans of up to $270.0 million,
consisting of:
(1) the Tranche A Term Loan of up to $70.0 million in term loans;
(2) the Tranche B Term Loan of up to $70.0 million in term loans;
(3) the Tranche C Term Loan of up to $50.0 million in term loans; and
(4) the Revolving Loan of up to $80.0 million in revolving credit loans,
letters of credit and swing line loans.
The New Senior Credit Agreement is:
(1) guaranteed by Simmons Holdings, one of our present domestic
subsidiaries ("Subsidiary Guarantor"), subject to certain exceptions, all
of our future material domestic subsidiaries and all of our future foreign
subsidiaries, to the extent that no material adverse tax consequence would
result therefrom; and
(2) secured by substantially all of our assets as well as the assets of
Simmons Holdings and Subsidiary Guarantor.
The Tranche A Term Loan matures in quarterly installments from December 1999
until final payment in October 2004. The Tranche B Term Loan matures in
quarterly installments from December 1998 until final payment in October 2005.
The Tranche C Term Loan matures in quarterly installments from December 1998
until final payment in October 2006. The Revolving Loan is available until the
earliest to occur of:
(1) October 29, 2004;
(2) the date the commitments of the lenders under the New Senior Credit
Agreement to provide Revolving Loans to us (the "Revolving Loan
Commitments") are permanently reduced to zero under certain circumstances;
and
(3) the date the Revolving Loan Commitments are terminated due to an
event of default under the New Senior Credit Agreement.
Our borrowings under the New Senior Credit Agreement bear interest at a
floating rate and may be maintained as Base Rate Loans or as Eurodollar Rate
Loans, provided that Swing Line Loans under the Revolving Credit Facility are
required to be maintained as Base Rate Loans. Base Rate Loans will bear
interest at the Base Rate (defined as the higher of (x) the applicable prime
lending rate of UBS and (y) the Federal Reserve reported average overnight
Federal funds rate plus 0.5%) plus the Applicable Margin. Eurodollar Rate Loans
will bear interest at the Adjusted Eurodollar Rate plus the Applicable Margin.
The Applicable Margin for Base Rate Loans and Eurodollar Rate Loans for the
Tranche A Loan and loans under the Revolving Credit Facility is initially 1.75%
and 2.75%, respectively, subject to reduction to 1.00%
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and 2.00%, respectively, according to a pricing grid based upon the Leverage
Ratio maintained by us. The Applicable Margin for Base Rate Loans for the
Tranche B and Tranche C Loans is 2.25% and 2.50%, respectively. The Applicable
Margin for Eurodollar Rate Loans for the Tranche B and Tranche C Loans is 3.25%
and 3.50%, respectively.
The New Senior Credit Agreement requires us to maintain financial ratios,
including fixed-charge coverage, cash interest coverage and leverage ratios.
The New Senior Credit Agreement also contains covenants which, among other
things, limit capital expenditures, the incurrence of additional indebtedness,
investments, dividends, transactions with affiliates, asset sales, mergers and
consolidations, acquisitions, prepayments of other indebtedness (including the
notes and the exchange notes), liens and encumbrances and other matters
customarily restricted in such agreements. The New Senior Credit Agreement
contains customary events of default, including payment defaults, breaches of
representations and warranties and covenants, default under other agreements
and indebtedness, ERISA matters, a change of control of Holdings and Holdings
ceasing to own 100% of our outstanding capital stock.
The New Senior Credit Agreement requires that certain amounts must be used
to prepay, and/or to reduce commitments under, the New Senior Credit Agreement,
including:
(1) subject to certain exceptions, 100% (or, subject to satisfying
certain debt to equity ratios, 75%) of the net proceeds of any sale or
issuance of equity;
(2) 100% of the net proceeds from any incurrence of indebtedness after
the closing of the Transactions by us or any of our subsidiaries, except
for proceeds of up to $125.0 million from the original offering and subject
to certain exceptions;
(3) 100% of the net after tax proceeds of any sale or other disposition
by us or any of our subsidiaries of any assets (including casualties or
condemnations), except for the sale of inventory in the ordinary course of
business and subject to certain other exceptions;
(4) 75% (or, subject to satisfying certain debt to equity ratios, 50%)
of Consolidated Excess Cash Flow (as defined in the New Senior Credit
Agreement) for each year commencing with the year ending in December 1999;
and
(5) 100% of any surplus assets, net of certain transaction costs and
taxes, returned to us or any of our subsidiaries from a pension plan of
ours or any of our subsidiaries.
In general, the mandatory prepayments described above will be applied first,
to prepay the Term Loan Facility, and then, to prepay and/or permanently reduce
commitments under the Revolving Credit Facility.
We are required to pay to the lenders under the New Senior Credit Agreement
a commitment fee equal to 0.50% per annum, payable in arrears on a quarterly
basis and upon the maturity or termination of the Revolving Credit Facility,
times the daily average unused portion of the Revolving Credit Facility. We are
also required to pay to the lenders a quarterly letter of credit fee with
respect to each such letter of credit outstanding equal to the applicable
margin for Eurodollar Rate Loans under the Revolving Credit Facility times the
daily amount available for drawing on such letter of credit, as well as a
fronting fee payable to the issuing bank for its own account of the greater of
$500 and 0.25% of the average daily amount available to be drawn under all
letters of credit issued. See "The Transactions and the Original Offering--New
Senior Credit Agreement".
In connection with the original offering, our New Senior Credit Agreement
was amended to:
(1) allow for the issuance of the notes;
(2) require prepayment of amounts outstanding under the New Senior
Credit Agreement to the extent the net proceeds of the original offering
exceeded $125.0 million; and
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(3) provide that voluntary and mandatory prepayments from the net
proceeds of the original offering were applied in forward order of
maturity.
As of December 26, 1998, we had no amounts outstanding under the Revolving
Credit Facility. Immediately prior to the original offering, we had borrowings
outstanding under the Revolving Credit Facility and the Term Loan Facility of
approximately $15.0 million and $189.7 million, respectively. We used a portion
of the proceeds of the original offering to repay all amounts outstanding under
the Revolving Credit Facility and to prepay approximately $23.6 million of
principal amounts under the Term Loan Facility as well as approximately $0.1
million of accrued interest. We applied $21.4 million, $1.1 million and
$1.1 million of prepayments to the Tranche A, Tranche B and Tranche C Term
Loans, respectively, which resulted in a total outstanding amount under the
Term Loan Facility of approximately $166.1 million.
Securities Purchase Agreement
In connection with the Transactions, we and Simmons Holdings entered into
the Securities Purchase Agreement with Fenway Investment LLC. Pursuant to the
Securities Purchase Agreement, we issued the Junior Simmons Notes in the
aggregate principal amount of $30.0 million and Simmons Holdings issued the
Junior Holdings PIK Notes in the aggregate principal amount of $10.0 million.
On March 16, 1999, with proceeds from the original offering, we repaid the
$30.0 million of indebtedness under the Junior Simmons Notes as well as
approximately $1.1 million of accrued interest.
The maturity date of the Junior Holdings PIK Notes is October 29, 2011. The
Junior Holdings PIK Notes initially bore interest at 15.0% through December 30,
1998, which rate increases by 0.5% for every three-month period thereafter up
to a maximum rate of 17.5%. Interest on the Junior Holdings PIK Notes is
payable in kind by Simmons Holdings by capitalizing such interest through
September, 2010.
Under the Securities Purchase Agreement, Simmons Holdings also issued:
(1) the Fenway Warrant to Fenway Investment LLC, and
(2) the Escrow Warrant which may be released to Fenway Investment LLC
under certain circumstances.
Manufacturing Facility Loans
We financed the construction costs of our Janesville, Wisconsin and Shawnee,
Kansas facilities with industrial revenue bonds issued by the cities of
Janesville, Wisconsin and Shawnee, Kansas. Each city loaned us the proceeds
from its respective bond issuance. In return, we agreed to pay to each city
amounts sufficient to pay debt service on the bonds. The Janesville bonds, with
a principal amount of $9.7 million, bear interest at a fixed rate of 7.0% and
mature in 2017. The Shawnee bonds, with a principal amount of $5.0 million,
bear interest at a variable rate and mature in 2016.
In December 1997, Simmons Caribbean Bedding Inc., our wholly owned
subsidiary, entered into a loan facility in the amount of $3.2 million. As of
December 26, 1998, approximately $3.2 million was drawn against the loan
facility and is accruing interest at a fluctuating rate equal to 200 basis
points over the London Interbank Offered Rate (or LIBOR), adjusted every 90
days.
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DESCRIPTION OF EXCHANGE NOTES
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions". In this description, the word "Company"
refers only to Simmons Company and not to any of its Subsidiaries or Holdings.
The Company will issue the exchange notes under the indenture between itself
and SunTrust Bank, Atlanta, as trustee. The terms of the Exchange Notes include
those stated in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act").
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the notes except that:
(1) the exchange notes will bear a Series B designation;
(2) the exchange notes have been registered under the Securities Act
and, therefore, will generally not bear legends restricting their transfer;
and
(3) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement dated as of March 16, 1999
by and among, us, Goldman Sachs, Fleet Securities, U.S. Bancorp and Warburg
Dillon Reed, including the provision providing for liquidated damages in
certain circumstances relating to the timing of the exchange notes
The exchange notes will evidence the same debt as the notes and will be
entitled to the benefits of the indenture. The exchange notes will be pari
passu with the Notes if all of such Notes are not exchanged pursuant to the
exchange offer.
The following description is a summary of the material provisions of the
indenture, which is filed as an exhibit to the registration statement of which
this prospectus forms a part. It does not restate the agreement in its
entirety. We urge you to read the indenture because it, and not this
description, defines your rights as holders of the exchange notes. Copies of
the indenture are available as set forth below under the subheading "Additional
Information". Except as the context otherwise requires, references to the notes
shall include the exchange notes.
Brief Description of the Exchange Notes and the Guarantees
The Exchange Notes
The exchange notes:
. are general unsecured obligations of the Company;
. are subordinated in right of payment to all current and future Senior Debt
of the Company; and
. are senior in right of payment to any future subordinated Indebtedness of
the Company.
The Guarantees
The exchange notes initially will not be guaranteed by any of our
subsidiaries.
As a result, the exchange notes will be effectively subordinated to all
indebtedness and other liabilities (including trade payables) of our
subsidiaries. As of the date of the indenture, we will have a single operating
subsidiary, located in Puerto Rico. This subsidiary accounted for less than
1.4% of our consolidated net sales for the year ended December 26, 1998 and
approximately 2.0% of our consolidated assets as of December 26, 1998. In the
event of a bankruptcy, liquidation or reorganization of any non-guarantor
subsidiary, the non-guarantor subsidiaries will pay the holders of their debt
and their trade creditors before they will be able to distribute any of their
assets to us.
Upon completion of the original offering and application of the proceeds as
intended, we had indebtedness senior to the notes aggregating $184.5 million
comprised of total Senior Debt of approximately
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$181.3 million (excluding unused commitments under the New Senior Credit
Agreement of $76.5 million) and $3.2 million of indebtedness of our sole
operating Subsidiary. As indicated above and as discussed in detail below under
the subheading "Subordination", payments on the Exchange Notes will be
subordinated to the payment of Senior Debt. The indenture will permit us to
incur additional Senior Debt in the future. Although the indenture contains
restrictions on the amount of additional Senior Debt that we may incur, under
certain circumstances, the amount of Senior Debt could be substantial.
As of the date of the indenture, all of our subsidiaries will be Restricted
Subsidiaries. However, under the circumstances described below under the
subheading "Certain Covenants--Designation of Restricted and Unrestricted
Subsidiaries", we will be permitted to designate certain of our subsidiaries as
"Unrestricted Subsidiaries". Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants in the indenture.
Principal, Maturity and Interest
The Company will issue exchange notes with a maximum aggregate principal of
$150.0 million in the exchange offer. The Company may issue up to $50.0 million
of additional notes (the "Additional Notes") from time to time after the
exchange offer. Any offering of Additional Notes is subject to the covenant
described below under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock". The exchange notes and any
Additional Notes subsequently issued under the indenture would be treated as a
single class for all purposes under the indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. The
Company will issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. The exchange notes will mature on March 15, 2009.
Interest on the exchange notes will accrue at the rate of 10 1/4% per annum
and will be payable semi-annually in cash in arrears on March 15 and September
15, commencing on September 15, 1999. The Company will make each interest
payment to the holders of record of the exchange notes on the immediately
preceding March 1 and September 1.
Additional Notes may be issued from time to time after the date of the
exchange offer, subject to the provisions of the indenture, including those
described under the subheading "Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock". The exchange notes and any Additional Notes
subsequently issued under the indenture would be treated as a single class for
all purposes under the indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase.
Interest on the exchange notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payment on the Exchange Notes
If a holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest payments on those exchange notes
in accordance with those instructions. All other payments on the exchange notes
will be made at the office or agency of the Paying Agent and Registrar within
the City and State of New York unless the Company elects to make interest
payments by check mailed to the holders at their addresses set forth in the
register of holders.
Paying Agent and Registrar for the Exchange Notes
The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the holders of
the exchange notes, and the Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
Transfer and Exchange
A holder may transfer or exchange exchange notes in accordance with the
indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer
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documents and the Company may require a holder to pay any taxes and fees
required by law or permitted by the indenture. The Company is not required to
transfer or exchange any exchange note selected for redemption. Also, the
Company is not required to transfer or exchange any exchange note for a period
of 15 days before a selection of exchange notes to be redeemed.
The registered holder of an exchange note will be treated as the owner of
it for all purposes.
Subordination
The payment of principal, premium, if any, and interest on the exchange
notes will be subordinated to the prior payment in full in cash of all Senior
Debt of the Company.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of such Senior Debt (including interest after
the commencement of the proceedings described below at the rate specified in
the applicable Senior Debt) before the holders of exchange notes will be
entitled to receive any payment with respect to the exchange notes (except
that holders of exchange notes may receive and retain Permitted Junior
Securities and payments made from the trust described under the subheading "--
Legal Defeasance and Covenant Defeasance"), in the event of any distribution
to creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the exchange notes
(except in Permitted Junior Securities or from the trust described under the
subheading "--Legal Defeasance and Covenant Defeasance") if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Company or the holders of any Designated Senior
Debt.
Payments on the exchange notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest, if any,
on the exchange notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been cured or waived for a period of not less than 180 days.
The Company must promptly notify holders of Senior Debt if payment of the
exchange notes is accelerated because of an Event of Default.
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As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or insolvency of the Company, holders of the exchange
notes may recover less ratably than creditors of the Company who are holders of
Senior Debt. See "Risk Factors--Subordination".
Optional Redemption
At any time prior to March 15, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of the exchange
notes ever issued under the indenture at a redemption price of 110.25% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the redemption date, with the net cash proceeds of any Public Equity Offering;
provided that
(1) at least 65% of the exchange notes ever issued remain outstanding
immediately after the occurrence of such redemption (excluding any exchange
notes held by the Company and its Subsidiaries); and
(2) the notice of redemption with respect to such redemption shall be
mailed at least 30 days but not more than 60 days after the date of the
closing of any such Public Equity Offering.
Except pursuant to the preceding paragraph, the exchange notes will not be
redeemable at the Company's option prior to March 15, 2004.
After March 15, 2004, the Company may redeem all or a part of the exchange
notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon, if any, to the applicable redemption date,
if redeemed during the twelve-month period beginning on March 15 of the years
indicated below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2004.................................................... 105.125%
2005.................................................... 103.417%
2006.................................................... 101.708%
2007 and thereafter..................................... 100.000%
</TABLE>
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the exchange notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of exchange notes will have the
right to require the Company to repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of that holder's exchange notes pursuant to the
Change of Control Offer described below. In the Change of Control Offer, the
Company will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of exchange notes repurchased plus accrued and
unpaid interest thereon, if any, to the date of purchase. Within ten days
following any Change of Control, the Company will mail a notice to each holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase exchange notes on the Change of Control
Payment Date specified in such notice, pursuant to the procedures required by
the indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the exchange notes as a result
of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all exchange notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
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(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all exchange notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the exchange notes
so accepted together with an Officers' Certificate stating the aggregate
principal amount of exchange notes or portions thereof being purchased by
the Company.
The Paying Agent will promptly mail to each holder of exchange notes so
tendered the Change of Control Payment for such exchange notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each holder a new exchange note equal in principal amount to any unpurchased
portion of the exchange notes surrendered, if any; provided that each such new
exchange note will be in a principal amount of $1,000 or an integral multiple
thereof.
Prior to complying with the provisions of this "Change of Control" covenant,
but in any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of exchange notes required by this covenant. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indenture are applicable. Except as
described above with respect to a Change of Control, the indenture does not
contain provisions that permit the holders of the exchange notes to require
that the Company repurchase or redeem the exchange notes in the event of a
takeover, recapitalization or similar transaction.
The Company's outstanding Senior Debt currently prohibits the Company from
purchasing any exchange notes, and also provides that certain change of control
events with respect to the Company would constitute a default under the
agreements governing the Senior Debt. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing exchange notes,
the Company could seek the consent of its senior lenders to the purchase of
exchange notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing exchange notes.
In such case, the Company's failure to purchase tendered exchange notes would
constitute an Event of Default under the indenture which would, in turn,
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the indenture would likely restrict payments to the
holders of exchange notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a Change of Control Offer made by the
Company and purchases all exchange notes validly tendered and not withdrawn
under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially
all", there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of exchange notes to require the
Company to repurchase such exchange notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of; and
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(2) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Cash Equivalents.
For purposes of this provision, each of the following shall be deemed to be
cash or Cash Equivalents:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the exchange notes
or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases
the Company or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by
the Company or such Restricted Subsidiary into cash or Cash Equivalents
(to the extent of the cash or Cash Equivalents received).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option:
(1) to repay Senior Debt and effect a corresponding reduction if such
Senior Debt is a revolving credit borrowing;
(2) to acquire all or more than half of the assets of another Permitted
Business;
(3) to acquire Capital Stock of a Permitted Business; provided that
after any such acquisition of Capital Stock such Permitted Business is or
becomes a Restricted Subsidiary;
(4) to make a capital expenditure; or
(5) to acquire other long-term assets that are used or useful in a
Permitted Business (such long-term assets being referred to herein as
"Additional Assets").
Pending the final application of any such Net Proceeds, the Company or such
Restricted Subsidiary may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds". When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will
make an offer to all holders of exchange notes and all holders of other
Indebtedness that is pari passu with the exchange notes containing provisions
similar to those set forth in the indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to
purchase the maximum principal amount of exchange notes and such other pari
passu Indebtedness that may be purchased out of the Excess Proceeds. The offer
price in any Asset Sale Offer will be equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the indenture. If the aggregate
principal amount of exchange notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the exchange notes and such other pari passu Indebtedness
to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the three immediately preceding paragraphs, the Company and
its Restricted Subsidiaries will be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent:
(1) at least 75% of the consideration for such Asset Sale constitutes
Additional Assets, cash and/or Cash Equivalents; and
(2) such Asset Sale is for fair market value, as determined in good
faith by the Company's Board of Directors; and
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(3) any consideration not constituting Additional Assets received by the
Company or any of its Restricted Subsidiaries in connection with any Asset
Sale permitted to be consummated under this paragraph are treated as Net
Proceeds from an Asset Sale and applied in accordance with the provisions
of the immediately preceding paragraph.
Selection and Notice
If less than all of the exchange notes are to be redeemed at any time, the
Trustee will select exchange notes for redemption as follows:
(1) if the exchange notes are listed, in compliance with the
requirements of the principal national securities exchange on which the
exchange notes are listed; or
(2) if the exchange notes are not so listed, on a pro rata basis, by lot
or by such method as the Trustee shall deem fair and appropriate.
No exchange notes of $1,000 in principal amount or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of exchange
notes to be redeemed at its registered address. Notices of redemption may not
be conditional.
If any exchange note is to be redeemed in part only, the notice of
redemption that relates to that exchange note shall state the portion of the
principal amount thereof to be redeemed. A new exchange note in principal
amount equal to the unredeemed portion of the original exchange note will be
issued in the name of the holder thereof upon cancellation of the original
exchange note. Exchange notes called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on exchange notes or portions of them called for redemption.
Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company
or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the exchange notes, except a payment of interest or
principal at Stated Maturity; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter
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period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described below under the subheading
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the indenture (excluding Restricted Payments
permitted by clauses (2), (3), (4), (6), (7), (8), (9) and (10) of the next
succeeding paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the indenture to the end of the
Company's most recently ended fiscal month for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into or exchanged for such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of the Company), plus
(c) to the extent that any Restricted Investment that was made after
the date of the indenture is sold for cash or otherwise liquidated or
repaid for cash, 50% of the net cash proceeds to the Company and its
Restricted Subsidiaries from the sale or liquidation of such Restricted
Investment (less the cost of disposition, if any), plus
(d) an amount equal to the fair market value of all Restricted
Investments made since the date of the indenture in any Unrestricted
Subsidiary that is thereafter redesignated as a Restricted Subsidiary,
such amount not to exceed the amount of Restricted Investments
previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary that were treated as Restricted Payments since
the date of the indenture.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the
Company in exchange for, or out of the net cash proceeds to the Company
from the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other Equity Interests of the Company (other than any
Disqualified Stock) or a contribution to the common equity capital of the
Company (other than from a Subsidiary of the Company); provided that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) the payments and applications of the proceeds to be received by the
Company from the issuance of the Notes in connection with the original
offering;
(5) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata basis;
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(6) payments to Holdings for the purpose of permitting, and in an amount
equal to the amount required to permit, Holdings to redeem or repurchase
Holdings' common equity or options in respect thereof, in each case in
connection with the repurchase provisions of employee stock option or stock
purchase agreements, the Stockholders Agreements or other agreements
relating to the compensation of management employees; provided that all
such repurchases or redemptions pursuant to this clause (6) shall not
exceed $2.5 million per annum plus the amount of any proceeds to the
Company from:
(a) sales of Capital Stock of Holdings to management employees
subsequent to the date of the indenture to the extent contributed to
the Company as common equity capital; provided that the amount of any
such net cash proceeds that are utilized for any such redemption or
repurchase shall be excluded from clause (3) (b) of the preceding
paragraph; and
(b) any "key-man" life insurance policies that are used to make any
such redemptions or repurchases; provided, further, that the
cancellation of Indebtedness owing to Holdings from members of
management of the Company or any of its Restricted Subsidiaries in
connection with a repurchase of Capital Stock of Holdings will not be
deemed to constitute a Restricted Payment under the indenture;
provided that any amounts that are not used for repurchases and redemptions
in any year may be carried forward to subsequent years;
(7) the making of distributions, loans or advances to Holdings in an
amount not to exceed $850,000 per annum in order to permit Holdings to pay
the ordinary operating expenses of Holdings (including without limitation,
directors' fees, indemnification obligations, professional fees and
expenses);
(8) payments to Holdings in respect of:
(a) federal income taxes for the tax periods for which a federal
consolidated return is filed by Holdings for a consolidated group of
which Holdings is the parent and the Company and its Subsidiaries are
members, in an amount not to exceed the hypothetical federal income
taxes that the Company would have paid if the Company and its
Restricted Subsidiaries filed a separate consolidated return with the
Company as the parent, taking into account carryovers and carrybacks of
tax attributes (including net operating losses) that would have been
allowed if such separate consolidated return had been filed; and
(b) state income tax for the tax periods for which a state combined
return is filed by Holdings for a combined group of which Holdings is
the parent and the Company and its Subsidiaries are members, in an
amount not to exceed the hypothetical state income taxes that the
Company would have paid if the Company and its Restricted Subsidiaries
had filed a separate combined return taking into account carryovers and
carrybacks of tax attributes (including net operating losses) that
would have been allowed if such separate combined return had been
filed; provided, however, that in no event shall any such tax payment
pursuant to this clause (7) exceed the amount of federal (or state, as
the case may be) income tax that is, at the time the Company makes such
tax payments, actually due and payable by Holdings to the relevant
taxing authorities or to become due and payable within 30 days of such
payment by the Company;
(9) distributions to Holdings to fund the Transactions;
(10) payments to Holdings to fund the payment of or payment by the
Company of dividends, loans, distributions or annual contributions
calculated in accordance with the requirements of Section 415 of the
Internal Revenue Code to the Simmons ESOP in amounts equal to amounts
expended by Holdings to repurchase shares of its Capital Stock from
deceased or retired employees in accordance with the terms of the Simmons
ESOP as in effect on the date of the indenture and from employees whose
employment with Holdings or any of its Subsidiaries has terminated for any
reason, in each case contemplated by this clause (10) only to the extent
mandatorily required by the Simmons ESOP as in effect on the date of the
indenture, the Internal Revenue Code or ERISA; and, provided, further, that
in each such case Holdings or
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the Company has deferred making any cash payments in respect of such
repurchase obligations to the maximum extent possible under the Simmons
ESOP as in effect on the date of the indenture or as modified from time to
time to comply with law;
(11) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the exercise
price thereof;
(12) the payments pursuant to the Fenway Agreement as in effect on the
date of the indenture; and
(13) if the Company would be permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Debt) in compliance with the
covenant described below under the subheading "--Incurrence of Indebtedness
and Issuance of Preferred Stock", other Restricted Payments in an aggregate
amount not to exceed $5.0 million since the date of the indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt) and that
the Company will not issue any Disqualified Stock and will not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company or any of its Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock
if the Fixed Charge Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not prohibit
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the Notes originally issued under the indenture, the Exchange Notes
issued in exchange therefor and any Guarantees of any Notes or Exchange
Notes;
(2) Indebtedness of the Company (and Guarantees thereof by any of the
Company's Restricted Subsidiaries) incurred pursuant to one or more Credit
Facilities in an aggregate principal amount at any time outstanding (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
not to exceed $290.0 million less (a) the aggregate amount of Indebtedness
of Securitization Entities at the time outstanding less (b) the amount of
all optional or mandatory principal payments actually made by the Company
or any of its Restricted Subsidiaries since the date of the indenture in
respect of term loans under Credit Facilities (excluding any such payments
to the extent refinanced at the time of payment under a Credit Facility)
and (c) further reduced by any repayments since the date of the indenture
of revolving credit borrowings under Credit Facilities that are accompanied
by a corresponding commitment reduction thereunder;
(3) other Indebtedness of the Company and its Subsidiaries outstanding
on the date of the indenture for so long as such Indebtedness remains
outstanding;
(4) Interest Swap Obligations of the Company covering Indebtedness of
the Company; provided that any Indebtedness to which any such Interest Swap
Obligations correspond is otherwise permitted to be incurred under the
indenture; and provided, further, that such Interest Swap Obligations are
entered into, in the judgment of the Company, to protect the Company from
fluctuation in interest rates on its outstanding Indebtedness;
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(5) Indebtedness of the Company under Currency Agreements;
(6) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that:
(i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the notes and the exchange
notes; and
(ii)(a) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (b) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary of the Company shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the guarantees by the Company or any of its Restricted Subsidiaries
of each other's Indebtedness; provided that such Indebtedness is permitted
to be incurred under the indenture;
(8) Indebtedness (including Capitalized Lease Obligations) incurred by
the Company or any of its Restricted Subsidiaries to finance the purchase,
lease or improvement of property (real or personal) or equipment (whether
through the direct purchase of assets or the Capital Stock of any Person
owning such assets) in an aggregate principal amount not to exceed $15.0
million at any one time outstanding (including any Permitted Refinancing
Indebtedness with respect thereto) (which amount may, but need not, be
incurred in whole or in part under the New Senior Credit Agreement);
(9) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to letters
of credit issued in the ordinary course of business, including, without
limitation, letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims;
(10) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any of its Restricted
Subsidiaries in the ordinary course of business;
(11) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred under the first paragraph hereof or clauses (1), (3), (8), (14)
and (15) of this paragraph or this clause (11) or the first paragraph of
this covenant;
(12) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is Non-Recourse Debt with respect
to the Company and its other Restricted Subsidiaries (except for Standard
Securitization Undertakings);
(13) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (13);
(14) the incurrence of Indebtedness by foreign Restricted Subsidiaries
of the Company in an aggregate principal amount not to exceed $20.0 million
at any one time outstanding;
(15) the incurrence of up to $25.0 million in aggregate principal amount
of Indebtedness by the Company or a Restricted Subsidiary of the Company on
or prior to September 30, 2000, the net proceeds of which are applied to a
concurrent acquisition of a Permitted Business or that is incurred as a
result of the assumption of Indebtedness of a Permitted Business at the
time of the acquisition thereof, provided
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that in each case, the pro forma Fixed Charge Coverage Ratio of the Company
for the most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the consummation
of such acquisition is higher than the actual historical Fixed Charge
Coverage Ratio of the Company for such four-quarter period; and
(16) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (16), not to exceed $20.0
million.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (16) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company shall, in its
sole discretion, classify such item of Indebtedness in any manner that complies
with this covenant.
Accrual of interest costs or fees, accretion or amortization of original
issue discount costs or fees, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the payment of
dividends on Disqualified Stock in the form of additional shares of the same
class of Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this
covenant; provided, in each such case, that the amount thereof is included in
Fixed Charges of the Company as accrued. Indebtedness under Credit Facilities
outstanding on the date on which the Exchange Notes are first issued and
authenticated under the indenture will be deemed to have been incurred on such
date in reliance on the exception provided by clause (2) of the definition of
Permitted Debt.
No Senior Subordinated Debt
The Company will not incur, create, issue, assume, Guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of payment to the
exchange notes. No Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of any Guarantor and senior in any respect
in right of payment to the Guarantees of the exchange notes.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien
of any kind securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries or with respect to any
other interest or participation in, or measured by, its profits, or pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indenture;
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(2) the New Senior Credit Agreement as in effect as of the date of the
indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are not
materially more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the New
Senior Credit Agreement as in effect on the date of the indenture;
(3) the indenture and the exchange notes;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
or assets acquired by the Company or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
indenture to be incurred;
(6) customary non-assignment provisions in leases, contracts and
licenses entered into in the ordinary course of business;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (3) of the preceding paragraph on the property so acquired;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(10) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
subheading "--Liens" that limit the right of the Company or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien;
(11) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(13) Indebtedness or other contractual requirements of a Securitization
Entity in connection with a Qualified Securitization Transaction; provided
that such restrictions apply only to such Securitization Entity;
(14) any agreement or instrument governing Indebtedness (whether or not
outstanding) of foreign Restricted Subsidiaries of the Company if it
constitutes Permitted Debt incurred pursuant to clause (14) under the
subheading "--Incurrence of Indebtedness and Issuance of Preferred Stock";
and
(15) any amendments to the above agreements, if such amendments are not
materially more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in the
agreements being amended.
Merger, Consolidation, or Sale of Assets
The Company may not, directly or indirectly: (1) consolidate or merge with
or into (whether or not the Company is the surviving corporation); or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets, in one or more related transactions, to another
Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer,
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conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state
thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of the Company under the registration rights agreement, the
notes, the exchange notes and the indenture pursuant to a supplemental
indenture in form reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company, the Company or the Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction; and
(5) except in the case of a merger of the Company with or into a Wholly
Owned Restricted Subsidiary of the Company, either:
(a) the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, conveyance or other disposition will,
immediately after such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described above under the subheading "--
Incurrence of Indebtedness and Issuance of Preferred Stock" or
(b) in the case of a merger in which the Company is the surviving
corporation, the Company shall, immediately after such transaction
after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness (including Permitted Debt) pursuant to the
covenant described under the subheading "--Incurrence of Indebtedness
and Issuance of Preferred Stock".
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this covenant will not be
applicable to a sale, assignment, transfer, conveyance or other disposition of
assets between or among the Company and any of the Restricted Subsidiaries.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.5 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with clause (1) above and
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that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$7.5 million, an opinion that such Affiliate Transaction is not
materially less favorable than those that might reasonably have been
obtained in a comparable transaction at such time on an arms-length
basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the Company
or such Restricted Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees and compensation;
(4) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(5) Restricted Payments that are permitted by the provisions of the
indenture described above under the subheading "--Restricted Payments";
(6) the performance of the Company's or any Subsidiary's obligations
under the Simmons ESOP as in effect on the date of the indenture;
(7) the performance of the Company's or any Subsidiary's obligations
under the Fenway Agreement as the same is in effect on the date of the
indenture;
(8) reasonable and customary costs and expenses incident to a public
offering of Equity Securities of Holdings to the extent that the proceeds
therefrom are intended to be contributed to the Company as common equity
capital;
(9) Qualified Securitization Transaction;
(10) the performance of the Company's or any Subsidiary's obligations
under the Transaction Documents as the same are in effect on the date of
the indenture;
(11) the making of loans to employees or consultants to the extent that
the same constitute Permitted Investments; and
(12) the granting of customary registration rights and/or put or call
options pursuant to the Stockholders Agreements or any similar agreement.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by the Company and its Restricted Subsidiaries
in the Subsidiary so designated will be deemed to be an Investment made as of
the time of such designation and will reduce the amount available for
Restricted Payments under the first paragraph of the covenant described above
under the subheading "--Restricted Payments" or Permitted Investments, as
applicable. All such outstanding Investments will be valued at their fair
market value at the time of such designation. That designation will only be
permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if such redesignation would not cause a Default.
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Limitations on Issuances of Guarantees of Indebtedness
If the Company acquires or creates a Restricted Subsidiary that is a
Significant Subsidiary of the Company, or if any Restricted Subsidiary of the
Company becomes a Significant Subsidiary of the Company, then such Significant
Subsidiary shall execute and deliver a supplemental indenture to the indenture
providing for the Guarantee of the payment of the notes and the exchange notes
by such Significant Subsidiary, which Guarantee shall be senior to or pari
passu with all other Indebtedness of such Significant Subsidiary, other than
Senior Debt, and shall be subordinated to all Senior Debt of such Significant
Subsidiary to the same extent as the notes and the exchange notes are
subordinated to Senior Debt.
Notwithstanding the preceding paragraph, any such Guarantee by a Significant
Subsidiary of the notes and the exchange notes shall provide by its terms that
it shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an Affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Significant Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of the indenture. The form of such Guarantee
will be attached as an exhibit to the indenture.
Conduct of Business
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any businesses a majority of whose revenues are not derived from
the same or reasonably similar, ancillary or related to, or a reasonable
extension, development or expansion of, the businesses in which the Company and
its Restricted Subsidiaries are engaged on the date of the indenture.
Reports
Whether or not required by the Commission, so long as any exchange notes are
outstanding, the Company will furnish to the holders of exchange notes, within
the time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the consolidated financial statements
included in the annual information only, a report thereon by our
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation,
either on the face of the financial statements or in the footnotes thereto, and
in Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of the Company
and its Restricted Subsidiaries separate from the financial condition and
results of operations of the Unrestricted Subsidiaries of the Company.
In addition, whether or not required by the Commission, the Company will
file a copy of all such information and reports referred to in clauses (1) and
(2) above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
The Company and the Guarantors have also agreed that, for so long as any
exchange notes remain outstanding, they will furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
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Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
exchange notes, whether or not prohibited by the subordination provisions
of the indenture;
(2) default in payment when due of the principal of or premium, if any,
on the notes or the exchange notes, whether or not prohibited by the
subordination provisions of the indenture;
(3) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described under the subheadings "--Change of
Control", "--Asset Sales", "--Restricted Payments" or "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and the continuance of such
failure after the receipt by the Company of written notice from the Trustee
or the holders of at least 25% in aggregate principal amount of the
exchange notes, including Additional Notes, if any, then outstanding of
such default;
(4) failure by the Company or any of its Subsidiaries for 60 days after
written notice is given to the Company by the Trustee or the holders of at
least 25% in aggregate principal amount of the notes and the exchange
notes, including Additional Notes, if any, then outstanding to comply with
any of its other agreements in the indenture or the notes and the exchange
notes and the continuance of such failure for a period of 60 days after the
receipt by the Company of written notice from the Trustee or the holders of
at least 25% in aggregate principal amount of the notes and the exchange
notes then outstanding of such default;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries
(or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness if such payment default is not cured
or waived within 10 Business Days of the occurrence thereof (a "Payment
Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $10.0 million or
more;
(6) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to the
Company or any of its Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to the Company, any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding notes and exchange notes will become due and
payable without further action or notice. If any Event of Default occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the notes and exchange notes then outstanding (including any Additional Notes,
if any) may declare all the notes and exchange notes to be due and payable
immediately.
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Holders of the exchange notes may not enforce the indenture or the exchange
notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding notes and
exchange notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from holders of the notes and exchange notes notice of
any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes and
exchange notes then outstanding by notice to the Trustee may on behalf of the
holders of all of the notes and exchange notes waive any existing Default or
Event of Default and its consequences under the indenture except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
the notes and exchange notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the exchange notes pursuant to
the optional redemption provisions of the indenture, an equivalent premium
shall also become and be immediately due and payable to the extent permitted by
law upon the acceleration of the exchange notes. If an Event of Default occurs
prior to March 15, 2004 by reason of any willful action or inaction taken or
not taken by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the exchange notes prior to March 15, 2004, then
the premium specified in the indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the exchange
notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
exchange notes or the indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each holder of exchange notes by
accepting an exchange note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the exchange notes.
The waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect the exchange notes ("Legal Defeasance")
except for:
(1) the rights of holders of outstanding exchange notes to receive
payments in respect of the principal of, premium, if any, and interest on,
the exchange notes when such payments are due from the trust referred to
below;
(2) the Company's obligations with respect to such exchange notes
concerning issuing temporary exchange notes, registration of exchange
notes, mutilated, destroyed, lost or stolen exchange notes and the
maintenance of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the indenture ("Covenant Defeasance") and
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thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the exchange notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the exchange notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the holders of the exchange notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest, if any, on all outstanding exchange notes on the
stated maturity or on the applicable redemption date, as the case may be,
and the Company must specify whether such exchange notes are being defeased
to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (a) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling
or (b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the holders of
the outstanding exchange notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance
had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to such Trustee confirming that the holders of the outstanding
exchange notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either:
(a) on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit); or
(b) insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (including the indenture and the New Senior Credit
Agreement) (other than a default resulting from the borrowing of funds to
be applied to such deposit) to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the holders of the exchange notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
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Amendment, Supplement and Waiver
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any exchange notes held by a non-consenting holder):
(1) reduce the principal amount of exchange notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any exchange
note or alter the provisions with respect to the time and amount of
redemption of the exchange notes (other than provisions relating to the
covenants described above under the subheading "--Repurchase at the Option
of Holders");
(3) reduce the rate of or change the time for payment of interest on any
exchange note;
(4) waive a Default or Event of Default in the payment of principal of,
premium, if any, or interest, if any, on the exchange notes (except a
rescission of acceleration of the exchange notes by the holders of at least
a majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any exchange note payable in money other than that stated in
the exchange notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of exchange notes to
receive payments of principal of or premium, if any, or interest on the
exchange notes;
(7) waive a redemption payment with respect to any exchange note (other
than a payment required by one of the covenants described above under the
subheading "--Repurchase at the Option of Holders"); or
(8) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to the provisions of the indenture relating to
subordination that adversely affects the rights of the holders of the notes and
exchange notes will require the consent of the holders of at least 75% in
aggregate principal amount of the notes and exchange notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of notes or
exchange notes, the Company and the Trustee may amend or supplement the
indenture or the notes or exchange notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes or exchange notes in addition to
or in place of certificated notes or exchange notes;
(3) to provide for the assumption of the Company's obligations to
holders of notes or exchange notes in the case of a merger or consolidation
or sale of all or substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or exchange notes or that does not
adversely affect the legal rights under the indenture of any such holder;
or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
Except as provided in the prior paragraphs, the indenture and the notes and
exchange notes may be amended or supplemented with the consent of the holders
of at least a majority in principal amount of the notes and exchange notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer for, exchange notes), and any existing
default or compliance with any provision of the indenture or the notes and
exchange notes may be waived with the consent of the holders of a majority in
principal amount of the then outstanding notes and exchange notes (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer for notes and exchange notes).
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Concerning the Trustee
If the Trustee become a creditor of the Company, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest the Trustee must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
and exchange notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The indenture provides that in case an Event of
Default shall occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of notes and exchange notes, unless such holder
shall have offered to the Trustee security and indemnity satisfactory to it
against any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain copies of the indenture,
without charge, by writing to Simmons Company, One Concourse Parkway, Suite
600, Atlanta, Georgia 30328, Attention: Treasurer.
Book-Entry, Delivery and Form
The Certificates representing the exchange notes will be issued in fully
registered form, without coupons. Except as described below, the exchange notes
will be deposited with, or on behalf of, The Depository Trust Company ("DTC"),
in New York, New York, and registered in the name of DTC or its nominee in the
form of one or more global certificates (the "Global Notes") or will remain in
the custody of the Trustee pursuant to a FAST Balance Certificate Agreement
between DTC and the Trustee.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to DTC or another nominee of DTC or to a successor of DTC or
its nominee. Except in the limited circumstances described below, owners of
beneficial interests in the Global Notes will not be entitled to receive
physical delivery of Certificated Notes (as defined below). See "--Exchange of
Book-Entry Notes for Certificated Notes." In addition, transfers of beneficial
interests in the Global Notes will be subject to the applicable rules and
procedures of DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Cedel), which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The exchange
notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the settlement system of DTC and are subject to
changes by them from time to time. The Company takes no responsibility for
these operations and procedures and urges investors to contact the system or
its participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as
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banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it:
(i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Trustee with portions of the principal
amount of the Global Notes; and
(ii) ownership of such interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
All interests in a Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in a Global Note to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in a Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Notes will not
have exchange notes registered in their names, will not receive physical
delivery of exchange notes in certificated form and will not be considered the
registered owners or "Holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, premium and interest, if any, on a
Global Note registered in the name of DTC or its nominee will be payable to DTC
in its capacity as the registered holder under the indenture. Under the terms
of the indenture, the Company and the Trustee will treat the persons in whose
names the exchange notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither the Company, the Trustee nor
any agent of the Company or the Trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the exchange notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of exchange
notes will be governed by standing instructions and customary practices and
will be the responsibility of the Participants or the Indirect Participants and
will not be the responsibility of DTC, the Trustee or the Company. Neither the
Company nor the Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the exchange notes, and
the Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee for all purposes.
Interest in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available
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funds, subject in all cases to the rules and procedures of DTC and its
Participants. See "--Same Day Settlement and Payment".
Subject to the transfer restrictions set forth under "Notice to Investors",
transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the exchange notes
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the exchange notes, DTC reserves
the right to exchange the Global Notes for legended exchange notes in
certificated form, and to distribute such notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Participants in DTC it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its respective participants or indirect participants of
their respective obligations under the rules and procedures governing its
operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive exchange notes in registered
certificated form ("Certificated Notes") if:
(1) DTC:
(a) notifies the Company that it is unwilling or unable to continue
as depositary for the Global Notes and the Company thereupon fails to
appoint a successor depositary; or
(b) has ceased to be a clearing agency registered under the Exchange
Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the exchange notes. In addition, beneficial
interests in a Global Note may be exchanged for Certificated Notes upon
request but only upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of DTC (in accordance with its
customary procedures) and will bear the applicable restrictive legend
referred to in "Notice to Investors", unless the Company determines
otherwise in compliance with applicable law.
Exchange of Certificated Notes for Book-Entry Notes
Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes. See "Notice to Investors".
Same Day Settlement and Payment
Payments in respect of the exchange notes represented by the Global Notes
(including principal, premium, if any, and interest, if any) be made by wire
transfer of immediately available funds to the accounts specified by the Global
Note holder. With respect to Certificated Notes, the Company will make all
payments of
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principal, premium, if any, and interest, if any, by wire transfer of
immediately available funds to the accounts specified by the holders thereof
or, if no such account is specified, by mailing a check to each such holder's
registered address. The exchange notes represented by the Global Notes are
expected to be eligible to trade in the PORTAL market and to trade in the DTC's
Same-Day Funds Settlement System, and any permitted secondary market trading
activity in such exchange notes will, therefore, be required by the DTC to be
settled in immediately available funds. The Company expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Additional Assets" has the meaning assigned to such term in the second
paragraph of the covenant described above under the subheading "Repurchase at
the Option of Holders--Asset Sales".
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and leaseback)
other than sales of inventory in the ordinary course of business consistent
with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the subheading "--Change
of Control" and/or the provisions described above under the subheading "--
Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant; and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $1.0
million; or
(b) results in net proceeds to the Company and its Restricted
Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Wholly
Owned Restricted Subsidiaries;
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(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary;
(4) a Restricted Payment that is permitted by the covenant described
above under the subheading "--Restricted Payments";
(5) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
(6) sales of accounts receivable, equipment and related assets,
including contract rights, of the type specified in the definition of
"Qualified Securitization Transaction" to a Securitization Entity for the
fair market value thereof, including cash in an amount at least equal to
75% of the fair market value thereof;
(7) the licensing of intellectual property in the ordinary course of
business; and
(8) the disposal or replacement of obsolete, surplus or worn-out
equipment in the ordinary course of business.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire,
whether such right is currently excercisable or is exercisable only upon the
occurrence of a subsequent condition.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, capital stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof (provided
that the full faith and credit of the United States is pledged in support
thereof) having maturities of not more than six months from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits, in
each case with any lender party to the New Senior Credit Agreement or with
any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition; and
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(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act) other than the Principals
or any of their Related Parties;
(2) the adoption of a plan by the stockholders thereof for the
liquidation or dissolution of the Company or Holdings;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals, their Related Parties or, prior
to the establishment of a Public Market, a Permitted Group, becomes the
Beneficial Owner, directly or indirectly, of more than 50% of the Voting
Stock of Holdings or the Company (measured by voting power rather than
number of shares);
(4) the first day on which a majority of the members of the Board of
Directors of Holdings or the Company are not Continuing Directors; or
(5) the first day on which Holdings ceases to own 100% of the
outstanding Equity Interests of the Company (other than as a result of a
merger of the Company and Holdings permitted by the indenture).
"Common Equity Documents" means the Recapitalization Agreement, the
Certificate of Merger and each other document executed in connection with the
Common Equity Financing.
"Common Equity Financing" means the issuance by Holdings or the retention by
existing stockholders of Holdings of not less than $177.0 million of common
equity in connection with the Merger, which equity shall consist of (i) the
contribution by Fenway of not less than $128.1 million in cash to Holdings,
(ii) the retention by the Management Investors of shares (or options to acquire
shares) of common stock of Holdings with an estimated value of approximately
$16.5 million, (iii) the conversion by the Simmons ESOP of its 3,413,672 shares
of the Company's Series A Preferred Stock which is not allocated to the
accounts of ESOP participants into approximately 3,482,036 shares of Holdings'
Class C Common Stock which will be converted in the Merger into 3,482,036
shares of unallocated common stock of Holdings and the retention of such
unallocated shares with an estimated value of $23.4 million and (iv) the
retention by certain affiliates of or entities organized by Investcorp of
approximately 1,336,998 shares of common stock of Holdings with an estimated
value of $9.0 million.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss, plus any net loss
realized in connection with an Asset Sale (without regard to the $1.0
million size limitation set forth in the definition of "Asset Sale"), to
the extent such losses were deducted in computing such Consolidated Net
Income; plus
(2) provision for taxes of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not capitalized
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations commissions, discounts and other
fees and charges incurred in respect of revolving credit facilities and
letter of credit or bankers' acceptance financings, and net payments, if
any, pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
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(4) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon, to the extent that
any such expense was deducted in computing such Consolidated Net Income;
plus
(5) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses and charges
(excluding any such non-cash expense and charge to the extent that it
represents an accrual of or reserve for cash expenses in any future period
or amortization of a prepaid cash expense that was paid in a prior period)
of such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash expenses and
charges were deducted in computing such Consolidated Net Income; plus
(6) nonrecurring expenses occurring prior to the date of the indenture;
plus
(7) nonrecurring compensation payments occurring, or committed to, on or
prior to the date of the indenture but only to the extent such payments are
disclosed under the subheading "Management" or "Certain Relationships and
Related Transactions" in this prospectus; plus
(8) bad debts charges relating to the bankruptcies of Montgomery Ward &
Co. and Levitz Furniture Inc.; plus
(9) nonrecurring expenses occurring on or prior to December 31, 1999
relating to the Company's SWIFT and UNITE productivity initiatives and
other strategic management initiatives, in an aggregate amount not to
exceed $2.0 million since the date of the indenture; plus
(10) the amortization of the prepaid fees paid to Investcorp
International Inc. prior to the date of the indenture; minus
(11) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned
Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded;
(4) the cumulative effect of a change in accounting principles shall be
excluded;
(5) the Net Income (or loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its
Subsidiaries; and
(6) nonrecurring payments or charges relating to the Transactions or the
original offering occurring, or committed to, on or prior to the date of
the indenture.
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"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock; less
(3) accumulated deficit; and
(4) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case, Permitted
Investments).
All of the foregoing amounts are to be determined in accordance with GAAP.
"Continuing Directors" means as of any date of determination, any member of
the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the
indenture; or
(2) was designated or nominated for election or elected to such Board of
Directors by any of the Principals or with the approval of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Senior Credit Agreement) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
Indebtedness under Credit Facilities outstanding on the date on which Notes are
first issued and authenticated under the indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (2) of
the definition of Permitted Debt.
"Currency Agreements" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the New Senior Credit Agreement;
and
(2) any other Senior Debt permitted under the indenture the original
principal amount of which is $10.0 million or more and that has been
designated by the Company as "Designated Senior Debt".
"Disqualified Stock" means 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, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the exchange notes mature; provided, however, that any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem
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any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the subheading "--
Certain Covenants--Restricted Payments".
"Domestic Subsidiary" means with respect to the Company, any Subsidiary of
the Company that:
(1) was formed under the laws of the United States of America; or
(2) that guarantees or otherwise becomes obligated with respect to any
Indebtedness of the Company.
"ESOP Stock Sale Agreement" means that certain ESOP Stock Sale and Exchange
Agreement dated as of July 22, 1998 (as amended by Amendment No. 1 thereto,
dated as of September 25, 1998) by and among Holdings, the Company, Merger
Corp. and State Street Bank & Trust Company, solely in its capacity as trustee
of the ESOP trust, as in effect on the Closing Date.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Senior Credit Agreement)
in existence on the date of the indenture, until such amounts are repaid.
"Existing Notes" means the 10.75% Senior Subordinated Notes due 2006 of the
Company.
"Fenway" means:
(1) Fenway Partners Capital Fund, L.P., a Delaware limited partnership;
(2) Fenway Partners Capital Fund II, L.P., a Delaware limited
partnership; and
(3) so long as it is controlled and more than 50% owned by one or more
of the entities described in clauses (1) and (2), Simmons Holdings LLC, a
Delaware limited liability company.
"Fenway Agreement" means that certain Advisory Agreement dated as of
October 29, 1998 by and among Fenway Partners, Inc., the Company and Holdings
as in effect on the date of the indenture.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of
revolving credit facilities and letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations, but
excluding the amortization of deferred financing costs); plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus
(4) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other
than dividend payments on Equity Interests payable solely in Equity
Interests of the Company or a Guarantor (other than Disqualified Stock) or
to the Company or a Restricted Subsidiary of the Company.
For purposes of the preceding, total interest expense shall be determined
after giving effect to any net payments made or received by the Company and
its Subsidiaries with respect to Interest Swap Obligations.
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"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems, repays, repurchases, defeases or otherwise discharges any Indebtedness
(other than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or
redemption, repayment, repurchase, defeasance or other discharge of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter reference period.
In addition, unless otherwise specified in a particular provision of the
indenture, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated (including any pro forma expense and
cost reductions and related adjustments to the extent that the same are
consistent with Regulation S-X under the Act, except in the case of clause
(15) of Permitted Debt and except in the case of the covenant described
above under the subheading "Merger, Consolidation, or Sale of Assets") and
without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income; and
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
For purposes of this definition, whenever pro forma effect is to be given to
any acquisition, the amount of Consolidated Cash Flow relating thereto and the
amount of Fixed Charges associated with any Indebtedness incurred in connection
therewith shall be determined in good faith by a responsible financial or
accounting officer of the Company in a manner that is consistent with this
definition.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each Subsidiary of the Company that executes a Guarantee
in accordance with the provisions of the indenture, and their respective
successors and assigns except those released in accordance with the terms of
the indenture.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
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(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Holdings" means Simmons Holdings, Inc., a Delaware corporation, and the
Company's direct parent.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property or any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable;
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other
Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Industrial Revenue Bonds" means:
(1) $9.7 million of 7.0% industrial revenue bonds maturing in 2017 that
the Company issued to finance the construction of its Janesville, Wisconsin
facility; and
(2) $5.0 million of variable rate industrial revenue bonds maturing in
2016 that the Company issued to finance the construction of its Shawnee,
Kansas facility.
"Interest Swap Obligations" means the obligations of any Person, pursuant
to any arrangement with any other Person, whereby, directly or indirectly,
such Person is entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made by such other
Persons calculated by applying a fixed or a floating rate of interest on the
same notional amount.
"Investcorp" means INVESTCORP S.A.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel, relocation
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no
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longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the subheading "--Restricted Payments".
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Management Investors" means the management officers and employees of the
Company and its Subsidiaries identified as management investors in the
Recapitalization Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with: (a) any
Asset Sale (including, without limitation, dispositions pursuant to sale
and leaseback transactions, and without regard to the $1.0 million size
limitation set forth in the definition of "Asset Sale") or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of its Restricted Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss); and
(3) non-cash compensation charges, including, any such non-cash charges
arising from existing stock options resulting from any merger,
recapitalization or other acquisition or disposition.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale) and any cash payments
received by way of deferred payments as and when received, net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Debt under a Credit Facility)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Senior Credit Agreement" means that certain senior secured credit
agreement, dated October 29, 1998, consisting of a $270.0 senior secured bank
financing including (i) an $80.0 million six-year revolver, (ii) a $70.0
million six-year term loan A, (iii) a $70.0 million seven-year term loan B and
(iv) a $50.0 million eight-year term loan C entered into by the Company,
Goldman Sachs Credit Partners L.P., as joint lead arranger, syndication agent
and lender, and Warburg Dillon Read LLC, as joint lead arranger, UBS AG,
Stamford Branch, as administrative agent and lender, and the other institutions
party thereto from time to time, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and in each case, as amended, modified, supplemented, renewed,
refunded, replaced, extended, restructured or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender; and
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(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of
any other Indebtedness of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means any business (including stock or assets) that
derives a majority of its revenues from the manufacture, distribution and sale
of mattresses, foundation and other bedding products and activities that are
reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which the Company and its
Restricted Subsidiaries are engaged on the date of the indenture.
"Permitted Debt" has the meaning assigned to such term in the second
paragraph of the covenant described above under the subheading "Certain
Covenants--Incurrence of indebtedness and Issuance of Preferred Stock".
"Permitted Group" means any group of investors that is deemed to be a
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders Agreements, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (together with
its Affiliates), other than the Principals and their Related Parties, is the
Beneficial Owner (with such beneficial ownership determined without regard to
the Stockholders Agreements, as the same may be amended, modified or
supplemented from time to time), directly or indirectly, of (a) more than 40%
of the Voting Stock of the Company that is "beneficially owned" (as defined
above) by such group of investors and (b) more of the Voting Stock of the
Company than is at the time "beneficially owned" (as defined above) by the
Principals and their Related Parties in the aggregate (Voting Stock, in each
case, measured by voting power rather than number of shares).
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company that is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company that is a Guarantor in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company
that is a Guarantor;
(4) any Investment in a Restricted Subsidiary that is not a Guarantor;
provided that the aggregate fair market value of such Investment, when
taken together with the fair market value of all other Investments made
pursuant to this clause (4) that are at that time outstanding, shall not
exceed 10% of Total Assets at the time of such Investment (with the fair
market value of each Investment being measured at the time made and without
giving effect to subsequent changes in value);
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the subheading "--
Repurchase at the Option of Holders--Asset Sales";
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(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(7) any Investment by the Company or a Subsidiary of the Company in a
Securitization Entity or any Investment by a Securitization Entity in any
other Person in connection with a Qualified Securitization Transaction;
provided that any Investment in a Securitization Entity is in the form of a
Purchase Money Note or an equity interest;
(8) any Investment existing on the date of the indenture;
(9) loans and advances to employees and officers in the ordinary course
of business not to exceed $5.0 million at any one time outstanding;
(10) Currency Agreements and Interest Swap Obligations;
(11) accounts receivable incurred in the ordinary course of business,
(12) Investments in securities of trade creditors or customers received
pursuant to a plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditor or customer;
(13) guarantees otherwise permitted under the indenture;
(14) Investments the payment of which consists exclusively of Equity
Interests other than Disqualified Stock; and
(15) additional Investments having an aggregate fair market value, taken
together with all other Investments made pursuant to this clause (15) that
are at that time outstanding, not to exceed $10.0 million at the time of
such Investment (with the fair market value of each Investment being
measured at the time made and without giving effect to subsequent changes
in value).
"Permitted Junior Securities" means:
(1) Equity Interests in the Company, Holdings or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) to substantially the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to the indenture.
"Permitted Liens" means:
(1) Liens securing Senior Debt that was permitted by the terms of the
indenture to be incurred;
(2) Liens in favor of the Company;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) Liens to secure Senior Debt of the Company that was permitted to be
incurred by the indenture;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
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(9) Liens incurred in the ordinary course of business of the Company or
any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than trade credit in the
ordinary course of business); and
(b) do not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary;
(10) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries;
(11) Liens securing the Industrial Revenue Bonds;
(12) 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; and
(13) leases or subleases to third parties.
"Permitted Refinancing Indebtedness" means any Indebtedness or Disqualified
Stock of the Company or any of its Restricted Subsidiaries issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund other Indebtedness or Disqualified Stock of the
Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value or liquidation value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value or liquidation value, if
applicable), plus accrued interest on, the Indebtedness or Disqualified
Stock so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses, costs or premiums incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness or Disqualified Stock being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Notes, such Permitted Refinancing Indebtedness has
a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded;
(4) such Indebtedness or Disqualified Stock is incurred or issued either
by the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness (or issuer of the Disqualified Stock) being extended,
refinanced, renewed, replaced, defeased or refunded; and
(5) if the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded provided for payment or
accrual of interest or dividends on a non-cash basis, then such
Indebtedness or Disqualified Stock contains provisions allowing for the
payment or accrual of interest and dividends on comparable terms.
"Principals" means (a) Fenway and (b) any other Person that owns more than
10% of the Equity Interests of Holdings as of the date of the indenture.
"Public Equity Offering" means any underwritten public offering of Qualified
Capital Stock of Holdings or the Company; provided that, in the event of any
such public equity offering by Holdings, Holdings contributes to the common
equity capital of the Company (other than as Disqualified Stock) the portion of
the net cash proceeds of such public equity offering necessary to pay the
aggregate redemption price (plus accrued
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interest to the redemption date) of the exchange notes to be redeemed pursuant
to the provisions of the second paragraph under the subheading "Optional
Redemption" with respect to the exchange notes.
A "Public Market" shall be deemed to exist if:
(1) a Public Equity Offering has been consummated; and
(2) at least 35% of the total issued and outstanding Common Stock of the
Company or Holdings (as applicable) immediately prior to the consummation
of such Public Equity Offering has been distributed by means of an
effective registration statement under the Securities Act.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (b) any other Person (in case of a transfer by a
Securitization Entity), or may grant a security interest in, any accounts
receivable or equipment (whether now existing or arising or acquired in the
future) of the Company or any of its Restricted Subsidiaries, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivable and equipment, all contracts and contract rights and all
Guarantees or other obligations in respect such accounts receivable and
equipment, proceeds of such accounts receivable and equipment and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment.
"Recapitalization Agreement" means that certain Agreement and Plan of Merger
dated as of July 16, 1998, by and among Holdings, the Company and Merger Corp.,
as amended by Amendment No. 1 dated as of September 22, 1998, and as amended by
Amendment No. 2 dated as of October 26, 1998.
"Related Party" means:
(1) any controlling stockholder of any of the Principals, any entity
that is more than 50% owned by any one or more Principals or their Related
Parties; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding a 51% or more controlling interest of which consist of the
Principals and/or such other Persons referred to in the immediately
preceding clause (1); or
(3) any Person who, directly or indirectly, controls through a
management agreement or a general partner or is under common control with
any of the Principals; or
(4) any trust, partnership, corporation or other entity, the
benefactors, stockholders, partners or owners of which consist of Persons
referred to in clause (3).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable or equipment and related assets) that engages in no
activities other than in connection with the financing of accounts receivable
or equipment and that is designated by the Board of Directors of the Company
(as provided below) as a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Restricted Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates
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the Company or any Restricted Subsidiary of the Company in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any
property or asset of the Company or any Restricted Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity, and (c) to which neither
the Company nor any Restricted Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by the Board
of Directors of the Company shall be evidenced to the Trustee by filing with
the Trustee a resolution of the Board of Directors of the Company giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Senior Credit Documents" means the New Senior Credit Agreement, the
guaranties thereunder, any pledge and security agreement, any mortgage and
each other document executed in connection with the issuance of the bank
financing thereunder as each such document may be amended, restated,
supplemented or otherwise modified from time to time.
"Senior Debt" means:
(1) all Indebtedness of the Company or any Guarantor outstanding on the
date of the indenture under Credit Facilities or thereafter incurred under
Credit Facilities, and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of the Company or any Guarantor permitted to
be incurred under the terms of the indenture, unless the instrument
governing such Indebtedness expressly provides that it is on a parity with
or subordinated in right of payment to the notes or any Guarantee thereof;
and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any Indebtedness represented by Capital Stock;
(2) any liability for federal, state, local or other taxes owed or owing
by the Company;
(3) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates;
(4) any trade payables including any Guarantees thereof or instruments
evidencing such liabilities;
(5) any Indebtedness that is incurred in violation of the indenture;
(6) the Existing Notes; or
(7) the Industrial Revenue Bonds.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Simmons ESOP" means the Simmons Company Employee Stock Ownership Plan, as
form time to time amended, supplemented or otherwise modified, and a trust
forming a part thereof and its successors.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company that are reasonably customary in an accounts receivable or equipment
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original
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documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Stockholders Agreements" means those certain Stockholders Agreements (i) by
and among Holdings, Fenway and ESOP, Investcorp and the other Persons listed
therein and the Company, and (ii) by and among Holdings, the Management
Investors and the other Persons listed therein, each as in effect on the date
of the indenture.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock 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 such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Transaction Documents" means the Senior Credit Documents, the Common Equity
Documents, the Stockholders Agreements, the ESOP Stock Sale Agreement, the
Recapitalization Agreement, the Fenway Agreement and all documents relating to
any of the foregoing.
"Total Assets" means the consolidated assets of the Company and its
Restricted Subsidiaries calculated in accordance with GAAP.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of the Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
by the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the subheading "Certain Covenants--Designation of
Restricted and Unrestricted Subsidiaries". If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the indenture and any Indebtedness of such Subsidiary shall be
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deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the subheading "Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock", the Company shall
be in default of such covenant). The Board of Directors of the Company may at
any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the subheading "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock", calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
(2) no Default or Event of Default would be in existence following such
designation and (3) if any such Subsidiary is a Domestic Subsidiary, it shall
execute a supplemental indenture to become a Guarantor with respect to the
Notes.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing;
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment,
by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We originally sold the notes to Goldman Sachs, Warburg Dillon Read, Fleet
Securities and U.S. Bancorp Libra (the "Initial Purchasers") pursuant to the
Purchase Agreement dated March 10, 1999. The Initial Purchasers subsequently
resold the notes to qualified institutional buyers in reliance on Rule 144A
under the Securities Act and to a limited number of persons outside the United
States under Regulation S. As a condition to the Purchase Agreement, we entered
into a registration rights agreement with the Initial Purchasers in which we
agreed to:
(1) file a registration statement registering the exchange notes with
the Commission within 105 days after the original issuance of the notes;
(2) use our best efforts to have the registration statement relating to
the exchange notes declared effective by the Commission within 165 days
after the original issuance of the notes;
(3) unless applicable law or Commission policy would not permit the
exchange offer, commence the exchange offer and use our best efforts to
issue, within 30 business days after the date on which the Commission
declares the registration statement relating to the exchange notes
effective, exchange notes in exchange for all notes tendered prior to the
expiration date; and
(4) if obligated to file a shelf registration statement, use our best
efforts to file the shelf registration statement with the Commission within
45 days after such filing obligation arises, to cause the shelf
registration statement to be declared effective by the Commission within 90
days after such obligation arises and to use our best efforts to keep
effective the shelf registration statement for at least two years after the
original issuance of the notes or such shorter period that will terminate
when all securities covered by the shelf registration statement have been
sold pursuant to the shelf registration statement.
We have agreed to keep the exchange offer open for not less than 20 business
days (or longer if required by applicable law) after the date on which the
Commission declares the registration statement relating to the exchange notes
effective. The registration rights agreement also requires us to include in the
prospectus for the exchange offer certain information necessary to allow
broker-dealers who hold notes, other than notes purchased directly from us or
an affiliate of us, to exchange such notes pursuant to the exchange offer and
to satisfy the prospectus delivery requirements in connection with resales of
the exchange notes received by such broker-dealers in the exchange offer.
This prospectus covers the offer and sale of the exchange notes pursuant to
the exchange offer and the resale of exchange notes received in the exchange
offer by any broker-dealer who held notes, other than notes purchased directly
from us or one of our affiliates.
For each note surrendered to us pursuant to the exchange offer, the holder
of such note will receive an exchange note having a principal amount equal to
that of the surrendered note. Interest on each exchange note will accrue from
the date of issuance of such exchange note. The holders of notes that are
accepted for exchange will receive, in cash, accrued interest on such notes to,
but not including, the issuance date of the exchange notes. We will pay such
interest with the first interest payment on the exchange notes. Interest on the
notes accepted for exchange will cease to accrue upon issuance of the exchange
notes.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, we believe the exchange notes would
in general be freely tradeable after the exchange offer without further
registration under the Securities Act. If our belief is inaccurate, holders who
transfer exchange notes in violation of the prospectus delivery provisions of
the Securities Act and without an exemption from registration may incur
liability under the Securities Act. We do not assume or indemnify holders
against such liability.
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Any purchaser of the notes who is either an "affiliate" of us, a broker-
dealer who purchased notes directly from us or an affiliate of us for resale,
or who intends to participate in the exchange offer for the purpose of
distributing the exchange notes:
(1) will not be able to rely on the interpretation of the staff of the
Commission;
(2) will not be able to tender its notes in the exchange offer; and
(3) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer
of the notes, unless such sale or transfer is made pursuant to all
exemption from such requirements.
We have agreed to file with the Commission a shelf registration statement to
cover resales of the notes by holders who satisfy certain conditions relating
to the provision of information in connection with the shelf registration
statement if:
(1) we are not required to file the registration statement for the
exchange offer or permitted to consummate the exchange offer because we are
not permitted by applicable law or Commission policy; or
(2) any holder of Transfer Restricted Securities notifies us prior to
the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from participating
in such offer;
(b) that it may not resell the exchange notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the registration statement relating to the
exchange offer is not appropriate or available for such resales; or
(c) that it is a broker-dealer that purchased notes directly from us
or an affiliate of us for resale.
For purposes of the foregoing and below, "Transfer Restricted Securities"
means each note until the earliest to occur of:
(1) the date on which a person other than a broker-dealer for an
exchange note has exchanged such note;
(2) following the exchange by a broker-dealer in the exchange offer of a
note for an exchange note, the date on which such exchange note is sold to
a purchaser who receives from such broker-dealer before the date of such
sale a copy of the prospectus contained in the registration statement
relating to the exchange offer;
(3) the date on which such note has been effectively registered under
the Securities Act and disposed of in accordance with the shelf
registration statement; or
(4) the date on which such note is distributed to the public pursuant to
Rule 144 under the Securities Act.
We will pay liquidated damages to each holder of notes if:
(1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
Commission on or before the date specified for such effectiveness (the
"Effectiveness Deadline");
(3) we fail to consummate the exchange offer within 30 business days
after the registration statement relating to the exchange offer is first
declared effective by the Commission; or
(4) the shelf registration statement or the registration statement
relating to the exchange offer is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer Restricted
Securities during the periods specified in the registration rights
agreement without being
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succeeded immediately by a post-effective amendment to such registration
statement that cures such failure and is itself declared effective by the
Commission (each such event referred to in clauses (1) through (4) above a
"Registration Default").
The amount of liquidated damages will be $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by each holder, with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default. The amount of liquidated damages will increase by
$.05 per week per $1,000 principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages for all
Registration Defaults of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities provided that we shall in no event be required to pay
liquidated damages for more than one Registration Default on the notes at any
time. We will pay all accrued liquidated damages on each interest payment date
in the manner provided for the payment of interest in the indenture. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease.
As contemplated by the aforementioned no-action letters and the registration
rights agreement, each holder tendering notes in the exchange offer is required
to represent to us in the letter of transmittal, that, among things:
(1) the person receiving the exchange notes pursuant to the exchange
offer, whether or not such person is the holder, is receiving them in the
ordinary course of business;
(2) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
exchange notes and that each such holder that is not a broker-dealer is not
engaged in, and does not intend to engage in, a distribution of exchange
notes;
(3) neither the holder nor any such other person is an "affiliate" of us
within the meaning of Rule 405 under the Securities Act;
(4) the holder acknowledges and agrees that (A) any person participating
in the exchange offer for the purpose of distributing the exchange notes
must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction with
respect to the exchange notes acquired by such person and cannot rely on
the position of the staff of the Commission set forth in no-action letters
that are discussed above and under the heading "--Purpose and Effect of the
exchange offer," and (B) any broker-dealer that receives exchange notes for
its own account in exchange for notes pursuant to the exchange offer must
deliver a prospectus in connection with any resale of such exchange notes,
but by so acknowledging, the holder shall not be deemed to admit that, by
delivering a prospectus, it is an "underwriter" within the meaning of the
Securities Act; and
(5) the holder understands that a secondary resale transaction described
in clause (4)(A) above should be covered by an effective registration
statement containing the selling security holder information required by
Item 507 or 508 of Regulation S-K of the Commission.
Although a broker-dealer may be an "underwriter" within the meaning of the
Securities Act, the letter of transmittal states that by so acknowledging 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. 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 exchange notes received in exchange
for notes.
The Commission has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to the exchange
notes (other than a resale of an unsold allotment from the original sale of the
notes) with a prospectus contained in the registration statement relating to
the exchange offer. Under the registration rights agreement, we are required to
allow broker-dealers to use the prospectus contained in the registration
statement relating to the exchange offer in connection with the resale of such
exchange notes.
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We will, in the event of the filing of a shelf registration statement,
provide to each holder of notes eligible to participate in such shelf
registration statement copies of the prospectus which is a part of the shelf
registration statement, notify each such holder when the shelf registration
statement for the notes has become effective and take other actions as are
required to permit resales of the notes. A holder of notes that sells such
notes pursuant to the shelf registration statement generally will be required
to be named as a selling securityholder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the registration rights agreement which are
applicable to such a holder, including certain indemnification obligations. In
addition, each such holder will be required to deliver information to be used
in connection with the shelf registration statement and to provide comments on
the shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the
shelf registration statement and to benefit from the provisions regarding
liquidated damages.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and the accompanying letter of transmittal, we will accept all notes validly
tendered prior to 5:00 p.m., New York City time, on the expiration date. We
will issue $1,000 principal amount of exchange notes in exchange for each
$1,000 principal amount of outstanding notes accepted in the exchange offer.
Holders may tender some or all of their notes pursuant to the exchange offer in
integral multiples of $1,000.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the notes except for the following:
(1) the exchange notes bear a Series B designation and different CUSIP
number from the notes;
(2) the exchange notes have been registered under the Securities Act
and, therefore, will not bear legends restricting their transfer; and
(3) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement, including the provisions
providing for liquidated damages in certain circumstances relating to the
timing of the exchange offer, all of which rights will terminate when the
exchange offer is terminated.
The exchange notes will evidence the same debt as the notes and will be
entitled to the benefits of the indenture. As of the date of this prospectus,
$150.0 million aggregate principal amount of the notes is outstanding. Solely
for reasons of administration and no other reason, we have fixed the close of
business on , 1999 as the record date for the exchange offer for purposes
of determining the persons to whom this prospectus and the letter of
transmittal will be mailed initially. Only a registered holder of notes (or
such holder's legal representative or attorney-in-fact) as reflected on the
records of the Trustee under the indenture may participate in the exchange
offer. There will be no fixed record date, however, for determining registered
holders of the notes entitled to participate in the exchange offer.
The holders of notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the indenture. We intend to conduct
the exchange offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission.
We shall be deemed to have accepted validly tendered notes when, as and if
the holder of such note has given oral or written notice thereof to the
exchange agent. The exchange agent will act as agent for the tendering holders
for the purpose of receiving the exchange notes from us.
If any tendered notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth in this prospectus or
otherwise, the certificates for any such unaccepted notes will be returned,
without expense, to the tendering holder as promptly as practicable after the
expiration date.
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Those holders who tender notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of notes. We will
pay all charges and expenses, other than certain applicable taxes, in
connection with the exchange offer. See "--Fees and Expenses."
Expiration Dates; Extensions; Amendments
The "expiration date" shall be 5:00 p.m., New York City time, on ,
1999 unless we, in our sole discretion, extend the exchange offer, in which
case the expiration date shall be the latest date to which the exchange offer
is extended. Notwithstanding the foregoing, we will not extend the expiration
date beyond , 1999.
We have no current plans to extend the exchange offer. In order to extend
the expiration date, we will notify the exchange agent of any extension by oral
or written notice and will make a public announcement of such extension, in
each case prior to 9:00 a.m., New York City time, no later than the next
business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion, to
(1) delay accepting any notes;
(2) extend the exchange offer; or
(3) terminate the exchange offer
if any of the conditions set forth below under "--Conditions of the Exchange
Offer" shall not have been satisfied, in each case by giving oral or written
notice of such delay, extension or termination to the exchange agent, and to
amend the terms of the exchange offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement of such event. If we amend the exchange
offer in a manner determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the notes and the exchange offer
will be extended for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner of disclosure
to the registered holders, assuming the exchange offer would otherwise expire
during such five to ten business day period.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall not have an obligation to publish, advertise, or otherwise
communicate any such public announcement other than by making a timely release
to the Dow Jones News Service.
Interest on the Exchange Notes
The exchange notes will bear interest from their date of issuance. Interest
is payable semiannually on March 15 and September 15 of each year commencing on
September 15, 1999, at the rate of 10 1/4% per annum. The holders of notes that
are accepted for exchange will receive, in cash, accrued interest on such notes
to, but not including, the issuance date of the exchange notes. Such interest
will be paid with the first interest payment on the exchange notes.
Consequently, holders who exchange their notes for exchange notes will receive
the same interest payment on September 15, 1999 which is the first interest
payment date with respect to the notes that they would have received had they
not accepted the exchange offer. Interest on the notes accepted for exchange
will cease to accrue upon issuance of the exchange notes.
Procedures for Tendering
Only a registered holder of notes may tender such notes in the exchange
offer. To effectively tender in the exchange offer, a holder must complete,
sign and date a copy or facsimile of the letter of transmittal, have the
signatures thereon guaranteed if required by the letter of transmittal, and
mail or otherwise deliver such letter of transmittal or such facsimile,
together with the notes and any other required documents, to the exchange agent
at the address set forth below under "exchange agent" for receipt prior to 5:00
p.m., New
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York City time, on the expiration date. Delivery of the notes also may be made
by book-entry transfer in accordance with the procedures described below. If
you are effecting delivery by book-entry transfer,
(1) confirmation of such book-entry transfer must be received by the
exchange agent prior to the expiration date; and
(2) you must transmit to the exchange agent on or prior to the
expiration date a computer-generated message transmitted by means of the
Automated Tender Offer Program System of the Depository Trust Company in
which you acknowledge and agree to be bound by the terms of the letter of
transmittal and which, when received by the exchange agent, forms a part of
the confirmation of book-entry transfer.
By executing the letter of transmittal or effecting delivery by book-entry
transfer, each holder is making to us those representations set forth under the
heading "--Resale of the Exchange Notes."
The tender by a holder of notes will constitute an agreement between such
holder and us in accordance with the terms and subject to the conditions set
forth herein and in the letter of transmittal.
The method of delivery of the notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and sole risk
of the holder. As an alternative to delivery by mail, holders may wish to
consider overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the exchange agent before the
expiration date. No letters of transmittal or notes should be sent to us.
Holders may request that their respective brokers, dealers, commercial banks,
trust companies or nominees effect the above transactions for such holders.
Only a registered holder of notes may tender such notes in connection with
the exchange offer. The term "holder" with respect to the exchange offer means
any person in whose name notes are registered on our books or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose notes are held of record by DTC who desires to deliver such
notes by book-entry transfer at DTC.
If your notes are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to tender, you should
promptly contact the person in whose name the notes are registered and instruct
such registered holder to tender on your behalf. If a beneficial owner wishes
to tender on his or her own behalf, the holder must, prior to completing and
executing the letter of transmittal and delivering the notes, either make
appropriate arrangements to register ownership of the notes in his or her name
or to obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (defined below) unless
the notes tendered are tendered:
(1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or
(2) for the account of an Eligible Institution.
If signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed, such guarantee must be by a participant in a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the letter of transmittal is signed by a person other than the registered
holder of any notes listed therein, such notes must be endorsed or accompanied
by a properly completed bond powers, signed by such registered holder as such
registered holder's name appears on such notes with the signature thereon
guaranteed by an Eligible Institution.
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If the letter of transmittal or any notes or bond powers 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 submit with the letter of
transmittal evidence satisfactory to so act.
We understand that the exchange agent will make a request, promptly after
the date of this prospectus, to establish accounts with respect to the notes at
the book-entry transfer facility of DTC for the purpose of facilitating this
exchange offer, and subject to the establishment of these accounts, any
financial institution that is a participant in the book-entry transfer facility
system may make book-entry delivery of notes by causing the transfer of such
notes into the exchange agent's account with respect to the notes in accordance
with DTC's procedures for such transfer. Although delivery of the notes may be
effected through book-entry transfer into the exchange agent's account at the
book-entry transfer facility, unless the holder complies with the procedures
described in the following paragraph or the guaranteed delivery procedures
described below, an appropriate letter of transmittal properly completed and
duly executed with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
exchange agent at its address set forth below before the expiration date. The
delivery of documents to the book-entry transfer facility does not constitute
delivery to the exchange agent.
The exchange agent and DTC have confirmed that the exchange offer is
eligible for the Automated Tender Offer Program ("ATOP") of DTC. Accordingly,
DTC participants may electronically transmit their acceptance of the exchange
offer by causing DTC to transfer notes to the exchange agent in accordance with
the procedures for transfer established under ATOP. DTC will then send an
Agent's Message to the exchange agent. The term "Agent's Message" means a
message transmitted by DTC, which when received by the exchange agent forms
part of the confirmation of a book-entry transfer, and which states that DTC
has received an express acknowledgment from the participant in DTC tendering
notes which are the subject of such book-entry confirmation that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that we may enforce such agreement against such participant. In
the case of an Agent's Message relating to guaranteed delivery, the term means
a message transmitted by DTC and received by the exchange agent which states
that DTC has received an express acknowledgment from the participant in DTC
tendering notes that such participant has received and agrees to be bound by
the Notice of Guaranteed Delivery.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered notes will be determined by
us in our sole discretion, which determinations will be final and binding. We
reserve the absolute right to reject any and all notes not validly tendered or
any notes the acceptance of which would, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any defects,
irregularities or conditions of tender as to particular notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of notes must be cured within such time as we shall determine. Although
we intend to notify holders of defects or irregularities with respect to the
tender of notes, neither we, the exchange agent nor any other person shall
incur any liability for failure to give such notification. Tenders of notes
will not be deemed to have been made until such defects or irregularities have
been cured or waived. Any notes received by the exchange agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived, or if notes are submitted in a principal amount greater than
the principal amount of notes being tendered by such tendering holder, such
unaccepted or non-exchanged notes will be returned by the exchange agent to the
tendering holders (or, in the case of 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 unaccepted or non-
exchanged notes will be credited to an account maintained with such book-entry
transfer facility), unless otherwise provided in the letter of transmittal
designated for such notes, as soon as practicable following the expiration
date.
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Guaranteed Delivery Procedures
Those holders who wish to tender their notes and
(1) whose notes are not immediately available; or
(2) who cannot deliver their notes, the letter of transmittal or any
other required documents to the exchange agent before the expiration date;
or
(3) who cannot complete the procedures for book-entry transfer before
the expiration date;
may effect a tender if:
(1) the tender is made through all Eligible Institution;
(2) before the expiration date, the exchange agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number or
numbers of such notes and the principal amount of notes tendered, stating
that the tender is being made thereby, and guaranteeing that, within five
business days after the expiration date, either (a) a copy or facsimile of
the letter of transmittal, or facsimile thereof, together with the
certificate(s) representing the notes and any other documents required by
the letter of transmittal, will be deposited by the Eligible Institution
with the exchange agent or (b) that a confirmation of book-entry transfer
of such notes into the exchange agent's account at DTC, will be delivered
to the exchange agent; and
(3) either (a) a copy or facsimile of such properly completed and
executed letter of transmittal together with the certificate(s)
representing all tendered notes in proper form for transfer and all other
documents required by the letter of transmittal or (b) if applicable,
confirmation of a book-entry transfer into the exchange agent's account at
DTC, are actually received by the exchange agent within five business days
after the expiration date.
Upon request to the exchange agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their notes according to the guaranteed
delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the expiration date.
To validly withdraw a tender of notes in the exchange offer, the exchange
agent must receive a telegram, telex, letter or facsimile transmission notice
of withdrawal at its address set forth herein prior to 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must:
(1) specify the name of the person having deposited the notes to be
withdrawn (the "Depositor");
(2) identify the notes to be withdrawn, including the certificate number
or numbers and the aggregate principal amount of such notes or, in the case
of notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited;
(3) be signed by the holder in the same manner as the original signature
on the letter of transmittal by which such notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfers sufficient to permit the Trustee with respect to the notes to
register the transfer of such notes into the name of the person withdrawing
the tender; and
(4) specify the name in which any such notes are to be registered, if
different from that of the Depositor.
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All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us, and our determination shall
be final and binding on all parties. Any notes so withdrawn will be deemed not
to have been validly tendered for purposes of the exchange offer and no
exchange notes will be issued in exchange for withdrawn notes unless those
notes so withdrawn are validly retendered. Any notes which have been tendered
but which are not accepted for exchange because of the rejection of the tender
due to uncured defects or the prior termination of the exchange offer, or
which have been validly withdrawn, will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the exchange offer. Properly withdrawn notes may
be retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the expiration date.
Conditions of the Exchange Offer
The offer is subject to the condition that the exchange offer, or the
making of any exchange by a holder, does not violate applicable law or any
applicable interpretation of the staff of the Commission. If there has been a
change in policy of the Commission such that in the reasonable opinion of
counsel to us there is a substantial question whether the exchange offer is
permitted by applicable federal law, we have agreed to seek a no-action letter
or other favorable decision from the Commission allowing us to consummate the
exchange offer.
If we determine that the exchange offer is not permitted by applicable
federal law, it may terminate the exchange offer. In connection with such
termination we may:
(1) refuse to accept any notes and return any notes that have been
tendered by the holders thereof;
(2) extend the exchange offer and retain all notes tendered prior to the
expiration date, subject to the rights of such holders of tendered notes to
withdraw their tendered notes; or
(3) waive such termination event with respect to the exchange offer and
accept all properly tendered notes that have not been properly withdrawn.
If such waiver constitutes a material change in the exchange offer, we will
disclose such change by means of a supplement to this prospectus that will be
distributed to each registered holder of notes, and we will extend the
exchange offer for a period of five to ten business days, depending upon the
significance of the waiver, if the exchange offer would otherwise expire
during such period.
Exchange Agent
SunTrust Bank, Atlanta, the Trustee under the indenture, has been appointed
as exchange agent for the exchange offer. Questions and requests for
assistance, requests for additional copies of this prospectus or the letter of
transmittal and requests for the Notice of Guaranteed Delivery should be
directed to the exchange agent addressed as follows:
By Registered or Certified Mail or Hand Delivery:
SunTrust Bank, Atlanta
25 Park Place
24th Floor
Atlanta, GA 30303-2900
Attention: Olga Warren
Facsimile Transmission: (404) 588-7335
Confirm by Telephone: (404) 588-7067
Any requests or deliveries to all address or facsimile number other than as
set forth above will not constitute a valid delivery.
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Fees and Expenses
The expenses of soliciting tenders will be borne by us. The principal
solicitation for lenders is being made by mail. Additional solicitations,
however, may be made by our officers and regular employees and our affiliates
in person, by telegraph or telephone.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will pay the exchange agent,
however, reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket expenses in connection with the
exchange offer.
We will pay the cash expenses incurred in connection with the exchange
offer. Such expenses include fees and expenses of the exchange agent and the
Trustee, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
notes pursuant to the exchange offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the notes pursuant to the exchange
offer, then the amount of any such transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the notes,
which is face value, as reflected in our accounting records on the date of
exchange. Accordingly, we will not recognize any gain or loss for accounting
purposes. The costs of the exchange offer will be amortized over the term of
the exchange notes.
Consequences of Failure to Exchange
The notes that are not exchanged for exchange notes pursuant to the exchange
offer will remain transfer restricted securities. Accordingly, such notes may
be resold only as follows:
(1) to us, upon redemption thereof or otherwise;
(2) (a) so long as the notes are eligible for resale pursuant to Rule
144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act in a transaction meeting the requirements of Rule
144A, (b) in accordance with Rule 144 under the Securities Act, or (c)
pursuant to another exemption from the registration requirements of the
Securities Act and based upon an opinion of counsel reasonably acceptable
to us;
(3) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act; or
(4) pursuant to an effective registration statement under the Securities
Act.
Persons who acquire the exchange notes are responsible for compliance with
the state securities or blue sky laws regarding resales. We assume no
responsibility for compliance with these requirements.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Scope of Discussion
This general discussion of certain United States federal income and estate
tax consequences applies to you if you acquired notes at original issue for
cash and you exchange those notes for exchange notes in the exchange offer.
This discussion only applies to you if you hold the exchange notes as a
"capital asset," generally, for investment, under Section 1221 of the Code.
This summary, however, does not consider state, local or foreign tax laws. In
addition, it does not include all of the rules which may affect the United
States tax treatment of your investment in the exchange notes. For example,
special rules not discussed here may apply to you if you are:
. a broker-dealer, a dealer in securities or a financial institution;
. an S corporation;
. an insurance company;
. a tax-exempt organization;
. subject to the alternative minimum tax provisions of the Code;
. holding the exchange notes as part of a hedge, straddle or other risk
reduction or constructive sale transaction; or
. a nonresident alien or foreign corporation subject to net-basis United
States federal income tax on income or gain derived from an exchange note
because such income or gain is effectively connected with the conduct of
a United States trade or business.
This discussion only represents our best attempt to describe certain
federal income tax consequences that may apply to you based on current United
States federal tax law. This discussion may in the end inaccurately describe
the federal income tax consequences which are applicable to you because the
law may change, possibly retroactively, and because the Internal Revenue
Service ("IRS") or any court may disagree with this discussion.
This summary may not cover your particular circumstances because it does
not consider foreign, state or local tax rules, disregards certain federal tax
rules, and does not describe future changes in federal tax rules. Please
consult your tax advisor rather than relying on this general description.
United States Holders
If you are a "United States Holder," as defined below, this section applies
to you. Otherwise, the next section, "Non-United States Holders," applies to
you.
Definition of United States Holder. You are a "United States Holder" if you
hold notes and you are:
. a citizen or resident of the United States, including an alien individual
who is a lawful permanent resident of the United States or meets the
"substantial presence" test under Section 7701(b) of the Code;
. a corporation or partnership created or organized in the United States or
under the laws of the United States or of any political subdivision;
. an estate the income of which is subject to United States federal income
tax regardless of its source; or
. a trust, if (i) a United States court can exercise primary supervision
over the administration of the trust and one or more United States
persons can control all substantial decisions of the trust, or (ii) the
trust was in existence on August 20, 1996 and has properly elected to
continue to be treated as a United States person.
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<PAGE>
Taxation of Stated Interest. You generally must pay federal income tax on
the interest on the exchange notes:
. when it accrues, if you use the accrual method of accounting for United
States federal income tax purposes; or
. when you receive it, if you use the cash method of accounting for United
States federal income tax purposes.
Redemption and Repurchase Rights. As described elsewhere in this prospectus,
we may under certain circumstances be required to repurchase the exchange notes
and we have the option to redeem some or all of the exchange notes at certain
times under certain circumstances.
Based on our current expectations, the chance that we will repurchase or
redeem the exchange notes is remote. Accordingly, we intend to take the
position that the payments contingent on the repurchase or redemption of the
exchange notes do not, as of the issue date, cause the exchange notes to have
original issue discount ("OID") and do not affect the yield to maturity or the
maturity date of the exchange notes. You may not take a contrary position
unless you disclose your contrary position in the proper manner to the IRS.
You should consult your tax adviser with respect to the contingent payments
described above. If, contrary to our expectations, we repurchase or redeem the
notes, or if the IRS takes the position that the contingent payments described
were not remote as of the issue date, you may have to redetermine the amount
and timing of interest income you must include in taxable income.
Sale or Other Taxable Disposition of the Exchange Notes. You must recognize
taxable gain or loss on the sale, exchange, redemption, retirement or other
taxable disposition of an exchange note. The amount of your gain or loss equals
the difference between the amount you receive for the exchange note (in cash or
other property, valued at fair market value), minus the amount attributable to
accrued interest on the exchange note, minus your adjusted tax basis in the
exchange note. Your initial tax basis in an exchange note equals the price you
paid for the note which you exchanged for the exchange note.
Your gain or loss will generally be a long-term capital gain or loss if your
holding period in the exchange note is more than one year. Otherwise, it will
be a short-term capital gain or loss. Payments attributable to accrued interest
which you have not yet included in income will be taxed as ordinary interest
income.
Receipt of Exchange Notes. Because the economic terms of the exchange notes
and the notes are identical, your exchange of notes for exchange notes under
the exchange offer will not constitute a taxable exchange of the notes. Even if
you received exchange notes in exchange for notes on which additional interest
was paid because of a registration default, the exchange will not be taxable
because the exchange would occur by operation of the notes' original terms. As
a result:
. you will not recognize taxable gain or loss when you receive exchange
notes in exchange for notes;
. your holding period in the exchange notes will include your holding
period in the notes; and
. your basis in the exchange notes will equal your basis in the notes.
Backup Withholding. You may be subject to a 31% backup withholding tax when
you receive interest payments on the exchange note or proceeds upon the sale or
other disposition of an exchange note. Certain holders (including, among
others, corporations and certain tax-exempt organizations) are generally not
subject to backup withholding. In addition, the 31% backup withholding tax will
not apply to you if you provide your taxpayer identification number ("TIN") in
the prescribed manner unless:
. the IRS notifies us or our agent that the TIN you provided is incorrect;
. you fail to report interest and dividend payments that you receive on
your tax return and the IRS notifies us or our agent that withholding is
required; or
. you fail to certify under penalties of perjury that you are not subject
to backup withholding.
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<PAGE>
If the 31% backup withholding tax does apply to you, you may use the amounts
withheld as a refund or credit against your United States federal income tax
liability as long as you provide certain information to the IRS.
Non-United States Holders
Definition of Non-United States Holder. A "Non-United States Holder" is any
person other than a United States Holder. If you are subject to United States
federal income tax on a net basis on income or gain with respect to an exchange
note because such income or gain is effectively connected with the conduct of a
United States trade or business, this disclosure does not cover the United
States federal tax rules that apply to you.
Interest.
Portfolio Interest Exemption. You will generally not have to pay United
States federal income tax on interest (or OID on the exchange notes, if any)
paid on the exchange notes because of the "portfolio interest exemption" if
either:
. you represent that you are not a United States person for United States
federal income tax purposes and you provide your name and address to us
or our paying agent on a properly executed IRS Form W-8 (or a suitable
substitute form) signed under penalties of perjury; or
. a securities clearing organization, bank, or other financial institution
that holds customers' securities in the ordinary course of its business
holds the exchange note on your behalf, certifies to us or our agent
under penalties of perjury that it has received IRS Form W-8 (or a
suitable substitute) from you or from another qualifying financial
institution intermediary, and provides a copy to us or our agent.
You will not, however, qualify for the portfolio interest exemption
described above if:
. you own, actually or constructively, 10% or more of the total combined
voting power of all classes of our capital stock;
. you are a controlled foreign corporation with respect to which we are a
"related person" within the meaning of Section 864(d)(4) of the Code, or
. you are a bank receiving interest described in Section 881(c)(3)(A) of
the Code.
Withholding Tax if the Interest Is Not Portfolio Interest. If you do not
claim, or do not qualify for, the benefit of the portfolio interest exemption,
you may be subject to 30% withholding tax on interest payments made on the
exchange notes. However, you may be able to claim the benefit of a reduced
withholding tax rate under an applicable income tax treaty. The required
information for claiming treaty benefits is generally submitted under current
regulations on Form 1001. Successor forms will require additional information,
as discussed below. See "Non-United States Holders--New Withholding
Regulations."
Reporting. We may report annually to the IRS and to you the amount of
interest paid to, and the tax withheld, if any, with respect to you.
Sale or Other Disposition of the Exchange Notes. You generally will not be
subject to United States federal income tax or withholding tax on gain
recognized on a sale, exchange, redemption, retirement, or other disposition of
an exchange note. You may, however, be subject to tax on such gain if:
. you are an individual who was present in the United States for 183 days
or more in the taxable year of the disposition, in which case you may
have to pay a United States federal income tax of 30% (or a reduced
treaty rate) on such gain, and you may also be subject to withholding
tax; or
. you are an individual who is a former citizen or resident of the United
States, your loss of citizenship or residency occurred within the last
ten years (and, if you are a former resident, on or after
February 6, 1995), and it had as one of its principal purposes the
avoidance of United States tax, in which case
116
<PAGE>
you may be taxed on the net gain derived from the sale under the graduated
United States federal income tax rates that are applicable to United
States citizens and resident aliens, and you may be subject to withholding
under certain circumstances.
Even if you are an individual described in one of the two paragraphs above,
you should not recognize gain subject to United States federal income tax as a
result of exchanging notes for exchange notes under the exchange offer. See the
more complete discussion above under "United States Holders--Receipt of
Exchange Notes."
United States Federal Estate Taxes. If you qualify for the portfolio
interest exemption under the rules described above when you die, the exchange
notes will not be included in your estate for United States federal estate tax
purposes.
Back-up Withholding and Information Reporting.
Payments from United States Office. If you receive payments of interest or
principal directly from us or through the United States office of a custodian,
nominee, agent or broker, there is a possibility that you will be subject to
both backup withholding at a rate of 31% and information reporting.
With respect to interest payments made on the exchange note, however, back-
up withholding and information reporting will not apply if you certify,
generally on a Form W-8 or substitute form, that you are not a United States
person in the manner described above. See "Non-United States Holders--
Interest."
Moreover, with respect to proceeds received on the sale, exchange,
redemption, or other disposition of an exchange note, back-up withholding or
information reporting generally will not apply if you properly provide,
generally on Form W-8 or a substitute form, a statement that you are an "exempt
foreign person" for purposes of the broker reporting rules, and other required
information. If you are not subject to United States federal income or
withholding tax on the sale or other disposition of an exchange note, as
described above under the heading "Non-United States Holders--Sale or Other
Disposition of Exchange Notes," you generally will qualify as an "exempt
foreign person" for purposes of the broker reporting rules.
Payments from Foreign Office. If payments of principal and interest are made
to you outside the United States by or through the foreign office of your
foreign custodian, nominee or other agent, or if you receive the proceeds of
the sale of an exchange note through a foreign office of a "broker," as defined
in the pertinent United States Treasury Regulations, you generally will not be
subject to backup withholding or information reporting. You will, however, be
subject to backup withholding and information reporting if the foreign
custodian, nominee, agent or broker has actual knowledge or reason to know that
the payee is a United States person. You will also be subject to information
reporting, but not backup withholding, if the payment is made by a foreign
office of a custodian, nominee, agent or broker that is a United States person
or a controlled foreign corporation for United States federal income tax
purposes, or that derives 50% or more of its gross income from the conduct of a
United States trade or business for a specified three year period, unless the
broker has in its records documentary evidence that you are a Non-United States
Holder and certain other conditions are met.
Refunds. Any amounts withheld under the backup withholding rules may be
refunded or credited against your federal income tax liability, provided that
you furnish the required information to the IRS.
New Withholding Regulations. New regulations relating to withholding tax on
income paid to foreign persons (the "New Withholding Regulations") will
generally be effective for payments made after December 31, 1999, subject to
certain transition rules. The New Withholding Regulations modify and, in
general, unify the way in which you establish your status as a non-United
States "beneficial owner" eligible for withholding exemptions, including the
portfolio interest exemption, a reduced treaty rate or an exemption from backup
withholding. For example, the New Withholding Regulations will require new
forms, which you
117
<PAGE>
generally will have to provide earlier than you would have had to provide
replacements for expiring existing forms.
The New Withholding Regulations clarify withholding agents' reliance
standards. They also require additional certifications for claiming treaty
benefits. For example, you may be required to provide a TIN, and you may have
to certify that you "derive" the income with respect to which the treaty
benefit is claimed within the meaning of applicable regulations. The New
Withholding Regulations also provide somewhat different procedures for foreign
intermediaries and flow-through entities (such as foreign partnerships) to
claim the benefit of applicable exemptions on behalf of non-United States
beneficial owners for which or for whom they receive payments. The New
Withholding Regulations also amend the foreign broker office definition as it
applies to partnerships.
The New Withholding Regulations are complex and this summary does not
completely describe them. Please consult your tax advisor to determine how the
New Withholding Regulations will affect your particular circumstances.
118
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer in exchange for Notes which such broker-dealer acquired
as a result of market-making or other trading activities must acknowledge that
it will deliver a prospectus in connection with any resale of such exchange
notes. Any such broker-dealer may use this prospectus, as we may amend or
supplement it from time to time, in connection with resales of exchange notes
received in exchange for notes. For a period of one year after we complete the
exchange offer, we 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. All resales must be made
in compliance with state securities or blue sky laws. We assume no
responsibility with regard to compliance with these requirements.
We will not receive any proceeds from any sales of the exchange notes by
broker-dealers. Broker-dealers may sell exchange notes received for their own
account pursuant to the exchange offer 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 exchange 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 the purchaser or to or through brokers-dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such exchange notes. Any broker-
dealer that resells the exchange notes that it received for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
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.
We have been advised by the Initial Purchasers that following completion of
this exchange offer they intend to make a market in the exchange notes. Such
entities, however, are under no obligation to do so and any market activities
with respect to the exchange notes may be discontinued at any time.
119
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the exchange notes will be passed
upon for Simmons by Jones, Day, Reavis & Pogue, Atlanta, Georgia and Ropes &
Gray, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets as of December 26, 1998 and December 27,
1997 and the consolidated statements of operations, common stockholders equity
(deficit), and cash flows for the years ended December 26, 1998, December 27,
1997, the period from March 22, 1996 to December 28, 1996 and from December 31,
1995 through March 21, 1996, included in this prospectus, have been included
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-4 under the Securities Act
with the Securities and Exchange Commission with respect to the exchange notes.
This prospectus, which forms a part of the registration statement, does not
contain all of the information included in the registration statement. We
omitted parts of this registration statement in accordance with the rules and
regulations of the Commission. For further information about us and the
exchange notes, we refer you to the registration statement. You should be aware
that none of the statements in this prospectus as to the contents of any
agreement or other document filed as an exhibit to the registration statement
are necessarily complete. We refer you to the copy of such documents filed as
exhibits to the registration statement.
We are not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934. We have
agreed that for so long as any of the exchange notes remain outstanding, we
will furnish to the holders of the exchange notes and, if permitted, will file
with the Commission, within the time periods specified in the rules and
regulations of the Commission:
(i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such forms, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the consolidated financial statements included in the
annual information only, a report thereon by our independent accountants;
and
(ii) all reports that would be required to be filed with the Commission
on Form 8-K if we were required to file such reports in each case.
Any reports or documents we file with the Commission, including the
registration statement, may be inspected and copied at the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 14th Floor,
500 West Madison Street, Chicago, Illinois 60661. Copies of such reports or
other documents may be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a web site that contains reports and other
information that is filed through the Commission's Electronic Data Gathering
Analysis and Retrieval System. The web site can be accessed at
http://www.sec.gov.
This prospectus incorporates important business and financial information
about us that is not included in or delivered with this prospectus. We will
provide without charge to each person to whom a copy of this prospectus is
delivered, upon written or oral request of any such person, a copy of any and
all of such information. Requests for such copies should be directed to the
Treasurer, Simmons Company, One Concourse Parkway, Atlanta, Georgia 30328
(Telephone Number (770) 512-7700). You should request any such information at
least five days in advance of the date on which you expect to make your
decision with respect to the exchange offer. In any event, you must request
such information prior to , 1999.
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SIMMONS COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements:
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 26, 1998 and December 27,
1997.................................................................... F-3
Consolidated Statements of Operations for the year ended December 26,
1998, the year ended December 27, 1997, the period from March 22, 1996
through December 28, 1996 (Successor Periods) and the period from
December 31, 1995 through March 21, 1996 (Predecessor Period)........... F-4
Consolidated Statements of Common Stockholders' Equity for the year ended
December 26, 1998, the year ended December 27, 1997, the period from
March 22, 1996 through December 28, 1996 (Successor Periods) and the
period from December 31, 1995 through March 21, 1996
(Predecessor Period).................................................... F-5
Consolidated Statements of Cash Flows for the year ended December 26,
1998, the year ended December 27, 1997, the period from March 22, 1996
through December 28, 1996 (Successor Periods) and the period from
December 31, 1995 through March 21, 1996 (Predecessor Period) .......... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Simmons Company
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, common stockholders' equity
(deficit) and cash flows present fairly, in all material respects, the
financial position of Simmons Company (the "Company") at December 26, 1998 and
December 27, 1997, and the results of its operations and its cash flows for
the years ended December 28, 1998 and December 27, 1997, the period from March
22, 1996 through December 28, 1996 and the period from December 31, 1995
through March 21, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
As discussed in Note 1, the parent of Simmons Company entered into a
recapitalization on October 29, 1998.
PricewaterhouseCoopers LLP
February 24, 1999
F-2
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 6,004 $ 9,108
Accounts receivable, less allowance for doubtful
accounts of $4,177 and $3,938.................. 71,354 65,488
Inventories..................................... 20,462 19,970
Deferred income taxes........................... 7,440 3,229
Other current assets............................ 14,792 13,808
-------- --------
Total current assets.......................... 120,052 111,603
Property, plant and equipment, net................ 54,153 47,564
Patents, net of accumulated amortization of $7,666
and $4,870....................................... 9,366 12,162
Goodwill, net of accumulated amortization of
$13,290 and $8,457............................... 180,017 184,850
Deferred income taxes............................. 17,704 8,453
Other assets...................................... 18,769 10,493
-------- --------
$400,061 $375,125
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................ $ 29,950 $ 27,847
Accrued wages and benefits...................... 5,323 8,830
Accrued advertising and incentives.............. 15,321 15,457
Accrued interest................................ 3,260 3,793
Other accrued expenses.......................... 13,627 9,435
Current maturities of long-term obligations..... 1,832 10,873
-------- --------
Total current liabilities..................... 69,313 76,235
Noncurrent liabilities:
Long-term obligations........................... 311,637 173,570
Postretirement benefit obligations other than
pensions....................................... 7,702 7,612
Other........................................... 11,626 13,864
-------- --------
Total liabilities............................. 400,278 271,281
-------- --------
Commitments and contingencies
Redeemable Series A Preferred Stock under ESOP,
net of related unearned compensation of $17,122.. -- 11,230
Redemption Obligation--ESOP, net of related
unearned compensation of $11,400................. 12,084 --
Common stockholders' equity (deficit):
Common stock, $.01 par value; 50,000,000 shares
authorized, 31,964,452 shares issued and
outstanding.................................... 320 320
Additional paid-in capital...................... -- 84,680
Retained earnings (accumulated deficit)......... (12,535) 7,674
Accumulated other comprehensive income (loss)... (86) (55)
Treasury stock, 974 shares in 1997 at cost...... -- (5)
-------- --------
Total common stockholders' equity (deficit)... (12,301) 92,614
-------- --------
$400,061 $375,125
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
--------------------------------------- ------------
Period from Period from
March 22, December 31,
Year ended Year ended 1996 through 1995 through
December 26, December 27, December 28, March 21,
1998 1997 1996 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales................ $ 600,773 $550,085 $423,870 $106,431
Costs and expenses:
Cost of products sold.. 348,842 319,074 254,127 66,630
Selling, general and
administrative........ 202,213 183,556 135,762 35,846
ESOP expense........... 6,453 6,230 3,797 1,203
Amortization of
intangibles........... 7,629 7,679 5,650 1,324
--------- -------- -------- --------
565,137 516,539 399,336 105,003
--------- -------- -------- --------
Income from
operations.......... 35,636 33,546 24,534 1,428
Interest expense, net.... 22,454 19,088 15,277 1,489
Other expense, net....... 17,544 1,571 1,557 96
--------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary item...... (4,362) 12,887 7,700 (157)
Provision (benefit) for
income taxes............ (345) 6,525 4,682 282
--------- -------- -------- --------
Income (loss) before
extraordinary item.. (4,017) 6,362 3,018 (439)
Extraordinary loss from
early extinguishment of
debt, net of income tax
benefit of $7,079 and
$1,137.................. 15,002 -- 1,706 --
--------- -------- -------- --------
Net income (loss)........ $ (19,019) $ 6,362 $ 1,312 $ (439)
========= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Retained Accumulated Total Common
Additional Unearned Earnings Other Stockholders'
Common Common Paid-In Compensation (Accumulated Comprehensive Treasury Equity
Shares Stock Capital Under ESOP Deficit) Income Stock (Deficit)
---------- ------ ---------- ------------ ------------ ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Predecessor
December 30, 1995....... 36,311,967 $363 $176,501 $(47,531) $(78,894) $(288) $(5,779) $ 44,372
ESOP share
allocations........... -- -- (2,298) 3,501 -- -- -- 1,203
Income tax benefit on
ESOP.................. -- -- 896 -- -- -- -- 896
Net loss............... -- -- -- -- (439) -- -- (439)
Other comprehensive
income:
Change in foreign
currency translation.. -- -- -- -- -- 9 -- 9
Purchase of treasury
stock................. -- -- -- -- -- -- (660) (660)
---------- ---- -------- -------- -------- ----- ------- --------
March 21, 1996.......... 36,311,967 $363 $175,099 $(44,030) $(79,333) $(279) $(6,439) $ 45,381
========== ==== ======== ======== ======== ===== ======= ========
Successor
March 22, 1996 (reflects
the new basis of
31,964,452 common
shares in connection
with the Investcorp
Acquisition)........... 31,964,452 $320 $ 84,680 $ -- $ -- $ (2) $ -- $ 84,998
Net income............. -- -- -- -- 1,312 -- -- 1,312
Other comprehensive
income (loss):
Change in foreign
currency translation.. -- -- -- -- -- (19) -- (19)
---------- ---- -------- -------- -------- ----- ------- --------
December 28, 1996....... 31,964,452 320 84,680 -- 1,312 (21) -- 86,291
Net income............. -- -- -- -- 6,362 -- -- 6,362
Other comprehensive
income (loss):
Change in foreign
currency translation.. -- -- -- -- -- (34) -- (34)
Purchase of treasury
stock................. -- -- -- -- -- -- (5) (5)
---------- ---- -------- -------- -------- ----- ------- --------
December 27, 1997....... 31,964,452 320 84,680 -- 7,674 (55) (5) 92,614
Net loss............... -- -- -- -- (19,019) -- -- (19,019)
Other comprehensive
income (loss):
Change in foreign
currency translation.. -- -- -- -- -- (31) -- (31)
Purchase of treasury
stock................. -- -- -- -- -- -- (55) (55)
Excess of ESOP expense
at fair market value
over cost............. -- -- 731 -- -- -- -- 731
Increase in ESOP
Redemption Obligation
based on fair market
value................. -- -- (10,582) -- -- -- -- (10,582)
Distribution to
Holdings.............. -- -- (74,829) -- (1,190) -- 60 (75,959)
---------- ---- -------- -------- -------- ----- ------- --------
December 26, 1998....... 31,964,452 $320 $ -- $ -- $(12,535) $ (86) $ -- $(12,301)
========== ==== ======== ======== ======== ===== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Successor Predecessor
---------------------------------------- ------------
Period from Period from
March 22, December 31,
Year ended Year ended 1996 through 1995 through
December 26, December 27, December 28, March 21,
1998 1997 1996 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss)....... $ (19,019) $ 6,362 $ 1,312 $ (439)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and
amortization.......... 16,593 13,549 9,118 2,198
ESOP expense........... 6,453 6,230 3,797 1,203
Non-cash portion of
extraordinary loss.... (921) -- 1,706 --
Gain from sale of
investment............ -- -- (4,011) --
Provision for bad
debts................. 75 2,750 1,273 566
Provision for deferred
income taxes.......... (1,902) 6,226 4,420 282
Other, net............. 1,072 613 46 472
Net changes in operating
assets and liabilities:
Accounts receivable.... (10,335) (1,604) (17,288) (1,732)
Inventories............ (492) (1,137) (769) 1,229
Other assets........... (5,208) (5,235) (3,724) (531)
Accounts payable....... 2,103 3,047 9,117 (7,250)
Accrued liabilities.... (2,427) 1,500 (11,443) 6,341
--------- -------- --------- ------
Cash provided by (used
in) operating
activities............. (14,008) 32,301 (6,446) 2,339
--------- -------- --------- ------
Cash flows from
investing activities:
Purchases of property,
plant and equipment,
net................... (15,553) (15,355) (13,546) (1,567)
Proceeds from sale of
investment............ -- -- 4,700 --
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... (15,553) (15,355) (183,461) (1,567)
--------- -------- --------- ------
Cash flows from
financing activities:
Distribution to
Holdings.............. (75,959) -- -- --
Distribution to
Holdings for purchase
of ESOP shares........ (15,450) -- -- --
Proceeds of New Credit
Facility.............. 200,000 -- -- --
Payments on New Credit
Facility.............. (10,000) -- -- --
Proceeds of Senior
Bridge Loans.......... 75,000 -- -- --
Proceeds of Junior
Simmons Notes......... 30,000 -- -- --
Payment of 10.75%
Senior Sub Notes...... (100,000) -- -- --
Proceeds of other
Successor long-term
borrowings............ 33,871 34,329 317,700 --
Payments on other
Successor long-term
borrowings............ (99,845) (46,701) (131,473) --
Proceeds from
Predecessor revolving
line of credit and
long-term borrowings.. -- -- -- 3,334
Payments on Predecessor
debt.................. -- -- (76,134) (3,490)
Payments of financing
costs................. (11,074) -- (9,744) --
Proceeds from issuance
of Successor common
stock................. -- -- 85,000 --
Treasury stock
purchases............. (55) (5) -- (660)
--------- -------- --------- ------
Net cash provided by
(used in) financing
activities............. 26,488 (12,377) 185,349 (816)
--------- -------- --------- ------
Net effect of exchange
rate changes on cash... (31) (34) (19) 9
--------- -------- --------- ------
Increase (decrease) in
cash and cash
equivalents............ (3,104) 4,535 (4,577) (35)
Cash and cash
equivalents, beginning
of period.............. 9,108 4,573 9,150 9,185
--------- -------- --------- ------
Cash and cash
equivalents, end of
period................. $ 6,004 $ 9,108 $ 4,573 $9,150
========= ======== ========= ======
Supplemental cash flow
information:
Cash paid for
interest.............. $ 19,517 $ 17,526 $ 11,798 $ 803
========= ======== ========= ======
Cash paid for income
taxes................. $ 322 $ 60 $ 93 $2,315
========= ======== ========= ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share amounts)
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 sells
bedding products to certain institutional customers, such as schools and
government entities, and to the lodging industry and licenses its patents and
trademarks to various domestic and foreign manufacturers.
The Transactions
On July 16, 1998, the Company's parent, Simmons Holdings, Inc. ("Holdings")
entered into a recapitalization agreement with the Company and REM Acquisition,
Inc., a transitory Delaware merger corporation ("REM"), sponsored by Fenway
Partners, Inc., ("Fenway"). Pursuant to the agreement on October 29, 1998 REM
merged with and into Holdings (the "Recapitalization"), with Holdings being the
surviving corporation. The Recapitalization resulted in certain stockholders of
Holdings who are affiliates of or investors arranged by INVESTCORP S.A.
("Investcorp") receiving an aggregate amount of cash equal to approximately
$193.4 million, and certain stockholders of Holdings who are members of
management of the Company receiving an aggregate amount of cash equal to
approximately $14.0 million. Investcorp retained shares of common stock of
Holdings with an estimated fair value of $9.0 million and management retained
shares of stock and options to purchase stock of Holdings with an estimated
fair value of $16.5 million. As part of the Recapitalization, REM purchased the
outstanding shares of Series A Preferred Stock of the Company (the "Series A
Preferred Stock") owned by the Simmons Employee Stock Ownership Plan (the
"ESOP") that had been allocated to its participants for an aggregate purchase
price of $15.4 million, and the ESOP exchanged its remaining outstanding shares
of Series A Preferred Stock for shares of common stock of Holdings. The ESOP
retained shares of stock of Holdings with an estimated fair value of $23.4
million.
Financing for the Recapitalization, the related transactions, and the fees
and expenses incurred therewith, was provided by (i) the Company's borrowings
under a new $270.0 million senior credit facility (the "New Senior Credit
Facility") which refinanced the majority of the Company's existing senior and
subordinated obligations, (ii) the Company's borrowings of $75.0 million Senior
Subordinated Bridge Loans (the "Senior Bridge Loans"), (iii) the Company's
borrowings of $30.0 million under the Junior Subordinated Notes (the "Junior
Simmons Notes") issued to an affiliate of Fenway, (iv) Holdings' borrowings of
$10.0 million under the Junior PIK Notes issued to an affiliate of Fenway, and
(v) $177.0 million of capital provided by Fenway, affiliates of Investcorp,
management and certain other investors of Holdings.
The Recapitalization, the refinancing under the New Senior Credit Facility,
the Senior Bridge Loans financing and the Junior Simmons Notes financing are
collectively referred to herein as the "Transactions". As a result of the
Recapitalization and related transactions, Fenway Investment LLC, an entity
controlled by funds managed by Fenway, acquired 75.1% of the outstanding voting
shares of Holdings, and management, the ESOP and Investcorp retained
approximately 5.9%, 13.7% and 5.3%, respectively, of the outstanding shares of
Holdings. The Company has accounted for the Transactions as a leveraged
recapitalization, whereby the historical bases of the assets and liabilities of
the Company have been maintained.
F-7
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
The Investcorp Acquisition
On March 22, 1996, Holdings acquired 100% of the outstanding common stock of
the Company (the "Investcorp Acquisition"). Holdings was formed to consummate
the Investcorp Acquisition on behalf of affiliates of Investcorp, management
and certain other investors. For purposes of identification and description,
Simmons Company is referred to as the "Predecessor" for the period prior to the
Investcorp Acquisition, the "Successor" for the period subsequent to the
Investcorp Acquisition, and the "Company" for both periods. For purposes of
financial reporting, the period from December 31, 1995 through March 21, 1996
is referred to as "Predecessor '96" and the period from March 22, 1996 through
December 28, 1996 is referred to as "Successor '96".
The purchase price for the Investcorp 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 was allocated to the assets and liabilities of the
Company based upon their estimated fair market value at the date of the
Investcorp Acquisition, under the purchase method of accounting. The financing
for the Investcorp Acquisition (including the refinancing of outstanding debt)
was provided 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.
As part of the Investcorp Acquisition, the ESOP sold 6,001,257 shares of the
Company's common stock (representing all of the allocated shares) to Holdings.
The remaining 5,670,406 shares of common stock of the Company (unallocated
shares) were converted into 5,670,406 shares of Series A Preferred Stock.
On April 18, 1996, the Company issued $100.0 million in 10.75% Senior
Subordinated Notes, pursuant to an offering (the "Offering") (See Note 8). The
proceeds of the offering were used to retire loans under the Subordinated Loan
Facility mentioned above.
The following condensed pro forma disclosures for net sales and net income
are adjusted to give effect to (i) the Investcorp Acquisition and (ii) the
Offering of the Notes and the application of the net proceeds therefrom to
repay the Subordinated Loan Facility (collectively, the "Investcorp
Transactions"). This pro forma disclosure assumes that the Investcorp
Transactions were consummated as of December 31, 1995 and does not purport to
be indicative of the results that would actually have been obtained if the
Investcorp Transactions had occurred on the date indicated or of the results
that may be obtained in the future.
<TABLE>
<CAPTION>
Unaudited
Combined
1996
---------
<S> <C> <C>
Pro Forma (in thousands):
Net sales................................................ $530,301
========
Net income............................................... $4,657
========
</TABLE>
F-8
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
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.
Use of Estimates and Reclassifications
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. Certain amounts in the 1997 and 1996 financial statements have been
reclassified to conform with the current presentation.
Fiscal Year
The Company operates on a 52/53 week fiscal year ending on the last Saturday
in December. Fiscal years 1998, 1997 and 1996 (Successor '96 and Predecessor
'96, combined) comprised 52 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
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
Computers and software........................................ 3- 7 years
</TABLE>
Whenever events or changes in circumstances indicate that the carrying value
may not be recoverable, management assesses whether there has been a permanent
impairment in the value of long-lived assets by comparing anticipated
undiscounted future cash flows from operating activities with the carrying
value of the long-lived asset. 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.
F-9
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
Patents and Goodwill
For all periods, the cost of patents acquired are being amortized using the
straight-line method over the estimated remaining economic lives of the
respective patents, principally over seven years. Amortization expense was
approximately $2,796, $2,799, $2,072 and $438 for 1998, 1997, Successor '96 and
Predecessor '96, respectively.
Goodwill is being amortized on a straight-line basis, over the estimated
periods benefited (principally 40 years). Amortization expense was $4,833,
$4,880, $3,578 and $886 for 1998, 1997, Successor '96 and Predecessor '96,
respectively.
Whenever events or changes in circumstances indicate that the carrying value
may not be recoverable, management assesses whether there has been a permanent
impairment in the value of intangible assets by comparing anticipated
undiscounted future cash flows from operating activities with the carrying
value of the intangible asset. 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
The Company follows the provisions of Statement of Position No. 93-6 of the
American Institute of Certified Public Accountants, "Employers' Accounting for
Employee Stock Ownership Plans", whereby ESOP expense is recognized as an
amount equal to the fair market value of the shares allocated to participants'
accounts. The unearned compensation balance continues to be amortized using the
shares allocated method (i.e., at cost). The difference in these two amounts,
if any, is recorded as an adjustment to additional paid-in capital.
Other Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards
for the reporting and display of comprehensive income and its components in the
financial statements. Prior periods have been reclassified to reflect the
adoption of this standard. The adoption of SFAS No. 130 has no material impact
on the Company's results of operations, financial position or cash flows.
Comprehensive income equals net income plus other comprehensive income. Other
comprehensive income refers to revenue, expenses, gains and losses which are
reflected in stockholders' equity but excluded from net income. The component
comprising other comprehensive income is foreign currency translation
adjustment.
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 $1,112, $1,185, $862 and $270 for 1998, 1997, Successor '96 and
Predecessor '96, respectively, and are included in cost of products sold in the
accompanying consolidated statements of operations.
F-10
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
Advertising Costs
The Company records the cost of advertising as an expense when incurred.
Advertising expense was $61,869, $54,802, $43,652 and $9,861 for 1998, 1997,
Successor '96 and Predecessor '96, respectively, and is included as a component
of selling, general and administrative expenses in the accompanying
consolidated statements of operations.
Significant Concentrations of Risk
The Company manufactures and markets sleep products, including mattresses
and box springs 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 21% of total sales for each
of 1998, 1997 and Successor '96 and Predecessor '96, combined. Accounts
receivable from one customer was approximately 7% and 9% of total accounts
receivable at December 26, 1998 and December 27, 1997, respectively. Sales to
Heilig Meyers entities represented approximately 11.8% and 10.7% of net sales
for 1998 and 1997, respectively. Sales to no one customer represented more than
10% of net sales for Successor '96 and Predecessor '96, combined.
Purchases of raw materials from one vendor represented approximately 23%,
24% and 23% of cost of products sold for 1998, 1997 and Successor '96 and
Predecessor '96, combined, 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 June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the accounting
for derivative instruments embedded in other contracts, by requiring that an
entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. This statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
Financial statements for prior periods need not be restated. The Company is
currently reviewing the provisions of SFAS No. 133 and does not believe that
the financial statements will be materially impacted by the adoption of this
pronouncement.
3. Employee Stock Ownership Plan
The Company is structured so that the employees of the Company have a
beneficial ownership of the stock of Holdings or, prior to the Transactions, of
the Company through their participation in the ESOP.
On October 29, 1998, REM purchased 2,295,110 shares of the Company's Series
A Preferred Stock from the ESOP, representing all the shares held by the ESOP
that had been allocated to plan participants as of such date for an aggregate
purchase price of approximately $15.4 million, which amount was reinvested, at
the direction of the participants, into diversified investments in the
respective accounts of such participants in the ESOP. Immediately prior to the
Recapitalization, the ESOP exchanged its remaining outstanding shares of Series
A Preferred Stock for 3,482,036 shares of common stock of Holdings.
F-11
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
In connection with the Investcorp Acquisition, the ESOP sold 6,001,257
shares of common stock of the Company to Holdings (representing all the shares
held by the ESOP that had been allocated to plan participants as of such date)
for $31.2 million in the aggregate, which amount was reinvested, at the
direction of the participants, into diversified investments in the respective
accounts of such participants in the ESOP. Each of the remaining 5,670,406
shares of common stock of the Company was converted into one share of Series A
Preferred Stock. As stated above, all outstanding shares of the Series A
Preferred Stock were exchanged for shares of common stock of Holdings in
connection with the Transactions.
The ESOP pledged all of its shares of Holdings common stock or, prior to the
Transactions, the Company's common stock as collateral for the ESOP loans.
These shares are held by State Street Bank and Trust Company, the ESOP trustee,
in a suspense account and are released to the ESOP participants' accounts based
on debt service. In 1997, 1,096,000 shares were released to participant's
accounts for the 1996 ESOP allocation. In 1998, 1,160,734 shares were released
to participant's accounts for the 1997 ESOP allocation. As of December 26,
1998, 1,140,000 shares of Holdings common stock have been committed to be
released. The remaining unallocated shares of Holdings common stock held in the
ESOP had an estimated fair value of approximately $15,765 ($6.7315 per share)
at December 26, 1998.
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 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 60% 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 or Holdings is obligated to
repurchase participant shares which have been distributed under the terms of
the ESOP, as long as the shares are not publicly traded or if the shares are
subject to trading limitations. The Company repurchased approximately 18,452
shares from ESOP participants in 1996 (prior to the Investcorp Acquisition) at
a price of $4.50 per share, 974 shares from ESOP participants in 1997 at a
price of $5.00 per share and 5,711 shares from ESOP participants in 1998 (prior
to the Transactions) at a price of $5.00 per share. These shares are reflected
as treasury stock in the common stockholders' equity section of the balance
sheet for periods prior to the Transactions.
Because of the Company's or Holdings' 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 consolidated balance sheets as Redeemable Series A Preferred Stock
under ESOP as of December 27, 1997 and as Redemption Obligation under ESOP as
of December 26, 1998. Additionally, pursuant to generally accepted accounting
principles, the Company has classified a proportional amount of unearned
compensation under ESOP in the same manner.
F-12
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
4. Accounts Receivable
Accounts receivable consisted of the following at December 26, 1998 and
December 27, 1997:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Accounts receivable........................... $79,628 $73,239
Allowance for doubtful accounts............... (4,177) (3,938)
Allowance for cash discounts and other........ (4,097) (3,813)
------- -------
$71,354 $65,488
======= =======
</TABLE>
5. Inventories
Inventories consisted of the following at December 26, 1998 and December
27, 1997:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Raw materials................................... $12,823 $12,209
Work-in-progress................................ 1,376 1,531
Finished goods.................................. 6,263 6,230
------- -------
$20,462 $19,970
======= =======
</TABLE>
6. Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 26,
1998 and December 27, 1997:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Land, buildings and improvements.............. $16,343 $11,945
Machinery and equipment....................... 46,050 39,309
Construction in progress...................... 7,336 3,713
------- -------
69,729 54,967
Less accumulated depreciation................. (15,576) (7,403)
------- -------
$54,153 $47,564
======= =======
</TABLE>
Depreciation expense for 1998, 1997, Successor '96 and Predecessor '96 was
$8,964, $5,870, $3,468 and $874, respectively.
7. Other Assets
Other assets consisted of the following at December 26, 1998 and December
27, 1997:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Long-term notes receivable.................... $ 6,594 $ 2,200
Debt issuance costs, net of accumulated
amortization of $177 and $1,165,
respectively................................. 11,405 7,259
Other......................................... 770 1,034
------- -------
$18,769 $10,493
======= =======
</TABLE>
F-13
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
Debt issuance costs are amortized using the effective interest method.
Amortization of $777, $613, $521 and $84 for 1998, 1997, Successor '96 and
Predecessor '96, respectively, is included as a component of interest expense
in the accompanying consolidated statements of operations.
8. Long-Term Obligations
Long-term obligations consisted of the following at December 26, 1998 and
December 27, 1997:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Senior loans:
Tranche A Term Loan....................... $ 70,000 $ --
Tranche B Term Loan....................... 70,000 --
Tranche C Term Loan....................... 50,000 --
Previous Credit Agreement................. -- 67,700
Industrial Revenue Bonds, 7.00%, due 2017... 9,700 9,700
Industrial Revenue Bonds, 3.90%, due 2016... 5,000 5,000
Banco Santander loan........................ 3,164 1,329
Senior Bridge Loans......................... 75,000 --
Junior Simmons Notes........................ 30,000 --
10.75% Series A Senior Subordinated Notes
due 2006................................... -- 100,000
Other, including capital lease obligations.. 605 714
-------- --------
313,469 184,443
Less current portion........................ (1,832) (10,873)
-------- --------
$311,637 $173,570
======== ========
</TABLE>
In connection with the Transactions, the Company entered into the New Senior
Credit Facility. The New Senior Credit Facility is collateralized by
substantially all of the Company's assets and provides for loans of up to
$270.0 million, consisting of (i) the Tranche A Term Loan of up to $70.0
million in term loans, (ii) the Tranche B Term Loan of up to $70.0 million in
term loans, (iii) the Tranche C Term Loan of up to $50.0 million in term loans,
and (iv) the Revolving Loan of up to $80.0 million in revolving credit loans,
letters of credit and swing line loans. The Company distributed a portion of
the proceeds of the Term Loan Facility and the Company's initial borrowings
under the Revolving Credit Facility to Holdings to provide a portion of the
funds necessary to consummate the Transactions.
The Tranche A Term Loan matures in quarterly installments from December 1999
until final payment in October 2004. The Tranche B Term Loan matures in
quarterly installments from December 1998 until final payment in October 2005.
The Tranche C Term Loan matures in quarterly installments from December 1998
until final payment in October 2006. The Revolving Loan matures on October
2004.
The interest rates applicable to the loans under the New Senior Credit
Facility are based upon a Base Rate or Eurodollar Rate (as defined), plus their
respective margin. The Applicable Margin for Base Rate Loans for the Tranche B
and Tranche C Loans is 2.25% and 2.50%, respectively. The Applicable Margin for
Eurodollar Loans for the Tranche B and Tranche C Loans is 3.25% and 3.50%,
respectively. For the Tranche A Loans and
F-14
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
loans under the Revolving Credit Facility, the Applicable Margin for Base Rate
Loans and Eurodollar Loans is initially 1.75% and 2.75%, respectively, subject
to reduction according to a pricing grid based upon the Leverage Ratio (as
defined).
The interest rates per annum in effect at December 26, 1998 for the Tranche
A Term Loan, Tranche B Term Loan and Tranche C Term Loan were 7.75%, 8.25% and
8.50%, respectively.
At December 26, 1998, the amount under the Revolving Credit Facility that
was available to be drawn was approximately $76.5 million, after giving effect
to $3.5 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 New Senior Credit Facility requires the Company to maintain certain
financial ratios including fixed-charge, cash interest coverage and leverage
ratios. The New Senior Credit Facility also contains covenants which, among
other things, limit capital expenditures, the incurrence of additional
indebtedness, investments, dividends, transactions with affiliates, asset
sales, mergers and consolidations, prepayments of other indebtedness, liens and
encumbrances and other matters customarily restricted in such agreements. As of
December 26, 1998, the Company was in compliance with respect to all covenants
under the New Senior Credit Facility.
In connection with the Transactions, the Company entered into a bridge loan
agreement (the "Senior Bridge Loan Agreement"). The Senior Bridge Loan
Agreement provided for $75.0 million in aggregate principal amount of the
Senior Bridge Loans. If the Senior Bridge Loans are not repaid in full by
October 29, 1999, the outstanding principal balance of the Senior Bridge Loans
may be converted into term loans due October 29, 2008. Once converted, the
lenders may elect to exchange all or any portion of the term loans for exchange
notes which are required to be registered under the Securities Act. The Senior
Bridge Loans bear interest at 9.6%, which rate increases by 1.0% on January 27,
1999 and increases by 0.5% for every three-month period thereafter up to a
maximum rate of 15.0%.
In connection with the Transactions, the Company issued the Junior Simmons
Notes to Fenway in the aggregate principal amount of $30.0 million. The
maturity date of the Simmons Junior Notes is October 29, 2010. The Junior
Simmons Notes bear interest at 13.0% through December 30, 1998, which rate
increases by 0.5% for every three-month period thereafter up to a maximum rate
of 16.0%. Such interest is to be paid upon maturity. If certain financial
conditions are met, up to 7.0% of the interest of the Junior Simmons Notes may
be payable in cash while the Senior Bridge Loans are outstanding, which cash
interest may increase to 12.0% once the Senior Bridge Loans have been repaid.
No such conditions have been met as of December 26, 1998.
Concurrently with the consummation of the Transactions, the Company called
the Previously Existing Notes for redemption and paid $115.9 million of the
proceeds ($100.0 million of principal and a $15.9 million redemption premium
(See Note 10)) to satisfy and discharge the Company's obligations thereunder.
In November 1998, Simmons Caribbean Bedding, Inc., a wholly owned subsidiary
of the Company, entered into a permanent loan facility with Banco Santander in
the amount of $3.2 million accruing interest at a fluctuating rate based on the
London Interbank Offered Rate (or LIBOR), which was 7.1% as of December 26,
1998.
F-15
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
Future maturities of long-term obligations as of December 26, 1998 are as
follows:
<TABLE>
<S> <C>
1999................................ $ 1,832
2000................................ 11,842
2001................................ 11,853
2002................................ 16,865
2003................................ 16,779
Thereafter.......................... 254,298
--------
$313,469
========
</TABLE>
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.
The fair value of long-term debt approximates the carrying value at December
26, 1998.
9. Other Expense, Net
Other expense, net is comprised of the following:
<TABLE>
<CAPTION>
Successor Predecessor
------------------------------------- -----------
Period from Period from
March 22, December
1996 31, 1995
Year ended Year ended through through
December 26, December 27, December March 21,
1998 1997 28, 1996 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Recapitalization/Acquisition
related:
Management compensation...... $14,223 -- $3,735 --
Other
recapitalization/acquisition
related expenses............ 1,012 -- 648 --
Management advisory fee........ 1,074 $1,000 833 --
Gain on sale of investment..... -- -- (4,011) --
Other non-operating expenses... 1,235 571 352 $96
------- ------ ------ ---
$17,544 $1,571 $1,557 $96
======= ====== ====== ===
</TABLE>
The gain on sale of investment was related to the Company's minority
interests in Simmons Asia, Ltd. (10.0%), Simmons Bedding & Furniture (HK) Ltd.
(8.1%) and Simmons Company, Ltd. (6.8%).
10. Extraordinary Items
In October 1998, the Company recorded a $15,002 charge, net of income tax
benefit of $7,079 representing the remaining unamortized debt issuance costs
related to long-term obligations repaid as a result of the refinancing of
certain debt in connection with the recapitalization of $4,184 (net of income
tax benefit
of $1,974) and the redemption premium obligation of $10,818 (net of income tax
benefit of $5,105) related to the early redemption of the Company's then
outstanding 10.75% Senior Subordinated Notes due 2006.
In April 1996, the Company recorded a $1,706 charge, net of income tax
benefit of $1,137 representing the remaining unamortized debt issuance costs
related to long-term obligations repaid as a result of the refinancing of
certain Investcorp Acquisition debt.
F-16
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
11. Leases
The Company leases certain facilities and equipment under operating leases.
Rent expense was $12,705, $11,258, $9,709 and $2,388 for 1998, 1997, Successor
'96 and Predecessor '96, 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 26, 1998:
<TABLE>
<S> <C>
1999................................. $11,061
2000................................. 9,775
2001................................. 9,370
2002................................. 9,119
2003................................. 6,520
Thereafter........................... 15,158
-------
$61,003
=======
</TABLE>
12. Stock Option Plan
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock incentive plans. Under APB
25, because the exercise price of employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recorded. The Company has adopted the disclosure-only provisions of Financial
Accounting Standards Board Statement No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123").
At the time of the Investcorp Acquisition, the board of directors
established a Management Stock Incentive Plan (the "1996 Plan"), which provided
for the granting of nonqualified options for Class C common stock of Holdings
to members of management and certain key employees. The options outstanding
under the 1996 Plan were granted at prices which equate to or were above the
market value of the Class C stock on the date of grant.
In connection with the Investcorp Acquisition, the Company entered into an
agreement with Holdings whereby 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. All references to stock options under the 1996 Plan
pertain to the Holdings options which have been attributed to the Company for
disclosure purposes. Information relating to stock options during 1998, 1997
and 1996 is as follows:
F-17
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
---------- --------
<S> <C> <C>
Shares under option at December 28, 1996................ 3,158,330 $2.73
Granted................................................. 50,000 $2.95
Forfeited............................................... (39,728) $2.66
---------- -----
Shares under option at December 27, 1997................ 3,168,602 $2.73
Granted................................................. 59,000 $5.15
Forfeited............................................... (17,062) $2.66
Canceled................................................ (1,571,463) $2.72
---------- -----
Shares under option at December 26, 1998................ 1,639,077 $2.83
========== =====
Shares exercisable at December 26, 1998................. 1,639,077 $2.83
========== =====
Shares exercisable at December 27, 1997................. 574,369 $2.66
========== =====
Shares exercisable at December 28, 1996................. 0 $2.66
========== =====
</TABLE>
All outstanding options were nonqualified options. No compensation expense
related to stock option grants was recorded in 1998, 1997 or 1996 as the option
exercise prices were equal to fair market value on the date of grant.
Pro forma information regarding net income is required by SFAS 123, and has
been determined as if the Company had accounted for the employee stock options
under the fair value method under that Statement. The fair value for these
options was estimated at the date of grant using the minimum present value
method with the following weighted average assumptions for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate........................... 5.47% 6.08% 6.32%
Expected life..................................... 7 years 7 years 7 years
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' expected life. The Company's
pro forma net earnings were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------ ------
<S> <C> <C> <C>
Net earnings (loss)--as reported................ $(19,019) $6,362 $1,312
Net earnings (loss)--proforma................... (20,309) 6,133 1,155
Weighted average fair value of options granted
during the year................................ 1.60 1.00 0.93
</TABLE>
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts.
As a result of the Transactions, the vesting of the issued and outstanding
stock options under the 1996 plan was accelerated. At the time of the
Transaction option holders under the 1996 plan elected to cancel a portion of
their options. For option shares canceled, each holder received reasonable
compensation for the
F-18
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
options, which was equal to the spread between the Recapitalization price of
$6.7315 and the respective per share exercise price for the canceled options.
The remaining option shares are fully vested and are exercisable at their
respective issuance price (ranging from $2.66 to $5.15). No additional option
shares have been granted post-Transactions.
13. Income Taxes
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Successor Predecessor
----------------------------------- -----------
Period from Period from
March 22, December
Year 1996 31, 1995
Year ended ended through through
December 26, December December 28, March 21,
1998 27, 1997 1996 1996
------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
Current tax provision:
Federal....................... $ 657 -- -- --
State......................... 600 -- -- --
Foreign....................... 300 $ 299 $ 262 --
------- ------ ------ -----
1,557 299 262 --
------- ------ ------ -----
Deferred tax provision:
Federal....................... (1,530) 5,230 3,627 $ 231
State......................... (372) 996 793 51
------- ------ ------ -----
(1,902) 6,226 4,420 282
------- ------ ------ -----
$ (345) $6,525 $4,682 $ 282
======= ====== ====== =====
</TABLE>
The reconciliation of the statutory federal income tax rate to the effective
income tax rate for 1998, 1997, Successor '96 and Predecessor '96 provision for
income taxes is as follows:
<TABLE>
<CAPTION>
Successor Predecessor
--------------------------------------- -----------
Period from Period from
March 22, December
1996 31, 1995
Year ended Year ended through through
December 26, December 27, December 28, March 21,
1998 1997 1996 1996
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Income taxes at federal
statutory rate.......... $(1,483) $4,382 $2,618 $(53)
State income taxes, net
of federal benefit...... (218) 657 556 (18)
Goodwill amortization.... 1,643 1,393 1,216 301
Other, net............... (287) 93 292 52
------- ------ ------ ----
$ (345) $6,525 $4,682 $282
======= ====== ====== ====
</TABLE>
In addition, the Company recorded a deferred tax benefit of $7,079 and
$1,137 for 1998 and Successor '96, respectively, associated with the
extraordinary item.
F-19
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
Components of the net deferred income tax asset (liability) at December 26,
1998 and December 27, 1997 are as follows:
<TABLE>
<CAPTION>
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Current deferred income taxes:
Accounts receivable and inventory reserves....... $ 3,757 $ 3,646
Accrued liabilities not currently deductible..... 8,253 9,002
Net operating loss carryforwards................. -- 82
Prepaids and other assets, not currently
taxable......................................... (4,570) (9,501)
------- -------
7,440 3,229
Noncurrent deferred income taxes:
Property basis differences....................... (7,382) (2,896)
Patents basis differences........................ (3,222) (4,214)
ESOP liability basis differences................. 6,247 8,710
Net operating loss carryforwards................. 19,610 2,638
Valuation allowance.............................. (3,999) (2,638)
Other noncurrent accrued liabilities, not
currently deductible............................ 6,450 6,853
------- -------
17,704 8,453
------- -------
Net deferred tax asset........................... $25,144 $11,682
======= =======
</TABLE>
At December 26, 1998, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $50,281, all of which are limited
to 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 full
benefit of the loss carryforwards and has provided a valuation allowance of
approximately $3,999 to reserve such amounts as of December 26, 1998. These
carryforwards expire through 2018. Undistributed earnings to be permanently
reinvested by the international subsidiaries totaled approximately $2,360 at
December 26, 1998. Because these earnings are to be permanently reinvested, no
U.S. deferred income tax has been recorded for them.
14. Retirement Plans
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 multi-employer pension plans
sponsored by their respective unions. Amounts charged to pension cost,
representing the Company's required contributions to these plans for 1998, 1997
and Successor '96 and Predecessor '96, combined, were $1,633, $1,439 and
$1,495, respectively.
The Company had accrued $2,653 and $2,679 at December 26, 1998 and December
27, 1997, 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 consolidated balance
sheets.
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.
F-20
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
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 $184, $64 and $128 to expense for 1998, 1997 and Successor '96
and Predecessor '96, combined, respectively. The accrued benefits under the
nonqualified plan were $373 and $189 at December 26, 1998 and December 27,
1997, respectively, and are included in other long-term liabilities in the
accompanying consolidated balance sheets. Vested interests of current
participants in the plan were distributed upon consummation of the Investcorp
Acquisition.
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 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-21
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
The following table presents a reconciliation of the plan's status at
December 26, 1998 and December 27, 1997:
<TABLE>
<CAPTION>
December December
26, 1998 27, 1997
-------- --------
<S> <C> <C>
Change in Benefit Obligation:
Benefit obligation, beginning of year.................. $ 5,138 $ 5,551
Service cost........................................... 205 187
Interest cost.......................................... 347 338
Benefits paid.......................................... (93) (386)
Actuarial (gain)/loss.................................. (131) (552)
------- -------
Benefit obligation, end of year........................ $ 5,466 $ 5,138
======= =======
Change in Plan Assets:
Fair value of assets, beginning of year................ $ -- $ --
Employer contributions................................. 93 386
Benefits paid.......................................... (93) (386)
------- -------
Fair value of assets, end of year...................... $ -- $ --
======= =======
Reconciliation of Accrued Benefit Cost:
Funded status.......................................... $(5,466) $(5,138)
Unrecognized prior service cost........................ (213) (243)
Unrecognized net gain.................................. (867) (748)
------- -------
Accrued benefit cost, end of year...................... $(6,546) $(6,129)
======= =======
Weighted-Average Assumptions:
Discount rate, December 31............................. 6.75% 7.00%
Components of Net Periodic Benefit Cost:
Service cost........................................... $205 $187
Interest cost.......................................... 347 338
Amortization of:
Prior service cost................................... (30) (30)
Gain................................................. (12) (22)
------- -------
Net periodic benefit cost.............................. $510 $473
======= =======
</TABLE>
A 10.0% annual rate of increase in the cost of health care benefits was
assumed for 1998; the rate was assumed to decrease 0.5% per year until 5.0% is
reached. A 1.0% change in assumed health care cost trend rates would have the
following effects:
<TABLE>
<CAPTION>
1% 1%
Increase Decrease
-------- --------
<S> <C> <C>
Effect on Total of
Service and Interest
Cost Components........ $ 83 $ (70)
Effect on Benefit
Obligation............. $552 $(496)
</TABLE>
F-22
<PAGE>
SIMMONS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share amounts)
15. Contingencies
From time to time, the Company has been involved in various legal
proceedings. Management believes that all 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 a material
adverse effect on the financial condition or results of operations of the
Company.
16. Related Party Transactions
The Company, Holdings and Fenway entered into a management agreement (the
"Fenway Advisory Agreement") effective upon consummation of the Transactions
pursuant to which Fenway agreed to provide strategic advisory services to the
Company. In exchange for such services, the Company agreed to pay Fenway (i)
annual management fees of 0.25% of net sales for the prior fiscal year, (ii)
fees in connection with the consummation of any acquisition transactions for
Fenway's assistance in negotiating such transactions and (iii) certain fees and
expenses, including legal and accounting fees and any out-of-pocket expenses
incurred by Fenway in connection with providing services to the Company.
In connection with the Investcorp Acquisition, the Company entered into an
agreement for management advisory and consulting services (the "Investcorp
Management Agreement") with Investcorp International Inc. ("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 Investcorp Acquisition, the
Company paid International $3.0 million for the first three years of the term
of the Investcorp Management Agreement in accordance with its terms. In
connection with the Transactions, this agreement was terminated.
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 $850 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 $2.0 million per year permitted
under the New Senior Credit Facility; and registration expenses incurred by
Holdings incident to a registration of any capital stock of Holdings under the
Securities Act.
F-23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You should rely only upon the information contained in this prospectus. We
have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Risk Factors............................................................. 18
The Transactions and the Original Offering............................... 25
The Simmons ESOP......................................................... 29
Use of Proceeds.......................................................... 30
Capitalization........................................................... 30
Selected Historical Consolidated Financial and Other Data................ 31
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 34
Business................................................................. 41
Management............................................................... 51
Principal Stockholders................................................... 59
Certain Relationships and Related Transactions........................... 61
Other Indebtedness....................................................... 62
Description of Exchange Notes............................................ 65
The Exchange Offer....................................................... 104
Certain United States Federal Income Tax Considerations.................. 114
Plan of Distribution..................................................... 118
Legal Matters............................................................ 119
Experts.................................................................. 119
Where You Can Find More Information...................................... 119
Index to Consolidated Financial Statements............................... F-1
</TABLE>
Until , 1999, all dealers effecting transactions in the Notes or the
Exchange Notes, whether or not participating in the Exchange Offer, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Simmons Company
Exchange Offer
$150,000,000
Series B Senior Subordinated
Notes due 2009
10 1/4%
----------------
[LOGO OF SIMMONS(TM) FPO COLOR]
----------------
April , 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE 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
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.
Our Certificate of Incorporation and Bylaws each include indemnification
provisions that mirror the language of the statute. In addition, our Bylaws
provide that, subject to any limitation in the Certificate of Incorporation, we
may indemnify a director or officer to the fullest extent permitted by law,
including, without limitation, DGCL (S)145. Consequently, any of our directors
or officers or any person serving at our request in those capacities will be
fully indemnified against such judgments, penalties, fines, settlements and
reasonable expenses actually incurred, except if : (1) he 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, he 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 us unless and only to the extent
that the Court of Chancery or the court in which the action was brought
determines that, despite the adjudication of liability but in view of all of
the circumstances of the case, he was fairly and reasonably entitled to
indemnity for the expenses which the court deems proper.
Our Certificate of Incorporation also contain a provision eliminating
liability to us or our shareholders for monetary damages from breach of
fiduciary duty as a director. The inclusion of these indemnification provisions
in our Certificate of Incorporation and Bylaws is intended to enable us to
attract qualified persons to serve as directors and officers who might
otherwise be reluctant to serve.
II-1
<PAGE>
ITEM 21. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
2.1 Agreement and Plan of Merger (the "Merger Agreement") dated July 16,
1998 by and among the Company, Simmons Holdings and REM.
2.2 Amendment No. 1 to Merger Agreement dated as of September 22, 1998.
2.3 Amendment No. 2 to Merger Agreement dated as of October 26, 1998.
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
4.1 Indenture between the Company and SunTrust Bank, Atlanta, as
Trustee, dated as of March 16, 1999.
4.2 Registration Rights Agreement between the Company and Goldman, Sachs
& Co. dated March 16, 1999.
4.3 Form of Letter of Transmittal.
4.4 Form of Notice of Guaranteed Delivery.
4.5 Exchange Agent Agreement.
5 Opinion of counsel to the Company.**
10.1 ESOP Stock Sale and Exchange Agreement (the "ESOP Purchase
Agreement") dated as of July 22, 1998 by and among Simmons Holdings,
the Company, State Street Bank & Trust Company ("State Street"),
solely in its capacity as trustee of the Simmons ESOP and REM.
10.2 Amendment No. 1 to ESOP Purchase Agreement dated as of September 25,
1998.
10.3 1998 Stockholders' Agreement (the "1998 Stockholders' Agreement")
dated as of October 29, 1998 among Simmons Holdings, the Company,
Fenway Investment LLC, Investcorp, and State Street, solely as
trustee of the Simmons ESOP.
10.4 Joinder to 1998 Stockholders' Agreement dated as of October 29, 1998
by SH Investment Limited.
10.5 1998 Stockholders' Agreement dated as of October 29, 1998 by and
among Simmons Holdings, Fenway Investment, LLC and the Management
Investors listed therein.
10.6 Credit and Guaranty Agreement (the "Credit and Guaranty Agreement")
dated as of October 29, 1998, among the Company, Simmons Holdings
and Certain Subsidiaries of the Company, as Guarantors, the
financial institutions listed therein, as Lenders, Goldman Sachs
Credit Partners L.P., as a Joint Lead Arranger and as Syndication
Agent, Warburg Dillon Read LLC as a Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent.
10.7 First Amendment to Credit and Guaranty Agreement dated as of March
1, 1999.
10.8 Advisory Agreement dated as of October 29, 1998 by and between
Simmons Holdings, the Company and Fenway Partners, Inc.
10.9 Simmons 1996 Management Stock Incentive Plan.
10.10 Form of Stock Option Agreement.
10.11 Form of Management Bonus Agreement.
10.12 Labor Agreement between the Company and The United Steel Workers,
Local No. 425 for all employees at the Jacksonville, Florida plant
of the Company excluding executives, sales employees, office
workers, supervisors, inspectors, departmental coordinators or
persons in any way identified with management for the period from
October 16, 1997 to October 15, 2001.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.13 Labor Agreement between the Company and The United Steel Workers,
Local No. 422 for all production and maintenance employees at the
Dallas, Texas plant of the Company excluding supervisors, foremen,
factory clerks, office employees, time keepers, watchmen or persons
in any way identified with management for the period from October
16, 1997 to October 15, 2001.
10.14 Labor Agreement between the Company and The United Steel Workers,
Local No. 2401 for all production at the Atlanta, Georgia plant of
the Company excluding office workers, supervisors, foremen,
inspectors, watchmen, plant guards, departmental coordinators,
carload checkers or persons in any way identified with management
for the period from October 16, 1997 to October 15, 2001.
10.15 Labor Agreement between the Company and The United Steel Workers,
Local No. 173 for all employees at the Shawnee, Kansas plant of the
Company excluding executives, sales employees, office workers,
supervisors, foremen, time keepers, mechanics or machinist for the
period from April 23, 1997 to April 22, 1999.
10.16 Labor Agreement between the Company and The United Steel Workers,
Local No. 515U for all employees at the Los Angeles, California
plant of the Company excluding executives, sales employees, office
workers, and supervisors for the period from October 16, 1997 to
October 15, 2001.
10.17 Labor Agreement between the Company and The United Steel Workers,
Local No. 420 for employees at the Piscataway, New Jersey plant of
the Company excluding watchmen, office janitors, maintenance
department employees, truck drivers, tool makers, machinists,
supervisors, porters, matrons, main office, clerical, and
maintenance helpers for the period of October 16, 1997 to October
15, 2001.
10.18 Labor Agreement between the Company and The United Steel Workers,
Local No. 424 for all production employees at the Columbus, Ohio
plant of the Company excluding executives, sales employees, office
workers, timekeepers, watchmen, office janitors, maintenance
department employees, truck drivers, foremen, supervisors, private
chauffeurs, main office, clerical, and engine room and power plant
employees for the period from October 16, 1997 to October 15, 2001.
10.19 Lease Agreement Concourse at Landmark Center between Concourse I,
Ltd., as Landlord, and the Company, as Tenant, dated February 7,
1992.
10.20 Lease between Beaver Ruin Business Center-Phase V between St. Paul
Properties, Inc., as Landlord, and the Company, as Tenant, dated
October 19, 1994, as amended by Addendum to Lease, dated September
1, 1995.
10.21 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, Series
A.
10.22 Loan Agreement between the City of Shawnee and the Company relating
to the Indenture of Trust between City of Shawnee, Kansas and State
Street Bank and Trust Company of Missouri, N.A., as Trustee, dated
December 1, 1996 relating to $5,000,000 Private Activity Revenue
Bonds, Series 1996.
10.23 Loan Agreement dated December 12, 1997 between Simmons Caribbean
Bedding, Inc. and Banco Santander Puerto Rico.**
10.24 Securities Purchase Agreement, dated as of October 29, 1998 among
the Company, Simmons Holdings and the Purchasers listed on Schedule
I attached thereto.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.25 Warrant to purchase 601,346.63 shares of common stock of Simmons
Holdings.
10.26 Warrant to purchase 2,104,713.22 shares of common stock of Simmons
Holdings dated October 29, 1998.
10.27 Escrow Agreement dated as of October 29, 1998 by and among Simmons
Holdings, the Company, Fenway Investment LLC and Ropes & Gray, as
Escrow agent.
10.28 Employment Agreement between the Company and Zenon S. Nie, dated as
of June 29, 1998, as amended.**
10.29 Employment Agreement between the Company and Martin R. Passaglia,
dated as of June 29, 1998, as amended.**
10.30 Employment Agreement between the Company and Jonathan C. Daiker,
dated as of June 29, 1998, as amended.**
10.31 Employment Agreement between the Company and Robert K. Barton, dated
as of June 29, 1998, as amended.**
10.32 Employment Agreement between the Company and Joseph Ulicny, dated as
of June 29, 1998, as amended.**
21 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of counsel to the Company.**
24 Power of Attorney.
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
</TABLE>
- --------
**To be filed by amendment.
ITEM 22. UNDERTAKINGS
(1) The Company undertakes:
(a) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(x) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(y) to reflect in the prospectus any facts or events arising after
the effective date of this 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 this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered, if the total
dollar value of securities offered would not exceed that which was
registered, and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and
(z) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(b) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to
be the initial bona fide offering thereof.
II-4
<PAGE>
(c) 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.
(2) The undersigned registrant undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, and where applicable, each filing of employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934, that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities, other than the payment by
the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding, is asserted by that director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(4) The undersigned registrant 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 registration statement, 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 this registration
statement through the date of responding to the request.
(5) The undersigned registrant 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
this registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Simmons Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on the 21st day of April, 1999.
Simmons Company
By: /s/ Jonathan C. Daiker
-------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice
President--Finance
and Administration
Chief Financial Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 21st day of April, 1999.
<TABLE>
<S> <C>
Signature Title
/s/ Zenon S. Nie* Chairman of the Board of Directors
- ------------------------------------- and Chief Executive Officer and
Zenon S. Nie President (principal executive
officer)
/s/ Jonathan C. Daiker Executive Vice President--Finance
- ------------------------------------- and Administration Officer and
Jonathan C. Daiker Director (principal financial and
accounting officer)
/s/ Martin R. Passaglia* Senior Executive Vice President,
- ------------------------------------- Secretary and Director
Martin R. Passaglia
/s/ Peter Lamm* Director
- -------------------------------------
Peter Lamm
/s/ Richard C. Dresdale* Director
- -------------------------------------
Richard C. Dresdale
/s/ Andrea Geisser* Director
- -------------------------------------
Andrea Geisser
/s/ Gregory P. Meredith* Director
- -------------------------------------
Gregory P. Meredith
/s/ Jonathan C. Daiker
- -------------------------------------
Jonathan C. Daiker
Attorney-in-fact*
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
2.1 Agreement and Plan of Merger (the "Merger Agreement") dated July 16,
1998 by and among the Company, Simmons Holdings and REM.
2.2 Amendment No. 1 to Merger Agreement dated as of September 22, 1998.
2.3 Amendment No. 2 to Merger Agreement dated as of October 26, 1998.
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company.
4.1 Indenture between the Company and SunTrust Bank, Atlanta, as
Trustee, dated as of March 16, 1999.
4.2 Registration Rights Agreement between the Company and Goldman, Sachs
& Co. dated March 16, 1999.
4.3 Form of Letter of Transmittal.
4.4 Form of Notice of Guaranteed Delivery.
4.5 Exchange Agent Agreement.
5 Opinion of counsel to the Company.**
10.1 ESOP Stock Sale and Exchange Agreement (the "ESOP Purchase
Agreement") dated as of July 22, 1998 by and among Simmons Holdings,
the Company, State Street Bank & Trust Company ("State Street"),
solely in its capacity as trustee of the Simmons ESOP and REM.
10.2 Amendment No. 1 to ESOP Purchase Agreement dated as of September 25,
1998.
10.3 1998 Stockholders' Agreement (the "1998 Stockholders' Agreement")
dated as of October 29, 1998 among Simmons Holdings, the Company,
Fenway Investment LLC, Investcorp, and State Street, solely as
trustee of the Simmons ESOP.
10.4 Joinder to 1998 Stockholders' Agreement dated as of October 29, 1998
by SH Investment Limited.
10.5 1998 Stockholders' Agreement dated as of October 29, 1998 by and
among Simmons Holdings, Fenway Investment, LLC and the Management
Investors listed therein.
10.6 Credit and Guaranty Agreement (the "Credit and Guaranty Agreement")
dated as of October 29, 1998, among the Company, Simmons Holdings
and Certain Subsidiaries of the Company, as Guarantors, the
financial institutions listed therein, as Lenders, Goldman Sachs
Credit Partners L.P., as a Joint Lead Arranger and as Syndication
Agent, Warburg Dillon Read LLC as a Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent.
10.7 First Amendment to Credit and Guaranty Agreement dated as of March
1, 1999.
10.8 Advisory Agreement dated as of October 29, 1998 by and between
Simmons Holdings, the Company and Fenway Partners, Inc.
10.9 Simmons 1996 Management Stock Incentive Plan.
10.10 Form of Stock Option Agreement.
10.11 Form of Management Bonus Agreement.
10.12 Labor Agreement between the Company and The United Steel Workers,
Local No. 425 for all employees at the Jacksonville, Florida plant
of the Company excluding executives, sales employees, office
workers, supervisors, inspectors, departmental coordinators or
persons in any way identified with management for the period from
October 16, 1997 to October 15, 2001.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.13 Labor Agreement between the Company and The United Steel Workers,
Local No. 422 for all production and maintenance employees at the
Dallas, Texas plant of the Company excluding supervisors, foremen,
factory clerks, office employees, time keepers, watchmen or persons
in any way identified with management for the period from October
16, 1997 to October 15, 2001.
10.14 Labor Agreement between the Company and The United Steel Workers,
Local No. 2401 for all production at the Atlanta, Georgia plant of
the Company excluding office workers, supervisors, foremen,
inspectors, watchmen, plant guards, departmental coordinators,
carload checkers or persons in any way identified with management
for the period from October 16, 1997 to October 15, 2001.
10.15 Labor Agreement between the Company and The United Steel Workers,
Local No. 173 for all employees at the Shawnee, Kansas plant of the
Company excluding executives, sales employees, office workers,
supervisors, foremen, time keepers, mechanics or machinist for the
period from April 23, 1997 to April 22, 1999.
10.16 Labor Agreement between the Company and The United Steel Workers,
Local No. 515U for all employees at the Los Angeles, California
plant of the Company excluding executives, sales employees, office
workers, and supervisors for the period from October 16, 1997 to
October 15, 2001.
10.17 Labor Agreement between the Company and The United Steel Workers,
Local No. 420 for employees at the Piscataway, New Jersey plant of
the Company excluding watchmen, office janitors, maintenance
department employees, truck drivers, tool makers, machinists,
supervisors, porters, matrons, main office, clerical, and
maintenance helpers for the period of October 16, 1997 to October
15, 2001.
10.18 Labor Agreement between the Company and The United Steel Workers,
Local No. 424 for all production employees at the Columbus, Ohio
plant of the Company excluding executives, sales employees, office
workers, timekeepers, watchmen, office janitors, maintenance
department employees, truck drivers, foremen, supervisors, private
chauffeurs, main office, clerical, and engine room and power plant
employees for the period from October 16, 1997 to October 15, 2001.
10.19 Lease Agreement Concourse at Landmark Center between Concourse I,
Ltd., as Landlord, and the Company, as Tenant, dated February 7,
1992.
10.20 Lease between Beaver Ruin Business Center-Phase V between St. Paul
Properties, Inc., as Landlord, and the Company, as Tenant, dated
October 19, 1994, as amended by Addendum to Lease, dated September
1, 1995.
10.21 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, Series
A.
10.22 Loan Agreement between the City of Shawnee and the Company relating
to the Indenture of Trust between City of Shawnee, Kansas and State
Street Bank and Trust Company of Missouri, N.A., as Trustee, dated
December 1, 1996 relating to $5,000,000 Private Activity Revenue
Bonds, Series 1996.
10.23 Loan Agreement dated December 12, 1997 between Simmons Caribbean
Bedding, Inc. and Banco Santander Puerto Rico.**
10.24 Securities Purchase Agreement, dated as of October 29, 1998 among
the Company, Simmons Holdings and the Purchasers listed on Schedule
I attached thereto.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.25 Warrant to purchase 601,346.63 shares of common stock of Simmons
Holdings.
10.26 Warrant to purchase 2,104,713.22 shares of common stock of Simmons
Holdings dated October 29, 1998.
10.27 Escrow Agreement dated as of October 29, 1998 by and among Simmons
Holdings, the Company, Fenway Investment LLC and Ropes & Gray, as
Escrow agent.
10.28 Employment Agreement between the Company and Zenon S. Nie, dated as
of June 29, 1998, as amended.**
10.29 Employment Agreement between the Company and Martin R. Passaglia,
dated as of June 29, 1998, as amended.**
10.30 Employment Agreement between the Company and Jonathan C. Daiker,
dated as of June 29, 1998, as amended.**
10.31 Employment Agreement between the Company and Robert K. Barton, dated
as of June 29, 1998, as amended.**
10.32 Employment Agreement between the Company and Joseph Ulicny, dated as
of June 29, 1998, as amended.**
21 Subsidiaries of the Company.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of counsel to the Company.**
24 Power of Attorney.
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
</TABLE>
- --------
**To be filed by Amendment.
<PAGE> 1
Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
SIMMONS COMPANY,
SIMMONS HOLDINGS, INC.,
and
REM ACQUISITION, INC.
As of July 16, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C>
Definitions ................................................................................................2
ARTICLE II
THE MERGER
Section 2.1 The Merger......................................................................................6
Section 2.2 Closing; Effective Time.........................................................................6
Section 2.3 Certificate of Incorporation....................................................................7
Section 2.4 By-laws.........................................................................................7
Section 2.5 Directors and Officers..........................................................................7
ARTICLE III
CONVERSION OF SHARES; STOCKHOLDER APPROVAL
Section 3.1 Effect on Capital Stock.........................................................................7
Section 3.2 Treatment of Options............................................................................8
Section 3.3 Payment for Shares.............................................................................10
Section 3.4 Stockholders' Meeting..........................................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY
Section 4.1 Corporate Organization.........................................................................13
Section 4.2 Capital Stock..................................................................................13
Section 4.3 Subsidiaries...................................................................................14
Section 4.4 Corporate Authority............................................................................15
Section 4.5 Financial Statements...........................................................................16
Section 4.6 Operations Since March 28, 1998................................................................17
Section 4.7 No Undisclosed Liabilities.....................................................................18
Section 4.8 Taxes..........................................................................................19
Section 4.9 Governmental Permits...........................................................................19
Section 4.10 Real Property..................................................................................20
Section 4.11 Real Property Leases...........................................................................20
Section 4.12 Intellectual Property..........................................................................21
Section 4.13 Labor Relations................................................................................21
Section 4.14 Employee Benefit Plans.........................................................................22
Section 4.15 Contracts......................................................................................24
Section 4.16 No Violation, Litigation or Regulatory Action..................................................25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 4.17 Insurance......................................................................................26
Section 4.18 Certain Transactions or Arrangements...........................................................26
Section 4.19 Customer and Supplier Relationships............................................................26
Section 4.20 Finders........................................................................................26
Section 4.21 Finders........................................................................................27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 5.1 Organization of MergerCo.......................................................................27
Section 5.2 Authority......................................................................................27
Section 5.3 No Finder......................................................................................28
Section 5.4 Absence of Proceedings.........................................................................28
Section 5.5 Financial Capability...........................................................................28
Section 5.6 No Outside Reliance............................................................................28
Section 5.7 Governmental Consents..........................................................................28
Section 5.8 MergerCo Capital Stock.........................................................................28
[Section 5.9 Certain Transactions or Arrangements]..........................................................28
ARTICLE VI
ADDITIONAL COVENANTS
Section 6.1 Investigation of the Company by MergerCo.......................................................29
Section 6.2 Certain Agreements.............................................................................29
Section 6.3 Operations Prior to the Closing Date...........................................................30
Section 6.4 No Public Announcement.........................................................................32
Section 6.5 Governmental Filings; Consents.................................................................32
Section 6.6 Directors' and Officers' Indemnification.......................................................33
Section 6.7 Pro Forma Balance Sheet; Post-Acquisition Capitalization of Company............................33
Section 6.8 Employee Benefits..............................................................................34
Section 6.9 MergerCo to Fund Certain Obligations...........................................................34
Section 6.10 New Stockholders' Agreement....................................................................34
Section 6.11 Minimum Equity of the Surviving Corporation....................................................34
Section 6.12 Financial Statements...........................................................................35
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MERGERCO
Section 7.1 No Misrepresentation or Breach of Covenants and Warranties.....................................35
Section 7.2 Resignations of Directors......................................................................36
Section 7.3 Litigation.....................................................................................36
Section 7.4 Necessary Approvals and Consents...............................................................36
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 7.5 Corporate Action...............................................................................36
Section 7.6 ESOP Trustee...................................................................................37
Section 7.7 FIRPTA Affidavit...............................................................................37
Section 7.8 Stockholders' Agreement........................................................................37
Section 7.9 Opinion........................................................................................37
Section 7.10 Financing Condition............................................................................37
Section 7.11 Adoption of Agreement..........................................................................37
Section 7.12 Investcorp Agreements..........................................................................37
Section 7.13 ESOP Trustee...................................................................................37
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF HOLDINGS AND THE COMPANY
Section 8.1 No Misrepresentation or Breach of Covenants and Warranties.....................................38
Section 8.2 Litigation.....................................................................................38
Section 8.3 Other Transactions.............................................................................38
Section 8.4 Opinion........................................................................................38
Section 8.5 ESOP Trustee...................................................................................38
Section 8.6 Stockholders Agreement.........................................................................39
ARTICLE IX
TERMINATION
Section 9.1 Termination....................................................................................39
Section 9.2 No Liability Upon Termination..................................................................39
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-survival of Representations, Warranties and Agreements.....................................40
Section 10.2 Notices........................................................................................40
Section 10.3 Partial Invalidity.............................................................................42
Section 10.4 Execution in Counterparts......................................................................42
Section 10.5 Governing Law..................................................................................42
Section 10.6 Assignment; Successors and Assigns.............................................................42
Section 10.7 Titles and Headings............................................................................42
Section 10.8 Schedules and Exhibits.........................................................................43
Section 10.9 Knowledge......................................................................................43
Section 10.10 Entire Agreement; Amendments...................................................................43
Section 10.11 Waivers........................................................................................43
Section 10.12 Specific Performance...........................................................................43
</TABLE>
-iii-
<PAGE> 5
-iv-
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is dated as of July 16,
1998, by and among Simmons Company, a Delaware corporation (the "COMPANY"),
Simmons Holdings, Inc., a Delaware corporation ("HOLDINGS") and REM Acquisition,
Inc., a Delaware corporation ("MergerCo").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of MergerCo and
Holdings have approved the merger of MergerCo with and into Holdings on the
terms and subject to the conditions set forth in this Agreement (the "MERGER"),
pursuant to which (i) each share of capital stock of Holdings (the "SHARES")
issued and outstanding immediately prior to the Effective Time (as defined in
Section 2.2) will be converted into either (A) the right to receive cash or (B)
subject to the terms hereof, the right to receive shares of capital stock issued
by the Surviving Corporation (as defined below), and (ii) each option to acquire
shares of capital stock of Holdings will be converted into either (A) the right
to receive cash or (B) subject to the terms hereof, the right to receive an
option to acquire shares of capital stock issued by the Surviving Corporation;
WHEREAS, the Board of Directors of Holdings has, in light of
and subject to the terms and conditions set forth herein, (i) determined that
the consideration to be paid for each Share in the Merger is fair to the
stockholders of Holdings and that the Merger is otherwise in the best interests
of Holdings and its stockholders and (ii) resolved to approve and adopt this
Agreement and the transactions contemplated hereby and to recommend approval and
adoption by the stockholders of Holdings of this Agreement;
WHEREAS, it is intended that the Merger be recorded as a
recapitalization under generally accepted accounting principles for financial
reporting purposes;
WHEREAS, to induce MergerCo to enter into this Agreement,
various stockholders of Holdings have entered into that certain Stockholder
Voting Agreement pursuant to which such stockholders have agreed to vote in
favor of the transactions contemplated hereby and to take certain additional
actions with respect thereto; and
WHEREAS, MergerCo, Holdings and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other covenants and agreements set forth herein, the parties
hereto hereby agree as follows:
<PAGE> 7
ARTICLE I
DEFINITIONS
-----------
In addition to the other words and terms defined elsewhere in
the Agreement, as used in this Agreement, the following words and terms have the
meanings specified or referred to below:
"AFFILIATE" means, with respect to any Person, any other
Person who, directly or indirectly, controls, is controlled by or is under
common control with such Person.
"ALLOCATED SHARES" means those shares of Series A Preferred
Stock of the Company owned by the ESOP which have, pursuant to the terms of the
ESOP, been allocated to the accounts of ESOP participants.
"ANTI-DILUTION OPTIONS" shall have the meaning specified in
Section 3.2(b)(i).
"ANTITRUST LAWS" has the meaning specified in Section 6.5(b).
"CASH PRICE" shall mean $7.00 per share.
"CASHED SHARES" has the meaning specified in Section
3.1(c)(ii).
"CERTIFICATE OF MERGER" has the meaning specified in Section
2.2.
"CLASS A STOCK" has the meaning specified in Section 4.2(b).
"CLASS C STOCK" has the meaning specified in Section 4.2(b).
"CLASS D STOCK" has the meaning specified in Section 4.2(b).
"CLOSING" has the meaning specified in Section 2.2.
"CLOSING DATE" has the meaning specified in Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning specified in Section 4.2(b).
"COMPANY" has the meaning specified in the preamble to this
Agreement.
"COMPANY COMMON STOCK" has the meaning specified in Section
4.2(a).
"COMPANY GROUP" has the meaning specified in Section 4.14(a).
"COMPANY OPTION PLAN" has the meaning specified in Section
4.2(a).
"COMPANY OPTIONS" has the meaning specified in Section
4.2(a).
2
<PAGE> 8
"CONTINUING ANTI-DILUTION OPTIONS" has the meaning specified
in Section 3.2(b)(ii)(A).
"CONTINUING MANAGEMENT OPTIONS" has the meaning specified in
Section 3.2(a)(ii)(A).
"DECEMBER 1997 BALANCE SHEET" has the meaning specified in
Section 4.5.
"DEFINED BENEFIT PLAN" has the meaning specified in Section
4.14(a).
"DGCL" has the meaning specified in Section 2.1.
"DISSENTING SHARES" has the meaning specified in Section
3.1(d).
"EFFECTIVE TIME" has the meaning specified in Section 2.2.
"EMPLOYEE BENEFIT PLAN" has the meaning specified in Section
4.14.
"EMPLOYEE PLAN" has the meaning specified in Section 4.14(a).
"ENCUMBRANCE" means any lien, claim, charge, security,
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title, covenant or other encumbrance or restriction of any
kind.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESOP" means the Simmons Company Employee Stock Ownership
Plan as amended and restated effective January 17, 1989, and as further amended
through the date hereof.
"ESOP Exchange Agreement" means the ESOP Exchange Agreement
by and among Holdings, the Company, the Trustee and MergerCo.
"ESOP Shares" shall mean, collectively, the Allocated Shares
and the Unallocated Shares.
"ESOT" means the Simmons Company Employee Stock Ownership
Trust.
"FINAL NOTICE" has the meaning specified in Section 6.9.
"FINANCIAL STATEMENTS" has the meaning specified in Section
4.5.
"FOREIGN PLAN" has the meaning specified in Section 4.14(a).
"GOVERNMENTAL BODY" means any federal, state, local or
foreign court, government, department, commission, board, bureau, agency,
official or other regulatory, administrative or governmental authority.
3
<PAGE> 9
"GOVERNMENTAL PERMITS" has the meaning specified in Section
4.9.
"HOLDINGS" has the meaning specified in the preamble for this
Agreement.
"HOLDINGS OPTION PLANS" has the meaning specified in Section
4.2(b).
"HOLDINGS OPTIONS" means, collectively, the Top Option,
Management Options and Anti-Dilution Options.
"H-S-R ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"INTELLECTUAL PROPERTY" has the meaning specified in Section
4.12(a).
"IRS" means the Internal Revenue Service.
"LOSSES" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
demands, claims, actions, causes of action, assessments, deficiencies and other
charges.
"MANAGEMENT OPTIONS" has the meaning specified in 3.2(a)(i).
"MARCH 1998 INTERIM BALANCE SHEET" has the meaning specified
in Section 4.5.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the financial condition, businesses or results of operations of Holdings,
the Company and the Subsidiaries taken as a whole or (ii) the ability of
Holdings, the Company and the Subsidiaries to consummate the transactions
contemplated hereby.
"MATERIAL CONTRACT" means the contracts, agreements and other
instruments listed on Schedule 4.15.
"MATERIAL LEASES" has the meaning specified in Section 4.11.
"MERGER" has the meaning specified in the preamble to this
Agreement.
"MERGERCO" has the meaning specified in the preamble to this
Agreement.
"MERGER COMMON STOCK" has the meaning specified in Section
3.1(a).
"MERGER CONSIDERATION" has the meaning specified in Section
3.1(c).
"MULTIEMPLOYER PLAN" has the meaning specified in Section
4.14(a).
"NEW STOCKHOLDERS' AGREEMENT" has the meaning specified in
Section 6.10.
"OPTION SHARES" means the shares of Class C Stock that may be
purchased upon exercise of the Holdings Options.
"OWNED REAL PROPERTY" has the meaning specified in Section
4.10.
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"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA, or any other
governmental agency, department or instrumentality succeeding to the functions
of said Corporation.
"PERMITTED ENCUMBRANCE" means (i) only with respect to real
estate and interests therein, easements, covenants, conditions, restrictions and
other matters of record, and incidental mechanics' and other similar liens, none
of which, individually or in the aggregate, materially affect the value of, or
marketability of title to, the property subject thereto or the use to which such
property is presently put and (ii) the Encumbrances arising from the Senior
Credit Agreement.
"PERMITTED INVESTMENTS" has the meaning specified in Section
3.3(a).
"PERSON" means and includes an individual, a partnership, a
corporation, a trust, a joint venture, other similar entities, an unincorporated
organization and any governmental or regulatory body or other agency or
authority.
"PREFERRED STOCK" has the meaning specified in Section
4.2(a).
"PRO-FORMA BALANCE SHEET" has the meaning specified in
Section 6.7.
"ROLLOVER SHARES" has the meaning specified in Section
3.1(c)(i).
"RETURNS" has the meaning specified in Section 4.8(a).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SENIOR CREDIT AGREEMENT" means the Credit Agreement dated as
of March 22, 1996, by and among the Company, The Chase Manhattan Bank (formerly
Chemical Bank) as Administrative Agent and Chase Securities Inc. (formerly
Chemical Securities Inc.) as Arranger, as amended from time-to-time through the
date hereof.
"SERIES A PREFERRED STOCK" has the meaning specified in
Section 4.2(a).
"SERIES C PREFERRED STOCK" has the meaning specified in
Section 4.2(a).
"SHARES" means, collectively, the Class A, Class C, Class D
and Common Stock of Holdings.
"STOCKHOLDERS' AGREEMENT" has the meaning specified in
Section 7.8.
"SUBORDINATED NOTES" has the meaning specified in Section
6.9.
"SUBSIDIARY" shall mean, as of the applicable point in time,
each corporation, partnership, joint venture or other entity, other than the
Company, of which Holdings owns, directly or indirectly, more than 50% of the
outstanding voting securities or equity interests.
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"SURVIVING CORPORATION" has the meaning specified in Section
2.1.
"TAX" or "TAXES" has the meaning specified in Section 4.8(a).
"TOP OPTION" has the meaning specified in Section 3.2(c)(i).
"TREASURY REGULATIONS" has the meaning specified in Section
4.8(d).
"TRUST AGREEMENT" has the meaning specified in Section
4.2(a).
"TRUSTEE" means State Street Bank & Trust, as Trustee of the
ESOT.
"UNALLOCATED SHARES" means those shares of Series A Preferred
Stock of the Company owned by the ESOP which have not, pursuant to the terms of
the ESOP, been allocated to the accounts of ESOP participants.
"USRPHC" has the meaning specified in Section 4.8(d).
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL"), MergerCo shall be
merged with and into Holdings, which shall be the surviving corporation in the
Merger (the "SURVIVING CORPORATION"). At the Effective Time, the separate
existence of MergerCo shall cease and the other effects of the Merger shall be
as set forth in Section 259 of the DGCL.
SECTION 2.2. CLOSING; EFFECTIVE TIME. Subject to the
provisions of Articles VII and VIII, the closing of the Merger (the "CLOSING")
shall take place in New York City at the offices of Gibson, Dunn & Crutcher LLP,
200 Park Avenue, New York, New York 10166, as soon as practicable but in no
event later than 10:00 a.m. New York City time on the first business day after
the date on which each of the conditions set forth in Articles VII and VIII have
been satisfied or waived by the party or parties entitled to the benefit of such
conditions, or at such other place, at such other time or on such other date as
MergerCo and Holdings may mutually agree. The date on which the Closing actually
occurs is hereinafter referred to as the "CLOSING DATE." At the Closing,
MergerCo and Holdings shall cause a certificate of merger (the "CERTIFICATE OF
MERGER") to be executed and filed with the Secretary of State of the State of
Delaware in accordance with the DGCL. The Merger shall become effective as of
the date and time of such filing, or such other time within 24 hours after such
filing as MergerCo and Holdings shall agree to be set forth in the Certificate
of Merger (the "EFFECTIVE TIME").
SECTION 2.3. CERTIFICATE OF INCORPORATION. At the Effective
Time, and without any further action on the part of Holdings or MergerCo, the
certificate of incorporation of MergerCo, in a form reasonably acceptable to
Holdings, until thereafter further amended as
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provided therein and under applicable law, shall be the certificate of
incorporation of the Surviving Corporation.
SECTION 2.4. BY-LAWS. The by-laws of MergerCo, as in effect
immediately prior to the Effective Time, shall become, from and after the
Effective Time, the by-laws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
SECTION 2.5. DIRECTORS AND OFFICERS. The directors of MergerCo
and officers of Holdings, respectively, immediately prior to the Effective Time
shall become, from and after the Effective Time, the directors and officers of
the Surviving Corporation, until their respective successors are duly elected or
appointed and shall qualify or their earlier resignation or removal.
ARTICLE III
CONVERSION OF SHARES; STOCKHOLDER APPROVAL
SECTION 3.1. EFFECT ON CAPITAL STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any Shares or any shares of capital stock of MergerCo:
(a) COMMON STOCK OF MERGERCO. Each share of common stock of
MergerCo, par value $0.01 per share, issued and outstanding immediately prior to
the Effective Time shall be converted into and become one share of common stock,
par value $0.01 per share, of the Surviving Corporation (the "MERGER COMMON
STOCK").
(b) TREASURY STOCK AND MERGERCO-OWNED STOCK. Each Share owned
by Holdings or any Subsidiary of Holdings and each Share owned by MergerCo or
any affiliate of MergerCo shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(c) CONVERSION (OR EXCHANGE) OF SHARES. Except as otherwise
provided in Section 3.1(d), all other issued and outstanding Shares of Holdings
shall be converted into the following (the consideration set forth in clauses
(i) and (ii) below being collectively referred to as the "MERGER
CONSIDERATION"):
(i) for each Share listed next to the names of those
Persons identified on Schedule 3.1(c) hereto (the "Rollover Shares"),
the right to retain the same number of fully paid and nonassessable
shares of Merger Common Stock; and
(ii) for each other Share (the "CASHED SHARES"), the
right to receive in cash, without interest, from the Surviving
Corporation following the Merger an amount equal to the Cash Price.
(d) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, each Share that is issued and outstanding immediately
prior to the Effective Time and
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that is held by a stockholder who has properly exercised and perfected appraisal
rights under Section 262 of the DGCL (the "DISSENTING SHARES"), shall not be
converted into or exchangeable for the right to receive the Merger
Consideration, but shall be entitled to receive such consideration as shall be
determined pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, that if such
holder shall have failed to perfect or shall have effectively withdrawn or lost
the right to appraisal and payment under the DGCL, each Share of such holder
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration consisting of the Cash Price, without any interest thereon, in
accordance with Section 3.1(c)(ii), and such shares shall no longer be
Dissenting Shares. Holdings shall give reasonably prompt notice to MergerCo of
any demands received by Holdings for appraisal of Shares, and MergerCo shall
have the right to participate in all negotiations and proceedings with respect
to such demands. Holdings shall not, except with the prior written consent of
MergerCo, make any payment with respect to, or settle or offer to settle, any
such demands.
(e) CANCELLATION AND RETIREMENT OF SHARES. At the Effective
Time, each Share converted into the right to receive the Rollover Shares or Cash
Price pursuant to Section 3.1(c)(i) or (ii) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Shares shall, to the extent such
certificate represents such Shares, cease to have any rights with respect
thereto, except the right to receive the Cash Price applicable thereto, upon
surrender of such certificate in accordance with Section 3.3.(b).
SECTION 3.2. TREATMENT OF OPTIONS.
(a) MANAGEMENT OPTIONS.
(i) Immediately prior to the Effective Time, each
outstanding management stock option granted pursuant to the Simmons
Holdings, Inc. 1996 Management Stock Incentive Plan dated as of March
22, 1996 (each, a "MANAGEMENT OPTION", collectively, the "MANAGEMENT
OPTIONS"), shall become immediately vested and exercisable in full,
subject to all expiration, lapse and other terms and conditions
thereof.
(ii) Holdings shall take all action necessary so that
each Management Option (and any rights thereunder) outstanding
immediately prior to the Effective Time shall be canceled immediately
prior to the Effective Time in exchange for the following
consideration:
(A) For the number of Management Options
listed next to the names of those Persons identified on SCHEDULE
3.2(B), the right to retain the same number of options (each, a
"CONTINUING MANAGEMENT OPTION") entitling the holder thereof to
purchase the number of shares of Merger Common Stock equal to the
number of Option Shares subject to such Management Options immediately
prior to the Effective Time, at an exercise price per share equal to
the exercise price per Option Share of such Management Options
immediately prior to the Effective Time. After the Effective Time, each
Continuing Management Option shall (unless otherwise agreed by Holdings
and the holder of such Continuing Management Option) be subject to the
same terms and conditions as were applicable to the related Management
Option immediately prior to the
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Effective Time, provided that all such Continuing Management Options
shall as of the Effective Time be immediately fully vested and
exercisable.
(B) For all remaining Management Options, an
amount in cash equal to the product of (1) the number of Option Shares
subject to such Management Options immediately prior to the Effective
Time and (2) the excess, if any, of the Cash Price over the per share
exercise price of such Management Options, to be delivered by the
Surviving Corporation immediately following the Effective Time. All
applicable withholding taxes attributable to the payments made
hereunder or to distributions contemplated hereby shall be deducted
from the amounts payable under this Section 3.2 and all such taxes
attributable to the exercise of Management Options shall be withheld
from the proceeds received in respect of the Option Shares issuable
upon such exercise.
(b) ANTI-DILUTION OPTIONS.
(i) Immediately prior to the Effective Time, each
outstanding AntiDilution Stock Option granted pursuant to the Simmons
Holdings, Inc. 1996 Management Stock Incentive Plan dated as of March
22, 1996 (each, a "ANTI-DILUTION OPTION", collectively, the
"ANTI-DILUTION OPTIONS"), shall become immediately vested and
exercisable in full, subject to all expiration, lapse and other terms
and conditions thereof.
(ii) Holdings shall take all action necessary so that
each Anti-Dilution Option (and any rights thereunder) outstanding
immediately prior to the Effective Time shall be canceled immediately
prior to the Effective Time in exchange for the following
consideration:
(A) For the number of Anti-Dilution Options
listed next to the names of those Persons identified on SCHEDULE
3.2(A), the right to retain the same number of options (each, a
"CONTINUING ANTI-DILUTION OPTION") entitling the holder thereof to
purchase the number of shares of Merger Common Stock of the Surviving
Corporation equal to the number of Option Shares subject to such
Anti-Dilution Options immediately prior to the Effective Time, at an
exercise price per share equal to the exercise price per Option Share
of such Anti-Dilution Options immediately prior to the Effective Time.
After the Effective Time, each Continuing Anti-Dilution Option shall
(unless otherwise agreed by Holdings and the holder of such Continuing
Anti-Dilution Option) be subject to the same terms and conditions as
were applicable to the related Anti-Dilution Option immediately prior
to the Effective Time, provided that all such Continuing Anti-Dilution
Options shall as of the Effective Time be immediately fully vested and
exercisable.
(B) For all remaining Anti-Dilution Options,
an amount in cash equal to the product of (1) the number of Option
Shares subject to such Anti-Dilution Options immediately prior to the
Effective Time and (2) the excess, if any, of the Cash Price over the
per share exercise price of such Anti-Dilution Options, to be delivered
by the Surviving Corporation immediately following the Effective Time.
All applicable withholding taxes attributable to the payments made
hereunder or to distributions contemplated hereby shall be deducted
from the amounts payable under this Section 3.2 and all such taxes
attributable to the exercise of Anti-Dilution Options shall be withheld
from the proceeds received in respect of the Option Shares issuable
upon such exercise.
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(c) TOP OPTION.
(i) Immediately prior to the Effective Time, the
Option (the "TOP OPTION") granted pursuant to that certain Stock Option
Agreement dated as of March 22, 1996, between Holdings and SH Equity
Limited (currently held by Investcorp Simmons Holdings L.P.) shall
become immediately vested and exercisable in full, subject to all
expiration, lapse and other terms and conditions thereof.
(ii) Holdings shall take all action necessary so that
the Top Option (and any rights thereunder) shall be canceled
immediately prior to the Effective Time in exchange for an amount in
cash equal to the product of (A) the number of Shares subject to the
Top Option immediately prior to the Effective Time and (B) the excess,
if any, of the Cash Price over the per share exercise price of the Top
Option, to be delivered by the Surviving Corporation immediately
following the Effective Time.
SECTION 3.3. PAYMENT FOR SHARES.
(a) EXCHANGE AGENT. On or before the Effective Time, MergerCo
shall cause to be deposited in trust with a bank or trust company designated by
MergerCo and reasonably satisfactory to Holdings (the "EXCHANGE AGENT") the
aggregate Merger Consideration to which holders of Shares shall be entitled at
the Effective Time pursuant to Section 3.1 (the "PAYMENT FUND"). The aggregate
amount of the Cash Price shall be so deposited in immediately available funds.
MergerCo shall cause the Exchange Agent to make the payments provided for in
Section 3.1(c) out of the Payment Fund. Notwithstanding the foregoing, payments
provided for in Section 3.2 shall be paid by the Surviving Corporation
immediately following the Effective Time, and payments provided for in Section
3.1(d) shall be paid by the Surviving Corporation as provided under Section 262
of the DGCL. The Exchange Agent shall invest undistributed portions of the
Payment Fund as MergerCo directs in obligations of or guaranteed by the United
States of America, in commercial paper obligations receiving the highest
investment grade rating from both Moody's Investor Services, Inc. and Standard &
Poor's Corporation, or in certificates of deposit, bank repurchase agreements or
banker's acceptances of commercial banks with capital exceeding $1,000,000,000
(collectively, "PERMITTED INVESTMENTS"); PROVIDED, HOWEVER, that the maturities
of Permitted Investments shall be such as to permit the Exchange Agent to make
prompt payment to former holders of Shares entitled thereto as contemplated by
Section 3.1(c). MergerCo shall cause the Payment Fund to be promptly replenished
to the extent of any losses incurred as a result of Permitted Investments. All
net earnings of Permitted Investments shall be paid to MergerCo as and when
requested by MergerCo. If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of Shares shall be entitled under
Section 3.1(c), MergerCo shall in any event be liable for payment thereof. The
Payment Fund shall not be used for any purpose except as expressly provided in
this Agreement. If any cash or cash equivalents deposited with the Exchange
Agent for purposes of paying the Merger Consideration for the Shares pursuant to
Section 3.1(c) remains unclaimed following the expiration of one year after the
Effective Time, such cash or cash equivalents (together with accrued interest)
shall be delivered to the Surviving Corporation by the Exchange Agent and,
thereafter, holders of certificates that immediately prior to the Effective Time
represented Shares shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat or similar laws) as general unsecured
creditors thereof.
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(b) EXCHANGE. Promptly after the Effective Time, MergerCo
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates that immediately prior to the Effective Time represented
outstanding Shares (the "CERTIFICATES") a form letter of transmittal (which
shall be in a form agreed to prior to the Effective Time and reasonably
acceptable to Holdings and MergerCo and specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates accompanied by a duly completed letter of
transmittal to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment or exchange therefor; PROVIDED that if
any holder of record presents to the Exchange Agent at the Effective Time such
holder's Certificate or Certificates that immediately prior to the Effective
Time represented outstanding Cashed Shares and effects the surrender of such
Certificate or Certificates for payment therefor, then such holder shall be
entitled to receive upon such surrender payment for such Cashed Shares in
immediately available funds by wire transfer to an account designated by such
holder. In effecting the payment of the Cash Price in respect of Shares
represented by Certificates entitled to payment of the Cash Price pursuant to
Section 3.1(c), upon the surrender of each such Certificate together with a duly
executed letter of transmittal, the Exchange Agent shall pay the holder of such
Certificate the Cash Price multiplied by the number of Cashed Shares, in
consideration therefor. Upon such payment (and the exchange, if any, of
Certificates formerly representing Shares for certificates representing Rollover
Shares) such Certificate shall forthwith be canceled. In effecting the exchange
of Rollover Shares in respect of Shares represented by Certificates which, at
the Effective Time, shall become Rollover Shares, upon surrender of each such
Certificate together with a duly executed letter of transmittal, the Exchange
Agent shall deliver to the holder of such Certificate a certificate representing
that number of shares of Merger Common Stock which such holder has the right to
receive pursuant to the provisions of Section 3.1(c)(i). Upon such exchange (and
any payment of the Cash Price for Cashed Shares), such Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable upon the surrender of the Certificates. If the payment is to be
made to a person other than the person in whose name a Certificate surrendered
is registered, it shall be a condition of payment that (a) the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
as reasonably determined by the Surviving Corporation and (b) the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 3.3, each Certificate shall represent for
all purposes whatsoever only the right to receive the Merger Consideration
applicable thereto, without any interest thereon.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES EXCHANGED FOR CASH.
All cash paid upon the surrender for exchange of Certificates in accordance with
the terms of this Article III shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the Cashed Shares exchanged for
cash theretofore represented by such Certificates.
(d) NO TRANSFERS. After the Effective Time there shall be no
transfers on the stock transfer books of the Surviving Corporation of the Shares
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
transfer or for any other reason, they shall be canceled and
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exchanged for cash or shares of Merger Common Stock, as applicable, as provided
in this Article III, except as otherwise provided by law.
(e) NO LIABILITY. None of MergerCo, Holdings, the Company or
the Exchange Agent shall be liable to any person in respect of any Rollover
Shares (or dividends or distributions with respect thereto) or cash from the
Payment Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificate shall not have been
surrendered prior to seven years after the Effective Time (or immediately prior
to such earlier date on which any Merger Consideration payable to the holder of
such Certificate pursuant to this Article III would otherwise escheat to or
become the property of any Governmental Body), any such Merger Consideration
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interests of any person
previously entitled thereto.
SECTION 3.4. STOCKHOLDERS' MEETING. Holdings will, as promptly
as practicable following the date of this Agreement, (i) take all action
necessary in accordance with applicable law to convene a meeting of, or obtain a
written consent from, its stockholders for the purpose of considering, approving
and adopting this Agreement and the transactions contemplated hereby (the
"STOCKHOLDERS' APPROVAL"), (ii) include in the notice for such Stockholders'
Approval the recommendation of the Board of Directors of Holdings (the "BOARD")
that the stockholders of Holdings vote in favor of the approval and adoption of
this Agreement and the transactions contemplated hereby and (iii) use its
reasonable best efforts to obtain the necessary approval of this Agreement and
the transactions contemplated hereby by its stockholders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
OF HOLDINGS AND THE COMPANY
---------------------------
As an inducement to MergerCo to enter into this Agreement and
to consummate the transactions contemplated hereby, Holdings and the Company
jointly and severally represent and warrant to MergerCo as follows:
SECTION 4.1. CORPORATE ORGANIZATION. Each of Holdings and the
Company is a corporation duly organized, legally existing and in good standing
under the laws of the State of Delaware. Except as set forth on SCHEDULE 4.1,
the Company is duly qualified to transact business as a foreign corporation and
is in good standing in each of the jurisdictions listed in SCHEDULE 4.1. Those
jurisdictions are the only jurisdictions in which the ownership or leasing of
its properties or the conduct of its business requires such qualification
(except where the failure to so qualify would not have a Material Adverse
Effect). Holdings and the Company each have all requisite corporate power to own
or lease and to operate and use their properties and assets and to carry on
their businesses as now conducted. Each of Holdings and the Company has
delivered or made available to MergerCo complete and correct copies of its
Certificate of Incorporation, and Bylaws, each as in effect on the date hereof
and as to be amended in connection with the transactions contemplated hereby.
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SECTION 4.2. CAPITAL STOCK.
(a) As of the date hereof, the authorized capital stock of the
Company consists of (i) 50,000,000 shares of common stock, par value $.01 per
share (the "COMPANY COMMON STOCK") and (ii) 6,000,000 shares of preferred stock,
par value $.01 per share (the "PREFERRED STOCK"), of which (A) 5,950,000 have
been designated as Series A Preferred Stock (the "SERIES A PREFERRED STOCK") and
(B) 50,000 have been designated as Series C Cumulative Redeemable Exchangeable
Preferred Stock (the "SERIES C PREFERRED STOCK"). As of the date hereof,
31,964,452 shares of Company Common Stock are outstanding all of which are owned
by Holdings, 5,663,721.023 shares of Series A Preferred Stock are outstanding
all of which are owned by the ESOT, and no shares of Series C Preferred Stock
are outstanding. As of the date hereof, no options to purchase shares of Company
Common Stock (the "COMPANY OPTIONS") have been issued to Holdings pursuant to
the terms of that certain Parent Option Agreement dated as of March 22, 1996
between Holdings and the Company (the "COMPANY OPTION PLAN"). None of the issued
and outstanding shares of capital stock issued by the Company have been issued
in violation of, or is subject to, any preemptive or any subscription rights.
Except as provided in the Stockholders' Agreement, this Agreement, in the
Company's Amended and Restated Certificate of Incorporation (with respect to the
Series A Preferred Stock), the transactions contemplated hereby and the
provisions of the ESOP and the Agreement of Trust between the Company and the
Trustee (the "TRUST AGREEMENT"), and except as disclosed on SCHEDULE 4.2(a),
there are no agreements, arrangements, warrants, options, puts, calls, rights,
option or other employee benefit plans or other commitments or understandings of
any character to which the Company is a party relating to the issuance, sale,
purchase, redemption, conversion, exchange, registration, voting or transfer of
any shares of Common Stock, Preferred Stock or other securities of the Company.
The names of the record holders of all such warrants, options, puts, calls and
rights, and the names of the parties to all such agreements, arrangements,
plans, commitments or understandings, are set forth on SCHEDULE 4.2(a). All of
the outstanding shares of Company Common Stock and Preferred Stock are duly
authorized and validly issued and fully paid and nonassessable, free of any
preemptive or subscription rights and free and clear of all Encumbrances (except
as set forth in SCHEDULE 4.2(a)).
(b) As of the date hereof, the authorized capital stock of
Holdings consists of (i) 45,200,000 shares of common stock, par value $.01 per
share (the "COMMON STOCK"), (ii) 26,000,000 shares of Class A stock, par value
$.01 per share (the "CLASS A STOCK"), (iii) 19,000,000 shares of Class C stock,
par value $.01 per share (the "CLASS C STOCK"), and (iv) 200,000 shares of Class
D stock, par value $.01 per share (the "CLASS D STOCK"), of which 25,567,800
shares of Class A Stock are currently outstanding, 6,128,197 shares of Class C
Stock are currently outstanding (excluding 68,455 shares held by the Company as
treasury shares), 200,000 shares of Class D Stock are currently outstanding, and
no shares of Common Stock are currently outstanding. Options to purchase
5,032,899 shares of Class C Stock (representing all of the Holdings Options) are
outstanding pursuant to Stock Option Agreements entered into between Holdings
and certain of the Company's management pursuant to the Simmons Holdings, Inc.
1996 Management Stock Incentive Plan, dated as of March 22, 1996, and certain
additional option agreements (collectively, the "HOLDINGS OPTION PLANS"). The
number of shares of Class C Stock subject to and the exercise prices of the
Holdings Options are set forth on SCHEDULE 4.2(b). None of the issued and
outstanding shares of capital stock issued by Holdings have been issued in
violation of, or are subject to, any preemptive or any subscription rights.
Except for this
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Agreement, the Holdings Option Plans and the Stockholders' Agreement, and except
as disclosed on SCHEDULE 4.2(b), there are no agreements, arrangements,
warrants, options, puts, calls, rights, option or other employee benefit plans
or other commitments or understandings of any character to which the Holdings is
a party relating to the issuance, sale, purchase, redemption, conversion,
exchange, registration, voting or transfer of any shares of capital stock or
other securities of the Holdings. The names of the record holders of all such
warrants, options, puts, calls and rights, and the names of the parties to all
such agreements, arrangements, plans, commitments or understandings, are set
forth on SCHEDULE 4.2(b). All of the shares of Class C Stock subject to issuance
pursuant to the Holdings Option Plans upon exercise of the Holdings Options
shall, upon issuance on the terms and conditions specified in the instruments
pursuant to which the shares are issuable, be duly authorized, validly issued,
fully paid and nonassessable. All of the outstanding shares of capital stock
issued by Holdings are duly authorized and validly issued and fully paid and
nonassessable, free of any preemptive or subscription rights (except as set
forth in SCHEDULE 4.2(b)).
SECTION 4.3. SUBSIDIARIES. (a) SCHEDULE 4.3 contains a list of
(i) each Subsidiary as of the date hereof and (ii) Person (other than any
Subsidiary) in which Holdings or the Company owns, directly or indirectly, at
least 10% of the voting securities or other equity interests. SCHEDULE 4.3
contains (A) the name, jurisdiction of incorporation or organization, authorized
and outstanding shares or other equity capital and percentage of outstanding
shares or other equity interests of each of the Subsidiaries owned, directly or
indirectly, of record by Holdings or the Company, and (B) to the knowledge of
the Holdings and the Company, the name of the owner and the number and
percentage of outstanding shares or other equity interests of each of the
Subsidiaries owned of record by any other person.
(b) Except as set forth on SCHEDULE 4.3, each of the
Subsidiaries is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction of its incorporation, and is duly
qualified to transact business as a foreign corporation and is in good standing
in each of the jurisdictions listed in SCHEDULE 4.3, which are the only
jurisdictions in which the ownership or leasing of its properties or the conduct
of its business requires such qualification (except where the failure to so
qualify would not have a Material Adverse Effect). Each of the Subsidiaries has
all requisite corporate power to own or lease and to operate and use its
properties and assets and to carry on its business as now conducted.
(c) All of the outstanding capital stock of each of the
Subsidiaries has been duly authorized and validly issued and is fully paid and
nonassessable. Except as disclosed on SCHEDULE 4.3, there are no agreements,
arrangements, options, warrants, puts, calls, rights, option or other employee
benefit plans or other commitments or understandings of any character relating
to the issuance, sale, purchase, redemption, conversion, exchange, registration,
voting or transfer of any capital stock or other securities of any of the
Subsidiaries. Either Holdings, the Company or a Subsidiary owns directly the
amount of shares of capital stock of each of the Subsidiaries set forth on
SCHEDULE 4.3 as being owned by them, free of preemptive and any subscription
rights and from all Encumbrances, other than Permitted Encumbrances.
SECTION 4.4. CORPORATE AUTHORITY. (a) Each of Holdings and the
Company has all requisite corporate power and authority to execute and deliver
this Agreement, to consummate the transactions, subject to the conditions set
forth herein, contemplated hereby and to comply
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with the terms, conditions and provisions hereof. The execution, delivery and
performance of this Agreement by Holdings and the Company have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by each of Holdings and the Company and constitutes, and
each other instrument contemplated hereby or thereby, when executed and
delivered by Holdings or the Company, as appropriate, will constitute the valid
and binding obligation of Holdings or the Company, as the case may be,
enforceable in accordance with its terms. The provisions of Section 203 of the
Delaware General Corporation Law are not and will not be applicable to the
transactions contemplated by this Agreement or to any other "business
combination" (as defined therein) involving MergerCo or any of its "affiliates"
or "associates" (as such terms are defined therein).
(b) Except as set forth in SCHEDULE 4.4, neither the execution
and delivery by Holdings or the Company of this Agreement or of any of the other
instruments contemplated hereby, nor the consummation by Holdings or the Company
of any of the transactions contemplated hereby, nor compliance by Holdings or
the Company with or fulfillment thereby of the terms, conditions and provisions
hereof will:
(i) violate any provision of Holdings', the
Company's or any Subsidiary's charter or bylaws;
(ii) result in the acceleration of, or entitle
any party to accelerate (whether after the giving of notice or lapse of
time or both), any debt obligation of Holdings, the Company or any
Subsidiary in excess of $3,000,000 in the aggregate;
(iii) violate, or result with giving of notice
or lapse of time or both in any violation of, or result in the creation
or imposition of, any Encumbrance upon any of the properties of
Holdings, the Company or any Subsidiary pursuant to any provision of,
any mortgage, lien, lease, agreement, Governmental Permit, item of
Intellectual Property, indenture, license, instrument, law, regulation,
order, arbitration award, judgment or decree to which Holdings, the
Company or any Subsidiary is a party or by which any of them or any of
their properties is bound, the effect of all of which violations,
creations and impositions would result in liability to Holdings, the
Company or any Subsidiary in excess of $3,750,000 in the aggregate;
(iv) constitute an event permitting
modification, amendment or termination of a mortgage, lien, lease,
agreement, Governmental Permit, item of Intellectual Property,
indenture, license, instrument, order, arbitration award, judgment or
decree to which Holdings, the Company or any Subsidiary is a party or
by which any of them or any of their properties is bound, which
modification(s), amendment(s) or termination(s) would result in
liability to Holdings, the Company or any Subsidiary in excess of
$3,750,000 in the aggregate; or
(v) require the approval, consent,
authorization or act of, or the making by Holdings, the Company or any
Subsidiary or any other Person, of any declaration, filing or
registration with any Person or any Governmental Body, except (A) as
provided by the New Jersey Industrial Site Recovery Act, (B) for such
federal and state securities laws requirements as will be satisfied
prior to the Effective Time, except
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to the extent that the failure to obtain any of the foregoing does not
result in a Material Adverse Effect.
SECTION 4.5. FINANCIAL STATEMENTS. SCHEDULE 4.5 contains true
and complete copies of (a) the consolidated balance sheet of the Company and its
Subsidiaries as of December 28, 1996 and the related statements of income, and
stockholders' equity and cash flow for the year then ended; (b) the consolidated
balance sheet of the Company and its Subsidiaries as of December 27, 1997 (the
"DECEMBER 1997 BALANCE SHEET") and the related statements of income and
stockholders' equity and cash flows for the year then ended, in the case of each
of clauses (a) and (b) as audited by, and accompanied by the opinion of, Coopers
& Lybrand L.L.P., independent certified public accountants; and (c) the
unaudited interim consolidated balance sheet of the Company and its Subsidiaries
as of March 28, 1998 (the "MARCH 1998 INTERIM BALANCE SHEET") and the related
interim statements of income, stockholders' equity and cash flows for the three
months then ended. The financial statements referred to in the preceding
sentence are herein referred to collectively as the "FINANCIAL STATEMENTS".
Subject, in the case of the March 1998 Interim Balance Sheet, to normal year-end
audit adjustments, all of the Financial Statements present fairly the financial
condition and results of operations of the Company and its consolidated
subsidiaries as of such dates and for such periods; such balance sheets and the
notes thereto disclose all liabilities, direct or contingent, of the Company and
its consolidated subsidiaries as of the dates thereof required to be disclosed
by generally accepted accounting principles; and such financial statements were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis except as specified in the notes thereto.
SECTION 4.6. OPERATIONS SINCE MARCH 28, 1998.
(a) Except as set forth in the Financial Statements, and
except for changes resulting from general industry and economic conditions and
changes that may result from announcement of the transactions contemplated by
this Agreement, since March 28, 1998 there has been no Material Adverse Effect.
(b) Except as described in SCHEDULE 4.6 or in any other
Schedule hereto and except for the transactions contemplated by this Agreement
or described herein, since March 28, 1998 each of Holdings and the Company has
conducted its business in the ordinary course and in conformity with past
practice and, without limiting the foregoing:
(i) Holdings, the Company and the Subsidiaries have not made
any capital expenditures or commitments for the acquisition or
construction of any assets characterized as "property and equipment" on
the Financial Statements exceeding $750,000 per item or exceeding
$3,000,000 in the aggregate;
(ii) there has been no declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock
of Holdings, the Company or any Subsidiary, other than dividends
declared by any wholly owned Subsidiary, and no issuance of any capital
stock of Holdings, the Company or any Subsidiary or of any securities
convertible into or exchangeable or exercisable for, or otherwise
representing any right to acquire, any such capital stock other than
issuances of Company Common Stock in connection with the conversion of
Series A Preferred Stock into Company Common Stock as permitted
pursuant to the terms of the Series A Preferred Stock, and
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issuances of Class C Stock in connection with the exchange of Company
Common Stock for Class C Stock as permitted pursuant to the terms of
the Company Common Stock as a result of the transactions contemplated
hereby;
(iii) neither Holdings, the Company nor any
Subsidiary has redeemed, repurchased, or otherwise acquired any of its
capital stock or securities convertible into or exchangeable or
exercisable for its capital stock or any other securities of Holdings,
the Company or any Subsidiary, nor entered into any agreement,
arrangement or other commitment to do so other than the acquisition by
the Company of Company Common Stock in connection with the conversion
of shares of Series A Preferred Stock permitted pursuant to the terms
of the Series A Preferred Stock and the acquisition by Holdings of
shares of Company Common Stock in connection with the exchange of
Company Common Stock into shares of Class C Stock as permitted pursuant
to the terms of the Company Common Stock;
(iv) neither Holdings, the Company nor any
Subsidiary has adopted or amended any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation
or other plan, agreement, trust fund or arrangement or other plan for
the benefit of its employees other than any such adoptions or
amendments as were in the ordinary course of business consistent with
past practices and which do not have a Material Adverse Effect;
(v) neither Holdings, the Company nor any
Subsidiary has granted any bonus or other special compensation or
increased compensation or benefits payable or to become payable to any
of their respective directors, officers or employees except, in the
case of employees, for increases, bonuses or special compensation in
the ordinary course of business consistent with past compensation
practice, or taken any action with respect to the grant or increase of
severance or termination pay or entered into any employment, consulting
or similar agreement;
(vi) neither Holdings, the Company nor any
Subsidiary has incurred any indebtedness for money borrowed except for
revolving credit borrowings, letters of credit and guarantees issued
under the Senior Credit Agreement;
(vii) neither Holdings, the Company nor any
Subsidiary has disposed of or acquired any assets or properties, other
than in the ordinary course of business;
(viii) neither Holdings , the Company nor any
Subsidiary has been the subject of any change in accounting methods,
principles or practice, except insofar as may have been required by a
change in generally accepted accounting principles;
(ix) there has been no damage, destruction or
similar loss to tangible property which has resulted in a Material
Adverse Effect; and
(x) neither Holdings, the Company nor any
Subsidiary has entered into any agreement, arrangement or
understanding, or otherwise resolved or committed, to do any of the
foregoing.
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SECTION 4.7. NO UNDISCLOSED LIABILITIES. Except as set forth
in SCHEDULE 4.7 or as is expressly set forth in any other Schedule to this
Agreement, neither Holdings, the Company nor any Subsidiary is subject to any
obligation or liability of any nature (whether accrued, absolute, contingent,
inchoate or otherwise, including, without limitation, unasserted claims), which
would individually or in the aggregate be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company but is not reflected on the December 1997 Balance Sheet or the notes
thereto, other than (i) obligations pursuant to or in connection with this
Agreement or the transactions contemplated hereby, (ii) liabilities and
obligations incurred in the ordinary course of business after December 27, 1997
or which are reflected on the March 1998 Interim Balance Sheet or the notes
thereto, and (iii) liabilities which do not have a Material Adverse Effect.
SECTION 4.8. TAXES.
(a) Except as set forth on SCHEDULE 4.8, Holdings, the Company
and each of the Subsidiaries have filed or caused to be filed all material
federal, state, foreign and local, tax returns, tax information returns,
reports, and estimates ("RETURNS"), for all taxable or reporting periods ending
at or before the Effective Time (taking into account applicable extension
periods) to the extent required to be filed by Holdings, the Company and each of
the Subsidiaries under the applicable federal, foreign, state or local law, at
or before the Effective Time; all Taxes shown to be due on such Returns have
been paid in full when due; and all such Returns are true, complete and accurate
in all material respects. As used in this Agreement, "TAXES" or "TAX" means all
taxes of any kind and any interest or penalties related thereto, including,
without limitation, net income, capital gains, gross receipts, franchise, or
withholding taxes validly imposed upon Holdings, the Company or any Subsidiary
with respect to such taxes.
(b) Except as set forth in SCHEDULE 4.8, there are no material
claims or investigations by any taxing authority pending or threatened against
Holdings, the Company or any Subsidiary for any past due Taxes for periods
ending prior to the Effective Time.
(c) Holdings, the Company and each Subsidiary have each (i)
withheld all material amounts required to be withheld from the wages of their
respective employees (if any), with respect to tax withholding and taxes due
from such employees under the Federal Insurance Contributions Act or any other
foreign, federal, state, or local unemployment tax laws for payroll periods
ending before the close of business on the day before the Effective Time, and
(ii) filed all material foreign, federal, state or local returns and reports
that were required by the applicable foreign, federal, state or local law to be
filed on or before the day before the Effective Time (taking into account
applicable extension periods) with respect to such withholding for such periods.
(d) None of Holdings, the Company or any Subsidiary is a
United States Real Property Holding Corporation (a "USRPHC") within the meaning
of Section 897 of the Code nor was a USRPHC on any "determination date" (as
defined in ss.1.897-2(c) of the regulations promulgated by the Treasury
Department pursuant to the Code (the "TREASURY REGULATIONS") that occurred in
the five-year period preceding the Effective Time.
SECTION 4.9. GOVERNMENTAL PERMITS. Holdings, the Company and
the Subsidiaries own, hold or possess all governmental licenses, franchises,
permits, privileges,
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immunities, approvals and other authorizations which are necessary for their
ownership, leasing, operation and use of their respective assets and properties
and which are required for their carrying on and conducting their respective
businesses as currently conducted (herein collectively called "GOVERNMENTAL
PERMITS"), except where the failure to own, hold or possess the same would not
have a Material Adverse Effect. Each of such material Governmental Permits is
valid, and in full force and effect and, to the knowledge of Holdings and the
Company, no suspension or cancellation of any of the same is threatened, except
for such suspensions or cancellations that would not have a Material Adverse
Effect. Except as set forth in SCHEDULE 4.9, no written notice of cancellation,
of default or of any dispute concerning any material Governmental Permit, or of
any event, condition or state of facts which constitutes or, after notice or
lapse of time or both, would constitute a breach or default under any material
Governmental Permit has been received by Holdings, the Company or any
Subsidiary, except for those that, singly or in the aggregate, would not have a
Material Adverse Effect. To the knowledge of Holdings and the Company, there are
no pending or proposed changes in permit requirements that would require
Holdings, the Company or any Subsidiary to make material additional monetary
payments in order to obtain, renew or comply with any material Governmental
Permit, except for those that would not in the aggregate have a Material Adverse
Effect.
SECTION 4.10. REAL PROPERTY. All real property of which
Holdings, the Company or any Subsidiary thereof is the record or beneficial
owner is identified on SCHEDULE 4.10 and is hereinafter referred to as the
"OWNED REAL PROPERTY". Except as stated in the policies of title insurance with
respect to such properties (copies of which have been delivered to MergerCo) or
as disclosed on SCHEDULE 4.10, Holdings, the Company or a Subsidiary, as the
case may be, holds good and marketable fee title to the Owned Real Property,
free of all Encumbrances which would have a Material Adverse Effect, but subject
to Permitted Encumbrances. Neither Holdings, the Company nor any Subsidiary has
heretofore made any title claims or has outstanding any title claims under any
policy of title insurance respecting the Owned Real Property. All improvements
on the Owned Real Property conform in all material respects to applicable zoning
and other land use ordinances and building codes and are in material compliance
with all applicable laws, statutes, rules, regulations and ordinances, except
where the failure to comply would not in the aggregate have a Material Adverse
Effect.
SECTION 4.11. REAL PROPERTY LEASES. The leases, subleases and
other agreements and documents with respect to real property which are
identified on SCHEDULE 4.11 constitute (a) the lease of the Company's
headquarters in Atlanta, Georgia, (b) the lease of all manufacturing facilities
of the Company and Subsidiaries other than those constituting Owned Real
Property, and (c) the lease of all other facilities material to Holdings, the
Company and the Subsidiaries and are hereinafter referred to as the "MATERIAL
LEASES". Correct and complete copies of the Material Leases have been delivered
to the MergerCo. Holdings, the Company or a Subsidiary, as the case may be,
holds good and valid leasehold title to each of the properties which are the
subject of the Material Leases, in each case free of all Encumbrances, except
for liens for (x) Taxes not yet due and payable or which are being contested in
good faith, (y) Encumbrances which neither materially interfere with the
intended use of the property which is the subject of the Material Lease nor have
a material adverse effect upon the use by Holdings, the Company or any
Subsidiary of such property or the business currently conducted thereon, and (z)
Permitted Encumbrances. To the actual knowledge of the Company, except as
identified on
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SCHEDULE 4.11, there are no existing defaults under any Material Lease, and no
event has occurred which with notice or lapse of time, or both, could constitute
an event of default under any Material Lease, which default would result in a
Material Adverse Effect. The transactions contemplated by this Agreement will
not result in a default under any Material Lease (which default would have a
Material Adverse Effect), except for Material Leases requiring consent of the
Landlord to the transactions contemplated by this Agreement.
SECTION 4.12. INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.12 contains a complete and correct list of all
United States and foreign patents, patent applications, registered trademarks,
trademark applications, registered service marks, service mark applications,
trade names and registered copyrights which are material to the business of
Holdings, the Company and the Subsidiaries taken as a whole (the "INTELLECTUAL
PROPERTY"), including, if applicable, (i) the date of issuance or registration,
(ii) the serial, patent or registration number, (iii) the date of application,
(iv) the expiration date and (v) the country of registration of such items of
Intellectual Property and any material licenses thereunder.
(b) Except as set forth in SCHEDULE 4.12, the right, title or
interest of Holdings, the Company and the Subsidiaries in each item of
Intellectual Property is free and clear of Encumbrances which would have a
Material Adverse Effect.
(c) Except as set forth in SCHEDULE 4.12, none of Holdings,
the Company nor any Subsidiary have received written notice that is still
pending to the effect that Holdings, the Company or any Subsidiary has infringed
upon any patent, trademark, service mark, trade name, copyright, brand name,
logo, symbol or other intellectual property right of any third party; nor is
there any action pending or, to Holdings' knowledge, threatened, against
Holdings, the Company or any Subsidiary claiming that Holdings, the Company or
any Subsidiary has, whether directly, contributorily or by inducement, infringed
any trade secret or misappropriated any other intellectual property which
infringement, notice, charge, claim, or assertion, as the case may be, would
have a Material Adverse Effect.
(d) Except as set forth in SCHEDULE 4.12, none of Holdings,
the Company nor any Subsidiary have sent or otherwise communicated to another
person any notice, charge, claim or other assertion of, and neither Holdings nor
the Company has any knowledge of, any present, impending or threatened patent,
trademark or copyright infringement of any Intellectual Property which
infringement would have a Material Adverse Effect.
SECTION 4.13. LABOR RELATIONS. Except as described in SCHEDULE
4.13, there are no pending labor grievances or unfair labor practice claims or
charges against Holdings, the Company or any Subsidiary which would have a
Material Adverse Effect. Except as described in SCHEDULE 4.13, to Holdings' and
the Company's knowledge there are no organizing efforts by any union or other
group seeking to represent any employees of Holdings, the Company or any
Subsidiary. There is not pending any decertification which would result in
withdrawal liability to any Multiemployer Plan, except such efforts, petitions
or decertifications which would not have a Material Adverse Effect.
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SECTION 4.14. EMPLOYEE BENEFIT PLANS.
(a) The term "EMPLOYEE PLAN" shall mean any pension,
retirement, profit-sharing, deferred compensation, stock purchase, stock option,
bonus or incentive plan, any medical, vision, dental or other health plan, any
life insurance plan, vacation, severance, disability or any other employee
benefit plan, program, policy, or arrangement, whether written, unwritten,
formal or informal, including, without limitation, any "EMPLOYEE BENEFIT PLAN"
as defined in Section 3(3) of ERISA, any employee benefit plan covering any
employees of Holdings, the Company, any domestic Subsidiary, any Subsidiary in
any foreign country or territory (a "FOREIGN PLAN") or any other entity which,
together with Holdings, the Company or any Subsidiary constitutes a single
employer within the meaning of Section 414 of the Code (hereinafter collectively
referred to as the "COMPANY GROUP") to which any member of the Company Group has
any outstanding present or future obligations to make payments to or to
contribute to, whether voluntary, contingent, or otherwise, is a party or is
bound and under which any employees of the Company Group are eligible to
participate or derive a benefit, except any government-sponsored program or
government-required benefit. SCHEDULE 4.14 lists each Employee Plan which is
presently in effect, or which was previously in effect (if it may result in a
material liability), and identifies each Employee Plan (other than a Foreign
Plan) which is a defined benefit plan as defined in Section 3(35) of ERISA (a
"DEFINED BENEFIT PLAN") or which is a multiemployer plan within the meaning of
Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN").
(b) As of the date hereof:
(i) Each of the Employee Plans that purports
to be qualified under Section 401(a) of the Code is qualified and any
trusts under such Employee Plans are exempt from income tax under
Section 501(a) of the Code or will be qualified and exempt by a
submission of such plan and trust for an IRS determination in a timely
fashion, if not already submitted, and the timely making of such
amendments as may be required as a condition for issuance of a
favorable determination. Each Employee Plan intended to be qualified
under Section 401 of the Code has been administered in all material
respects according to its terms, and neither the Company Group, nor any
fiduciary of any Employee Plan has done anything which would adversely
affect its qualified status or the qualified status of the related
trusts. The Employee Plans and each member of the Company Group are in
material compliance with all other laws (including, without limitation,
ERISA and the Code), orders, government rules and regulations, and any
collective bargaining agreement applicable to Employee Plans. All
material reports and material disclosures relating to the Employee
Plans required to be filed with or furnished to governmental agencies,
participants, or beneficiaries prior to the Closing have been or will
be filed or furnished in a timely manner and in accordance with
applicable law. Other than routine claims for benefits submitted by
participants or beneficiaries, there is no litigation, legal action,
investigation, claim, or proceeding pending or, to Holdings', the
Company's or any Subsidiary's knowledge, threatened against any
Employee Plan or against any fiduciary of any Employee Plan.
(ii) With respect to any Employee Plan, no
prohibited transaction (within the meaning of Section 406 of ERISA
and/or Section 4975 of the Code) exists which could subject the Company
Group to any civil penalty assessed pursuant to Section
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502(1) of ERISA or tax imposed by Section 4975 of the Code. Neither any
member of the Company Group, nor any administrator or fiduciary of any
Employee Plan (or agent of any of the foregoing) has engaged in any
transaction or acted or failed to act in a manner which is likely to
subject any member of the Company Group to any liability for a breach
of fiduciary or other duty under ERISA or any other applicable law
which would have a Material Adverse Effect. To the extent applicable,
the representations and warranties contained in this paragraph (ii) are
true and accurate with respect to each Multiemployer Plan.
(iii) No Defined Benefit Plan has been
terminated or partially terminated after September 1, 1974, except as
set forth on SCHEDULE 4.14. Each Defined Benefit Plan listed as
terminated on SCHEDULE 4.14 has met the requirements for standard
termination of single-employer plans contained in Section 4041(b) of
ERISA to the extent such requirements were applicable to such Defined
Benefit Plans.
(iv) Except as provided in SCHEDULE 4.14, no
member of the Company Group has completely or partially withdrawn from
any Multiemployer Plan. No member of the Company Group has suffered a
70% decline in "contribution base units" (within the meaning of Section
4205(b) (1) (A) of ERISA) in any plan year beginning after 1979. No
termination liability to the PBGC or withdrawal liability to any
Multiemployer Plan that is material in the aggregate has been or is
expected to be incurred with respect to any Employee Plan by any member
of the Company Group. The PBGC has not instituted, and is not expected
to institute, any proceedings to terminate any Employee Plan. Except as
provided in SCHEDULE 4.14, there has been no reportable event (within
the meaning of Section 4043(b) of ERISA) with respect to any Employee
Plan.
(c) Each member of the Company Group has made full and timely
payment of all amounts required under the terms of each of the Employee Plans
that are employee pension benefit plans (as defined in Section 3(2) of ERISA),
including the Multiemployer Plans, to have been paid as contributions to such
plan. No accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
Employee Plan. Each member of the Company Group has made full and timely payment
of, or has accrued pending full and timely payment, all amounts which are
required under the terms of each Employee Plan to be paid as a contribution to
each such Employee Plan. The assets of each Defined Benefit Plan are sufficient
to provide all of the benefits under each such Defined Benefit Plan, except as
set forth on SCHEDULE 4.14.
(d) Each member of the Company Group has complied in material
respects with the continuation coverage requirements of Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(e) Except as provided in SCHEDULE 4.14, no member of the
Company Group has any outstanding, present or future obligations to make payment
to any insurers for reserves of any Employee Plan which is an employee welfare
or benefit plan (within the meaning of Section 3(1) of ERISA) provided under a
minimum premium arrangement with an insurer.
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(f) Neither the consummation of the transactions contemplated
by this Agreement nor its execution will accelerate or increase any liability
under any Employee Plan because of an acceleration or increase of any of the
rights or benefits to which employees may be entitled thereunder. Prior to
Closing, except as contemplated by this Agreement, no member of the Company
Group shall amend any Employee Plan, except to the extent necessary to maintain
compliance with the Code or ERISA, increase any benefits or rights under any
Employee Plan, or adopt any new plan, program, policy, or arrangement which, if
it existed as of the date hereof, would constitute an Employee Plan.
(g) No state of facts exists with respect to the Foreign Plans
which would have a Material Adverse Effect.
SECTION 4.15. CONTRACTS.
(a) Except as set forth in SCHEDULE 4.15 or as expressly set
forth herein or in any other Schedule to this Agreement, neither Holdings, the
Company nor any Subsidiary is a party to, nor bound by, nor are any of their
respective properties subject to, any written or oral agreement described as
follows:
(i) any contract (except purchase orders that
involve the purchase or sale of goods) with a value, or involving
payments by Holdings or the Company, of more than $1,500,000 and which
is not cancelable within six months after the date of notice of
cancellation without liability upon such notice given at or after the
Effective Time;
(ii) any contract for the employment of any
officer or employee (other than, with respect to any employee,
contracts which are terminable without liability upon notice of 30 days
or less and do not provide for any further payments following such
termination) or with a former officer or employee pursuant to which
payments by Holdings, the Company or by a Subsidiary may be required to
be made at any time following the date hereof;
(iii) any mortgage or other form of secured
indebtedness, other than indebtedness incurred in connection with the
transactions contemplated hereby, or any other indebtedness for money
borrowed;
(iv) any unsecured debentures, notes or
installment obligations or other instruments for or relating to any
unsecured borrowing of money by Holdings, the Company or a Subsidiary,
or any letter of credit issued to secure any obligation of a third
party other than borrowings less than $1,500,000 in the aggregate; or
(v) any agreement containing any covenant not
to compete.
(b) Complete and correct copies of all contracts, agreements
and other instruments referred to in SCHEDULE 4.15 have heretofore been made
available to MergerCo by Holdings or the Company, as the case may be.
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(c) Except as disclosed in SCHEDULE 4.15, none of Holdings,
the Company, any Subsidiary, or, to Holdings' and the Company's knowledge, any
third party, is in default under, and no event has occurred which with notice or
lapse of time, or both, could reasonably be expected to result in a material
default under, or violation of, any contract, agreement or instrument identified
in subsection (a) above, which defaults and violations in the aggregate would
have a Material Adverse Effect.
SECTION 4.16. NO VIOLATION, LITIGATION OR REGULATORY ACTION.
(a) Holdings, the Company and the Subsidiaries have complied
in all material respects in the conduct of their respective businesses with all
material foreign, federal, state and local laws, except failures to comply which
would not have a Material Adverse Effect. Without limiting the foregoing, and
except as set forth in SCHEDULE 4.16, none of Holdings, the Company or the
Subsidiaries have been notified in writing that they may be potentially
responsible parties under or otherwise in material violation of or material
noncompliance with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. section 9601 ET SEQ., the Resource Conservation
and Recovery Act, 42 U.S.C. section 6901, the Federal Water Pollution Control
Act, 33 U.S.C. section 1201, the Clean Water Act, 33 U.S.C. section 1321, the
Clean Air Act, 42 U.S.C. section 7401, and the Toxic Substances Control Act, 15
U.S.C. section 2601, in each case, as amended from time to time, or any other
federal, state or local law, ordinance or regulation dealing with the protection
of human health, natural resources and/or the environment, and there are no
events or facts known to Holdings, the Company or any Subsidiary that indicate
that Holdings, the Company or the Subsidiaries will be a "potentially
responsible party", including without limitation, any disposal, release, burial
or placement of hazardous or toxic substances, pollutants, contaminants,
petroleum or gas products or asbestos containing materials by Holdings, the
Company or any Subsidiary or on properties owned or leased by Holdings, the
Company or any Subsidiary.
(b) Except as set forth in SCHEDULE 4.16, there is no action,
suit, proceeding or investigation pending or, to Holdings' or the Company's
knowledge, threatened against Holdings, the Company or any Subsidiary which if
adversely determined could reasonably be expected to result in damages in excess
of $1,500,000 that are not covered by insurance, nor has Holdings, the Company
or any Subsidiary entered into or received any consent decree, compliance order
or administrative order (whether relating to environmental protection or
otherwise); and neither Holdings, the Company nor any Subsidiary is in default
(or would be in default with the giving of notice or lapse of time or both) in
respect of any judgment, order, writ, injunction or decree of any court or any
Governmental Body which defaults in the aggregate would have a Material Adverse
Effect.
SECTION 4.17. INSURANCE. SCHEDULE 4.17 is a complete and
correct schedule of all currently effective material insurance policies or
binders of insurance or programs of self-insurance which relate to the business
of Holdings, the Company and the Subsidiaries (excluding insurance funding
Employee Plans which are set forth on Schedule 4.14). The coverage under each
such policy and binder is in full force and effect, and no notice of
cancellation or nonrenewal with respect to, or disallowance of any claim under,
or material increase of premium for, any such policy or binder has been received
by Holdings, the Company or any Subsidiary,
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except such notices, disallowances or increases which would in the aggregate not
have a Material Adverse Effect.
SECTION 4.18. CERTAIN TRANSACTIONS OR ARRANGEMENTS. To
Holdings' and the Company's knowledge, except as described on SCHEDULE 4.18 and
other than pursuant to employee benefit arrangements, employment agreements or
arrangements and for participation in or pursuant to the ESOP or as expressly
contemplated by this Agreement, no securityholder, officer or director of
Holdings or the Company (and no Person with whom any such securityholder,
officer or director has any direct or indirect relation by blood, marriage or
adoption) and no Affiliate or associate (as such term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended), of any of
the foregoing is presently, directly or indirectly, a party to any agreement,
arrangement or understanding with Holdings, the Company or any of the
Subsidiaries (other than arising out of the employment at will of that
securityholder by the Company), including without limitation: (a) any contract,
agreement, understanding, commitment or other arrangement providing for the
furnishing of services or rental of real or personal property to or from, or
otherwise relating to the business or operations of, Holdings, the Company or a
Subsidiary; (b) any loans or advances to or from the Company or any of the
Subsidiaries; (c) any arrangement pursuant to which Holdings, the Company or any
Subsidiary or Affiliate thereof may have any obligation or liability whatsoever;
and (d) any transaction of a kind which would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated by the Securities and
Exchange Commission, if the Company were subject thereto.
SECTION 4.19. CUSTOMER AND SUPPLIER RELATIONSHIPS. Except as
set forth on SCHEDULE 4.19, to the knowledge of Holdings and the Company, the
relationships of the Company with its material customers (including franchisees
and authorized dealers) and suppliers are, in the aggregate, satisfactory, and
neither Holdings nor the Company is aware of any fact or circumstance (including
the entering into of this Agreement) that would cause any change in such
relationships, which change would have a Material Adverse Effect.
SECTION 4.20. FINDERS. Neither Holdings, the Company nor any
party acting on its behalf has paid or become obligated to pay any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated by this Agreement, except (i) Goldman, Sachs & Co.,
who have been retained by Holdings and the Company to serve as financial
advisors in connection with the transactions contemplated hereby, and (ii) those
advisors retained by Holdings or the Company which are identified in SCHEDULE
4.20.
SECTION 4.21. HOLDINGS ASSETS AND LIABILITIES. Holdings (i) is
a holding company whose only assets are the shares of capital stock it owns in
the Company, (ii) has no liabilities other than expenses in Section 6.9(b)
related to this Agreement and (iii) has conducted no operations since its
formation other than those incidental to its ownership of the Company Common
Stock.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As an inducement to the Company and Holdings to enter into
this Agreement and to consummate the transactions contemplated hereby, MergerCo
represents and warrants to the Company and Holdings as follows:
SECTION 5.1. ORGANIZATION OF MERGERCO. MergerCo is a
corporation duly organized, legally existing and in good standing under the laws
of the jurisdiction of its formation and has full corporate power and authority
to own or lease and to operate and use its properties and assets and to carry on
its business as now conducted. Prior to the date hereof, true and complete
copies of the Certificate of Incorporation and bylaws of MergerCo have been
delivered to Holdings or the Company, and such Certificate has not been amended
to date.
SECTION 5.2. AUTHORITY.
(a) MergerCo has the requisite power and authority to execute
and deliver this Agreement and all of the other instruments contemplated hereby
to be executed by it, to consummate the transactions contemplated hereby and to
comply with the terms, conditions and provisions hereof. The execution, delivery
and performance of this Agreement by MergerCo has been duly authorized and
approved by all necessary corporate action on its behalf and do not require any
further authorization or consent of MergerCo or its stockholders. This Agreement
is, and each other instrument of MergerCo contemplated hereby to be executed by
it will be, the legal, valid and binding obligation of MergerCo, enforceable
against MergerCo in accordance with its terms.
(b) The execution and delivery by MergerCo of this Agreement
or any of the other instruments contemplated hereby, the consummation by
MergerCo of the transactions contemplated hereby and the compliance by MergerCo
with, or fulfillment by MergerCo of the terms, conditions and provisions hereof,
will not:
(i) conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination or
cancellation or a loss of rights under the charter, by-laws, trust
agreement, partnership agreement or certificate of partnership or other
constitutive documents of the MergerCo or any note, instrument,
agreement, mortgage, lease, license, franchise, Governmental Permit or
judgment, order, award or decree to which MergerCo is a party, to which
any of its properties are subject, or by which MergerCo is bound; or
(ii) require the approval, consent, authorization or act of,
or the making by MergerCo of any declaration, filing or registration
with, any third Person or any Governmental Body, except as provided
under the New Jersey Industrial Site Recovery Act.
SECTION 5.3. NO FINDER. Neither MergerCo nor any party acting
on its behalf has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary for or on account of the transactions
contemplated by this Agreement.
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SECTION 5.4. ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding or investigation pending, or to the knowledge of MergerCo,
threatened, against MergerCo which might adversely affect or restrict MergerCo's
ability to consummate the transactions contemplated by this Agreement.
SECTION 5.5. FINANCIAL CAPABILITY. Assuming that the financing
contemplated by the commitment letters attached as SCHEDULE 5.5 (the "Commitment
Letters") is consummated in accordance with the terms thereof, the funds to be
borrowed and/or provided thereunder, together with MergerCo's, Holdings and
Company's available cash, will provide sufficient funds to satisfy its
obligations hereunder. As of the date of this Agreement, MergerCo is not aware
of any facts or circumstances that create a reasonable basis for MergerCo to
believe that MergerCo will not be able to obtain financing in accordance with
the terms of the Commitment Letters.
SECTION 5.6. NO OUTSIDE RELIANCE. MergerCo has not relied and
is not relying upon any statement or representation not made in this Agreement
or a Schedule hereto or contemplated hereby or any certificate or document
required to be provided by Holdings or the Company pursuant to this Agreement.
SECTION 5.7. GOVERNMENTAL CONSENTS. No consent, approval or
authorization of, or declaration, filing or registration with, any governmental
or regulatory authority (other than filings pursuant to the H-S-R Act) is
required to be made or obtained by MergerCo in connection with the execution, of
this Agreement.
SECTION 5.8. MERGERCO CAPITAL STOCK. The Shares of common
stock of MergerCo to be issued to the sole stockholder of MergerCo prior to the
Effective Time will be issued for a purchase price of $7.00 cash per share.
SECTION 5.9. CERTAIN TRANSACTIONS OR ARRANGEMENTS. Except as
described on SCHEDULE 5.9, except for arrangements and agreements disclosed to
the Trustee or as expressly contemplated by this Agreement, immediately
following the Closing neither MergerCo, nor its Affiliates will be, directly or
indirectly, a party to any agreement, arrangement or understanding with
Holdings, the Company or any of the Subsidiaries.
ARTICLE VI
ADDITIONAL COVENANTS
The respective parties hereto covenant and agree to take, or
to cause Holdings or the Company to take, the following actions between the date
hereof and the Effective Time:
SECTION 6.1. INVESTIGATION OF THE COMPANY BY MERGERCO.
Holdings and the Company shall afford to the officers, employees and authorized
representatives of MergerCo (including, without limitation, independent public
accountants, attorneys, environmental consultants and engineers) and to the
employees and authorized representatives of MergerCo financing sources,
reasonable access during normal business hours to the offices, properties,
employees and business and financial records (including computer files,
retrieval programs and similar documentation) of Holdings, the Company and the
Subsidiaries to the extent MergerCo
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shall reasonably deem necessary or desirable and shall furnish to MergerCo or
its authorized representatives, such additional information concerning Holdings,
the Company, the Subsidiaries and their properties, assets, businesses and
operations as shall be reasonably requested, including all such information as
shall be necessary to enable MergerCo or its representatives to verify the
accuracy of the representations and warranties contained in Article IV, to
verify that the covenants of Holdings and the Company in Section 6.3 have been
complied with, and to determine whether the conditions set forth in Article VII
have been satisfied. MergerCo covenants that such investigation shall be
conducted in such a manner as not to interfere unreasonably with the operations
of Holdings or the Company. No investigation by MergerCo or its representatives
hereunder shall affect the representations and warranties of Holdings or the
Company. Nothing in this section shall be interpreted so as to grant MergerCo
the right to perform invasive or subsurface investigations of the properties.
SECTION 6.2. CERTAIN AGREEMENTS. Each of the parties hereto
shall use his or its commercially reasonable best efforts to consummate the
transactions contemplated by this Agreement. Each party shall promptly notify
the others of any action suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Holdings and the
Company shall promptly notify MergerCo of any lawsuit, claim, proceeding or
investigation that may be threatened, brought, asserted or commenced after the
date hereof against Holdings, the Company or any Subsidiary that would have been
required to be included on SCHEDULE 4.16, and, in the case of any of the
foregoing pending on the date hereof, of any material development with respect
thereto. Each of Holdings and the Company on the one hand, and MergerCo on the
other, shall give prompt notice to the other parties of (a) any notice or other
communication received by any such Person from any Governmental Body or third
Person alleging that the consent of such Governmental Body or third Person is or
may be required in connection with the transactions contemplated by this
Agreement, (b) the occurrence of any event or circumstance which could have a
Material Adverse Effect, and of which such party has knowledge, or (c) the
breach of any material representation, warranty, covenant or other material
agreement of any such party.
SECTION 6.3. OPERATIONS PRIOR TO THE EFFECTIVE TIME.
(a) Subject to Section 6.3(b) hereof, Holdings and the Company
shall, and shall cause each of the Subsidiaries to, operate and carry on their
businesses only in the ordinary course, except as otherwise expressly
contemplated by this Agreement. In furtherance and not in limitation of the
foregoing, Holdings and the Company shall, and shall cause each of the
Subsidiaries to, use reasonable efforts consistent with good business practice
to (i) keep and maintain their respective assets and properties in normal
operating condition and repair, (ii) maintain the business organization of
Holdings, the Company and the Subsidiaries intact and (iii) preserve the
goodwill of the suppliers, contractors, licensors, employees, customers,
distributors and others having business relations with them.
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(b) Except as contemplated by this Agreement, neither Holdings
nor the Company shall, and they shall not cause or allow any Subsidiary to,
without the express prior written approval of MergerCo (which shall not be
unreasonably withheld):
(i) amend its Certificate of Incorporation or
Bylaws (or other comparable charter or organizational documents);
(ii) issue or agree to issue (by the issuance
or granting of options, warrants or rights to purchase any capital
stock issued thereby), any securities exchangeable or exercisable for
or convertible into such capital stock, or other securities, except in
connection with the conversion of Series A Preferred Shares and Company
Common Stock as permitted pursuant to the terms thereof, or the
exercise of Company Options or Holdings Options granted prior to the
date hereof pursuant to the Option Plans, the Holdings Option Plans or
the ESOP;
(iii) split, combine or reclassify any shares
of capital stock or declare, set aside or pay any dividends or make any
other distributions (whether in cash, stock or other property) in
respect of such shares;
(iv) issue, transfer, sell or deliver any
shares of its capital stock (or securities convertible into or
exchangeable or exercisable for, with or without additional
consideration, such capital stock) or any other interest therein,
except in connection with exercise of Company Options or Holdings
Options granted prior to the date hereof pursuant to the Option Plans
and the Holdings Option Plans, and for issuances from Treasury of not
more than 16,000 shares of Class C Stock, or grants of Holdings Options
(provided that in the aggregate the total number of Holdings Options
does not exceed the number set forth in Section 4.2(b)) to employees of
the Company;
(v) other than pursuant to the terms of the
ESOP, redeem, purchase or otherwise acquire for any consideration (A)
any outstanding shares of its capital stock or securities carrying the
right to acquire, or which are convertible into or exchangeable or
exercisable for, with or without additional consideration, such stock,
(B) any other securities of Holdings, the Company or any Subsidiary, or
(C) any interest in any of the foregoing, except for such repurchases
or redemptions of Class C Stock from employees of the Company in
connection with, or as a result of, the termination of such employees;
(vi) incur any indebtedness for borrowed
money, except revolving credit borrowings in the ordinary course of
business under the Senior Credit Agreement and otherwise not in excess
of $3,750,000 in the aggregate, or amend, supplement or otherwise
modify any of the terms of the Senior Credit Agreement or any other
instrument or agreement evidencing indebtedness for borrowed money;
(vii) make any acquisition or disposition of
stock or assets of any entity not in the ordinary course of business
and in excess of $1,500,000;
(viii) incur capital expenditures not otherwise
provided for in applicable budgets or in connection with the projects
referenced on SCHEDULE 4.6, and which expenditures are in excess of
$1,500,000;
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(ix) merge or consolidate with any corporation
or other entity;
(x) enter into any employment or similar
contract with, or materially increase the compensation payable to, any
officer or employee, except in the ordinary course of business;
(xi) alter in any respect its practices and
policies relating to the payment and collection, as the case may be, of
accounts payable and accounts receivable;
(xii) except as contemplated by or described in
this Agreement, adopt, amend in any material respect or terminate any
Employee Plan, severance plan or collective bargaining agreement or
make awards or distributions under any Employee Plan, except awards or
distributions to any participant or employee in the ordinary course and
relating to the Holdings Option Plans;
(xiii) create, assume or suffer to be incurred
any Encumbrance of any kind on any of its properties or assets or the
properties or assets of any Subsidiary other than (A) Encumbrances in
the ordinary course of business consistent with past practices, as long
as the creation, assumption or sufferance thereof does not interfere
with, hinder or delay the transactions contemplated hereby and (B)
Permitted Encumbrances;
(xiv) amend, supplement or modify any contract
set forth on SCHEDULE 4.15 or relinquish any material right or
privilege of Holdings, the Company or any Subsidiary, except, in the
case of any contract set forth on SCHEDULE 4.15, for any such
amendments, supplements or modifications which are not materially
adverse to Holdings or the Company; or
(xv) agree, commit or resolve to do or
authorize any of the foregoing.
(c) Prior to the Closing, Holdings or the Company and the
Subsidiaries shall:
(i) promptly comply with all filing
requirements (including without limitation, pursuant to the H-S-R Act)
which foreign, federal or state law may impose on Holdings, the Company
or any Subsidiary with respect to the transactions contemplated hereby;
and
(ii) use their reasonable efforts to obtain
any consent, authorization or approval of, or exemption by, any
Governmental Body or other third Person, including without limitation,
landlords and lenders and those persons (other than Holdings, the
Company and the Subsidiaries) who are parties to the agreements
described on SCHEDULE 4.4 hereto, required to be obtained or made by it
in connection with the transactions contemplated hereby.
SECTION 6.4. NO PUBLIC ANNOUNCEMENT. Prior to the Effective
Time, neither MergerCo, Holdings, nor the Company shall, without the approval of
MergerCo and Holdings, make any press release or other public announcement
concerning the transactions contemplated by this Agreement, except as and to the
extent that any such party shall be so obligated by law, in which case MergerCo
and Holdings shall be advised, and MergerCo and Holdings shall use their
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reasonable efforts to cause a mutually agreeable release or announcement to be
issued. On the date hereof and at the Effective Time, the parties shall issue a
joint press release which shall be reasonably acceptable to Holdings and
MergerCo.
SECTION 6.5. GOVERNMENTAL FILINGS; CONSENTS.
(a) The Sellers, Holdings, the Company and MergerCo shall
cooperate with each other in filing any necessary applications, reports or other
documents with any federal or state agencies, authorities or bodies (domestic or
foreign) having jurisdiction with respect to this Agreement and the transactions
contemplated hereby, and in seeking necessary consultation with and prompt
favorable action by, including required consents of, any such agencies,
authorities or bodies.
(b) In furtherance and not in limitation of the foregoing,
MergerCo shall use its best efforts to resolve such objections, if any, as may
be asserted with respect to the transactions contemplated by this Agreement
under any antitrust, competition or trade regulatory laws, rules or regulations
of any Governmental Body (including the H-S-R Act, the "Antitrust Laws"). If any
suit is instituted challenging any of the transactions contemplated by this
Agreement as violative of any Antitrust Law, MergerCo shall take such action
(including, without limitation, agreeing to hold separate or to divest any of
the businesses, product lines or assets of MergerCo or any of its Affiliates or
of any of Holdings, the Company, or the Subsidiaries or their Affiliates) as may
be required (i) by the applicable Governmental Body (including, without
limitation, the Antitrust Division of the United States Department of Justice or
the Federal Trade Commission) in order to resolve such objections as such
Governmental Body may have to such transactions under such Antitrust Law, or
(ii) by any domestic or foreign court or similar tribunal, in any suit brought
by a private party or Governmental Body challenging the transactions
contemplated by this Agreement as violative of any Antitrust Law, in order to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order or other order that has the effect of preventing the
consummation of any of such transactions.
SECTION 6.6. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) With respect to the current members of Holdings' and the
Company's Boards of Directors, Holdings and the Company shall not take any
action to directly or indirectly disaffirm the provisions of their respective
Certificates of Incorporation and Bylaws relating to indemnification of officers
and directors.
(b) For five years from the Effective Time, MergerCo shall
cause Holdings and the Company to use their best efforts to maintain, if
available, officers' and directors' liability insurance covering the persons who
are presently covered by their officers' and directors' liability insurance
policies (copies of which have heretofore been delivered to MergerCo) with
respect to actions and omissions occurring prior to the Effective Time, on terms
which are not materially less favorable than the terms of such current insurance
in effect for Holdings and the Company on the date hereof; PROVIDED, HOWEVER,
that in no event shall Holdings or the Company be obligated to pay annual
premiums greater than 200% of such premiums paid or payable as of the date
hereof; PROVIDED, FURTHER, that if any annual premium for such coverage and
amount of insurance would exceed 200% of such annual rate, Holdings and the
Company shall provide the
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maximum coverage which shall then be available at an annual premium equal to
200% of such rate.
(c) MergerCo covenants for itself and its successors, assigns,
heirs, legatees and personal representatives that they shall not institute any
action or proceeding in any court or before any administrative agency or before
any other tribunal against any of the current directors of Holdings or the
Company, in their capacity as such, with respect to any liabilities, actions or
causes of action, judgments, claims and demands of any nature or description
(consequential, compensatory, punitive or otherwise), in each such case solely
to the extent resulting from their approval of this Agreement or the
transactions contemplated hereby.
SECTION 6.7. PRO FORMA BALANCE SHEET; POST-ACQUISITION
CAPITALIZATION OF COMPANY. On or prior to July 20, 1998, MergerCo will provide
to the Trustee and Holdings a true and complete copy of the consolidated pro
forma balance sheet of MergerCo and its subsidiaries as of March 28, 1998 giving
effect to the consummation of the transactions contemplated hereby (the "PRO
FORMA BALANCE SHEET"). The Pro Forma Balance Sheet will fairly present, based on
the assumptions set forth therein, the adjustments giving effect to such
transactions.
SECTION 6.8. EMPLOYEE BENEFITS. From and after the Closing,
Holdings and the Company shall perform all obligations pursuant to employee
benefit plans and policies that have accrued or otherwise become due on or
before the Closing.
SECTION 6.9.MERGERCO TO FUND CERTAIN OBLIGATIONS.
(a)At least three business days prior to the date that is
expected to be the Effective Time, the Company shall deliver to MergerCo a
notice setting forth the amounts that the Company estimates will, at the
Effective Time, be outstanding under the Senior Credit Agreement and that are
due in connection with the transactions contemplated hereby under those certain
Senior Subordinated Notes dated April 18, 1996, in the aggregate principal
amount of $100 million (the "SUBORDINATED NOTES"). After the close of business
on the day prior to the expected Effective Time, the Company shall deliver to
MergerCo a notice (the "FINAL NOTICE") setting forth such amounts under such
documents. At the Closing, MergerCo shall pay or shall contribute or otherwise
make available to the Company and cause the Company to pay the amounts set forth
in the Final Notice.
(b)At the Effective Time, MergerCo shall pay or contribute or
otherwise make such funds available to Holdings and cause Holdings to pay (i)
all of the costs and expenses of Holdings and the Company incident to their
negotiation and preparation of this Agreement and any other related agreement
contemplated hereby and to their performance and compliance with all agreements
and conditions contained herein or therein on their part to be performed or
complied with, including the fees, expenses and disbursements of their
respective financial advisors, counsel and accountants, and (ii) the members of
the Company's management the aggregate amounts disclosed in SCHEDULE 6.9,
provided that the aggregate total of such costs and expenses and such amounts on
SCHEDULE 6.9 shall not exceed $12.7 million and any amounts in excess of such
amounts shall be borne by parties that are stockholders of Holdings immediately
prior to the Effective Time.
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SECTION 6.10.NEW STOCKHOLDERS' AGREEMENT. At the Effective
Time, the Trustee, all holders of Rollover Shares, other than members of
Holdings or the Company's management, Holdings and the Company shall enter into
the stockholders agreement substantially in the form of Exhibit 6.10 hereto with
such modifications as are necessary to add holders of Rollover Shares who are
not employees (the "NEW STOCKHOLDERS' AGREEMENT").
SECTION 6.11.MINIMUM EQUITY OF THE SURVIVING CORPORATION.
MergerCo covenants that, upon consummation of the Merger and the related
financings and the disposition of the cash portion of the Merger Consideration
as provided in Article III hereof pursuant to the Merger, not less than $109
million shall have been contributed to MergerCo or the Surviving Corporation in
cash.
SECTION 6.12.FINANCIAL STATEMENTS. Holdings and the Company
shall furnish or shall cause their independent accountants to furnish not later
than August 15, 1998: (a) consolidated audited financial statements for each of
Holdings and the Company, together with their Subsidiaries, for the years ended
December 27, 1997, December 28, 1996 and December 30, 1995, which will present
fairly the financial condition and results of operation and will be prepared in
accordance with GAAP consistently applied in a form meeting the requirements of
Regulation S-X of the Securities Act, PROVIDED, that Holdings shall only provide
such financial statements since inception; and (b) the consent of Holdings' and
the Company's independent accountants to the inclusion of their reports on such
financial statements in any registration statement of the Surviving Corporation,
Holdings or the Company or any offering memorandum under any offering conducted
in reliance upon an exemption under the Securities Act, any resale exemption
under the Securities Act (including pursuant to Rule 144A thereunder) or under
the Securities Act and any amendments thereto; and for the purposes of assisting
Buyer with any such registration statement and subsequent reporting requirements
of the Securities Exchange Act of 1934, or any offering memorandum Holdings and
the Company will deliver to Buyer (i) unaudited consolidated income statements
and balance sheets for Holdings and for the Company for each 1998 fiscal quarter
completed on or prior to the Closing Date and (ii) unaudited consolidated income
statements and balance sheets of Holdings and of the Company for each 1997
calendar quarter. The financial statements and schedules described above shall
be delivered by August 15, 1998. Holdings (for the periods during which it
existed) and the Company shall provide Buyer with the unaudited financial
information for the years 1993 and 1994 meeting the requirements of item 301 of
Reg S-K by August 15, 1998.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF MERGERCO
The obligations of MergerCo to consummate the transactions
contemplated by this Agreement shall, at the option of MergerCo, be subject to
the satisfaction, on or prior to the Closing Date, of the following conditions:
SECTION 7.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by Holdings or the Company
in the performance of any of their covenants, agreements and obligations herein;
none of the representations and warranties contained or referred to in Article
IV hereof shall fail to be true and correct on the date hereof and at the
Effective Time as though made at the Effective Time,
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except for (i) representations and warranties that speak as of a specific date
or time other than the Effective Time (which need only be true and correct as of
such date or time), (ii) representations and warranties which are not qualified
by Material Adverse Effect or otherwise by material adversity (which need be
true and correct except for such inaccuracies as in the aggregate (together with
the inaccuracies referred to in the following clause (iii)) would not have a
Material Adverse Effect), (iii) representations and warranties which are
qualified by Material Adverse Effect or otherwise by material adversity shall
also be true and correct without regard to such qualification except for such
inaccuracies as in the aggregate (together with the inaccuracies referred to in
the preceding clause (ii)) would not have a Material Adverse Effect, (iv) the
representations and warranties set forth in Section 4.2 shall be true and
correct on the date hereof and at the Effective Time and (v) changes therein
specifically permitted by this Agreement or resulting from any transaction
expressly consented to in writing by MergerCo; and there shall have been
delivered to MergerCo a certificate to such effect, dated the Effective Time and
signed by the President or other senior executive officer of each of Holdings
and the Company.
SECTION 7.2. RESIGNATIONS OF DIRECTORS. Prior to the Closing,
MergerCo shall notify Holdings and the Company of those directors of Holdings,
the Company and the Subsidiaries from whom it will require resignations.
Holdings and the Company shall have furnished MergerCo with such signed
resignations, effective as of the Closing.
SECTION 7.3. LITIGATION. As of the Closing Date, there shall
be no injunction, restraining order or decree of any nature of any court or
other Governmental Body of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the transactions or other material
obligations of the parties hereto as contemplated hereby; PROVIDED, HOWEVER,
that entry by a court of an order or decree permitting the transactions to be
consummated but requiring that any of the businesses, product lines or assets of
any of MergerCo or its Affiliates, or Holdings, the Company, the Subsidiaries or
their Affiliates be divested or held separate by MergerCo or that would
otherwise limit MergerCo's freedom of action with respect to, or its ability to
retain, Holdings, the Company and the Subsidiaries, or any portion thereof, or
any of MergerCo's or its Affiliates' other assets or businesses, shall not be
deemed a failure to satisfy that condition or any other condition hereof.
SECTION 7.4. NECESSARY APPROVALS AND CONSENTS. Holdings and
the Company shall have delivered to MergerCo such evidence as MergerCo may
reasonably request of the receipt of all consents, approvals and actions of any
third Person or Governmental Body specified in SCHEDULE 4.4, and all exceptions
set forth on SCHEDULE 4.1 and SCHEDULE 4.3 shall have been cured, unless the
absence of such cure would not have a Material Adverse Effect. The waiting
period (and any extension hereof) applicable to the transactions contemplated by
this Agreement under the H-S-R Act shall have been terminated or shall have
otherwise expired.
SECTION 7.5. CORPORATE ACTION. The Boards of Directors of each
of Holdings and the Company shall have taken all action necessary to approve the
transactions contemplated by this Agreement, and each of Holdings and the
Company shall have furnished MergerCo with certified copies of resolutions
adopted by the respective Boards of Directors of each of Holdings and the
Company, in form and substance reasonably satisfactory to counsel for MergerCo,
in connection with such transactions.
34
<PAGE> 40
SECTION 7.6.ESOP TRUSTEE. The Company shall have received a
written statement from the Trustee to the effect that, on the basis of the
representations, warranties, covenants and conditions set forth in this
Agreement and its own evaluation and on the advice of its financial and legal
advisors, the Trustee believes that the transactions contemplated by this
Agreement are fair from a financial point of view to the ESOP.
SECTION 7.7.FIRPTA AFFIDAVIT.At or prior to the Effective
Time, Holdings shall deliver a certification satisfying the requirements of
section 1.1445-2(c)(3) of the Treasury Regulations.
SECTION 7.8. STOCKHOLDERS' AGREEMENT. The Stockholders'
Agreement dated as of March 22, 1996 by and among the Sellers named therein,
Holdings and the Company (as the same may have been amended through the date
hereof, the "Stockholders Agreement") shall have been terminated in the manner
contemplated by the New Stockholders' Agreement, and the New Stockholders
Agreement shall have been executed and delivered to MergerCo by Holdings, the
Company, all holders of Rollover Shares other than members of Holdings or the
Company's management and the Trustee on behalf of the ESOT.
SECTION 7.9.OPINION. Holdings shall have received an opinion
or certificate of a reputable expert firm selected by MergerCo and reasonably
satisfactory to Holdings confirming the solvency of the Surviving Corporation
and its subsidiaries on a consolidated basis after giving effect to the
transactions contemplated hereby, involving the related financings, which
opinion or certificate shall be addressed to the Board of Directors of Holdings
and upon which the Board of Directors of Holdings shall be entitled to rely.
SECTION 7.10.FINANCING CONDITION. MergerCo, Holdings and the
Company shall have consummated the Financing contemplated by the Commitment
Letters.
SECTION 7.11.ADOPTION OF AGREEMENT. This Agreement shall have
been adopted by the affirmative vote of the stockholders of Holdings by the
requisite vote in accordance with applicable law.
SECTION 7.12.INVESTCORP AGREEMENTS. The agreements between the
Company, Holdings and affiliates of Investcorp E.C. relating to management
services and transactions services shall be terminated.
SECTION 7.13.ESOP TRUSTEE. The ESOP Trustee shall have
performed all of its obligations under the ESOP Exchange Agreement, or the ESOP
and the other parties to such agreement shall havewaived performance thereof,
and the transactions, including the Exchange (as defined therein) contemplated
by the ESOP Exchange Agreement shall have been consummated.
35
<PAGE> 41
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS
OF HOLDINGS AND THE COMPANY
The obligations of Holdings and the Company to consummate the
transactions contemplated by this Agreement shall, at their respective options,
be subject to the satisfaction at or prior to the Effective Time, of the
following conditions:
SECTION 8.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by MergerCo in the
performance of any of its covenants and agreements herein; each of the
representations and warranties of MergerCo contained or referred to in this
Agreement shall be true and correct at the Effective Time as though made at the
Effective Time, except for (a) representations and warranties that speak as of a
specific date or time other than the Effective Time (which need only be true and
correct as of such date or time), (b) representations and warranties which are
qualified by a material adverse effect (which need be true and correct except
for such inaccuracies as in the aggregate would not have a Material Adverse
Effect) and (c) changes therein specifically permitted by this Agreement or
resulting from any transaction expressly consented to in writing by Holdings and
the Company; and there shall have been delivered to Holdings a certificate to
such effect, dated the Effective Time and signed by the President or other
senior executive officer of MergerCo.
SECTION 8.2. LITIGATION. At the Effective Time, there shall be
no injunction, restraining order or decree of any nature of any court or other
Governmental Body of competent jurisdiction that is in effect that restrains or
prohibits the consummation of the transactions or other material obligations of
the parties hereto as contemplated hereby, and no proceeding seeking any such
relief or seeking material damages with respect to the transactions contemplated
hereby shall be threatened or pending by any Governmental Body of competent
jurisdiction.
SECTION 8.3. OTHER TRANSACTIONS. The conditions set forth in
Sections 7.4 and 7.6 shall be satisfied (except if such condition is to
MergerCo's satisfaction and discretion, it shall be read as being to the
Company's satisfaction or discretion).
SECTION 8.4.OPINION. Holdings shall have received an opinion
or certificate of a reputable expert firm selected by MergerCo and reasonably
satisfactory to Holdings confirming the solvency of the Surviving Corporation
and its subsidiaries on a consolidated basis after giving effect to the
transactions contemplated hereby, involving the related financings, which
opinion or certificate shall be addressed to the Board of Directors of Holdings
and upon which the Board of Directors of Holdings shall be entitled to rely.
SECTION 8.5.ESOP TRUSTEE. The ESOP Trustee shall have
performed all of its obligations under the ESOP Exchange Agreement, or the ESOP
and the other parties to such agreement shall have waived performance thereof,
and the transactions, including the Exchange (as defined therein) contemplated
by the ESOP Exchange Agreement shall have been consummated.
SECTION 8.6. STOCKHOLDERS AGREEMENT. The Stockholders'
Agreement shall have been terminated in the manner contemplated by the New
Stockholders' Agreement, and the
36
<PAGE> 42
New Stockholders' Agreement shall have been executed and delivered to Holdings
by MergerCo, the Company, all holders of Rollover Shares other than the members
of Holdings or the Company's management and the Trustee on behalf of the ESOT.
ARTICLE IX
TERMINATION
SECTION 9.1. TERMINATION. Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated at any time
prior to the Effective Time: (a) by the mutual consent of MergerCo and Holdings;
(b) by MergerCo or Holdings if the ESOP has not consented to the transaction
contemplated hereby before 3:00 p.m. on July 22, 1998; PROVIDED that such right
to terminate under this Section 9.1(b) shall terminate if the ESOP executes and
delivers the ESOP Exchange Agreement prior to the time that notice is given by
Holdings or MergerCo that such party is exercising its right to terminate this
Agreement pursuant to this Section 9.1(b); (c) by MergerCo in the event that any
condition set forth in Article VII shall not be satisfied and shall not be
reasonably capable of being remedied at or prior to the September 30, 1998, (d)
by Holdings in the event that any condition set forth in Article VIII shall not
be satisfied and shall not be reasonably capable of being remedied at or prior
to September 30, 1998; and (e) by MergerCo or Holdings if the Closing shall not
have occurred on or before September 30, 1998 (or, if MergerCo and Holdings
shall have agreed to a later date pursuant to Section 2.2, on or before any such
later date); PROVIDED, HOWEVER, that no party may terminate this Agreement
pursuant to clause (c), (d) or (e) if the failure of any condition in Article
VII or Article VIII to be satisfied or the failure of the Closing to occur on or
before September 30, 1998 (or, if MergerCo and Holdings shall have agreed to a
later date pursuant to Section 2.2, on or before any such later date), results
from the willful and material breach by such party of any covenant of this
Agreement.
SECTION 9.2. NO LIABILITY UPON TERMINATION. In the event that
this Agreement shall be terminated pursuant to this Article IX, all obligations
of the parties under this Agreement (other than under this Section 9.2 and
Section 10.1) shall be terminated without liability or penalty on the part of
any party or its officers, directors or general or limited partners to any other
party, other than as may result from any willful and material breach by a party
of this Agreement.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. All representations and warranties set forth in Article IV of this
Agreement shall terminate at the earlier of (a) consummation of the transactions
contemplated hereby and (b) termination of this Agreement in accordance with
Article IX hereof. All covenants and agreements set forth in this Agreement
shall survive in accordance with their terms.
37
<PAGE> 43
SECTION 10.2. NOTICES. All notices and other communications
given or made pursuant to this Agreement shall be in writing and shall be deemed
to have been duly given or made (a) five business days after being sent by
registered or certified mail, return receipt requested, (b) upon delivery, if
hand delivered, (c) one business day after being sent by prepaid overnight
carrier with guaranteed delivery, with a record of receipt, or (d) upon
transmission with confirmed delivery if sent by cable, telegram, facsimile or
telecopy, to the parties at the following addresses (or at such other addresses
as shall be specified by the parties by like notice):
(a) if to MergerCo:
c/o Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Attn.: Richard C. Dresdale
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn.: Lauren I. Norton
(b) if to the Company:
Simmons Company
One Concourse Parkway Suite 600
Atlanta, GA 30328
Attention: Zenon S. Nie
Telecopy: 770-392-2565
with copies to:
(i) Roger W. Franklin
(at the address listed above)
and
(ii) Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street NE
Atlanta, GA 30308
Attention: Lizanne Thomas, Esq.
Telecopy: 404-581-8330
38
<PAGE> 44
(c) if to Holdings:
c/o Investcorp International, Inc.
280 Park Avenue
New York, NY 10017
Attention: Christopher J. O'Brien
Telecopy: 212-983-7073
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Attention: Sean P. Griffiths, Esq.
Telecopy: 212-351-4035
(d) if to the Trustee:
State Street Bank & Trust Company
Batterymarch Park III
Three Pine Hill Drive
Quincy, MA 02169
Attn: Kelly Q. Driscoll
Telecopy: 617-376-7313
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15272
Attention: Charles R. Smith, Esq.
Telecopy: 412-355-6501
SECTION 10.3. PARTIAL INVALIDITY. Wherever possible, each
provision hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in the case that any provision contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions would
result in such a material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
SECTION 10.4. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties and delivered to each of the Company and MergerCo.
39
<PAGE> 45
SECTION 10.5. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws.
SECTION 10.6. ASSIGNMENT; SUCCESSORS AND ASSIGNS. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
or assigns, heirs, legatees, distributees, executors, administrators and
guardians. Nothing in this Agreement, expressed or implied, is intended or shall
be construed upon any Person (other than the parties hereto and the successors
and assigns permitted by this Section 10.6, the officers and directors of
Holdings and the Company and their respective heirs, legatees and personal
representatives with respect to Section 6.6) any right, remedy or claim under or
by reason of this Agreement.
SECTION 10.7. TITLES AND HEADINGS. Titles and headings to
sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 10.8. SCHEDULES AND EXHIBITS. The schedules and
exhibits referred to in this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been set
forth verbatim herein. Except as expressly set forth herein, disclosure of any
fact or item in any schedule hereto shall, to the extent apparent from the face
of such schedule and relevant to any other schedule or schedules, be deemed to
be disclosed in such other schedule or schedules, notwithstanding the lack of a
specific cross-reference.
SECTION 10.9. KNOWLEDGE. In each provision of this Agreement
in which a representation or warranty is qualified to the "knowledge" of a
Person or to the "best of the knowledge" of a person, unless otherwise stated in
such provision, each such phrase means that the Person does not have actual
knowledge after due investigation thereof of any state of facts which is
different from the facts described in the warranty or representation. With
respect to Holdings and the Company, such knowledge shall refer solely to the
"knowledge" of one or more of those Persons identified in SCHEDULE 10.9.
SECTION 10.10. ENTIRE AGREEMENT; AMENDMENTS. This Agreement,
including the schedules and exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. The parties
hereto, by mutual agreement in writing, may amend, modify and supplement this
Agreement. Any such agreement shall be validly and sufficiently authorized for
purposes of this Agreement if it is signed by MergerCo and Holdings and, as
applicable, the Company.
SECTION 10.11. WAIVERS. Any term or provision of this
Agreement may be waived, or the time for its performance may be extended, by the
party or parties entitled to the benefit thereof. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
40
<PAGE> 46
SECTION 10.12. SPECIFIC PERFORMANCE. The parties acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issues by a court of competent jurisdiction. Such a remedy shall, however, not
be exclusive, and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
[Signatures on next page]
41
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
REM ACQUISITION, INC.
SIMMONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Richard C. Dresdale
-------------------------
Name: Richard C. Dresdale
Title: Secretary By: /s/ Zenon S. Nie
-------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware
corporation
By: /s/ Zenon S. Nie
-------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
42
<PAGE> 1
Exhibit 2.2
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 to Agreement and Plan of Merger ("Amendment No.
1") is entered into as of September 22, 1998, by and among Simmons Company, a
Delaware corporation (the "Company"), Simmons Holdings, Inc., a Delaware
corporation ("Holdings") and REM Acquisition, Inc., a Delaware corporation
("MergerCo").
W I T N E S S E T H
WHEREAS, the Company, Holdings and MergerCo are parties to an Agreement
and Plan of Merger dated as of July 16, 1998 (the "Merger Agreement"); and
WHEREAS, such parties desire to amend the Merger Agreement as set forth
herein;
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto do hereby agree as follows:
1. Article I of the Merger Agreement is hereby amended as follows:
"Agreement" shall mean this Agreement and Plan of Merger, as amended
from time to time.
"Cash Price" shall mean $6.7315 per share.
"ESOP Exchange Agreement" means the ESOP Exchange Agreement by and
among Holdings, the Company, the Trustee and MergerCo, as amended from time to
time.
2. Schedule 3.1(c) of the Merger Agreement is hereby amended in part by
replacing for each stockholder indicated the share amounts and percentages set
forth on Exhibit A hereto.
3. Section 5.5 of the Merger Agreement is hereby deleted in its
entirety. Section 5.8 of the Merger Agreement is hereby amended such that the
phrase "issued for a purchase price of $7.00 cash per share" shall instead read
"issued for a per share purchase price equal to the Cash Price."
4. Section 6.7 of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
<PAGE> 2
SECTION 6.7. PRO FORMA BALANCE SHEET; POST-ACQUISITION
CAPITALIZATION OF COMPANY. On or prior to September 23,1998, MergerCo will
provide to the Trustee and Holdings a true and complete copy of the consolidated
pro forma balance sheet of MergerCo and its subsidiaries as of June 27, 1998
giving effect to the consummation of the transactions contemplated hereby (the
"PRO FORMA BALANCE SHEET"). The Pro Forma Balance Sheet will fairly present,
based on the assumptions set forth therein, the adjustments giving effect to
such transactions and shall be accompanied by a summary of the terms of any
debt, preferred stock or other financing to be incurred or issued by MergerCo,
Holdings or the Company in connection with such transactions.
5. Section 6.9(b) of the Merger Agreement is amended and restated in
its entirety to read as follows:
"(b) At the Effective Time, MergerCo shall pay or otherwise
make such funds available to Holdings and cause Holdings to
pay (i) all of the cost and expenses of Holdings and the
Company incident to their negotiation and preparation of this
Agreement and any other related agreement contemplated hereby
and to their performance and compliance with all agreements
and conditions contained herein or therein on their part to be
performed or complied with, including the fees, expenses and
disbursements of their respective financial advisors, counsel
and accountants and (ii) the members of the Company's
management the aggregate amounts disclosed on SCHEDULE 6.9;
provided however, that the aggregate costs and expenses under
(i) and (ii) above shall not exceed $10.6 million and any
amounts in excess of such amount shall be borne by parties
that are stockholders of Holdings immediately prior to the
Effective Time."
6. SCHEDULE 6.9 of the Merger Agreement is amended and restated in its
entirety to read as set forth in Exhibit B attached hereto.
7. Section 6.11 of the Merger Agreement is hereby amended and restated
to read as follows:
SECTION 6.11. SUFFICIENT FUNDS. MergerCo covenants that at the
Effective Time (a) the Surviving Corporation will have sufficient funds to
satisfy all obligations of MergerCo and the Surviving Corporation hereunder and
(b) not less than $129.6 million in cash shall have been contributed or
otherwise made available to Holdings in the form of equity to MergerCo by its
stockholders prior to the Effective Time. In addition, MergerCo covenants that
the terms of any debt, preferred stock or other financing to be incurred or
issued by MergerCo, Holdings or the Company in connection with the transactions
contemplated hereby shall be no less favorable to MergerCo, Holdings or the
Company than the terms set forth in the summary accompanying the Pro Forma
Balance Sheet.
8. Section 7.10 of the Merger Agreement is hereby deleted in its
entirety.
-2-
<PAGE> 3
9. Section 9.1 of the Merger Agreement is hereby amended and restated
to read in its entirety as follows:
SECTION 9.1. TERMINATION. Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated at any time
prior to the Effective Time: (a) by the mutual consent of MergerCo and Holdings;
(b) by MergerCo in the event that any condition set forth in Article VII shall
not be satisfied and shall not be reasonably capable of being remedied at or
prior to the October 30, 1998, (c) by Holdings in the event that any condition
set forth in Article VIII shall not be satisfied and shall not be reasonably
capable of being remedied at or prior to October 30, 1998; and (d) by MergerCo
or Holdings if the Closing shall not have occurred on or before October 30, 1998
(or, if MergerCo and Holdings shall have agreed to a later date pursuant to
Section 2.2, on or before any such later date); PROVIDED, HOWEVER, that no party
may terminate this Agreement pursuant to clause (b), (c) or (d) if the failure
of any condition in Article VII or Article VIII to be satisfied or the failure
of the Closing to occur on or before October 30, 1998 (or, if MergerCo and
Holdings shall have agreed to a later date pursuant to Section 2.2, on or before
any such later date), results from the willful and material breach by such party
of any covenant of this Agreement.
10. This Amendment shall be effective immediately; PROVIDED, HOWEVER,
that, in the event that this Amendment has not been approved in writing by the
ESOP Trustee by 3:00 p.m. New York time on September 25, 1998, then this
Amendment shall be considered void AB INITIO and the parties to the Merger
Agreement shall be bound by the terms of the original Merger Agreement.
11. The Merger Agreement remains in full force and effect in all other
respects.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day and year first written above.
REM ACQUISITION, INC.
SIMMONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Richard C. Dresdale
-------------------------
Name: Richard C. Dresdale
Title: Managing Director By: /s/ Zenon S. Nie
-----------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware
corporation
By: /s/ Zenon S. Nie
----------------
Name: Zenon S. Nie
Title: Chief Executive Officer
-4-
<PAGE> 5
EXHIBIT A
---------
Schedule 3.1(c)
ROLLOVER SHARES
---------------
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------
Common Rollover Rollover
Investcorp Shares % Shares
<S> <C> <C> <C>
Connoissour Equity Limited 1,962,692.5 4.6% 89,711.57
Equity SIMA Limited 2,589,315.8 4.6% 118,079.28
Equity SIMB Limited 2,452,515.0 4.6% 112,100.59
Foundation Equity Limited 1,962,692.5 4.6% 89,711.57
Foundation Holdings Ltd. 1,962,692.5 4.6% 89,711.57
Simmons Equity Limited 1,962,692.5 4.6% 89,711.57
Simmons Holdings Limited 1,962,692.5 4.6% 89,711.57
Simmons Investments Ltd. 1,962,692.5 4.6% 89,711.57
Spring Equity Limited 1,962,692.5 4.6% 89,711.57
Spring International Limited 1,962,692.5 4.6% 89,711.57
Spring Investments Limited 1,962,692.5 4.6% 89,711.57
Connoisseur Holdings Ltd. 2,831,886.0 4.6% 129,441.03
Ashford Limited 8,962.7 4.6% 409.67
Chamblee Limited 8,962.7 4.6% 409.67
Fairburn Limited 8,962.7 4.6% 409.67
Peach Limited 8,962.7 4.6% 409.67
------------ ------------
Total Class A 25,567,800.0 1,168,663.73
</TABLE>
-5-
<PAGE> 6
<TABLE>
<CAPTION>
Common Rollover Rollover
Investcorp Shares % Shares
- ---------- ------ - ------
<S> <C> <C> <C>
Chemical Norm. (Guernsey) 797,607 4.6% 36,457.36
Investcorp Simmons Hold 2,685,171 4.6% 122,734.92
--------- ----------
Investcorp Class C 3,482,778 4.6% 159,192
Ballet Limited 18,400 4.6% 841.03
Denary Limited 18,400 4.6% 841.03
Gleam Limited 18,400 4.6% 841.03
Highlands Limited 18,400 4.6% 841.03
Noble Limited 18,400 4.6% 841.03
Outrigger Limited 18,400 4.6% 841.03
Quill Limited 18,400 4.6% 841.03
Radial Limited 18,400 4.6% 841.03
Shoreline Limited 18,400 4.6% 841.03
Zinnia Limited 18,400 4.6% 841.03
Investcorp Investment Equity
Limited 16,000 4.6% 731.33
--------- ----------
Investcorp Class D 200,000 4.6% 9,141.68
Subtotal Investcorp 29,250,578 1,336,997.70
</TABLE>
-6-
<PAGE> 7
EXHIBIT B
SCHEDULE 6.9
MERGERCO TO FUND CERTAIN OBLIGATIONS
------------------------------------
Fees of financial advisors, counsel and accountants to Holdings, the Company
and the ESOP;
and
Transaction bonuses payable to certain officers of the Company, (i) and (ii)
not to exceed $10.6 million in aggregate. Holdings and the
Company estimate these expenses (in millions) as follows:
<TABLE>
<CAPTION>
<S> <C>
Financial Advisory $ 4.3
Accounting / Legal 1.9
ESOP Related 1.2
Cash Management Bonus 3.2
$10.6
</TABLE>
<PAGE> 8
FENWAY PARTNERS INC.
September 22, 1998
REM Acquisition, Inc.
c/o Fenway Partners, Inc.
152 West 57th Street
New York, NY
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger by and among REM
Acquisition, Inc. ("REM"), Simmons Holdings, Inc. and Simmons Company dated as
of July 16, 1998, as amended from time to time (the "Recapitalization
Agreement"). Upon the satisfaction or fulfillment of the conditions to closing
set forth in Section 7 of the Recapitalization Agreement, the undersigned agree
to make an equity investment on the terms contemplated thereby in an amount
equal to at least $129.6 million of equity in the aggregate in REM or its
successor by merger. The undersigned agree to cause REM to perform its
obligations and agreements under the Recapitalization Agreement. The undersigned
hereby represent and warrant that each has full partnership power and authority
to execute and deliver this Agreement and perform its obligations hereunder;
each has taken all actions necessary to authorize the execution, delivery and
performance of this Agreement; such execution, delivery and performance do not
conflict with, violate or otherwise result in a default under its respective
partnership agreement; and this Agreement is a true, legal, valid and binding
obligation of each of the undersigned, enforceable in accordance with its terms.
This letter is intended to be relied upon by REM and the other parties to the
Recapitalization Agreement.
<PAGE> 9
REM Acquisition, Inc. September 22, 1998
This Agreement shall terminate upon the earlier of the termination or closing
under the Recapitalization Agreement.
Very truly yours,
FENWAY PARTNERS CAPITAL FUND, L.P.
By: Fenway Partners, L.P.
its General Partner
By: Fenway Partners Management, Inc.
its General Partner
By: /s/ Richard C. Dresdale
-----------------------
A Duly Authorized Officer
FENWAY PARTNERS CAPITAL FUND II, L.P.
By: Fenway Partners II, LLC,
its General Partner
By: /s/ Richard C. Dresdale
-----------------------
A Duly Authorized Officer
-9-
<PAGE> 1
Exhibit 2.3
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 to Agreement and Plan of Merger ("Amendment No.
2") is entered into as of October 26, 1998, by and among Simmons Company, a
Delaware corporation (the "Company"), Simmons Holdings, Inc., a Delaware
corporation ("Holdings") and REM Acquisition, Inc., a Delaware corporation
("MergerCo").
W I T N E S S E T H
WHEREAS, the Company, Holdings and MergerCo are parties to an Agreement
and Plan of Merger dated as of July 16, 1998 (the "Merger Agreement");
WHEREAS, the Merger Agreement was amended by Amendment No. 1 to
Agreement and plan of Merger dated as of September 22, 1998, by and among the
Company, Holdings and MergerCo; and
WHEREAS, the parties hereto desire to amend the Merger Agreement to
reflect the elections made by such Electing Stockholders;
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, the parties hereto do hereby agree as follows:
1. Article I of the Merger Agreement is hereby amended as
follows:
"ELECTION MEMORANDUM" has the meaning specified in Section
3.1(c)(i).
"MANAGEMENT CASHED SHARES" has the meaning specified in
Section 3.1(c)(i).
"MANAGEMENT ROLLOVER SHARES" has the meaning specified in
Section 3.1(c)(i).
"MANAGEMENT STOCKHOLDER" has the meaning specified in Section
3.1(c)(i).
"NON-MANAGEMENT CASHED SHARES" has the meaning specified in
Section 3.1(c)(i).
"NON-MANAGEMENT ROLLOVER SHARES" has the meaning specified in
Section
3.1(c)(i).
-1-
<PAGE> 2
2. Section 3.1(c) of the Merger Agreement is amended and restated in
its entirety to read as follows:
"(c) CONVERSION (OR EXCHANGE) OF SHARES. Except as otherwise
provided in Section 3.1(d), all other issued and outstanding Shares of
Holdings shall be converted into the following:
(i) any holder of Shares of Holdings who is a member of
management of Holdings or the Company (each, a "MANAGEMENT
STOCKHOLDER"; collectively, the "MANAGEMENT STOCKHOLDERS") may elect to
receive shares of Merger Common Stock ("MANAGEMENT ROLLOVER SHARES"),
cash in lieu of shares of Merger Common Stock ("MANAGEMENT CASHED
SHARES"), or a combination of cash and Merger Common Stock. Management
Stockholders shall make such election by having completed and returned
the Election Memorandum dated October 16, 1998 (the "ELECTION
MEMORANDUM") to Simmons Company, One Concourse Parkway Suite 600,
Atlanta, GA 30328, Attention: Roger Franklin, on or prior to 5:00 p.m.
on Thursday, October 22, 1998. All other holders of Shares have elected
(i) to receive the shares of Merger Common Stock (the "NON-MANAGEMENT
ROLLOVER SHARES"; together with the Management Rollover Shares, the
"ROLLOVER SHARES") as indicated on Schedule 3.1(c) hereto and (ii) to
receive cash in lieu of shares of Merger Common Stock (the
"NON-MANAGEMENT CASHED SHARES"; together with the Management Cashed
Shares, the "CASHED SHARES") for the balance of such stockholders'
Shares. The consideration set forth in this clause (i) is referred to
as the "MERGER CONSIDERATION".
(ii) The Rollover Shares of Management Stockholders pursuant
to (i) above are as indicated on Schedule 3.1(c)."
-2-
<PAGE> 3
3. Section 3.2(a)(ii) is hereby amended and restated in its entirety to
read as follows:
"(A) In respect of the number of Management Options listed
next to the names of those Persons identified on Schedule 3.2(a)
hereto, each Management Stockholder may elect to receive an amount in
cash equal to the product of (1) the number of Option Shares subject to
such Management Options immediately prior to the Effective Time and (2)
the excess, if any, of the Cash Price over the per share exercise price
of such Management Options, to be delivered by the Surviving
Corporation immediately following the Effective Time. All applicable
withholdings taxes attributable to the payments made hereunder or to
distributions contemplated hereby shall be deducted from the amounts
payable under this Section 3.2 and all such taxes attributable to the
exercise of Management Options shall be withheld from the proceeds
received in respect of the Option Shares issuable upon such exercise.
(B) For all Management Options for which elections pursuant to
Section 3.2(a)(ii)(A) were not made, and for any other Management
Options, holders thereof shall be deemed to have elected to receive the
same number of options (each, a "CONTINUING MANAGEMENT OPTION")
entitling the holder thereof to purchase the number of shares of Merger
Common Stock equal to the number of Option Shares subject to such
Management Options immediately prior to the Effective Time, at an
exercise price per share equal to the exercise price per Option Share
of such Management Options immediately prior to the Effective Time.
After the Effective Time, each Continuing Management Option shall
(unless otherwise agreed by Holdings and the holder of such Continuing
Management Option) be subject to the same, terms and conditions as were
applicable to the related Management Option immediately prior to the
Effective Time, provided that all such Continuing Management Option
shall as of the Effective Time be immediately fully vested and
exercisable.
(C) The election referred to in Section 3.2(a)(ii)(A) above
shall be made by each Management Option holder's completing and
returning the Election Memorandum to Simmons Company on or prior to
October 22, 1998."
4. Section 3.2(b)(ii) is hereby amended and restated in its entirety to
read as follows:
"(A) In respect of the number of Anti-Dilution Options listed
next to the names of those Persons identified on Schedule 3.2(b)
hereto, each Management Stockholder may elect to receive an amount in
cash equal to the product of (1) the number of Option Shares subject to
such Anti-Dilution Options immediately prior to the Effective Time and
(2) the excess, if any, of the Cash Price over the per share exercise
price of such Management Options, to be delivered by the Surviving
Corporation immediately following the Effective Time. All applicable
withholdings taxes attributable to the payments made hereunder or to
distributions contemplated hereby shall be deducted from the amounts
payable under this Section 3.2 and all such taxes attributable to the
exercise of Anti-Dilution Options shall be withheld from the proceeds
received in respect of the Option Shares issuable upon such exercise.
-3-
<PAGE> 4
(B) For all Anti-Dilution Options for which elections pursuant
to Section 3.2(b)(ii)(A) were not made, and for any other anti-Dilution
Options, holders thereof shall be deemed to have elected to receive the
same number of options (each, a "CONTINUING ANTI-DILUTION OPTION")
entitling the holder thereof to purchase the number of shares of Merger
Common Stock equal to the number of Option Shares subject to such Anti-
Dilution Options immediately prior to the Effective Time, at an
exercise price per share equal to the exercise price per Option Share
subject to such Anti-Dilution Options immediately prior to the
Effective Time. After the Effective Time, each Continuing Anti-
Dilution Option shall (unless otherwise agreed by Holdings and the
holder of such Continuing Anti-Dilution Option) be subject to the same
terms and conditions as were applicable to the related Anti-Dilution
Option immediately prior to the Effective Time, provided that all such
Continuing Anti-Dilution Options shall as of the Effective Time be
immediately fully vested and exercisable.
(C) The election referred to in Section 3.2(a)(ii)(A) above
shall have been made by each Anti-Dilution Option holder's completing
and returning the Election Memorandum to Simmons Company on or prior to
October 22, 1998."
5. Schedules 3.1(c), 3.2(a) and 3.2(b) to the Merger Agreement are each
hereby amended and restated in their entirety by replacing each of such
Schedules with those Schedules attached hereto as Exhibits A, B and C,
respectively.
6. This Amendment shall be effective immediately upon execution by the
parties hereto and upon consent by the ESOP Trustee to the terms and conditions
hereof.
7. The Merger Agreement remains in full force and effect in all other
respects.
[remainder of page intentionally left blank]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day and year first written above.
REM ACQUISITION, INC.
SIMMONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Gregory P. Meredith
------------------------
Name: Gregory P. Meredith
Title: Vice President By: /s/ Zenon S. Nie
----------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware
corporation
By: /s/ Zenon S. Nie
----------------
Name: Zenon S. Nie
Title: Chief Executive Officer
-5-
<PAGE> 6
EXHIBIT A
---------
Schedule 3.1(c)
ROLLOVER SHARES
---------------
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
------ -------- --------
<S> <C> <C> <C>
Ayers 154,716 70% 108,301
Barton 215,663 65% 140,181
Brennan 171,928 23% 39,543
Daiker 54,162 75% 40,622
Franklin 135,000 60% 81,000
Maher 123,516 60% 74,110
Murphy 39,344 60% 23,606
Nie 700,000 40% 280,000
Passaglia 285,763 60% 171,458
Pleasant 129,716 60% 77,830
Ulicny 126,146 60% 75,688
--------- ---------
Senior Management 2,135,954 1,112,339
--------------------------------------------------------
Applegate 5,639 100% 5,639
Brinkman 15,535 100% 15,535
Brooks 15,535 60% 9,321
Cantrell 20,944 80% 16,755
Castricone 10,000 100% 10,000
Chambless 80% 0
Clayton 10,000 100% 10,000
Cowie 23,302 60% 13,981
Cuppia 15,535 100% 15,535
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
------ -------- --------
<S> <C> <C> <C>
Davis (retiring) 38,836 0% 0
Dohm 4,710 60% 2,826
Elliott 3,000 100% 3,000
Fettner (resigned) 0% 0
Giambalo 100% 0
Glover 5,000 100% 5,000
Grippando 5,000 100% 5,000
Hellyer 19,470 70% 13,629
Hoffmann 10,000 100% 10,000
Hutchinson 15,535 100% 15,535
Katz 11,279 60% 6,767
Kessler 5,000 60% 3,000
Lachenmeier 4,000 100% 4,000
Leber 38,836 100% 38,836
Messershmitt 39,083 60% 23,450
Messner 2,000 100% 2,000
Miller 5,000 75% 3,750
Murray 38,836 60% 23,302
Newman 10,000 100% 10,000
Orth (retiring) 4,710 0% 0
O'sorio 80% 0
Parsons 46,605 90% 41,944
Peterken 100% 0
Poliseo 25,802 75% 19,352
Saunders 30,002 100% 30,002
Senese 5,000 100% 5,000
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
------ -------- --------
<S> <C> <C> <C>
Silverstone 5,000 85% 4,250
Slattery 5,000 100% 5,000
Tobin 15,272 60% 9,163
Woodhead 80% 0
- -------- --------- ---------
Other Management 509,465 381,572
---------------- --------- ---------
Subtotal - Simmons 2,645,419 1,493,911
</TABLE>
-8-
<PAGE> 9
EXHIBIT A
Schedule 3.1(c)
ROLLOVER SHARES
<TABLE>
<CAPTION>
Common Stock
--------------------------------------------------------------
Common Rollover Rollover
Investcorp Shares % Shares
- ---------- ---------------- --------- -----------
<S> <C> <C> <C>
Connoissour Equity Limited 1,962,692.5 4.6% 89,711.57
Equity SIMA Limited 2,589,315.8 4.6% 118,079.28
Equity SIMB Limited 2,452,515.0 4.6% 112,100.59
Foundation Equity Limited 1,962,692.5 4.6% 89,711.57
Foundation Holdings Ltd. 1,962,692.5 4.6% 89,711.57
Simmons Equity Limited 1,962,692.5 4.6% 89,711.57
Simmons Holdings Limited 1,962,692.5 4.6% 89,711.57
Simmons Investments Ltd. 1,962,692.5 4.6% 89,711.57
Spring Equity Limited 1,962,692.5 4.6% 89,711.57
Spring International Limited 1,962,692.5 4.6% 89,711.57
Spring Investments Limited 1,962,692.5 4.6% 89,711.57
Connoisseur Holdings Ltd. 2,831,886.0 4.6% 129,441.03
Ashford Limited 8,962.7 4.6% 409.67
Chamblee Limited 8,962.7 4.6% 409.67
Fairburn Limited 8,962.7 4.6% 409.67
Peach Limited 8,962.7 4.6% 409.67
--------------- -----------------
Total Class A 25,567,800.0 1,168,663.73
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
Common Rollover Rollover
Investcorp Shares % Shares
- ---------- ---------------- --------- -----------
<S> <C> <C> <C>
Chemical Norm. (Guernsey) 797,607 4.6% 36,457.36
Investcorp Simmons Hold. 2,685,171 4.6% 122,734.92
------------ ----------------
Investcorp Class C 3,482,778 4.6% 159,192
Ballet Limited 18,400 4.6% 841.03
Denary Limited 18,400 4.6% 841.03
Gleam Limited 18,400 4.6% 841.03
Highlands Limited 18,400 4.6% 841.03
Noble Limited 18,400 4.6% 841.03
Outrigger Limited 18,400 4.6% 841.03
Quill Limited 18,400 4.6% 841.03
Radial Limited 18,400 4.6% 841.03
Shoreline Limited 18,400 4.6% 841.03
Zinnia Limited 18,400 4.6% 841.03
Investcorp Investment Equity
Limited 16,000 4.6% 731.33
-------------- ----------------
Investcorp Class D 200,000 4.6% 9,141.68
Subtotal Investcorp 29,250,578 1,336,997.70
</TABLE>
-10-
<PAGE> 11
EXHIBIT B
---------
Schedule 3.2(a)
CONTINUING MANAGEMENT OPTIONS
-----------------------------
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
<S> <C> <C> <C>
Ayers 45,284 70% 31,699
Barton 63,667 65% 41,384
Brennan 50,000 23% 11,500
Daiker 156,338 75% 117,254
Franklin 20,000 60% 12,000
Maher 45,284 60% 27,170
Murphy 120,656 60% 72,394
Nie 1,800,000 40% 720,000
Passaglia 64,237 60% 38,542
Pleasant 45,284 60% 27,170
Ulicny 30,000 60% 18,000
- ------ --------- ---------
Senior Management 2,440,750 1,117,113
-------------------------------------------------------
Applegate 100% 0
Brinkman 100% 0
Brooks 14,465 60% 8,679
Cantrell 21,056 80% 16,845
Castricone 100% 0
Chambless 30,000 80% 24,000
Clayton 100% 0
Cowie 6,698 60% 4,019
Cuppia 100% 0
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
------- -------- -------------
<S> <C> <C> <C>
Davis (retiring) 0% 0
Dohm 45,290 60% 27,174
Elliott 100% 0
Fettner (resigned) 10,000 0% 0
Giambalo 30,000 100% 30,000
Glover 100% 0
Grippando 100% 0
Hellyer 38,048 70% 26,634
Hoffmann 100% 0
Hutchinson 14,465 100% 14,465
Katz 23,721 60% 14,233
Kessler 25,000 60% 15,000
Lachenmeier 16,000 100% 16,000
Leber 41,164 100% 41,164
Messershmitt 11,234 60% 6,740
Messner 8,000 100% 8,000
Miller 25,000 75% 18,750
Murray 11,164 60% 6,698
Newman 100% 0
Orth (retiring) 25,290 0% 0
O'sorio 20,000 80% 16,000
Parsons 90% 0
Peterken 30,000 100% 30,000
Poliseo 6,698 75% 5,024
Saunders 100% 0
Senese 10,000 100% 10,000
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
------- -------- -------------
<S> <C> <C> <C>
Silverstone 25,000 85% 21,250
Slattery 100% 0
Tobin 14,728 60% 8,837
Woodhead 20,000 80% 16,000
- -------- --------- ------
Other Management 523,021 385,512
---------------- --------- ---------
Subtotal - Simmons 2,963,771 1,502,625
</TABLE>
-13-
<PAGE> 14
EXHIBIT C
---------
Schedule 3.2(b)
CONTINUING ANTI-DILUTION OPTIONS
--------------------------------
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
<S> <C> <C> <C>
Ayers 14,123 70% 9,886
Barton 19,436 65% 12,633
Brennan 9,552 23% 2,197
Daiker 5,580 75% 4,185
Franklin 15,417 60% 9,250
Maher 13,065 60% 7,839
Murphy 3,821 60% 2,293
Nie 81,519 40% 32,608
Passaglia 21,834 60% 13,100
Pleasant 13,275 60% 7,965
Ulicny 14,122 60% 8,473
- ------ ------- -------
Senior Management 211,744 110,429
-----------------------------------------------------------------
Applegate 191 100% 191
Brinkman 527 100% 527
Brooks 1,018 60% 611
Cantrell 1,425 80% 1,140
Castricone 339 100% 339
Chambless 1,018 80% 814
Clayton 339 100% 339
Cowie 1,018 60% 611
Cuppia 527 100% 527
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
<S> <C> <C> <C>
Davis (retiring) 1,317 0% 0
Dohm 1,696 60% 1,018
Elliott 102 100% 102
Fettner (resigned) 339 0% 0
Giambalo 1,018 100% 1,018
Glover 170 100% 170
Grippando 170 100% 170
Hellyer 1,951 70% 1,366
Hoffmann 339 100% 339
Hutchinson 1,018 100% 1,018
Katz 1,187 60% 712
Kessler 1,018 60% 611
Lachenmeier 678 100% 678
Leber 2,714 100% 2,714
Messershmitt 1,707 60% 1,024
Messner 339 100% 339
Miller 1,018 75% 764
Murray 1,696 60% 1,018
Newman 339 100% 339
Orth (retiring) 1,018 0% 0
O'sorio 678 80% 542
Parsons 1,581 90% 1,423
Peterken 1,018 100% 1,018
Poliseo 1,102 75% 827
Saunders 1,018 100% 1,018
Senese 508 100% 508
</TABLE>
-15-
<PAGE> 16
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
------------- -------- --------
<S> <C> <C> <C>
Silverstone 1,018 85% 865
Slattery 170 100% 170
Tobin 1,018 60% 611
Woodhead 678 80% 542
------- ------- -------
Other Management 35,025 26,023
------- ------- -------
Subtotal - Simmons 246,769 136,452
</TABLE>
-16-
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF SIMMONS COMPANY
The undersigned, for the purpose of amending and restating the
Certificate of Incorporation of SIMMONS COMPANY, a Delaware corporation (the
"Corporation"), does hereby certify that:
(1) The name of the Corporation is "Simmons Company."
(2) The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of Delaware was July 30, 1979, under
the name "Simmons U.S.A. Corporation."
(3) The Certificate of Incorporation of Simmons Company is hereby
amended and restated in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation (hereinafter called the "Corporation") is
"Simmons Company".
ARTICLE II
DURATION
The period of duration of the Corporation is perpetual.
ARTICLE III
PURPOSE
The purpose for which the Corporation is organized is the transaction
of any and all lawful business for which corporations may be incorporated under
the Delaware General Corporation Law.
ARTICLE IV
CAPITALIZATION
The total number of shares of stock which the Corporation shall have
authority to issue is 56,000,000 shares. 50,000,000 of said shares shall be
designated as shares of Common Stock, all of which shall be the same series with
$.01 par value per share. 6,000,000 of said shares shall be designated as
Preferred Stock, which shall be of such series as designated below:
1. SERIES A PREFERRED. A series of Preferred Stock shall be designated
consisting of 5,950,000 shares of Preferred Stock, such series entitled "Series
A Preferred Stock", with $.01
<PAGE> 2
par value per share. The Series A Preferred Stock will have such rights,
preferences, privileges and restrictions thereof as follows:
(a) DIVIDENDS.
(1) Dividends shall be paid on shares of Series A
Preferred Stock in such amount and at such time as shall be determined
from time to time by the Board of Directors and as shall be expressed
by resolution duly authorized.
(2) Each dividend shall be paid to the holders of
record of shares of Series A Preferred Stock as they appear on the
books of the Corporation on the record date, not exceeding 30 days
prior to the Dividend Payment Date thereof, as shall be fixed by the
Board of Directors of the Corporation.
(3) Dividends or distributions may be declared and
paid upon shares of Common Stock only if equal per-share dividends on
an as converted basis shall have been declared and paid on all shares
of Series A Preferred Stock. Dividends, if paid or if declared and set
apart for payment on the Series A Preferred Stock, must be paid or
declared and set apart for payment on the Series A Preferred Stock
contemporaneously.
(b) REDEMPTION AT THE OPTION OF THE HOLDER.
(1) At least 30 Business Days (as defined below)
prior to (i) the consummation of a transaction which would result in a
Sale of Simmons Holdings (as defined below), (ii) the date that a
registration statement is declared effective for a Corporation IPO or
(iii) the date that a registration statement is declared effective for
a Simmons Holding IPO (as defined below) (any of the events set forth
in clauses (i) through (iii) hereinafter referred to as a "Redemption
Event"), the Corporation shall provide written notice (the "Redemption
Event Notice") of the Redemption Event to each holder of record of the
Series A Preferred Stock. The Redemption Notice shall set forth the
material terms of the Redemption Event, including in the event of a (A)
Sale of Simmons Holdings, the purchase price (less estimated fees and
expenses to be bourne by stockholders of Simmons Holdings) of a share
of Class C Stock of Simmons Holdings in connection with such Sale of
Simmons Holdings or (B) Corporation IPO or Simmons Holdings IPO, the
estimated range of the initial per share price to the public and
underwriting discounts and commissions of such IPO.
Each holder of record of Series A Preferred Stock
shall have the right, exercisable by delivery of a written notice (the
"Redemption Notice") to the Corporation on or before the expiration of
ten Business Days after the date of the Redemption Event Notice, to
require the Corporation to redeem all or part of the Series A Preferred
Stock held by it by delivery of written notice requesting such
redemption and specifying the number of shares of Series A Preferred
Stock desired to be so redeemed.
For purposes of this Amended and Restated Certificate
of Incorporation, (i) a "Sale of Simmons Holdings" shall mean the sale
of Simmons Holdings, Inc., a
2
<PAGE> 3
Delaware corporation ("Simmons Holdings"), whether such sale occurs
pursuant to (A) the sale of fifty percent (50%) or more of the
outstanding shares of Simmons Holdings' voting capital stock, (B) a
sale of all or substantially all of the assets of Simmons Holdings or
(C) a merger, consolidation or recapitalization of Simmons Holdings as
a result of which the ownership of Simmons Holdings' voting capital
stock (or the capital voting stock of the surviving corporation, if
Simmons Holdings is not the survivor) is changed to the extent of more
than fifty percent (50%), (ii) "Corporation IPO" shall mean the
consummation of an underwritten initial public offering of Common Stock
of the Corporation pursuant to a registration statement that was
declared effective under the Securities Act of 1933, as amended (the
"Securities Act"), (iii) "Simmons Holdings IPO" shall mean the
consummation of an underwritten initial public offering of common
stock, $.01 par value, of Simmons Holdings pursuant to a registration
statement that was declared effective under the Securities Act and (iv)
"Business Day" shall mean any day other than a Saturday, Sunday,
federal holiday or other day on which commercial banks in New York City
are authorized or required to close under the laws of the State of New
York.
(2) In addition to the redemption right set forth in
Section 1(b)(1) of this Article IV, a holder of record of Series A
Preferred Stock who receives written notice pursuant to Section 2.1 of
the 1996 Stockholders' Agreement (as amended from time to time, the
"1996 Stockholders' Agreement"), dated March 22, 1996, among the
Corporation, Simmons Holdings, NationsBank, N.A. (South), solely as
trustee of the Simmons Company Employee Stock Ownership Trust (the
"Trust"), shall have the right (a "Covered Sale Redemption Right"),
exercisable by delivery of a written notice (the "Covered Sale
Redemption Notice") to the Corporation within five Business Days of
such Section 2.1 written notice, to require the Corporation to redeem
up to that number of such holder's shares of Series A Preferred Stock
equal to the number of shares of Series A Preferred Stock convertible
into the number of shares of Common Stock such holder would have been
entitled to sell pursuant to the terms and conditions of Section 2.1 of
the 1996 Stockholders Agreement. The Covered Sale Redemption Notice
shall specify the number of shares of Series A Preferred Stock desired
to be so redeemed, assuming the conversion of such holder's Series A
Preferred Stock.
(3) The shares of the Series A Preferred Stock
specified in a timely delivered Redemption Notice or Covered Sale
Redemption Notice shall hereinafter be defined as "Redemption Shares".
The Corporation shall redeem all Redemption Shares at a redemption
price equal to 100% of the Liquidation Value (as hereinafter defined)
of such shares (the "Redemption Price").
(4) Redemption by the Corporation of the Redemption
Shares shall take place at the principal office of the Corporation (i)
in the case of Redemption Shares specified in a Redemption Event
Notice, immediately prior to or contemporaneously with the consummation
of the transaction giving rise to the Redemption Event and (ii) in the
case of Redemption Shares specified in a Covered Sale Redemption
Notice, on the date specified in the written notice received by the
holder of such Redemption Shares triggering the Covered Sale Redemption
Right, provided that on or prior to such date the
3
<PAGE> 4
transaction giving rise to such notice is consummated (the times and
dates referred to in clauses (i) and (ii) hereinafter defined as the
"Redemption Date"). On the Redemption Date, each holder of Redemption
Shares to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation, and thereupon the
Redemption Price for such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall be canceled and
retired. In the event less than all of the shares represented by such
certificate are redeemed, a new certificate representing the unredeemed
shares shall be issued to the holder of such shares.
(5) Notwithstanding anything to the contrary
contained in this Section 1(b) of this Article IV, the Corporation
shall not be obligated to redeem any Redemption Shares to the extent
that the redemption thereof would violate any law, statute, order,
writ, injunction, decree, judgment, rule, regulation, policy, or
guideline promulgated, or judgment entered, by any federal, state,
local or foreign court or governmental authority applicable to the
Corporation or any of its subsidiaries.
(6) From and after the Redemption Date, unless there
shall have been a failure by the Corporation to pay the Redemption
Price (including by virtue of Section 1(b)(5) of this Article IV), all
rights of the holders of such shares as holders of Series A Preferred
Stock (except the right to receive the applicable Redemption Price
without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for the redemption of Redemption Shares
on any Redemption Date are insufficient to redeem the total number of
Redemption Shares to be redeemed, the funds which are legally available
will be used to redeem the maximum possible number of such shares
ratably among the holders of such shares to be redeemed. The Redemption
Shares not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of such Redemption Shares, such funds will immediately be
used to redeem the balance of the Redemption Shares, provided such
shares have not been converted into Common Stock, which the Corporation
has become obligated to redeem on any Redemption Date but which it has
not redeemed.
(c) CONVERSION.
(1) Each share of the Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after
the date of the issuance of such share, at the office of the
Corporation or any transfer agent for the Series A Preferred Stock or
the Common Stock, into that number of the fully paid and non-assessable
shares of Common Stock determined in accordance with the provisions of
Section 1(c)(4) of this Article IV. In order to convert shares of
Series A Preferred Stock into shares of Common Stock, the holder
thereof shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or to the transfer agent for
the Series A Preferred Stock or the
4
<PAGE> 5
Common Stock, together with written notice to the Corporation stating
that it elects to convert the same and setting forth the name or names
it wishes the certificate or certificates for Common Stock to be
issued, and the number of shares of Series A Preferred Stock being
converted.
(2) If a holder of record of Series A Preferred Stock
becomes entitled under Section 1(b) of this Article IV to redeem any
shares of Series A Preferred Stock and such holder fails to, or does
not properly, exercise its redemption rights with respect to such
shares (it being understood that the failure of the Corporation to have
legally available funds to pay the Redemption Price shall not be deemed
to be a failure of a holder to exercise or to properly exercise its
redemption rights), such shares (and only such shares) shall be
automatically converted into that number of fully paid and
nonassessable shares of Common Stock determined in accordance with the
provisions of Section 1(c)(4) of this Article IV. Such automatic
conversion shall take place on the Redemption Date for such shares
irrespective of the receipt by the Corporation of any Redemption
Notice.
(3) The Corporation shall, as soon as practicable
after the surrender of the certificate or certificates evidencing the
surrender of the shares of Series A Preferred Stock for conversion at
the office of the Corporation or the transfer agent for the Series A
Preferred Stock or the Common Stock, issue to each holder of such
shares, or its nominee or nominees, a certificate or certificates
evidencing the number of shares of Common Stock (and any other
securities and property) to which it shall be entitled and, in the
event that only a part of the shares evidenced by such certificate or
certificates are converted, a certificate evidencing the number of
shares of Series A Preferred Stock which are not converted. In the case
of any voluntary conversion, such conversion shall be deemed to have
been made on the date of such surrender of the shares of Series A
Preferred Stock to be converted not later than immediately prior to the
close of business on such date. In the case of any automatic
conversion, such conversion shall be deemed to have been made on the
Redemption Date. The person or persons entitled to receive the shares
of Common Stock issuable upon any conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock
at such date and shall, with respect to such shares, have only those
rights of a holder of Common Stock of the Corporation.
(4) The Series A Preferred Stock shall be convertible
into the number of shares of Common Stock which results from
multiplying the number of shares of Series A Preferred Stock being
converted by the Conversion Factor (as defined below) in effect at the
time of conversion.
(5) The conversion factor per share for the Series A
Preferred Stock shall initially be one (the "Conversion Factor") and
shall be subject to adjustment from time to time as provided herein.
(6) If the outstanding shares of the Common Stock of
the Corporation shall be subdivided into a greater number of shares, or
a dividend in Common Stock or other securities of the Corporation
convertible into or exchangeable for Common Stock
5
<PAGE> 6
(in which latter event the number of shares of Common Stock issuable
upon the conversion or exchange of such securities shall be deemed to
have been distributed), shall be paid in respect to the Common Stock of
the Corporation, the Conversion Factor in effect immediately prior to
such subdivision or at the record date of such dividend shall,
simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend, be proportionately
increased, and conversely, if outstanding shares of the Common Stock of
the Corporation shall be combined into a smaller number of shares, the
Conversion Factor in effect immediately prior to such combination shall
simultaneously with the effectiveness of such combination, be
proportionately decreased.
Any adjustment to the Conversion Factor under this
Section 1(c)(6) of this Article IV shall become effective at the close
of business on the date the subdivision or combination referred to
herein becomes effective.
(7) In the event the Corporation at any time, or from
time to time, shall make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Corporation
other than shares of Common Stock or securities convertible into or
exchangeable for Common Stock then and in each such event, the
Corporation shall give notice to each holder of the Series A Preferred
Stock then outstanding of such event at least ten Business Days prior
to such event.
(8) In each case of an adjustment or readjustment of
the Conversion Factor, the Corporation, at its expense, shall cause the
chief financial officer of the Corporation to compute such adjustment
or readjustment in accordance with the provisions contained herein and
prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate, by first-class mail, postage prepaid, to
each registered holder of the Series A Preferred Stock at the holder's
address shown on the Corporation's stock transfer books. The
certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based,
including a statement of the number of additional shares of Common
Stock and the type and amount, if any, of the other property which at
the time would be received upon conversion of the Series A Preferred
Stock.
(9) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares
of Series A Preferred Stock, such number of its shares of Common Stock
as shall from time to time be sufficient to effect a conversion of all
outstanding shares of the Series A Preferred Stock, and if at any time
the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares
of the Series A Preferred Stock, the Corporation shall promptly seek
such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
6
<PAGE> 7
(10) The Corporation shall pay all taxes and other
governmental charges (other than any income or other taxes imposed upon
the profits realized by the recipient) that may be imposed in respect
of the issue or delivery of shares of Common Stock or other securities
or property upon conversion of shares of Series A Preferred Stock,
including without limitation, any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of
shares of Common Stock or other securities in a name other than that of
which the shares of Series A Preferred Stock so converted were
registered.
(11) In the event any shares of Series A Preferred
Stock shall be converted pursuant to Section 1(c) of this Article IV,
the shares so converted shall be canceled and shall not be issuable by
the Corporation.
(d) VOTING. Each share of Series A Preferred Stock shall be
entitled to vote, either in person or by proxy, at any meeting of the
stockholders, or to consent in writing to any action of the stockholders without
a meeting, pursuant to Section 228 of the Delaware General Corporation Law, and
each share of Series A Preferred Stock shall be entitled to a number of votes
equal to the number of votes carried by the number of full shares of Common
Stock which would be issuable were such share of Series A Preferred Stock
converted to Common Stock, pursuant to Section 1(c) of this Article IV, on the
record date fixing the stockholders entitled to vote at such meeting or, in the
case of an action by written consent, as of the effective date of such written
consent.
(e) LIQUIDATION.
(1) In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and
other liabilities of the Corporation, the holders of each share of
Series A Preferred Stock shall be entitled to receive out of the assets
of the Corporation, whether such assets are capital, surplus or
earnings, an amount equal to the Liquidation Value of such share before
any payment shall be made or assets distributed on the Common Stock or
any other class or series of capital stock of the Corporation other
than Series C Preferred Stock (as hereinafter defined) which shall be
on a parity with the Series A Preferred Stock for purposes of payments
or distributions made pursuant to a liquidation or winding up of the
Corporation.
(2) If upon any dissolution, liquidation or winding
up of the affairs of the Corporation, the assets of the Corporation
distributable as aforesaid among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to them of the full
preferential amounts to which they are entitled, then the entire assets
of the Corporation so to be distributed shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
sum of their respective per share liquidation values, until payment in
full of such amount per share.
(3) The Liquidation Value per share of Series A
Preferred Stock shall be $5.00.
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<PAGE> 8
(4) For purposes of this Section 1(e) of this Article
IV, a dissolution, liquidation or winding up of the affairs of the
Corporation shall not be deemed to be occasioned by or to include the
consolidation or merger of the Corporation with or into another person,
or the sale or other disposition of all or substantially all of the
assets of the Corporation.
2. SERIES C PREFERRED STOCK. A series of Preferred Stock shall be
designated consisting of 50,000 shares of Preferred Stock, such series entitled
"Series C Cumulative Redeemable Exchangeable Preferred Stock" (hereinafter
referred to as the "Series C Preferred Stock"), with $.01 par value per share.
The Series C Preferred Stock will have such rights, preferences, privileges and
restrictions thereof as follows:
(a) DIVIDENDS.
(1) Subject to Section 2(a)(7) of this Article IV,
with respect to each dividend period the Board of Directors shall
declare, the Corporation shall pay and the holders of the shares of
Series C Preferred Stock shall be entitled to receive, if funds are
legally available therefor, cumulative dividends on the shares of the
Series C Preferred Stock, at a rate per annum of the Applicable Rate
(as defined below) of the liquidation preference thereof. The term
Applicable Rate shall mean, for each 12-month period following the
initial date of issuance of the Series C Preferred Stock (the "Series C
Initial Issuance Date"), the rate per annum set forth below:
<TABLE>
<CAPTION>
12-Month Period Following
Series C Initial Issuance Date Rate Per Annum
- ------------------------------ --------------
<S> <C>
First 8%
Second 8%
Third 8%
Fourth 9%
Fifth 10%
Sixth and thereafter 12%
</TABLE>
(2) All dividends described in this Section 2(a) of
this Article IV shall be payable on June 1 of each year, which date
shall be the first day of the next succeeding dividend period (an
"Annual Dividend Period"), and on the date of any redemption of the
Series C Preferred Stock, or if any such date is not a Business Day (as
hereinafter defined), on the next succeeding Business Day (each of such
dates being a "Series C Dividend Payment Date"), commencing June 1,
1992 in preference to and in priority over dividends on the Junior
Securities, except as provided in Section 2(a)(10) of this Article IV.
8
<PAGE> 9
(3) All dividends on the Series C Preferred Stock
shall be paid to the holders of record at the close of business on the
date specified by the Board of Directors of the Corporation at the time
such dividend is declared; provided, however, that such date shall not
be more than 60 days nor less than 10 days prior to the respective
Series C Dividend Payment Date. Each of such annual dividends shall be
fully cumulative and shall accrue (whether or not earned or declared),
without interest, from the first day of the Annual Dividend Period,
except that with respect to the Annual Dividend Period ending on June
1, 1992, such dividend shall accrue from the Series C Initial Issuance
Date. The amount of dividends payable hereunder shall be determined on
the basis of twelve 30-day months and a 360-day year. Cumulative
dividends with respect to Series C Preferred Stock which are in arrears
may be declared and paid at any time without reference to any regular
Series C Dividend Payment Date.
(4) All shares of Series C Preferred Stock redeemed
or purchased by the Corporation shall be retired and cancelled and
shall be restored to the status of authorized but unissued shares of
preferred stock, without designation as to series, and may thereafter
be issued, but not as shares of Series C Preferred Stock. After the
Series C Initial Issuance Date (as defined below), the Corporation
shall not issue any shares of Series C Preferred Stock other than
shares which comprise Additional Shares of Series C Preferred Stock (as
defined below).
(5) The Series C Preferred Stock shall, with respect
to dividend rights and rights of liquidation, winding up and
dissolution, rank (i) junior to any other series of preferred stock
established by the Board of Directors of the Corporation, the terms of
which shall specifically provide that such series shall rank prior to
the Series C Preferred Stock, (ii) on a parity with any other series of
preferred stock established by the Board of Directors, the terms of
which shall specifically provide that such series shall rank on a
parity with the Series C Preferred Stock, and (iii) prior to any other
equity securities of the Corporation, including, without limitation,
the Common Stock; all of such equity securities of the Corporation to
which the Series C Preferred Stock ranks prior, including without
limitation the Common Stock, are collectively referred to herein as the
"Junior Securities".
(6) Any dividend on the Series C Preferred Stock
accrued and payable on any Series C Dividend Payment Date shall be paid
either, as so elected by the Board of Directors of the Corporation, (x)
in cash, except as provided in the following sentence, or (y) by
issuing a number of additional shares of the Series C Preferred Stock
(the "Additional Shares of Series C Preferred Stock") for each such
share (or partial share) of Series C Preferred Stock then outstanding
equal to the dividend then payable on each such share (or partial
share) of Series C Preferred Stock for the Annual Dividend Period then
ended (expressed as a dollar amount) divided by the liquidation value
of one share of Series C Preferred Stock (expressed as a dollar
amount); provided, however, that on each Series C Dividend Payment Date
which occurs on or after June 1, 1995, except as provided in the
following sentence, at least 33.33% of such dividend amount shall be
paid in cash. If, at any time after the Series C Initial Issuance Date,
the Corporation is not
9
<PAGE> 10
required to pay cash dividends pursuant to Section 2(a)(7) of this
Article IV, then the Corporation shall instead issue Additional Shares
of Series C Preferred Stock as set forth in clause (y) of the preceding
sentence.
(7) Notwithstanding any of the other provisions of
this Section 2(a) of this Article IV, the Corporation shall not be
required to pay cash dividends on shares of Series C Preferred Stock if
the payment thereof would result in an Indebtedness Default (as
hereinafter defined), if an Indebtedness Default has occurred and is
continuing, or would result therefrom, or to the extent the payment of
cash dividends on shares of Series C Preferred Stock is prohibited by
the then applicable corporation law of the State of Delaware.
Notwithstanding any of the other provisions of this Section 2(a) of
this Article IV, the Corporation shall not be required to pay dividends
on shares of Series C Preferred Stock in Additional Shares of Series C
Preferred Stock to the extent such payment is prohibited by the then
applicable corporation law of the State of Delaware.
(8) No full cash dividends shall be declared or paid
or set apart for payment on the preferred stock of any series ranking,
as to dividends, on a parity with Series C Preferred Stock for any
period unless full cumulative dividends have been or contemporaneously
are declared and paid in cash or declared and a sum sufficient for the
payment thereof set apart for such payment in cash on shares of Series
C Preferred Stock or unless such dividends shall have been paid by the
issuance of Additional Shares of Series C Preferred Stock, in any
event, through the most recent Series C Dividend Payment Date. When
dividends are not paid in full, as aforesaid, upon the shares of Series
C Preferred Stock and any other series of preferred stock ranking on a
parity as to dividends with Series C Preferred Stock, all dividends
declared on Series C Preferred Stock and any other series of preferred
stock ranking on a parity as to dividends with Series C Preferred Stock
shall be declared and paid in cash or by the issuance of additional
shares of such respective series of preferred stock pro rata so that
the amount of dividends so declared per share on Series C Preferred
Stock and such other series of preferred stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the
shares of Series C Preferred Stock through the most recent Series C
Dividend Payment Date and such other series of preferred stock bear to
each other.
(9) Subject to Section 2(a)(10) of this Article IV,
as long as any shares of Series C Preferred Stock are outstanding, no
dividend shall be declared or paid or set aside for payment or other
distribution declared or made (in each case, other than dividends or
distributions paid in shares of, or options, warrants or rights to
subscribe for or purchase shares of, Junior Securities) upon the Junior
Securities, nor shall any Junior Securities be redeemed, purchased or
otherwise acquired by the Corporation for any consideration (except for
shares of Junior Securities or options, warrants or rights to subscribe
for or purchase shares of Junior Securities or by conversion into or
exchange for Junior Securities), unless, in each case, the full
cumulative dividends on all outstanding shares of Series C Preferred
Stock shall have been paid (either in cash or by issuance of Additional
Shares of Series C Preferred Stock) through the most recent Series C
Dividend Payment Date.
10
<PAGE> 11
(10) Nothing contained in this Amended and Restated
Certificate of Incorporation shall prevent (x) the declaration, payment
or setting aside for payment of dividends, or the declaration or making
of other distributions, on capital stock of the Corporation held by the
Simmons Company Employee Stock Ownership Plan (or any successor plan)
(the "ESOP") or (y) the purchase, redemption or other acquisition by
the Corporation for any consideration of shares of capital stock from
current, future or former ESOP plan participants or their beneficiaries
to the extent required by applicable law or the terms of the ESOP (or
any related trust or other agreement) as in effect from time to time.
(11) Any dividend payment made on shares of Series C
Preferred Stock shall first be credited against the dividends accrued
with respect to the earliest periods for which dividends have not been
paid. Holders of shares of Series C Preferred Stock shall not be
entitled to (i) any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on
the Series C Preferred Stock, or (ii) any interest, or sum of money in
lieu of interest, in respect of any dividend payment or payments on the
Series C Preferred Stock which may be in arrears.
(12) Certificates for Additional Shares of Series C
Preferred Stock shall bear a legend identifying such shares as
Additional Shares of Series C Preferred Stock. Except as expressly set
forth in Section 2(b) of this Article IV, shares of Additional Shares
of Series C Preferred Stock are identical in all respects to shares of
Series C Preferred Stock and shall be treated alike.
(b) REDEMPTION.
(1) At the option of the Corporation, shares of
Series C Preferred Stock may be redeemed at any time as a whole or in
part from time to time, out of funds legally available therefor, at a
cash redemption price of $100 per share, with such redemption price per
share to be adjusted proportionally in respect of partial shares, plus,
in each case, an amount equal to accrued and unpaid dividends thereon
(whether or not earned or declared), if any, to the date fixed for
redemption.
(2) Subject to Section 2(b)(8) of this Article IV, on
January 17, 2003, the Corporation shall be required to redeem all of
the shares of the Series C Preferred Stock then outstanding, out of
funds legally available therefor, by paying in cash $100 per share,
plus accrued and unpaid dividends thereon (whether or not earned or
declared) if any, with such redemption price per share to be adjusted
proportionally in respect of partial shares, to the date fixed for
redemption.
(3) Subject to Section 2(b)(8) of this Article IV,
the Corporation shall be required to redeem on January 17, 1999, and on
each anniversary of such date, at a cash redemption price of $100 per
share, plus accrued and unpaid dividends thereon (whether or not earned
or declared), if any, with such redemption price per share to be
adjusted proportionally in respect of partial shares, to the date fixed
for redemption, the percentage of the shares of Series C Preferred
Stock outstanding on each such respective
11
<PAGE> 12
date equal to the applicable Payment Percentage (as defined below);
provided, however, that the Corporation shall not be required to redeem
any Series C Preferred Stock pursuant to this clause (ii) unless on or
prior to the date on which the Series C Preferred Stock would otherwise
be redeemable pursuant to this clause (ii) all Obligations (as such
term is defined in the Bank Credit Agreement), and all Bridge Loan
Financing shall have been paid in full (and all indebtedness incurred
or assumed by the Corporation or any Subsidiary to repay or refinance
such Obligations or such Bridge Loan Financing shall have been paid in
full) (the "Full Payment Date"). The Payment Percentage shall mean the
lowest applicable percentage set forth below if the Full Payment Date
occurs:
<TABLE>
<CAPTION>
Payment
On Or Prior To Percentage
-------------- ----------
<S> <C>
January 17, 1999 20.00%
January 17, 2000 25.00%
January 17, 2001 33.33%
January 17, 2002 50.00%
and thereafter 100.00%
</TABLE>
(4) Subject to Section 2(b)(8) of this Article IV, if
any Restricted Payment Event (as defined in the Junior Subordinated
Notes as in effect on the Series C Initial Issuance Date) (x) shall
occur on or after the Term Loan Full Payment Date (as defined in the
Junior Subordinated Notes as in effect on the Series C Initial Issuance
Date), the Corporation shall be required to redeem all then outstanding
Additional Shares of Series C Preferred Stock at a cash redemption
price of $100 per share plus accrued and unpaid dividends thereon
(whether or not earned or declared), if any, to the date fixed for
redemption, and (y) the Corporation shall be required to redeem the
percentage of the shares of Series C Preferred Stock which are not
Additional Shares of Series C Preferred Stock outstanding on the date
of such Restricted Payment Event equal to the Trigger Percentage (as
defined below) at a cash redemption price equal to $100 per share, plus
accrued and unpaid dividends thereon (whether or not earned or
declared), if any, to the date fixed for redemption. The term "Trigger
Percentage" shall mean a fraction the numerator of which is the then
applicable Test Percentage (as defined below) multiplied by the
aggregate amount of the proceeds received by the Covered Stockholders
(as defined in the Junior Subordinated Notes as in effect on the Series
C Initial Issuance Date) in such Restricted Payment Event and the
denominator of which is the sum of the aggregate liquidation value of
all shares of Series C Preferred Stock outstanding on the date of the
Restricted Payment Event and all accrued and unpaid dividends thereon
(whether or not earned or declared), if any, to the date fixed for
redemption. The term "Test Percentage" shall mean (A) .0091 if the
Restricted Payment Event occurs on or prior to March 15, 1995, (B)
.0182 if the Restricted Payment Event occurs after March 15, 1995 and
on or prior to March 15, 1999, and (C) .0274 if the Restricted Payment
Event occurs thereafter.
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<PAGE> 13
(5) Subject to Section 2(b)(8) of this Article IV, in
the event of an Initial Public Offering which involves the sale by the
Corporation of Common Stock for its own account, the Corporation shall
apply .91% of the excess of (X) the net proceeds to the Corporation of
such Initial Public Offering of such Common Stock over (Y) the amount
of such net proceeds which are utilized by the Corporation or any of
its Subsidiaries to repay or reduce any Indebtedness (as such term is
defined in the Bank Credit Agreement, as in effect on the Series C
Initial Issuance Date), whether or not such payment or reduction is
optional or mandatory, and whether or not such reduction or repayment
results in a reduction of any lender's commitment to advance funds, to
redeem such number of shares of Series C Preferred Stock as may be
redeemed at a cash redemption price of $100 per share, plus accrued and
unpaid dividends thereon (whether or not earned or declared), if any,
to the date fixed for redemption.
(6) Subject to Section 2(b)(8) of this Article IV,
upon the occurrence of a Triggering Event (as defined below), the
Corporation shall redeem all shares of Series C Preferred Stock then
outstanding at a cash redemption price of $100 per share, plus accrued
and unpaid dividends thereon (whether or not earned or declared), if
any, to the date fixed for redemption. The term "Triggering Event"
shall mean the earliest to occur of the following events:
(a) the sale by the Corporation and its
Subsidiaries of all or substantially all of the assets of the
Corporation and its Subsidiaries in a single transaction or a
series of related transactions;
(b) 40 days following the occurrence of a
Change of Control (as such term is defined in the Bank Credit
Agreement, as in effect on the Series C Initial Issuance
Date); and
(c) any merger, consolidation or other
business combination (other than a statutory merger to effect
jurisdictional changes or similar purposes and other than a
merger, consolidation or other business combination involving
Merrill Lynch Capital Partners, Inc. ("MLCP") or one or more
of its Affiliates) by the Corporation with one or more persons
other than a wholly-owned Subsidiary of the Corporation.
(7) If an Indebtedness Default (as defined below) has
occurred and is continuing solely as a result of a cross-default
provision in such Indebtedness (as defined in the Bank Credit Agreement
(as in effect on the Series C Initial Issuance Date)) to the failure of
the Corporation to pay dividends or other amounts on the Series C
Preferred Stock, and if there is no other Indebtedness Default and if
no Indebtedness Default would result from such redemption, and if the
banks party to the Bank Credit Agreement shall have waived (or failed
to declare an event of default thereunder within 40 days after the
occurrence of a Change of Control (as defined above)) compliance with
clause (m) of Article VII of the Bank Credit Agreement (as in effect on
the Series C Initial Issuance Date) the provisions of Section 2(b)(8)
of this Article IV shall not be applicable to a Triggering Event
specified in clause (b) of Section 2(b)(6) of this Article IV.
13
<PAGE> 14
(8) The Corporation shall not be required to
discharge its redemption obligations pursuant to this Section 2(b) of
this Article IV if such redemption would result in an Indebtedness
Default or if an Indebtedness Default has occurred and is continuing or
would result therefrom or to the extent such redemption is prohibited
by the then applicable corporation law of the State of Delaware. Any
such redemption obligation shall be discharged as soon as the
provisions of the immediately preceding sentence are no longer
applicable.
(9) Whenever shares of Series C Preferred Stock
(including Additional Shares of Series C Preferred Stock) are to be
redeemed pursuant to this Section (2)(b) of this Article IV, a notice
of such redemption shall be mailed, by first class mail, postage
prepaid, or delivered to each holder of the shares to be redeemed at
such holder's address as the same appears on the stock transfer books
of the Corporation. Such notice shall be mailed or delivered not less
than 20 days and not more than 60 days prior to the date fixed for
redemption. Each such notice shall state: (i) the date fixed for
redemption; (ii) the number of shares of Series C Preferred Stock to be
redeemed; (iii) the redemption price; (iv) the place or places where
such shares of Series C Preferred Stock are to be surrendered for
payment of the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on such date fixed for redemption; (vi)
the provision of this Section 2(b) of this Article IV under which the
redemption is made; and (vii) the extent, if any, to which Additional
Shares of Series C Preferred Stock are being redeemed. If fewer than
all shares of Series C Preferred Stock held by a holder are to be
redeemed, the notice mailed to such holder shall specify the number of
shares to be redeemed from such holder. Except as required by
applicable law, no defect in the notice of redemption or in the mailing
thereof shall affect the validity of the redemption proceedings.
Notwithstanding Section 2(b)(2) through Section 2(b)(7) of this Article
IV, the Corporation shall not be required to mail any such notice, in
the case of Section 2(b)(3) of this Article IV, until the Full Payment
Date shall occur, in the case of Section 2(b)(4) of this Article IV,
until the consummation of the applicable Restricted Payment Event, in
the case of Section 2(b)(5) of this Article IV, until the consummation
of the Initial Public Offering, and in the case of Section 2(b)(6) of
this Article IV, until the occurrence of a Triggering Event; provided,
however, that in no event shall the Corporation be required to mail any
such notice if it is not required to redeem any Notes pursuant to
Section 2(b)(8) of this Article IV.
(10) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by the
Corporation in providing money for the payment of the redemption price
of the shares called for redemption) dividends on the shares of Series
C Preferred Stock so called for redemption shall cease to accrue, and
said shares shall no longer be deemed to be outstanding and shall have
the status of authorized but unissued shares of preferred stock,
unclassified as to series, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price and any accrued and unpaid dividends
to the redemption date) shall cease. Upon surrender in accordance with
said notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the
14
<PAGE> 15
Board of Directors of the Corporation shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at
the redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the
holder thereof.
(11) In the event that fewer than all shares of
Series C Preferred Stock are redeemed, except as expressly provided
herein, the Corporation may elect whether to redeem shares of Series C
Preferred Stock generally, only Additional Shares of Series C Preferred
Stock or any combination thereof. Any such redemption of Additional
Shares of Series C Preferred Stock or other Series C Preferred Stock
shall be made pro rata among Additional Shares of Series C Preferred
Stock or other Series C Preferred Stock, as the case may be.
(12) Nothing contained herein shall limit any legal
right of the Corporation or any Affiliate to purchase or otherwise
acquire any shares of Series C Preferred Stock at any price, whether
higher or lower than the redemption price.
(c) EXCHANGE.
(1) From and after March 15, 1994, the Series C
Preferred Stock shall be exchangeable in whole or in part on any Series
C Dividend Payment Date, subject to the following sentence, at the
option of the holder thereof. The Corporation shall not be required to
exchange any shares of Series C Preferred Stock pursuant to this
Section 2(c) of this Article IV if any such exchange would result in an
Indebtedness Default, if an Indebtedness Default has occurred and is
continuing, or would result therefrom, or if any such exchange is
prohibited by the then applicable corporation law of the State of
Delaware and unless and until such exchange is permitted by Federal
securities law and any applicable state or "blue sky" securities law
(it being agreed that the Corporation shall have no obligation to
register the Exchange Junior Subordinated Notes (as such term is
defined below) issuable upon exchange hereof under the Securities Act
(as defined below) or pursuant to any such state or "blue sky"
securities law) (any of the foregoing, an "Exchange Restriction").
Holders of the outstanding shares of Series C Preferred Stock will be
entitled to receive (x) prior to March 15, 1997, $97.00 principal
amount of the Exchange Junior Subordinated Notes and (y) thereafter
$100.00 principal amount of the Exchange Junior Subordinated Notes, in
each case in exchange for each share of Series C Preferred Stock held
by them at the time fixed for exchange. At such time, the rights of the
holders of Series C Preferred Stock to be exchanged as stockholders of
the Corporation shall cease, and the person or persons entitled to
receive the Exchange Junior Subordinated Notes issuable upon exchange
shall be treated for all purposes as the registered holder or holders
of such Exchange Junior Subordinated Notes.
(2) Any holder desiring to exercise its option to
exchange all or a portion of its Series C Preferred Stock shall give
written notice of the number of such shares to be so exchanged to the
Corporation at least thirty, but not more than sixty, days prior to the
date fixed for exchange. In the event that the exchange is subject to
an
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Exchange Restriction, the Corporation shall give notice thereof to the
holder so electing to exchange on or prior to the date fixed for such
exchange. In the event any such notice is so given, such holder's
election to exchange shall be deemed to be rescinded. Each holder of
shares of Series C Preferred Stock may exercise such exchange privilege
by surrendering to the Corporation the certificate or certificates for
the shares to be exchanged, together with a written notice of exchange
executed to indicate the number of shares to be exchanged.
(3) All shares of Series C Preferred Stock which have
been exchanged shall no longer be deemed to be outstanding and shall be
retired, and all rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall forthwith cease,
except only the right of the holders thereof to receive Exchange Junior
Subordinated Notes in exchange therefor and to receive any accrued and
unpaid dividends thereon.
(4) Such retired shares of Series C Preferred Stock
shall become authorized but unissued preferred stock. Upon any exchange
of shares of Series C Preferred Stock in accordance with this Section
(2)(c) of this Article IV, the Corporation will pay any stock transfer
taxes which may be due with respect to the transfer and sale of such
exchanged shares to the Corporation; provided, however, that if the
Exchange Junior Subordinated Notes into which the Series C Preferred
Stock is exchangeable pursuant to this Section (2)(c) of this Article
IV is to be issued in the name of any person other than the registered
holder of the Series C Preferred Stock to be so exchanged (the
"registered holder"), the amount of any transfer taxes (whether imposed
on the registered holder or on such other person) payable on account of
the transfer to such person will be payable by the registered holder.
If satisfactory evidence of the payment of such taxes or exemption
therefrom is not submitted upon exchange, either the exchange
consideration will be withheld until such evidence or payment is
received or, at the Corporation's option, the amount of such stock
transfer taxes will be billed directly to such registered holder. In
case fewer than all the shares represented by any certificate for
Series C Preferred Stock are exchanged, a new certificate shall be
issued representing the unexchanged shares without cost to the
registered holder of such shares so exchanged.
(d) VOTING. The holders of record of shares of Series C
Preferred Stock shall not be entitled to any voting rights except as specified
in this Section (2)(d) of this Article IV and except as otherwise provided by
law. The affirmative vote of the holders of at least a majority in liquidation
value of the outstanding shares of Series C Preferred Stock, voting separately
as a single class on a one vote per share (prorated for fractional shares)
basis, in person or by proxy, at a special or annual meeting of stockholders
called for the purpose, or by consent, shall be required to amend, repeal or
change any provisions of this Amended Certificate of Incorporation of Series C
Preferred Stock in any manner which would materially and adversely affect, alter
or change the powers, preferences or special rights of any shares of Series C
Preferred Stock. Notwithstanding the foregoing, and without limiting the first
sentence of this Section (2)(d) of this Article IV, no vote or consent of the
holders of the Series C Preferred Stock will be required for (i) the creation or
incurrence of any indebtedness of any kind of the Corporation or any of its
Subsidiaries, (ii) the creation, issuance, or increase or decrease in the amount
of any class or
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series of capital stock of the Corporation, whether ranking prior to, on a
parity with, or junior to the Series C Preferred Stock as to dividends or upon
liquidation, dissolution or winding up of the Corporation, (iii) any merger,
consolidation or similar transaction involving the Corporation or any sale,
lease or other conveyance of all or substantially all of the assets of the
Corporation, or (iv) any other action by the Corporation or any of its
Subsidiaries.
(e) LIQUIDATION.
(1) Upon a liquidation, winding up or dissolution of
the affairs of the Corporation, whether voluntary or involuntary, the
holders of shares of Series C Preferred Stock then outstanding shall be
entitled, whether from capital or surplus before any assets of the
Corporation shall be distributed among or paid over to the holders of
Junior Securities but after distribution of such assets among, or
payment thereof over to, creditors of the Corporation and to holders of
any stock of the Corporation with liquidation rights senior to the
Series C Preferred Stock, to be paid $100 per share (prorated for
fractional shares), plus, in each such case, an amount equal to all
accrued and unpaid dividends thereon (whether or not earned or
declared) to and including the date of final distribution. After any
such payment in full, the holders of shares of the Series C Preferred
Stock shall not be entitled to any further participation in any
distribution of assets of the Corporation.
(2) Neither the merger or consolidation of the
Corporation into or with any other corporation or the merger or
consolidation of any other corporation into or with the Corporation,
nor the sale of assets by the Corporation, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, for
the purposes of this Section (2)(e) of this Article IV.
(3) If, upon any such liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
assets of the Corporation shall be insufficient to make the full
payments required by Section 2(e)(1) of this Article IV, no such
distribution shall be made on account of any shares of any other class
or series of preferred stock ranking on a parity with the shares of
Series C Preferred Stock upon such dissolution, liquidation or winding
up unless proportionate distributive amounts shall be paid on account
of the shares of Series C Preferred Stock, ratably, in proportion to
the full distributable amounts for which holders of all such parity
shares are respectively entitled upon such dissolution, liquidation or
winding up.
(4) Subject to the rights of the holders of shares of
any series or class or classes of stock ranking on a parity with or
prior to the shares of Series C Preferred Stock upon liquidation,
dissolution or winding up of the Corporation, after payment shall have
been made in full to the holders of the shares of Series C Preferred
Stock as provided in this Section (2)(e) of this Article IV, but not
prior thereto, any Junior Securities shall, subject to the respective
terms and provisions (if any) applying thereto, be entitled to receive
any and all assets remaining to be paid or distributed, and the holders
of the shares of Series C Preferred Stock shall not be entitled to
share therein.
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<PAGE> 18
(f) RESTRICTIONS ON TRANSFER.
(1) No sale, assignment, transfer, pledge,
encumbrance or other disposition (each, a "disposition") of any shares
of Series C Preferred Stock, in whole or in part, shall be permitted
unless such disposition is permitted by Sections 2(f)(2) and (2)(f)(3)
of this Article IV.
(2) The Series C Preferred Stock has not been
registered under the Securities Act or any applicable state securities
or blue sky law and may not be sold, transferred or otherwise disposed
of without such registration unless the sale, transfer or disposition
can be effected without such registration and in compliance with the
Securities Act and such laws. The holder of the Series C Preferred
Stock shall not sell, transfer or otherwise dispose of all or any part
of, any shares of Series C Preferred Stock, other than pursuant to an
effective registration statement under the Securities Act, without
first notifying the Corporation prior to such sale, transfer or
disposition and, if requested by the Corporation, delivering to the
Corporation a written opinion of legal counsel experienced in
Securities Act matters, in form and substance reasonably satisfactory
to the Corporation, that an exemption from registration is available
under the Securities Act and any applicable state securities or blue
sky law.
(3) No disposition of any shares of Series C
Preferred Stock, in whole or in part, shall be permitted at any time
unless such disposition is not to any person or entity, engaged,
directly or indirectly, in any line of business in which the
Corporation or any of its Subsidiaries then engages, or to any person
or entity which is a supplier to, or customer of, the Corporation or
any of its Subsidiaries.
(g) NO REGISTRATION RIGHTS. No person shall at any time be
entitled to registration or similar rights with respect to any shares of Series
C Preferred Stock.
(h) ADDITIONAL DEFINITIONS. As used in this Certificate of
Designation, the following terms have the meanings specified below:
"AFFILIATE" shall have the meaning assigned to it in
the Junior Subordinated Notes.
"BANK CREDIT AGREEMENT" shall have the meaning
assigned to it in the Junior Subordinated Notes (as such Junior Subordinated
Notes are in effect on the Series C Initial Issuance Date). A copy of the Bank
Credit Agreement is available at the principal executive offices of the
Corporation and a copy will be sent to any holder of the Series C Preferred
Stock upon request.
"BRIDGE LOAN AGREEMENT" shall have the meaning
assigned to it in the Junior Subordinated Notes (as such Junior Subordinated
Notes are in effect on the Series C Initial Issuance Date). A copy of the Bridge
Loan Agreement is available at the principal executive offices of the
Corporation and a copy will be sent to any holder of the Series C Preferred
Stock upon request.
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"BRIDGE LOAN FINANCING" shall have the meaning
assigned to it in the Junior Subordinated Notes (as such Junior Subordinated
Notes are in effect on the Series C Initial Issuance Date).
"BUSINESS DAY" shall mean any day (other than a day
which is a Saturday, Sunday or legal holiday in the State of New York or the
State of Georgia) on which banks are open for business in New York City.
"EXCHANGE JUNIOR SUBORDINATED NOTES" shall mean the
Junior Subordinated Notes due January 17, 2003 of the Corporation, in the form
attached as an exhibit to the Junior Securities Exchange, Termination and
Release Agreement, dated as of March 11, 1991, among the Corporation, the
initial holders of the Series C Preferred Stock and certain other persons. A
copy of such Junior Securities Exchange, Termination and Release Agreement is
available at the principal executive offices of the Corporation and a copy will
be sent to any holder of the Series C Preferred Stock upon request.
"INDEBTEDNESS DEFAULT" means any breach of, or the
happening of a default or event of default under, the Bank Credit Agreement, the
Bridge Loan Agreement, the Management Notes, the Junior Subordinated Notes (or
any agreement or instrument relating to any of the foregoing) or any other
agreement, instrument or other document representing or relating to Indebtedness
(as defined in the Bank Credit Agreement, as in effect on the Series C Initial
Issuance Date) to which the Corporation or any of its Subsidiaries is a party or
by which any of their respective properties or assets is bound, that, in any
such event, permits, or would permit upon notice or with lapse of time or both,
any holder thereof to effect, or automatically effects, or would effect, whether
upon notice or with lapse of time or both, an acceleration of the maturity
thereof.
"INITIAL PUBLIC OFFERING" shall have the meaning
assigned to it in the Junior Subordinated Notes (as such Junior Subordinated
Notes are in effect on the Series C Initial Issuance Date).
"JUNIOR SUBORDINATED NOTES" shall mean the Junior
Subordinated Notes due January 17, 2003 of the Corporation, as the same may be
amended, supplemented or otherwise modified from time to time. A copy of the
Junior Subordinated Notes is available at the principal executive offices of the
Corporation and a copy will be sent to any holder of the Series C Preferred
Stock upon request.
"MANAGEMENT NOTES" shall mean the Amended and
Restated Adjustable Rate Senior Subordinated Notes due January 1, 1999 of the
Corporation as amended, supplemented or otherwise modified from time to time. A
copy of the Management Notes is available at the principal executive offices of
the Corporation and a copy will be sent to any holder of the Series C Preferred
Stock upon request.
"SECURITIES ACT" shall mean the Securities Act of
1933, as amended.
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"SUBSIDIARY" shall have the meaning assigned to it in
the Junior Subordinated Notes (as such Junior Subordinated Notes are in effect
on the Series C Initial Issuance Date).
ARTICLE V
REGISTERED OFFICE
The address, including street, number, city and county, of the
registered office of the Corporation is 1013 Centre Road, in the City of
Wilmington, County of New Castle, Delaware, and the name of the registered agent
of the Corporation at such address is Corporation Service Corporation.
ARTICLE VI
REQUIRED STOCKHOLDER VOTE AND CONSENT
Except as otherwise required by law, the affirmative vote of the
holders of a majority of the issued and outstanding shares of the Corporation
shall decide any matter submitted to a vote of the stockholders of the
Corporation. The holders of a majority of the issued and outstanding shares of
the Corporation may take any action that the stockholders of the Corporation are
permitted or required to take at a meeting pursuant to a consent signed by such
holders and setting forth the action taken.
ARTICLE VII
DIRECTORS
The number of directors constituting the initial Board of Directors of
the Corporation is four.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall (i) indemnify any person who was, is, or is
threatened to be made a defendant or respondent in any completed, pending, or
threatened action, proceeding, or suit (whether civil, criminal, administrative,
or investigative or whether an appeal in such action, proceeding, or suit or an
inquiry or investigation that could lead to such an action, proceeding or suit)
because such person was or is a director or officer of the Corporation, or,
while a director or officer of the Corporation, was or is serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise, against judgments, penalties (including excise and similar
taxes), fines, settlements, and reasonable expenses (including attorneys' fees)
actually incurred by such person in connection with such action, proceeding, or
suit and (ii) advance reasonable expenses to such person in connection with such
action, proceeding or suit. Any repeal or modification of this Article shall not
adversely affect any rights to indemnification of any person with respect to any
completed, pending, or threatened action, proceeding, or suit existing
immediately prior to such repeal or modification. The rights provided in this
Article shall not be exclusive of any other
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rights to which such person may be entitled under any provision of the
bylaws of the Corporation, resolution of the stockholders or directors of the
Corporation, agreement, or otherwise.
ARTICLE IX
LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be liable to the Corporation or
its stockholders for monetary damages for breach of his or her fiduciary duty as
a director. Any repeal or modification of this Article shall not adversely
affect any rights or protection of a director of the Corporation existing
immediately prior to such repeal or modification.
ARTICLE X
CORPORATE POWER
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on the stockholders
of the Corporation herein are granted subject to this reservation.
SIMMONS COMPANY
By: /s/ Zenon S. Nie
-----------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
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Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
SIMMONS CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1.01 Registered Office. The registered office of
Simmons Corporation (hereinafter called the "Corporation") in the State of
Delaware shall be at 1013 Centre Road, in the City of Wilmington, County of
Newcastle, Delaware; and the name of the registered agent in charge thereof
shall be Corporation Service Corporation.
SECTION 1.02 Other Offices. The Corporation may also have an
office or offices at such other place or places, either within or without the
State of Delaware, as the Board of Directors (hereinafter called the "Board")
may from time to time determine or as the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.01 Annual Meetings. Annual meetings of the
stockholders of the Corporation, for the purpose of electing directors and for
the transaction of such other proper business as may come before such meetings,
may be held at such time, date and place as the Board shall determine by
resolution.
SECTION 2.02 Special Meetings. A special meeting of the
stockholders, for the transaction of any proper business, may be called at any
time by the Board or by the Chief Executive Officer.
SECTION 2.03 Place of Meetings. All meetings of the
stockholders shall be held at such places, within or without the State of
Delaware, as may from time to time be designated by the person or persons
calling the respective meeting and as specified in the respective notices or
waivers of notice thereof.
SECTION 2.04 Notice of Meetings. Except as otherwise required
by law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail or in the care of an
express courier in a postage prepaid envelope directed to him at his post office
address or other deliver address furnished by him to the Secretary of the
Corporation for such purpose, or, if he shall not have furnished to the
Secretary his address for such purpose, at his post office address last known to
the Secretary, or by transmitting a notice thereof to him at such address by
facsimile,
<PAGE> 2
telegraph, cable, or wireless. Except as otherwise expressly required by law, no
publication of any notice of a meeting of the stockholders shall be required.
Every notice of a meeting of the stockholders shall state the place, date and
hour of the meeting and, in the case of a special meeting, shall also state the
purpose or purposes for which the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall have
waived such notice, and such notice shall be deemed waived by any stockholder
who shall attend such meeting in person or by proxy, except as a stockholder who
shall attend such meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Except as otherwise expressly required by law,
notice of any adjourned meeting of the stockholders need not be given if the
time and place thereof are announced at the meeting at which the adjournment is
taken.
SECTION 2.05 Quorum. Except in the case of any meeting for the
election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present, in person or by proxy, and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at or to act as secretary of such meeting may adjourn such meeting from
time to time. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.06 Voting.
(a) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and shall be registered in his
name on the books of the Corporation:
(i) on the date fixed pursuant to Section 6.05 of
these Bylaws as the record date for the determination of stockholders
entitled to notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed,
then (A) at the close of business on the day next preceding the day on
which notice of the meeting shall be given or (B) if notice of the
meeting shall be waived, at the close of business on the day next
preceding the day on which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor
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<PAGE> 3
be counted for quorum purposes. Persons holding stock of the Corporation in a
fiduciary capacity shall be entitled to vote such stock. Persons whose stock is
pledged shall be entitled to vote, unless in the transfer by the pledgor on the
books of the Corporation he shall have expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or his proxy, may represent such stock
and vote thereon. Stock having voting power standing of record in the names of
two or more persons or other entities, whether fiduciaries, members of a
partnership, joint tenants in common, tenants by entirety or otherwise, or with
respect to which two or more persons or other entities have the same fiduciary
relationship, shall be voted in accordance with the provisions of the Delaware
General Corporation Law.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder, or by his attorney thereunto
authorized, and delivered to the secretary of the meeting; provided, however,
that no proxy shall be voted or acted upon after eleven months from its date
unless said proxy shall provide for a longer period. The attendance at any
meeting of a stockholder who may theretofore have given a proxy shall not have
the effect of revoking the same unless he shall in writing so notify the
secretary of the meeting prior to the voting of the proxy. At any meeting of the
stockholders all matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided by the vote of a
majority in voting interest of the stockholders present in person or by proxy
and entitled to vote thereat and thereon, a quorum being present. The vote at
any meeting of the Shareholders on any question need not be by ballot, unless so
directed by the chairman of the meeting. On a vote by ballot each ballot shall
be signed by the stockholder voting, or by his proxy, if there be such proxy,
and it shall state the number of shares voted.
SECTION 2.07 List of Shareholders. The Secretary of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 2.08 Judges. If at any meeting of the stockholders a
vote by written ballot shall be taken on any question, the chairman of such
meeting may appoint a judge or judges to act with respect to such vote. Each
judge so appointed shall first subscribe an oath to faithfully execute the
duties of a judge at such meeting with strict impartiality and according to the
best of his ability. Such judges shall decide upon the qualification of the
voters and shall report
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<PAGE> 4
the number of shares represented at the meeting and entitled to vote on such
question, shall conduct and accept the votes, and, when the voting is completed,
shall ascertain and report the number of shares voted respectively for and
against the question. Reports of judges shall be in writing and subscribed and
delivered by them to the Secretary of the Corporation. The judges need not be
stockholders of the Corporation, and any officer of the Corporation may be a
judge on any question other than a vote for or against a proposal in which he
shall have a material interest.
SECTION 2.09 Action Without Meeting. Any action required to be
taken at any annual or special meeting of stockholders of the Corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares of stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 2.10 Telephonic Meetings. The stockholders may hold a
meeting by means of conference telephone or similar communications equipment if
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section 2.10 shall constitute presence in person at
such meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 General Powers. The property, business and
affairs of the Corporation shall be managed by the Board.
SECTION 3.02 Number and Term of Office. The Board shall
initially consist of the number of directors established in the Corporation's
Amended and Restated Certificate of Incorporation and may be changed by a
resolution of the Board; provided that the number of directors shall not be less
than one (1) and not more than ten (10). Each of the directors of the
Corporation shall hold office until his successor shall have been duly elected
and shall qualify or until he shall resign or shall have been removed in the
manner hereinafter provided.
SECTION 3.03 Election of Directors. The directors shall be
elected annually by the stockholders of the Corporation entitled to vote thereon
and the persons receiving the greatest number of votes, up to the number of
directors to be elected, shall be the directors.
SECTION 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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SECTION 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy in the Board, whether because of
death, resignation, disqualification, an increase in the number of directors or
any other cause, may be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so chosen to fill a
vacancy shall hold office until his successor shall have been elected and shall
qualify or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 3.06 Place of Meeting, Etc. The Board may hold any of
its meetings at such place or places within or without the State of Delaware as
the Board may from time to time by resolution designate or as shall be
designated by the person or persons calling the meeting or in the notice or a
waiver of notice of any such meeting. Directors may participate in any regular
or special meeting of the Board by means of conference telephone or similar
communications equipment pursuant to which all persons participating in the
meeting of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
SECTION 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors, and notice of such first
meeting shall not be required.
SECTION 3.08 Regular Meetings. Regular meetings of the Board
may be held at such times as the Board shall from time to time by resolution
determine. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting shall be held at the
same hour and place on the next succeeding business day not a legal holiday.
Except as provided by law, notice of regular meetings need not be given.
SECTION 3.09 Special Meetings. Special meetings of the Board
shall be held whenever called by the Chief Executive Officer or a majority in
number of directors then serving on the Board. Except as otherwise provided by
law, notice of the time and place of each such special meeting shall be mailed
to each directors, addressed to him at his residence or usual place of business,
at least five (5) days before the day on which the meeting is to be held or
shall be sent to him at such place by facsimile, wireless, telegraph or cable or
be delivered personally not less than forty-eight (48) hours before the time at
which the meeting is to be held.
Except where otherwise required by law or by these Bylaws, notice of the
purposes of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 Quorum and Manner of Acting. Except as otherwise
provided in the Certificate of Incorporation, in these Bylaws or by law, the
presence of a majority of the authorized number of directors shall be required
to constitute a quorum for the transaction of
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business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 Action by Consent. Any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting if written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 3.12 Removal of Directors. Subject to the provisions
of the Certificate of Incorporation, any directors may be removed at any time,
with or without cause, by the affirmative vote of stockholders having a majority
of the shares entitled to elect directors of the Corporation given at a special
meeting of the Shareholders called for the purpose.
SECTION 3.13 Compensation. The directors shall receive only
such compensation for their services as directors as may be allowed by
resolution of the Board. The Board may also provide that the Corporation shall
reimburse each such director for any expense incurred by him on account of his
attendance at any meetings of the Board or Committees of the Board. Neither the
payment of such compensation nor the reimbursement of such expenses shall be
construed to preclude any director from serving the Corporation or its
subsidiaries in any other capacity and receiving compensation therefor.
SECTION 3.14 Committees. The Board may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board and except
as otherwise limited by law, shall have and may exercise all the powers and
authority of the Board in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Any such committee shall keep written minutes of
its meetings and report the same to the Board at the next regular meeting of the
Board. In the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.
ARTICLE IV
OFFICERS
SECTION 4.01 Number. The Board shall elect a Chief Executive
Officer or a President (or both), a Secretary, and a Treasurer, and it may, if
it so determines, choose a Chairman of the Board from among its members. The
Board may also choose one or more Vice
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Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers. The same person may hold any two or more offices.
SECTION 4.02 Election, Term of Office and Qualifications. The
officers of the Corporation, except such officers as may be appointed in
accordance with Section 4.03, shall be elected annually by the Board at the
first meeting thereof held after the election thereof. Each officer shall hold
office until his successor shall have been duly chosen and shall qualify or
until his resignation or removal in the manner hereinafter provided.
SECTION 4.03 Assistants, Agents and Employees, Etc. In
addition to the officers specified in Section 4.01, the Board may appoint other
assistants, agents and employees as it may deem necessary or advisable,
including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority
and perform such duties as the Board may from time to time determine. The Board
may delegate to any officer of the Corporation or any committee of the Board the
power to appoint, remove and prescribe the duties of any such assistants, agents
or employees.
SECTION 4.04 Removal. Any officer, assistant, agent or
employee of the Corporation may be removed, with or without cause, at any time:
(i) in the case of an officer, assistant, agent or employee appointed by the
Board, only by resolution of the Board; and (ii) in the case of any other
officer, assistant, agent or employee, by any officer of the Corporation or
committee of the Board upon whom or which such power of removal may be conferred
by the Board.
SECTION 4.05 Resignations. Any officer or assistant may resign
at any time by giving written notice of his resignation to the Board or the
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or other cause may be filled for
the unexpired portion of the term thereof in the manner prescribed in these
Bylaws for regular appointments or elections to such office.
SECTION 4.07 The Chief Executive Officer. The Chief Executive
Officer of the Corporation shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board, general and
active supervision and management over the business of the Corporation and over
its several officers, assistants, agents and employees.
SECTION 4.07A The President. The President of the Corporation
shall have such powers and perform such duties as the Board may from time to
time prescribe. At the request of the Chief Executive
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Officer, or in the absence or inability of the Chief Executive Officer to act,
upon the request of the Board, the President shall perform the duties of Chief
Executive Officer and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer.
SECTION 4.08 The Vice Presidents. Each Vice President shall
have such powers and perform such duties as the Board may from time to time
prescribe. At the request of the President, or in case of the President's
absence or inability to act, upon the request of the Board, a Vice President
shall perform the duties of the President and, when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the President.
SECTION 4.09 The Secretary. The Secretary shall, if present,
record in one or more books provided for that purpose the proceedings of all
meetings of the Board, of the stockholders, and of all committees for which a
secretary shall not have been appointed; he shall see that all notices are duly
given in accordance with these Bylaws and as required by law; he shall be
custodian of the seal of the Corporation and shall affix and attest the seal to
all documents to be executed on behalf of the Corporation under its seal; and,
in general, he shall perform all the duties incident to the office of Secretary
and such other duties as may from time to time be assigned to him by the Board.
SECTION 4.10 The Treasurer. The Treasurer shall have the
general care and custody of the funds and securities of the Corporation and
shall deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected by the Board. He shall
receive, and give receipts for, moneys due and payable to the Corporation from
any source whatsoever. He shall exercise general supervision over expenditures
and disbursements made by officers, agents and employees of the Corporation and
the preparation of such records and reports in connection therewith as may be
necessary or desirable. He shall, in general, perform all other duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.11 Compensation. The compensation of the officers of
the Corporation shall be fixed from time to time by the Board. None of such
officers shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 Execution of Contracts. The Board, except as
these Bylaws otherwise provide, may authorize any officer or officers, agent or
agents, to enter into any
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contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness, issued in
the name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolutions of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
SECTION 5.03 Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
may select, or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. For the purpose of deposit
and for the purpose of collection for the account of the Corporation, the Chief
Executive Officer, President, any Vice President or the Treasurer (or any other
officer or officers, assistant or assistants, agent or agents, or attorney or
attorneys of the Corporation who shall from time to time be determined by the
Board) may endorse, assign and deliver checks, drafts and other orders for the
payment of money which are payable to the order of the Corporation.
SECTION 5.04 General and Special Bank Accounts. The Board may
from time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 Certificates for Stock. Every owner of stock of
the Corporation shall be entitled to have a certificate or certificates, to be
in such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any or all of the signatures on the
certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record
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shall be kept of the respective names of the persons, firms or corporations
owning the stock represented by such certificates, the number and class of
shares represented by such certificates, respectively, and the respective dates
thereof, and in case of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for exchange or transfer shall
be canceled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 6.04.
SECTION 6.02 Transfers of Stock. Transfers of shares of stock
of the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.03, and upon surrender of
the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry of transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
SECTION 6.03 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
SECTION 6.04 Lost, Stolen, Destroyed and Mutilated
Certificates. In any case of loss, theft, destruction, or mutilation of any
certificate of stock, another may be issued in its place upon proof of such
loss, theft, destruction or mutilation and upon the giving of a bond of
indemnity to the Corporation in such form and in such sum as the Board may
direct; provided, however, that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper so to do.
SECTION 6.05 Fixing Date for Determination of Shareholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board may
fix, in advance, a record date, which shall not be more than 60 nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. If in any case involving the determination of stockholders for any
purpose other than notice of or voting at a meeting of
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stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Indemnification. Subject to any limitation which
may be contained in the Certificate of Incorporation, the Corporation shall to
the full extent permitted by law, including, without limitation, Delaware
General Corporation Law ss. 145, as such Section now exists or shall hereafter
be amended, indemnify any person who was, is or is threatened to be made a named
defendant or respondent to any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, arbitral, administrative, or
investigative, any appeal in such action, suit, or proceeding, and any inquiry
or investigation that could lead to such an action, suit, or proceeding, because
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, against judgments, penalties
(including excise and similar taxes), fines, settlements, and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit, or proceeding. The termination of any action,
suit or proceeding by judgment, order, settlement, or conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that an individual did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation, or,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
SECTION 7.02 Expenses. Subject to any limitation which may be
contained in the Certificate of Incorporation, the Corporation shall, to the
full extent permitted by law, including, without limitation, ss. 145 of the
Delaware General Corporation Law, as such Section now exists or shall hereafter
be amended, pay or reimburse on a current basis the expenses incurred by any
person described in Section 7.01 in connection with any such action, suit, or
proceeding in advance of the final disposition thereof, if the Corporation has
received (i) a written affirmation by the recipient of his good faith belief
that he has met the standard of conduct necessary for indemnification under the
Delaware General Corporation Law and (ii) a written undertaking by or on behalf
of the director to repay the amount paid or reimbursed if it is ultimately
determined that he has not satisfied such standard of conduct or if
indemnification is prohibited by law.
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SECTION 7.03 Notice to Shareholders. If required by law at the
time such payment is made, any payment of indemnification or advance of expenses
to a director shall be reported in writing to the stockholders with or before
the notice or waiver of notice of the next Shareholder's meeting or with or
before the next submission to Shareholders of a consent to action without a
meeting pursuant to ss. 228 of the Delaware General Corporation Law, and, in any
case, within the 12-month period immediately following the date of the
indemnification or advance.
SECTION 7.04 Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or who is or was serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, against any liability asserted against him
and incurred by him in such a capacity or arising out of his status as such a
person, whether or not the corporation would have the power to indemnify him
against that liability under this article, subject to any restrictions imposed
by law. The Corporation may create a trust fund, establish any form of
self-insurance, grant a security interest or other lien on the assets of the
Corporation, or use other means (including, without limitation, a letter of
credit, guarantee or surety arrangement) to ensure the payment of such sums as
may become necessary to effect indemnification as provided herein.
SECTION 7.05 Other Rights and Remedies. The rights provided
under this Article VII shall not be deemed exclusive of any other rights
permitted by law to which such person may be entitled under any provision of the
Certificate of Incorporation, a resolution of stockholders or directors of the
Corporation, an agreement, or otherwise 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. The rights
provided in this Article VII shall be deemed to be provided by a contract
between the Corporation and the individuals who serve in the capacities
described in Section 7.01 at any time while these bylaws are in effect, and no
repeal or modification of this Article VII by the Shareholders shall adversely
affect any right of any person otherwise entitled to indemnification by virtue
of this Article VII at the time of such repeal or modification.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Fiscal Year. The fiscal year of the Corporation
shall be determined by resolution of the Board.
SECTION 8.02 Seal. The Board shall provide a corporate seal,
which shall be in the form of a circle and shall bear the name of the
Corporation and words and figures showing that the Corporation was incorporated
in the State of Delaware and the year of incorporation.
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SECTION 8.03 Waiver of Notices. Whenever notice is required to
be given by these Bylaws or the Certificate of Incorporation, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.04 Amendments. These Bylaws, or any portion of them,
may be altered, amended or repealed, and new Bylaws may be made, (i) by the
Board, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the Board or (ii) by the stockholders
holding shares of a class of stock entitled to vote for the election of
directors, at any annual meeting of stockholders, without previous notice, or at
any special meeting of stockholders, provided that notice of such proposed
amendment, modification, repeal or adoption is given in the notice of special
meeting. Any Bylaws made or altered by the stockholders may be altered or
repealed by either the Board or the stockholders.
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Exhibit 4.1
SIMMONS COMPANY
SERIES A AND SERIES B
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
Dated as of March 16, 1999
SUNTRUST BANK, ATLANTA
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.10
(c) N.A.
311 (a) 7.11
(b) 7.11
(c) N.A.
312 (a) 2.05
(b) 12.03
(c) 12.03
313 (a) 7.06
(b)(1) N.A.
(b)(2) 7.07
(c) 7.06;12.02
(d) 7.06
314 (a) 4.03;12.02
(b) N.A.
(c)(1) 12.04
(c)(2) 12.04
(c)(3) N.A.
(d) N.A.
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(e) 12.05
(f) N.A.
315 (a) 7.01
(b) 7.05,12.02
(c) 7.01
(d) 7.01
(e) 6.11
316 (a) (last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 2.12
317 (a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318 (a) 12.01
(b) N.A.
(c) 12.01
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
EXECUTION COPY
<PAGE> 4
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions...................................................
Section 1.02. Other Definitions.............................................
Section 1.03. Incorporation by Reference of Trust Indenture Act.............
Section 1.04. Rules of Construction.........................................
ARTICLE 2 THE NOTES
Section 2.01. Form and Dating...............................................
Section 2.02. Execution and Authentication..................................
Section 2.03. Registrar and Paying Agent....................................
Section 2.04. Paying Agent to Hold Money in Trust...........................
Section 2.05. Holder Lists..................................................
Section 2.06. Transfer and Exchange.........................................
Section 2.07. Replacement Notes.............................................
Section 2.08. Outstanding Notes.............................................
Section 2.09. Treasury Notes................................................
Section 2.10. Temporary Notes...............................................
Section 2.11. Cancellation..................................................
Section 2.12. Defaulted Interest............................................
ARTICLE 3 REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee............................................
Section 3.02. Selection of Notes to Be Redeemed.............................
Section 3.03. Notice of Redemption..........................................
Section 3.04. Effect of Notice of Redemption................................
Section 3.05. Deposit of Redemption Price...................................
Section 3.06. Notes Redeemed in Part........................................
Section 3.07. Optional Redemption...........................................
Section 3.08. Mandatory Redemption..........................................
Section 3.09. Offer to Purchase by Application of Excess Proceeds...........
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes..............................................
Section 4.02. Maintenance of Office or Agency...............................
Section 4.03. Reports.......................................................
Section 4.04. Compliance Certificate........................................
Section 4.05. Taxes.........................................................
Section 4.06. Stay, Extension and Usury Laws................................
Section 4.07. Restricted Payments...........................................
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock....
Section 4.10. Asset Sales...................................................
Section 4.11. Transactions with Affiliates..................................
Section 4.12. Liens.........................................................
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<PAGE> 5
Section 4.13. Conduct of Business...........................................
Section 4.14. Corporate Existence...........................................
Section 4.15. Offer to Repurchase Upon Change of Control....................
Section 4.16. No Senior Subordinated Debt...................................
Section 4.17. Limitation on Issuances of Guarantees of Indebtedness.........
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.......
ARTICLE 5 SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets......................
Section 5.02. Successor Corporation Substituted.............................
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default.............................................
Section 6.02. Acceleration..................................................
Section 6.03. Other Remedies................................................
Section 6.04. Waiver of Past Defaults.......................................
Section 6.05. Control by Majority...........................................
Section 6.06. Limitation on Suits...........................................
Section 6.07. Rights of Holders of Notes to Receive Payment.................
Section 6.08. Collection Suit by Trustee....................................
Section 6.09. Trustee May File Proofs of Claim..............................
Section 6.10. Priorities....................................................
Section 6.11. Undertaking for Costs.........................................
ARTICLE 7 TRUSTEE
Section 7.01. Duties of Trustee.............................................
Section 7.02. Rights of Trustee.............................................
Section 7.03. Individual Rights of Trustee..................................
Section 7.04. Trustee's Disclaimer..........................................
Section 7.05. Notice of Defaults............................................
Section 7.06. Reports by Trustee to Holders of the Notes....................
Section 7.07. Compensation and Indemnity....................................
Section 7.08. Replacement of Trustee........................................
Section 7.09. Successor Trustee by Merger, etc..............................
Section 7.10. Eligibility; Disqualification.................................
Section 7.11. Preferential Collection of Claims Against Company.............
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance......
Section 8.02. Legal Defeasance and Discharge................................
Section 8.03. Covenant Defeasance...........................................
Section 8.04. Conditions to Legal or Covenant Defeasance....................
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions..............................
Section 8.06. Repayment to Company..........................................
Section 8.07. Reinstatement.................................................
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER
EXECUTION COPY
<PAGE> 6
Section 9.01. Without Consent of Holders of Notes...........................
Section 9.02. With Consent of Holders of Notes..............................
Section 9.03. Compliance with Trust Indenture Act...........................
Section 9.04. Revocation and Effect of Consents.............................
Section 9.05. Notation on or Exchange of Notes..............................
Section 9.06. Trustee to Sign Amendments, etc...............................
ARTICLE 10 SUBORDINATION
Section 10.01. Agreement to Subordinate.....................................
Section 10.02. Liquidation; Dissolution; Bankruptcy.........................
Section 10.03. Default on Designated Senior Debt............................
Section 10.04. Acceleration of Securities...................................
Section 10.05. When Distribution Must Be Paid Over..........................
Section 10.06. Notice by Company............................................
Section 10.07. Subrogation..................................................
Section 10.08. Relative Rights..............................................
Section 10.09. Subordination May Not Be Impaired by Company.................
Section 10.10. Distribution or Notice to Representative.....................
Section 10.11. Rights of Trustee and Paying Agent...........................
Section 10.12. Authorization to Effect Subordination........................
Section 10.13. Amendments...................................................
ARTICLE 11 NOTE GUARANTEES
Section 11.01. Guarantee....................................................
Section 11.02. Subordination of Note Guarantee..............................
Section 11.03. Limitation on Guarantor Liability............................
Section 11.04. Execution and Delivery of Note Guarantee.....................
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms...........
Section 11.06. Releases Following Sale of Assets............................
ARTICLE 12 MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.................................
Section 12.02. Notices......................................................
Section 12.03. Communication by Holders of Notes with Other Holders of Notes
Section 12.04. Certificate and Opinion as to Conditions Precedent...........
Section 12.05. Statements Required in Certificate or Opinion................
Section 12.06. Rules by Trustee and Agents..................................
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders...............................................
Section 12.08. Governing Law................................................
Section 12.09. No Adverse Interpretation of Other Agreements................
Section 12.10. Successors...................................................
Section 12.11. Severability.................................................
Section 12.12. Counterpart Originals........................................
Section 12.13. Table of Contents, Headings, etc.............................
EXHIBITS
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Exhibit A1 FORM OF NOTE
Exhibit A2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of March 16, 1999 between Simmons Company, a
Delaware corporation (the "Company"), and SunTrust Bank, Atlanta, as trustee
(the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 1/4% Series
A Senior Subordinated Notes due 2009 (the "Series A Notes") and the 10 1/4%
Series B Senior Subordinated Notes due 2009 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such
specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Additional Assets" has the meaning assigned to such term in the second
paragraph of Section 4.10 hereof.
"Additional Notes" means up to $50.0 million aggregate principal amount
of Notes (other than the Initial Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the
Initial Notes. The Initial Notes and any Additional Notes subsequently issued
under this Indenture shall be treated as a single class for all purposes under
this Indenture, including, without limitation, waivers, amendments, redemptions,
and offer to purchase.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
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"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a
whole shall be governed by Sections 4.15 and/or 5.01 hereof and
not by Section 4.10 hereof; and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed
to be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than
$1.0 million; or
(b) results in net proceeds to the Company and its Restricted
Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Wholly
Owned Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary;
(4) a Restricted Payment that is permitted by Section 4.07 hereof;
(5) the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
(6) sales of accounts receivable, equipment and related assets,
including contract rights, of the type specified in the definition
of "Qualified Securitization Transaction" to a Securitization
Entity for the fair market value thereof, including cash in an
amount at least equal to 75% of the fair market value thereof;
(7) the licensing of intellectual property in the ordinary course of
business; and
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(8) the disposal or replacement of obsolete, surplus or worn-out
equipment in the ordinary course of business.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule
13(d)(3) and Rule 13(d)(5) under the Exchange Act, except that in calculating
the beneficial ownership of any particular "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, capital stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of capital stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality
thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition;
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(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the
New Senior Credit Agreement or with any domestic commercial bank
having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and
(3) above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of
acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5)
of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any
"person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or any of their Related Parties;
(2) the adoption of a plan by the stockholders thereof for the
liquidation or dissolution of the Company or Holdings;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any "person" (as defined above), other than the Principals,
their Related Parties or, prior to the establishment of a Public
Market, a Permitted Group, becomes the Beneficial Owner, directly
or indirectly, of more than 50% of the Voting Stock of Holdings or
the Company (measured by voting power rather than number of
shares);
(4) the first day on which a majority of the members of the Board of
Directors of Holdings or the Company are not Continuing Directors;
or
(5) the first day on which Holdings ceases to own 100% of the
outstanding Equity Interests of the Company (other than as a
result of a merger of the Company and Holdings permitted by this
Indenture).
"Closing Date" means the date of this Indenture.
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"Common Equity Documents" means the Recapitalization Agreement, the
Certificate of Merger and each other document executed in connection with the
Common Equity Financing.
"Common Equity Financing" means the issuance by Holdings or the
retention by existing stockholders of Holdings of not less than $177.0 million
of common equity in connection with the Merger, which equity shall consist of
(i) the contribution by Fenway of not less than $128.1 million in cash to
Holdings, (ii) the retention by the Management Investors of shares (or options
to acquire shares) of common stock of Holdings with an estimated value of
approximately $16.5 million, (iii) the conversion by the Simmons ESOP of its
3,413,672 shares of the Company's Series A Preferred Stock which is not
allocated to the accounts of ESOP participants into approximately 3,482,036
shares of Holdings' Class C Common Stock which shall be converted in the Merger
into 3,482,036 shares of unallocated common stock of Holdings and the retention
of such unallocated shares with an estimated value of $23.4 million and (iv) the
retention by certain affiliates of or entities organized by Investcorp of
approximately 1,336,998 shares of common stock of Holdings with an estimated
value of $9.0 million.
"Company" means Simmons Company, and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss, plus any net loss
realized in connection with an Asset Sale (without regard to the
$1.0 million size limitation set forth in the definition of "Asset
Sale"), to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was deducted
in computing such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of revolving credit
facilities and letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such
Consolidated Net Income; plus
(4) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is
called upon, to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus
(5) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other
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non-cash expenses and charges (excluding any such non-cash expense
and charge to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of
a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, amortization and other non-cash
expenses and charges were deducted in computing such Consolidated
Net Income; plus
(6) nonrecurring expenses occurring prior to the date of this
Indenture; plus
(7) nonrecurring compensation payments occurring, or committed to, on
or prior to the date of this Indenture but only to the extent such
payments are disclosed under the subheading "Management" or
"Certain Relationships and Related Transactions" in the Offering
Circular; plus
(8) bad debts charges relating to the bankruptcies of Montgomery Ward
& Co. and Levitz Furniture Inc.; plus
(9) nonrecurring expenses occurring on or prior to December 31, 1999
relating to the Company's SWIFT and UNITE productivity initiatives
and other strategic management initiatives, in an aggregate amount
not to exceed $2.0 million since the date of this Indenture; plus
(10) the amortization of the prepaid fees paid to Investcorp
International Inc. prior to the date of this Indenture; minus
(11) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course
of business,
in each case, on a consolidated basis and determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent
Person or a Wholly Owned Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is
not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or its stockholders;
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(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded;
(4) the cumulative effect of a change in accounting principles shall
be excluded;
(5) the Net Income (or loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its
Subsidiaries; and
(6) nonrecurring payments or charges relating to the Transactions or
the Offering of the Series A Notes occurring, or committed to, on
or prior to the date of this Indenture.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of:
(1) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other
than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and
paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock;
less
(3) accumulated deficit; and
(4) all investments as of such date in unconsolidated Subsidiaries and
in Persons that are not Subsidiaries (except, in each case,
Permitted Investments).
All of the foregoing amounts are to be determined in accordance with GAAP.
"Continuing Directors" means as of any date of determination, any
member of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of this
Indenture; or
(2) was designated or nominated for election or elected to such Board
of Directors by any of the Principals or with the approval of a
majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give written notice to the Company as provided therein.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Senior Credit Agreement)
or commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow
<PAGE> 15
from such lenders against such receivables) or letters of credit, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Notes are first issued and authenticated under
this Indenture shall be deemed to have been incurred on such date in reliance on
the exception provided by clause (2) of the definition of Permitted Debt.
"Currency Agreements" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the New Senior Credit
Agreement; and
(2) any other Senior Debt permitted under this Indenture the original
principal amount of which is $10.0 million or more and that has
been designated by the Company as "Designated Senior Debt".
"Disqualified Stock" means 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, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
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"Domestic Subsidiary" means with respect to the Company, any Subsidiary
of the Company that:
(1) was formed under the laws of the United States of America; or
(2) that guarantees or otherwise becomes obligated with respect to any
Indebtedness of the Company.
"ESOP Stock Sale Agreement" means that certain ESOP Stock Sale and
Exchange Agreement dated as of July 22, 1998 (as amended by Amendment No. 1
thereto, dated as of September 25, 1998) by and among Holdings, the Company, REM
Acquisition, Inc. and State Street Bank & Trust Company, solely in its capacity
as trustee of the ESOP trust, as in effect on the Closing Date.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant
to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Senior Credit Agreement) in
existence on the date of this Indenture, until such amounts are repaid.
"Fenway" means:
(1) Fenway Partners Capital Fund, L.P., a Delaware limited
partnership;
(2) Fenway Partners Capital Fund II, L.P., a Delaware limited
partnership; and
(3) so long as it is controlled and more than 50% owned by one or more
of the entities described in clauses (1) and (2), Simmons Holdings
LLC, a Delaware limited liability company.
"Fenway Agreement" means that certain Advisory Agreement dated as of
October 29, 1998 by and among Fenway Partners, Inc., the Company and Holdings as
in effect on the date of this Indenture.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of:
<PAGE> 17
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of revolving credit
facilities and letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations, but
excluding the amortization of deferred financing costs); plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is
called upon; plus
(4) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company or a Guarantor
(other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company.
For purposes of the preceding, total interest expense shall be determined after
giving effect to any net payments made or received by the Company and its
Subsidiaries with respect to Interest Swap Obligations.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems, repays, repurchases, defeases or otherwise discharges any Indebtedness
(other than revolving credit borrowings) or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption, repayment, repurchase,
defeasance or other discharge of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, unless otherwise specified in a particular provision of
this Indenture, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be
deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference
period shall be calculated (including any pro forma expense and
cost reductions and related adjustments to the extent that the
same are consistent with Regulation S-X under the Securities Act,
except in the case of clause (15) of Section 4.09 hereof and
except in the case of the Section 5.01
<PAGE> 18
hereof) and without giving effect to clause (3) of the proviso set
forth in the definition of Consolidated Net Income; and
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be
excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed
Charges shall not be obligations of the referent Person or any of
its Restricted Subsidiaries following the Calculation Date.
For purposes of this definition, whenever pro forma effect is to be given to any
acquisition, the amount of Consolidated Cash Flow relating thereto and the
amount of Fixed Charges associated with any Indebtedness incurred in connection
therewith shall be determined in good faith by a responsible financial or
accounting officer of the Company in a manner that is consistent with this
definition.
"Foreign Subsidiary" means any Subsidiary of the Company organized
under the laws of any jurisdiction outside of the United States of America.
"GAAP" means generally accepted accounting principles 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A1 or A2 hereto issued in accordance with Section 2.01,
2.06(b)(iv), 2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each Subsidiary of the Company that executes a
Guarantee in accordance with the provisions of Section 4.17 and Article 11 of
this Indenture, and their respective successors and assigns except those
released in accordance with the terms of this Indenture.
<PAGE> 19
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means Simmons Holdings, Inc., a Delaware corporation, and
the Company's direct parent.
"IAI Global Note" means the global Note substantially in the form of
Exhibit A1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that shall be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property or any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable;
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
<PAGE> 20
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Industrial Revenue Bonds" means:
(1) $9.7 million of 7.0% industrial revenue bonds maturing in 2017
that the Company issued to finance the construction of its
Janesville, Wisconsin facility; and
(2) $5.0 million of variable rate industrial revenue bonds maturing in
2016 that the Company issued to finance the construction of its
Shawnee, Kansas facility.
"Initial Notes" means the first $150.0 million aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Swap Obligations" means the obligations of any Person,
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Persons calculated by applying a fixed or a floating rate of interest on the
same notional amount.
"Investcorp" means INVESTCORP S.A.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel, relocation and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of
Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the State of Georgia or at a place of
payment are authorized by law, regulation or executive order or other
governmental action to remain closed. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue on such payment for
the intervening period.
<PAGE> 21
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 5 of the Registration Rights Agreement.
"Management Investors" means the management officers and employees of
the Company and its Subsidiaries identified as management investors in the
Recapitalization Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with:
(a)uany Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions, and without regard to
the $1.0 million size limitation set forth in the definition of
"Asset Sale") or (b)uthe disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment
of any Indebtedness of such Person or any of its Restricted
Subsidiaries; and
(2) any extraordinary gain (but not loss), together with any related
provision for taxes on such extraordinary gain (but not loss); and
(3) non-cash compensation charges, including any such non-cash charges
arising from existing stock options resulting from any merger,
recapitalization or other acquisition or disposition.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale) and any
cash payments received by way of deferred payments as and when received, net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Debt under a Credit Facility)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"New Senior Credit Agreement" means that certain senior secured credit
agreement, dated October 29, 1998, consisting of a $270.0 senior secured bank
financing including (i) an $80.0 million six-year
<PAGE> 22
revolver, (ii) a $70.0 million six-year term loan A, (iii) a $70.0 million
seven-year term loan B and (iv) a $50.0 million eight-year term loan C entered
into by the Company, Goldman Sachs Credit Partners L.P., as joint lead arranger,
syndication agent and lender, and Warburg Dillon Read LLC, as joint lead
arranger, UBS AG, Stamford Branch, as administrative agent and lender, and the
other institutions party thereto from time to time, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case, as amended, modified, supplemented,
renewed, refunded, replaced, extended, restructured or refinanced from time to
time.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a
guarantor or otherwise), or (c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or
any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated
or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
shall not have any recourse to the stock or assets of the Company
or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the Company's
payment obligations under this Indenture and on the Notes, executed pursuant to
the provisions of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture. The Initial Notes and the Additional Notes shall be treated as a
single class for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Offering Circular" means the Offering Circular of the Company dated
March 10, 1999 relating to the Notes.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the
<PAGE> 23
treasurer or the principal accounting officer of the Company, that meets the
requirements of Sections 12.04 and 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Sections
12.04 and 12.05 hereof. The counsel may be an employee of or counsel to the
Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means any business (including stock or assets)
that derives a majority of its revenues from the manufacture, distribution and
sale of mattresses, foundation and other bedding products and activities that
are reasonably similar, ancillary or related to, or a reasonable extension,
development or expansion of, the businesses in which the Company and its
Restricted Subsidiaries are engaged on the date of this Indenture.
"Permitted Debt" has the meaning assigned to such term in the second
paragraph of the Section 4.09 hereof.
"Permitted Group" means any group of investors that is deemed to be a
"person" (as such term is used in Section 13(d)(3) of the Exchange Act) by
virtue of the Stockholders Agreements, as the same may be amended, modified or
supplemented from time to time, provided that no single Person (together with
its Affiliates), other than the Principals and their Related Parties, is the
Beneficial Owner (with such beneficial ownership determined without regard to
the Stockholders Agreements, as the same may be amended, modified or
supplemented from time to time), directly or indirectly, of (a) more than 40% of
the Voting Stock of the Company that is "beneficially owned" (as defined above)
by such group of investors and (b) more of the Voting Stock of the Company than
is at the time "beneficially owned" (as defined above) by the Principals and
their Related Parties in the aggregate (Voting Stock, in each case, measured by
voting power rather than number of shares).
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company that is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company that is a Guarantor in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company that is a Guarantor;
<PAGE> 24
(4) any Investment in a Restricted Subsidiary that is not a Guarantor;
provided that the aggregate fair market value of such Investment,
when taken together with the fair market value of all other
Investments made pursuant to this clause (4) that are at that time
outstanding, shall not exceed 10% of Total Assets at the time of
such Investment (with the fair market value of each Investment
being measured at the time made and without giving effect to
subsequent changes in value);
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof;
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;
(7) any Investment by the Company or a Subsidiary of the Company in a
Securitization Entity or any Investment by a Securitization Entity
in any other Person in connection with a Qualified Securitization
Transaction; provided that any Investment in a Securitization
Entity is in the form of a Purchase Money Note or an equity
interest;
(8) any Investment existing on the date of this Indenture;
(9) loans and advances to employees and officers in the ordinary
course of business not to exceed $5.0 million at any one time
outstanding;
( ) Currency Agreements and Interest Swap Obligations;
( ) accounts receivable incurred in the ordinary course of business,
( ) Investments in securities of trade creditors or customers received
pursuant to a plan of reorganization or similar arrangement upon
the bankruptcy or insolvency of such trade creditor or customer;
( ) guarantees otherwise permitted under this Indenture;
( ) Investments the payment of which consists exclusively of Equity
Interests other than Disqualified Stock; and
( ) additional Investments having an aggregate fair market value,
taken together with all other Investments made pursuant to this
clause (15) that are at that time outstanding, not to exceed $10.0
million at the time of such Investment (with the fair market value
of each Investment being measured at the time made and without
giving effect to subsequent changes in value).
"Permitted Junior Securities" means: (1) Equity Interests in the
Company, Holdings or any Guarantor; or (2) debt securities that are subordinated
to all Senior Debt (and any debt securities issued in exchange for Senior Debt)
to substantially the same extent as, or to a greater extent than, the Notes are
subordinated to Senior Debt pursuant to this Indenture.
<PAGE> 25
"Permitted Liens" means:
(1) Liens securing Senior Debt that was permitted by the terms of this
Indenture to be incurred;
(2) Liens in favor of the Company;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of
the Person merged into or consolidated with the Company;
(4) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such
acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;
(6) Liens to secure Senior Debt of the Company that was permitted to
be incurred by this Indenture;
(7) Liens existing on the date of this Indenture;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP
shall have been made therefor;
(9) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that
do not exceed $5.0 million at any one time outstanding and that:
(a) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit (other than trade credit
in the ordinary course of business); and
(b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary;
(10) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries;
(11) Liens securing the Industrial Revenue Bonds;
<PAGE> 26
(12) 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; and
(13) leases or subleases to third parties.
"Permitted Refinancing Indebtedness" means any Indebtedness or
Disqualified Stock of the Company or any of its Restricted Subsidiaries issued
in exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other Indebtedness or Disqualified Stock of
the Company or any of its Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) the principal amount (or accreted value or liquidation value, if
applicable) of such Permitted Refinancing Indebtedness does not
exceed the principal amount of (or accreted value or liquidation
value, if applicable), plus accrued interest on, the Indebtedness
or Disqualified Stock so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses,
costs or premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness or Disqualified Stock being
extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the
Indebtedness or Disqualified Stock being extended, refinanced,
renewed, replaced, defeased or refunded;
(4) such Indebtedness or Disqualified Stock is incurred or issued
either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness (or issuer of the Disqualified Stock)
being extended, refinanced, renewed, replaced, defeased or
refunded; and
(5) if the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded provided for
payment or accrual of interest or dividends on a non-cash basis,
then such Indebtedness or Disqualified Stock contains provisions
allowing for the payment or accrual of interest and dividends on
comparable terms.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means (a) Fenway and (b) any other Person that owns more
than 10% of the Equity Interests of Holdings as of the date of this Indenture.
<PAGE> 27
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means any underwritten public offering of
Qualified Capital Stock of Holdings or the Company; provided that, in the event
of any such public equity offering by Holdings, Holdings contributes to the
common equity capital of the Company (other than as Disqualified Stock) the
portion of the net cash proceeds of such public equity offering necessary to pay
the aggregate redemption price (plus accrued interest to the redemption date) of
the Notes to be redeemed pursuant to the provisions of the first paragraph under
Section 3.07 with respect to the Notes.
A "Public Market" shall be deemed to exist if:
(1) a Public Equity Offering has been consummated; and
(2) at least 35% of the total issued and outstanding Common Stock of
the Company or Holdings (as applicable) immediately prior to the
consummation of such Public Equity Offering has been distributed
by means of an effective registration statement under the
Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Stock.
"Qualified Securitization Transaction" means any transaction or series
of transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (b) any other Person (in case of a transfer by a
Securitization Entity), or may grant a security interest in, any accounts
receivable or equipment (whether now existing or arising or acquired in the
future) of the Company or any of its Restricted Subsidiaries, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivable and equipment, all contracts and contract rights and all
Guarantees or other obligations in respect such accounts receivable and
equipment, proceeds of such accounts receivable and equipment and other assets
(including contract rights) which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable and equipment.
"Recapitalization Agreement" means that certain Agreement and Plan of
Merger dated as of July 16, 1998, by and among Holdings, the Company and REM
Acquisition, Inc., as amended by Amendment No. 1 dated as of September 22, 1998,
and as amended by Amendment No. 2 dated as of October 26, 1998.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 16, 1999, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act."
"Regulation S" means Regulation S promulgated under the Securities Act.
<PAGE> 28
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A2 hereto bearing the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) any controlling stockholder of any of the Principals, any entity
that is more than 50% owned by any one or more Principals or their
Related Parties; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons
beneficially holding a 51% or more controlling interest of which
consist of the Principals and/or such other Persons referred to in
the immediately preceding clause (1); or
(3) any Person who, directly or indirectly, controls through a
management agreement or a general partner or is under common
control with any of the Principals; or
(4) any trust, partnership, corporation or other entity, the
benefactors, stockholders, partners or owners of which consist of
Persons referred to in clause (3).
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
<PAGE> 29
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company makes
an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) that engages in
no activities other than in connection with the financing of accounts receivable
or equipment and that is designated by the Board of Directors of the Company (as
provided below) as a Securitization Entity (a) no portion of the Indebtedness or
any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Restricted Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates the Company or any Restricted Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Restricted Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity, and (c) to which neither
the Company nor any Restricted Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results. Any such designation by the Board
of Directors of the Company shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors of the
Company giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Senior Credit Documents" means the New Senior Credit Agreement, the
guaranties thereunder, any pledge and security agreement, any mortgage and each
other document executed in connection with the issuance of the bank financing
thereunder as each such document may be amended, restated, supplemented or
otherwise modified from time to time.
"Senior Debt" means:
<PAGE> 30
(1) all Indebtedness of the Company or any Guarantor outstanding on
the date of this Indenture under Credit Facilities or thereafter
incurred under Credit Facilities, and all Hedging Obligations with
respect thereto;
(2) any other Indebtedness of the Company or any Guarantor permitted
to be incurred under the terms of this Indenture, unless the
instrument governing such Indebtedness expressly provides that it
is on a parity with or subordinated in right of payment to the
Notes or any Guarantee thereof; and
(3) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the preceding, Senior Debt
shall not include:
(1) any Indebtedness represented by Capital Stock;
(2) any liability for federal, state, local or other taxes owed or
owing by the Company;
(3) any Indebtedness of the Company to any of its Subsidiaries or
other Affiliates;
(4) any trade payables including any Guarantees thereof or instruments
evidencing such liabilities;
(5) any Indebtedness that is incurred in violation of this Indenture;
or
(6) the Industrial Revenue Bonds.
"Senior Guarantees" means the Guarantees by the Guarantors of
Obligations under the Credit Facilities.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Simmons 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.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company that are reasonably customary in an accounts
receivable or equipment transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay,
<PAGE> 31
redeem or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Stockholders Agreements" means those certain Stockholders Agreements
(i) by and among Holdings, Fenway and ESOP, Investcorp and the other Persons
listed therein and the Company, and (ii) by and among Holdings, the Management
Investors and the other Persons listed therein, each as in effect on the date of
this Indenture.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock
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 such
Person or one or more of the other Subsidiaries of that Person
(or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person
or of one or more Subsidiaries of such Person (or any combination
thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Total Assets" means the consolidated assets of the Company and its
Restricted Subsidiaries calculated in accordance with GAAP.
"Transaction Documents" means the Senior Credit Documents, the Common
Equity Documents, the Stockholders Agreements, the ESOP Stock Sale Agreement,
the Recapitalization Agreement, the Fenway Agreement and all documents relating
to any of the foregoing.
"Trustee" means the party named as such above unless a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note substantially
in the form of Exhibit A1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
<PAGE> 32
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the
Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company
or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of the Company or any of its
Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of the Company or any
of its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted
Subsidiary by the Board of Directors shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.18 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such Section). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, (2) no Default or Event of Default would be in existence
following such designation and (3) if any such Subsidiary is a Domestic
Subsidiary, it shall execute a supplemental indenture to become a Guarantor with
respect to the Notes.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing;
<PAGE> 33
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final
maturity, in respect thereof, by (b)uthe number of years
(calculated to the nearest one-twelfth) that shall elapse between
such date and the making of such payment, by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
- ---- -------
"Affiliate Transaction"............................................. 4.11
"Asset Sale"........................................................ 4.10
"Asset Sale Offer".................................................. 4.10
"Authentication Order".............................................. 2.02
"Change of Control Offer"........................................... 4.15
"Change of Control Payment"......................................... 4.15
"Change of Control Payment Date".................................... 4.15
<PAGE> 34
"Covenant Defeasance"............................................... 8.03
"DTC"............................................................... 2.03
"Event of Default".................................................. 6.01
"Excess Proceeds"................................................... 4.10
"incur"............................................................. 4.09
"Legal Defeasance".................................................. 8.02
"Offer Amount"...................................................... 3.09
"Offer Period"...................................................... 3.09
"Paying Agent"...................................................... 2.03
"Permitted Debt".................................................... 4.09
"Purchase Date"..................................................... 3.09
"Registrar"......................................................... 2.03
"Restricted Payments"............................................... 4.07
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
<PAGE> 35
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Note Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or rules
adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
<PAGE> 36
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibits A1 or A2 attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with written
instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York office, as custodian for
the Depositary, and registered in the name of the Depositary or the nominee of
the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel Bank, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The Restricted Period shall be terminated upon
the receipt by the Trustee of (i) a written certificate from the Depositary,
together with copies of certificates from Euroclear and Cedel Bank certifying
that they have received certification of non-United States beneficial ownership
of 100% of the aggregate principal amount of the Regulation S Temporary Global
Note (except to the extent of any beneficial owners thereof who acquired an
interest therein during the Restricted Period pursuant to another exemption from
registration under the Securities Act and who will take delivery of a beneficial
ownership interest in a 144A Global Note or an IAI Global Note bearing a Private
Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and
(ii) an Officers' Certificate from the Company. Following the termination of the
Restricted Period, beneficial interests in the Regulation S Temporary Global
Note shall be exchanged for beneficial interests in Regulation S Permanent
Global Notes pursuant to the Applicable Procedures. Simultaneously with the
authentication of Regulation S Permanent Global Notes, the Trustee shall cancel
the Regulation S Temporary Global Note. The aggregate principal amount of the
Regulation S Temporary Global Note and the Regulation S Permanent Global Notes
may from time to time be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its nominee, as the case may be, in
connection with transfers of interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
<PAGE> 37
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon receipt of a written order of the Company
signed by two Officers (an "Authentication Order"), authenticate Notes for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Notes. The aggregate principal amount of Notes outstanding at any time may not
exceed such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
<PAGE> 38
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA section 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
written notice, if available, from the Depositary that it is unwilling or unable
to continue to act as Depositary or that it is no longer a clearing agency
registered under the Exchange Act and, in either case, a successor Depositary is
not appointed by the Company within 120 days after the date of such written
notice from the Depositary or (ii) the Company in its sole discretion determines
that the Global Notes (in whole but not in part) should be exchanged for
Definitive Notes and delivers a written notice to such effect to the Trustee;
provided that in no event shall the Regulation S Temporary Global Note be
exchanged by the Company for Definitive Notes prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the
occurrence of either of the preceding events in (i) or (ii) above, Definitive
Notes shall be issued in such names as the Depositary shall instruct the Trustee
by means of a written instruction. Global Notes also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof.
Every Note authenticated and delivered in exchange for, or in lieu of, a Global
Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or
2.10 hereof, shall be authenticated and delivered in the form of, and shall be,
a Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), however, beneficial interests in a Global Note
may be transferred and exchanged as provided in Section 2.06(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser).
<PAGE> 39
Beneficial interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the RegulationuS Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the RegulationuS Temporary Global Note or the
RegulationuS Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
<PAGE> 40
including the certifications and certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the aggregate principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
<PAGE> 41
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Restricted Definitive Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in
item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted
<PAGE> 42
Global Note pursuant to this Section 2.06(c) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Regulation S Temporary Global Note to
Definitive Notes. Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form
of a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
<PAGE> 43
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in an
Unrestricted Global Note proposes to exchange such beneficial interest for
a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred
to a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred
to a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
<PAGE> 44
(E) if such Restricted Definitive Note is being transferred
to an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred
to the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
RegulationuS Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
<PAGE> 45
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require,
an Opinion of Counsel in form reasonably acceptable to the
Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are
no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel
the Definitive Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests
in Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive
Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (2)
thereof; and
<PAGE> 46
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in
<PAGE> 47
an aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND, (B) IN
ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(iii),
(c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
<PAGE> 48
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's written order or at the Registrar's
written request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
<PAGE> 49
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of
Section 3.07(a) hereof.
<PAGE> 50
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory in its sole judgment
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee has actual knowledge are so owned shall be so
disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). The Company may not issue new Notes to replace Notes that it has paid or
that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed
<PAGE> 51
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
<PAGE> 52
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of, accrued interest and Liquidated Damages, if any, on all
Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Company any money deposited with the Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph,
on and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to
<PAGE> 53
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Notwithstanding the provisions of clause (b) of this
Section 3.07, at any time prior to March 15, 2002, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of the Notes
ever issued under this Indenture at a redemption price of 110.25% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
any Public Equity Offering; provided that:
(1) at least 65% of the Notes ever issued remain outstanding
immediately after the occurrence of such redemption (excluding Notes held
by the Company and its Subsidiaries); and
(2) the notice of redemption with respect to such redemption
shall be mailed at least 30 days but not more than 60 days after the date
of the closing of any such Public Equity Offering.
(b) Except as set forth in clause (a) of this Section 3.07, the
Notes shall not be redeemable pursuant to this Section 3.07 at the Company's
option prior to March 15, 2004. After March 15, 2004, the Company may redeem all
or a part of these Notes upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on March 15 of the years indicated below:
PERCENTAGE OF
PRINCIPAL
YEAR AMOUNT
---- -------------
2004........................................ 105.125%
2005........................................ 103.417%
2006........................................ 101.708%
<PAGE> 54
2007 and thereafter......................... 100.000%
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption payments
with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period the Company shall
purchase (the "Purchase Date") the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the extent such Note is repaid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest shall be payable after the Purchase Date to Holders who tender Notes
pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrete or accrue interest;
<PAGE> 55
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest on the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Company in accordance
with the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company shall authenticate and mail
or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
<PAGE> 56
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 12:00 noon (New York City time) Eastern Time on the due date money
deposited by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due; funds
received by the Paying Agent after that time on such due date shall be deemed to
have been paid by the Company on the next succeeding Business Day. The Company
shall pay all Liquidated Damages, if any, in the same manner on the dates and in
the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes, within the time periods specified in the SEC's rules and
regulations:
<PAGE> 57
(1) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants; and
(2) all current reports that would be required to be filed
with the SEC on Form 8-K if the Company were required to file such reports.
If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Company and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries of the
Company.
In addition, whether or not required by the SEC, the Company shall
file a copy of all such information and reports referred to in clauses (1) and
(2) above with the SEC for public availability within the time periods specified
in the SEC's rules and regulations (unless the SEC will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request.
The Company shall at all times comply with TIA Section 314(a).
(b) For so long as any Notes remain outstanding, the Company and
the Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within
90 days after the end of each fiscal year, an Officers' Certificate stating that
a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall
<PAGE> 58
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the
direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the
Company or a Restricted Subsidiary of the Company);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company;
<PAGE> 59
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness
that is subordinated to the Notes, except a payment of interest or
principal at Stated Maturity; or
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted
Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09
hereof; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding
Restricted Payments permitted by clauses (2), (3), (4), (6), (7),
(8), (9) and (10) of the next succeeding paragraph), is less than
the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the
end of the Company's most recently ended fiscal month for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of this Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Company that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company), plus
(c) to the extent that any Restricted Investment that was made after
the date of this Indenture is sold for cash or otherwise
liquidated or repaid for cash, 50% of the net cash proceeds to the
Company and its Restricted Subsidiaries from the sale or
liquidation of such Restricted Investment (less the cost of
disposition, if any), plus
(d) an amount equal to the fair market value of all Restricted
Investments made since the date of this Indenture in any
Unrestricted Subsidiary that is thereafter redesignated as a
Restricted Subsidiary, such amount not to exceed the amount of
Restricted Investments
<PAGE> 60
previously made by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary that were treated as Restricted
Payments since the date of this Indenture.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds to
the Company from the substantially concurrent sale (other than to
a Subsidiary of the Company) of, other Equity Interests of the
Company (other than any Disqualified Stock) or a contribution to
the common equity capital of the Company (other than from a
Subsidiary of the Company); provided that the amount of any such
net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(4) the payments and applications of the proceeds to be received by
the Company from the issuance of the Notes as described under the
caption "Use of Proceeds" in the Offering Circular;
(5) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its Equity Interests on a pro rata
basis;
(6) payments to Holdings for the purpose of permitting, and in an
amount equal to the amount required to permit, Holdings to redeem
or repurchase Holdings' common equity or options in respect
thereof, in each case in connection with the repurchase provisions
of employee stock option or stock purchase agreements, the
Stockholders Agreements or other agreements relating to the
compensation of management employees; provided that all such
repurchases or redemptions pursuant to this clause (6) shall not
exceed $2.5 million per annum plus the amount of any proceeds to
the Company from:
( ) sales of Capital Stock of Holdings to management employees
subsequent to the date of this Indenture to the extent contributed
to the Company as common equity capital; provided that the amount
of any such net cash proceeds that are utilized for any such
redemption or repurchase shall be excluded from clause (3) (b) of
the preceding paragraph; and
( ) any "key-man" life insurance policies that are used to make any
such redemptions or repurchases; provided, further, that the
cancellation of Indebtedness owing to Holdings from members of
management of the Company or any of its Restricted Subsidiaries in
connection
<PAGE> 61
with a repurchase of Capital Stock of Holdings shall not be deemed
to constitute a Restricted Payment under this Indenture;
provided that any amounts that are not used for repurchases and
redemptions in any year may be carried forward to subsequent years;
(7) the making of distributions, loans or advances to Holdings in an
amount not to exceed $850,000 per annum in order to permit
Holdings to pay the ordinary operating expenses of Holdings
(including without limitation, directors' fees, indemnification
obligations, professional fees and expenses);
(8) payments to Holdings in respect of:
( ) federal income taxes for the tax periods for which a federal
consolidated return is filed by Holdings for a consolidated group
of which Holdings is the parent and the Company and its
Subsidiaries are members, in an amount not to exceed the
hypothetical federal income taxes that the Company would have paid
if the Company and its Restricted Subsidiaries filed a separate
consolidated return with the Company as the parent, taking into
account carryovers and carrybacks of tax attributes (including net
operating losses) that would have been allowed if such separate
consolidated return had been filed; and
( ) state income tax for the tax periods for which a state combined
return is filed by Holdings for a combined group of which Holdings
is the parent and the Company and its Subsidiaries are members, in
an amount not to exceed the hypothetical state income taxes that
the Company would have paid if the Company and its Restricted
Subsidiaries had filed a separate combined return taking into
account carryovers and carrybacks of tax attributes (including net
operating losses) that would have been allowed if such separate
combined return had been filed;
provided, however, that in no event shall any such tax payment pursuant
to this clause (8) exceed the amount of federal (or state, as the case
may be) income tax that is, at the time the Company makes such tax
payments, actually due and payable by Holdings to the relevant taxing
authorities or to become due and payable within 30 days of such payment
by the Company;
(9) distributions to Holdings to fund the Transactions;
(10) payments to Holdings to fund the payment of or payment by the
Company of dividends, loans, distributions or annual contributions
calculated in accordance with the requirements of Section 415 of
the Internal Revenue Code to the Simmons ESOP in amounts equal to
amounts expended by Holdings to repurchase shares of its Capital
Stock from deceased or retired employees in accordance with the
terms of the Simmons ESOP as in effect on the date of this
Indenture and from employees whose employment with Holdings or any
of its Subsidiaries has terminated for any reason, in each case
contemplated by this clause (10) only to the extent mandatorily
required by the Simmons ESOP as in effect on the date of this
Indenture, the Internal Revenue Code or ERISA; and, provided,
further, that in each such case Holdings or the Company has
deferred making any cash payments in respect of
<PAGE> 62
such repurchase obligations to the maximum extent possible under
the Simmons ESOP as in effect on the date of this Indenture or as
modified from time to time to comply with law;
(11) repurchases of Capital Stock deemed to occur upon the exercise of
stock options if such Capital Stock represents a portion of the
exercise price thereof;
(12) the payments pursuant to the Fenway Agreement as in effect on the
date of this Indenture; and
(13) if the Company would be permitted to incur at least $1.00 of
additional Indebtedness (other than Permitted Debt) in compliance
with Section 4.09 hereof, other Restricted Payments in an
aggregate amount not to exceed $5.0 million since the date of this
Indenture.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to:
( ) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries or with
respect to any other interest or participation in, or measured by,
its profits, or pay any indebtedness owed to the Company or any of
its Restricted Subsidiaries;
( ) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
( ) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of this Indenture;
(2) the New Senior Credit Agreement as in effect as of the date of
this Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are not materially more
restrictive, taken as a whole, with respect to such dividend and
other payment restrictions than those contained in the New Senior
Credit Agreement as in effect on the date of this Indenture;
<PAGE> 63
(3) this Indenture and the Notes;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
or assets acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except
to the extent such Indebtedness was incurred in connection with or
in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or
assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this
Indenture to be incurred;
(6) customary non-assignment provisions in leases, contracts and
licenses entered into in the ordinary course of business;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature
described in clause (3) of the preceding paragraph on the property
so acquired;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale or other disposition;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being
refinanced;
(10) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 4.12 hereof that limit the
right of the Company or any of its Restricted Subsidiaries to
dispose of the assets subject to such Lien;
(11) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
(13) Indebtedness or other contractual requirements of a Securitization
Entity in connection with a Qualified Securitization Transaction;
provided that such restrictions apply only to such Securitization
Entity;
(14) any agreement or instrument governing Indebtedness (whether or not
outstanding) of foreign Restricted Subsidiaries of the Company if
it constitutes Permitted Debt incurred pursuant to clause (14)
under Section 4.09 hereof; and
<PAGE> 64
(15) any amendments to the above agreements, if such amendments are not
materially more restrictive, taken as a whole, with respect to
such dividend and other payment restrictions than those contained
in the agreements being amended.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and that the
Company shall not issue any Disqualified Stock and shall not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company or any of its Restricted Subsidiaries may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this Section shall not
prohibit the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(1) the Notes originally issued under this Indenture, the Exchange
Notes issued in exchange therefor and any Guarantees of any Notes
or Exchange Notes;
(2) Indebtedness of the Company (and Guarantees thereof by any of the
Company's Restricted Subsidiaries) incurred pursuant to one or
more Credit Facilities in an aggregate principal amount at any
time outstanding (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the
Company and its Subsidiaries thereunder) not to exceed $290.0
million less (a) the aggregate amount of Indebtedness of
Securitization Entities at the time outstanding less (b) the
amount of all optional or mandatory principal payments actually
made by the Company or any of its Restricted Subsidiaries since
the date of this Indenture in respect of term loans under Credit
Facilities (excluding any such payments to the extent refinanced
at the time of payment under a Credit Facility) and (c) further
reduced by any repayments since the date of this Indenture of
revolving credit borrowings under Credit Facilities that are
accompanied by a corresponding commitment reduction thereunder;
(3) other Indebtedness of the Company and its Subsidiaries outstanding
on the date of this Indenture for so long as such Indebtedness
remains outstanding;
(4) Interest Swap Obligations of the Company covering Indebtedness of
the Company; provided that any Indebtedness to which any such
Interest Swap Obligations correspond is otherwise permitted to be
incurred under this Indenture; and provided, further, that such
Interest Swap Obligations are entered into, in the judgment of the
Company, to protect the Company from fluctuation in interest rates
on its outstanding Indebtedness;
<PAGE> 65
(5) Indebtedness of the Company under Currency Agreements;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries; provided, however,
that (i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes and
(ii)(a) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof and (b) any
sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Restricted Subsidiary of the
Company shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (6);
(7) the guarantees by the Company or any of its Restricted
Subsidiaries of each other's Indebtedness; provided that such
Indebtedness is permitted to be incurred under this Indenture;
(8) Indebtedness (including Capitalized Lease Obligations) incurred by
the Company or any of its Restricted Subsidiaries to finance the
purchase, lease or improvement of property (real or personal) or
equipment (whether through the direct purchase of assets or the
Capital Stock of any Person owning such assets) in an aggregate
principal amount not to exceed $15.0 million at any one time
outstanding (including any Permitted Refinancing Indebtedness with
respect thereto) (which amount may, but need not, be incurred in
whole or in part under the New Senior Credit Agreement);
(9) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect
to letters of credit issued in the ordinary course of business,
including, without limitation, letters of credit in respect of
workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations
regarding workers' compensation claims;
(10) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any of its
Restricted Subsidiaries in the ordinary course of business;
(11) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany Indebtedness) that
was permitted by this Indenture to be incurred under the first
paragraph hereof or clauses (1), (3), (8), (14) and (15) of this
paragraph or this clause (11) or the first paragraph of this
Section;
(12) the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is Non-Recourse Debt
with respect to the Company and its other Restricted Subsidiaries
(except for Standard Securitization Undertakings);
<PAGE> 66
(13) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence
of Indebtedness by a Restricted Subsidiary of the Company that was
not permitted by this clause (13);
(14) the incurrence of Indebtedness by foreign Restricted Subsidiaries
of the Company in an aggregate principal amount not to exceed
$20.0 million at any one time outstanding;
(15) the incurrence of up to $25.0 million in aggregate principal
amount of Indebtedness by the Company or a Restricted Subsidiary
of the Company on or prior to September 30, 2000, the net proceeds
of which are applied to a concurrent acquisition of a Permitted
Business or that is incurred as a result of the assumption of
Indebtedness of a Permitted Business at the time of the
acquisition thereof, provided that in each case, the pro forma
Fixed Charge Coverage Ratio of the Company for the most recently
ended four full fiscal quarters for which internal financial
statements are available immediately preceding the consummation of
such acquisition is higher than the actual historical Fixed Charge
Coverage Ratio of the Company for such four-quarter period; and
(16) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to
this clause (16), not to exceed $20.0 million.
For purposes of determining compliance with this Section 4.09, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (1) through (16) above, or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09.
Accrual of interest costs or fees, accretion or amortization of
original issue discount costs or fees, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock shall not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued. Indebtedness under Credit Facilities
outstanding on the date on which the Notes are first issued and authenticated
under this Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (2) of the definition of Permitted
Debt.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
<PAGE> 67
( ) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests
issued or sold or otherwise disposed of; and
( ) such fair market value is determined by the Company's Board of
Directors and evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee;
and
( ) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash or Cash Equivalents:
( ) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet), of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms
subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability; and
( ) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such
Restricted Subsidiary into cash or Cash Equivalents (to the
extent of the cash or Cash Equivalents received).
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds at its option:
(1) to repay Senior Debt and effect a corresponding reduction if such
Senior Debt is a revolving credit borrowing;
(2) to acquire all or more than half of the assets of another
Permitted Business;
(3) to acquire Capital Stock of a Permitted Business; provided that
after any such acquisition of Capital Stock such Permitted
Business is or becomes a Restricted Subsidiary;
(4) to make a capital expenditure; or
(5) to acquire other long-term assets that are used or useful in a
Permitted Business
(such long-term assets being referred to herein as "Additional
Assets").
Pending the final application of any such Net Proceeds, the Company or
such Restricted Subsidiary may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture.
<PAGE> 68
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an offer to all Holders of Notes and all holders of other Indebtedness that
is pari passu with the Notes containing provisions similar to those set forth in
this Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, and shall be payable in cash.
If any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
this Indenture. If the aggregate principal amount of Notes and such other pari
passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Notwithstanding the three immediately preceding paragraphs, the Company
and its Restricted Subsidiaries shall be permitted to consummate an Asset Sale
without complying with such paragraphs to the extent:
( ) at least 75% of the consideration for such Asset Sale
constitutes Additional Assets, cash and/or Cash Equivalents; and
( ) such Asset Sale is for fair market value, as determined in good
faith by the Company's Board of Directors; and
( ) any consideration not constituting Additional Assets received by
the Company or any of its Restricted Subsidiaries in connection
with any Asset Sale permitted to be consummated under this
paragraph are treated as Net Proceeds from an Asset Sale and
applied in accordance with the provisions of the immediately
preceding paragraph.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person;
and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $2.5 million, a resolution of the
<PAGE> 69
Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with
clause (1) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the
Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $7.5 million, an opinion that such Affiliate
Transaction is not materially less favorable than those that
might reasonably have been obtained in a comparable
transaction at such time on an arms-length basis from a Person
that is not an Affiliate of the Company or such Restricted
Subsidiary issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the
Company or such Restricted Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees and compensation;
(4) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company;
(5) Restricted Payments that are permitted by the provisions of this
Indenture described above under Section 4.07 hereof;
(6) the performance of the Company's or any Subsidiary's obligations
under the Simmons ESOP as in effect on the date of this Indenture;
(7) the performance of the Company's or any Subsidiary's obligations
under the Fenway Agreement as the same is in effect on the date of
this Indenture;
(8) reasonable and customary costs and expenses incident to a public
offering of Equity Securities of Holdings to the extent that the
proceeds therefrom are intended to be contributed to the Company
as common equity capital;
(9) Qualified Securitization Transaction;
(10) the performance of the Company's or any Subsidiary's obligations
under the Transaction Documents as the same are in effect on the
date of this Indenture;
<PAGE> 70
(11) the making of loans to employees or consultants to the extent that
the same constitute Permitted Investments; and
(12) the granting of customary registration rights and/or put or call
options pursuant to the Stockholders Agreements or any similar
agreement.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, except Permitted Liens.
Section 4.13. Conduct of Business.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any businesses a majority of whose revenues are not
derived from the same or reasonably similar, ancillary or related to, or a
reasonable extension, development or expansion of, the businesses in which the
Company and its Restricted Subsidiaries are engaged on the date of this
Indenture.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at
a purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to each Holder stating: (1)
that the Change of Control Offer is being made pursuant to this Section 4.15 and
that all Notes tendered shall be accepted for payment; (2) the purchase price
and the purchase date, which shall be no earlier than 30 days and no later than
60 days from the date such notice is mailed (the "Change of Control Payment
Date"); (3) that any Note not tendered shall continue to accrue interest; (4)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control
<PAGE> 71
Payment Date; (5) that Holders electing to have any Notes purchased pursuant to
a Change of Control Offer shall be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have the Notes purchased; and (7) that
Holders whose Notes are being purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of Notes in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being
purchased by the Company.
The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Prior to complying with this Section 4.15, but in any event
within 90 days following a Change of Control, the Company shall either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant.
(d) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.15 and Section 3.09 hereof and all other provisions of this
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
<PAGE> 72
Section 4.16. No Senior Subordinated Debt.
The Company shall not incur, create, issue, assume, Guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes. No Guarantor shall incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of any Guarantor and senior in any respect
in right of payment to the Guarantees of the Notes.
Section 4.17. Limitation on Issuances of Guarantees of Indebtedness.
If the Company acquires or creates a Restricted Subsidiary that is a
Significant Subsidiary of the Company, or if any Restricted Subsidiary of the
Company becomes a Significant Subsidiary of the Company, then such Significant
Subsidiary shall execute and deliver a supplemental indenture to this Indenture
providing for the Guarantee of the payment of the Notes by such Significant
Subsidiary, which Guarantee shall be senior to or pari passu with all other
Indebtedness of such Significant Subsidiary, other than Senior Debt, and shall
be subordinated to all Senior Debt of such Significant Subsidiary to the same
extent as the Notes are subordinated to Senior Debt; provided that if the
issuance of a Guarantee by a Foreign Subsidiary would have material adverse tax
consequences to the Company and its Restricted Subsidiaries taken as a whole,
then such Foreign Subsidiary will not be required to become a Guarantor under
this Indenture unless and until such Foreign Subsidiary has Guaranteed, or later
Guarantees, any other Indebtedness of the Company.
Notwithstanding the preceding paragraph, any such Guarantee by a
Significant Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Significant Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of this Indenture. The form of such Guarantee is
attached as Exhibit E to this Indenture.
Section 4.18. Designation of Restricted and Unrestricted Subsidiaries.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by the Company and its Restricted Subsidiaries in
the Subsidiary so designated shall be deemed to be an Investment made as of the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of Section 4.07 hereof or Permitted
Investments, as applicable. All such outstanding Investments shall be valued at
their fair market value at the time of such designation. That designation shall
only be permitted if such Restricted Payment would be permitted at such time and
if such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The Board of Directors may redesignate any Unrestricted Subsidiary
to be a Restricted Subsidiary if such redesignation would not cause a Default.
<PAGE> 73
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly: (1) consolidate
or merge with or into (whether or not the Company is the surviving corporation);
or (2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b)
the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale,
assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such
sale, assignment, transfer, conveyance or other disposition
shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and
this Indenture pursuant to a supplemental Indenture in form
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of
Default exists;
(4) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company
or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall
have been made shall have Consolidated Net Worth immediately
after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding
the transaction; and
(5) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, either:
() the Company or the Person formed by or surviving any
such consolidation or merger (if other than the
Company), or to which such sale, assignment,
transfer, conveyance or other disposition shall,
immediately after such transaction after giving pro
forma effect thereto and any related financing
transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of
Section 4.09 hereof or
() in the case of a merger in which the Company is the
surviving corporation, the Company shall, immediately
after such transaction after giving pro forma effect
thereto and any related financing transactions as if
the same had occurred at the
<PAGE> 74
beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional
Indebtedness (including Permitted Debt) pursuant to
Section 4.09 hereof.
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this covenant shall not be
applicable to a sale, assignment, transfer, conveyance or other disposition of
assets between or among the Company and any of the Restricted Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days, whether or not prohibited by the subordination provisions of
this Indenture;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise, whether or not prohibited by the subordination provisions of this
Indenture;
(c) the Company or any of its Restricted Subsidiaries fails to comply
with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof and the
continuance of such failure after the receipt by the Company of written notice
from the Trustee or the Holders of at least 25% in aggregate principal amount of
the Notes, including Additional Notes, if any, then outstanding of such default;
<PAGE> 75
(d) the Company or any of its Subsidiaries fails to comply with any
of its other agreements in this Indenture or the Notes for 60 days after written
notice is given to the Company by the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes, including Additional Notes, if any
voting as a single class then outstanding of such default and the continuance of
such failure for a period of 60 days after the receipt by the Company of written
notice from the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding of such default;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Subsidiaries), whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, if that
default:
(a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness if
such payment default is not cured or waived within 10
Business Days of the occurrence thereof (a "Payment
Default"); or
(b) results in the acceleration of such Indebtedness
prior to its express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Subsidiaries and such judgment or judgments remain undischarged for a
period (during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such undischarged judgments exceeds $10.0
million;
(g) the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary
case;
<PAGE> 76
(ii) appoints a custodian of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(j) except as permitted by this Indenture, any Note Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Note Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary) occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Upon any such declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after March 15, 2004 by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding payment of the premium that the Company
would have had to pay if the Company then had elected to redeem the Notes
pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to March 15, 2004
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on March 15 of the years
set forth below, as set forth below (expressed as a percentage of the principal
amount of the Notes on the date of payment that would otherwise be due but for
the provisions of this sentence):
<PAGE> 77
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
1999.................................................. 110.250%
2000.................................................. 109.225%
2001.................................................. 108.200%
2002.................................................. 107.175%
2003.................................................. 106.150%
</TABLE>
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by written notice to the Trustee may on behalf of the
Holders of all of the Notes waive an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
<PAGE> 78
Holders of a majority in principal amount of the then outstanding
Notes may direct, by providing written notice to the Trustee, the time, method
and place of conducting any proceeding for exercising any remedy available to
the Trustee or exercising any trust or power conferred on it. However, the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture that the Trustee determines may be unduly prejudicial to the rights of
other Holders of Notes or that may involve the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
<PAGE> 79
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee
and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
premium and Liquidated Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This
<PAGE> 80
Section does not apply to a suit by the Trustee, a suit by a Holder of a Note
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and
skill in its exercise, as a prudent trustee would exercise or
use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the
Trustee need perform only those duties that are
specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to
determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
grossly negligent action, its own grossly negligent failure to
act, or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was grossly
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in
accordance with a direction received by it pursuant
to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The
Trustee shall be under no obligation to exercise any of its
rights and powers under this Indenture at the request of any
Holders, unless such Holder shall have
<PAGE> 81
offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in a separate
writing with the Company. Money held in trust by the Trustee
need not be segregated from other funds except to the extent
required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
<PAGE> 82
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if the
Trustee has actual knowledge of such Default or Event of Default, the Trustee
shall mail to Holders of Notes a notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Note,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA Section 313(a) (but if no event described
in TIA Section 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services provided
hereunder, including counsel fees and expenses. The Trustee's compensation shall
not be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities, claims, damages, causes of action or expenses of whatsoever kind
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company (including this Section
7.07) and defending itself against any claim (whether asserted by the Company or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability
<PAGE> 83
or expense may be attributable to its gross negligence or willful misconduct.
The Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
<PAGE> 84
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee, provided such corporation shall at the time be qualified and
eligible under this Article.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
<PAGE> 85
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and the
Note Guarantees upon compliance with the conditions set forth below in this
Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
deemed to have been discharged from their respective obligations with respect to
all outstanding Notes and Note Guarantees on the date the conditions set forth
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal
Defeasance means that the Company and each Guarantor shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding Notes
and Note Guarantees, which shall thereafter be deemed to be "outstanding" only
for the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes, Note Guarantees and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following provisions which
shall survive until otherwise terminated or discharged hereunder: (a) the rights
of Holders of outstanding Notes to receive solely from the trust fund described
in Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, interest and Liquidated Damages,
if any, on such Notes when such payments are due, (b) the Company's obligations
with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from its obligations under the covenants contained in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof and clause
(iv) of Section 5.01 hereof with respect to the outstanding Notes on and after
the date the conditions set forth in Section 8.04 are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes and Note Guarantees shall thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes and Note
Guarantees shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes
and Note Guarantees, the Company and the Guarantors may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes and Note Guarantees shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this
<PAGE> 86
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes and Note Guarantees:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on all the outstanding Notes on the stated date for payment thereof
or on the applicable redemption date, as the case may be and the Company must
specify whether such Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which shall be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material agreement
or instrument (including this Indenture and the New Senior Credit Agreement)
(other than a default resulting from the borrowing of funds to be applied to
such deposit) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound;
<PAGE> 87
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds shall not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, interest or Liquidated Damages, if any, on any Note and remaining unclaimed
for two years after such principal, and premium, if any, or interest has become
due and payable shall be paid to the Company on its request or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the
<PAGE> 88
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, interest or Liquidated Damages, if
any, on any Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
<PAGE> 89
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture and/or
a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof), the Note Guarantees and the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes (including Additional Notes, if any) then outstanding voting
as a single class (including, without limitation, consents obtained in
connection with a purchase of, tender offer or exchange offer for, the Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, the Note Guarantees or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including Additional Notes, if any) voting as a single
class (including, without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, the Notes). Without the
consent of at least 75% in aggregate principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, tender offer or exchange offer for, such Notes), no waiver or
amendment to this Indenture may make any change in the provisions of Article 10
hereof that adversely affects the rights of any Holder of Notes. Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
<PAGE> 90
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes (including Additional Notes, if
any) and a waiver of the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or interest on the Notes;
(g) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions; or
(h) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 or 4.15 hereof); or
(i) release any Guarantor from any of its obligations under its Note
Guarantee or this Indenture, except in accordance with the terms of this
Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
<PAGE> 91
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
all Obligations with respect to the Notes are subordinated in right of payment,
to the extent and in the manner provided in this Article 10, to the prior
payment in full in cash of all Obligations with respect to Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities:
<PAGE> 92
(i) holders of Senior Debt shall be entitled to receive payment
in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the
rate specified in the applicable Senior Debt whether or not an allowed
claim) before Holders of the Notes shall be entitled to receive any
payment with respect to the Notes (except that Holders may receive (A)
Permitted Junior Securities and (B) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof); and
(ii) until all Obligations with respect to Senior Debt (as
provided in clause (i) above) are paid in full in cash, any distribution
to which Holders would be entitled but for this Article 10 shall be made
to holders of Senior Debt (except that Holders of Notes may receive (A)
Permitted Junior Securities and (B) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof), as
their interests may appear.
Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (A) Permitted Junior Securities and (B) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Designated Senior Debt occurs and is
continuing beyond any applicable grace period in the agreement, indenture
or other document governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated
Senior Debt occurs and is continuing that then permits holders of the
Designated Senior Debt to accelerate its maturity and the Trustee receives
a notice of the default (a "Payment Blockage Notice") from a Person who
may give it pursuant to Section 10.11 hereof. If the Trustee receives any
such Payment Blockage Notice, no subsequent Payment Blockage Notice shall
be effective for purposes of this Section unless and until (A) at least
360 days shall have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice and (B) all scheduled payments of principal,
premium, if any, and interest and Liquidated Damages on the Securities
that have come due have been paid in full in cash. No nonpayment default
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been
waived for a period of not less than 180 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived, or
(ii) in the case of a default referred to in clause (ii) of
Section 10.03(a) hereof, 179 days pass after notice is received if the
maturity of such Designated Senior Debt has not been accelerated,
<PAGE> 93
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.04. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.03 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article 10.
Section 10.07. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders of Notes shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
Section 10.08. Relative Rights.
<PAGE> 94
\
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Debt. Nothing in this Indenture shall:
(i) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(ii) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(iii) prevent the Trustee or any Holder of Notes from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative of Designated Senior Debt may give the notice. Nothing in this
Article 10 shall impair the claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof.
<PAGE> 95
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Notes.
Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Designated Senior Debt.
Notwithstanding the foregoing, any amendment to the provisions of this Article
10 shall require the consent of the Holders of at least 75% in aggregate
principal amount of the Notes then outstanding if such amendment would adversely
affect the rights of the Holders of the Notes.
ARTICLE 11
NOTE GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of
<PAGE> 96
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant
that this Note Guarantee shall not be discharged except by complete performance
of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
Section 11.02. Subordination of Note Guarantee.
The Obligations of each Guarantor under its Note Guarantee pursuant
to this Article 10 shall be junior and subordinated to the Senior Guarantee of
such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee of
such Guarantor not constitute a fraudulent transfer or conveyance for purposes
of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders
and the Guarantors hereby irrevocably agree that the obligations of such
Guarantor shall, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such
laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 11, result
in the obligations of such Guarantor under its Note Guarantee not constituting a
fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Note Guarantee.
<PAGE> 97
To evidence its Note Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Note Guarantee substantially in
the form included in Exhibit E shall be endorsed by an Officer of such Guarantor
on each Note authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.24 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Note Guarantees in accordance with Section 4.24
hereof and this Article 11, to the extent applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person whether or not affiliated with such Guarantor
unless:
(a) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture and the Note Guarantee on the terms set
forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Note Guarantee endorsed upon the Notes and the due and punctual performance of
all of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor Person shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor Person thereupon may cause to be signed any or all of the Note
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Note Guarantees so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
all of such Note Guarantees had been issued at the date of the execution hereof.
<PAGE> 98
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions) a
Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof.
Upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of this Indenture, including
without limitation Section 4.10 hereof, the Trustee shall execute any documents
reasonably required in order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the Company and/or any Guarantor:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Telecopier No.: (770) 392-2565
<PAGE> 99
Attention: Chief Financial Officer
With a copy to:
Ropes & Gray
1 International Place
Boston, Massachusetts 02110
Telecopier No.: (617) 951-7050
Attention: Lauren I. Norton
With a copy to:
Jones, Day, Reavis & Pogue
Suite 3500
OneTrust Plaza
303 Peachtree Street NE
Atlanta, Georgia 30308
Telecopier No.: (404) 581-8330
Attention: Lizanne Thomas
If to the Trustee:
SunTrust Bank, Atlanta
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305
Telecopier No.: (404) 240-2030
Attention: Olga Warren
With a copy to (only physical delivery):
SunTrust Bank, Atlanta
c/o First Chicago Trust Company
Corporate Trust 8th Floor
14 Wall Street, Suite 4607
New York, New York 10005
Attention: Frank Balentine
The Company, any Guarantor or the Trustee, by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
<PAGE> 100
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
<PAGE> 101
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or Guarantor, as such, shall have any liability
for any obligations of the Company under the Notes, Note Guarantees or this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
SEC that such a waiver is against public policy.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT GIVING EFFECT
TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors. All agreements of each Guarantor in this Indenture shall bind
its successors, except as otherwise provided in Section 11.06.
Section 12.11. Severability.
<PAGE> 102
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
<PAGE> 103
SIGNATURES
Dated as of March 16, 1999
SIMMONS COMPANY
By: /s/ Jonathan C. Daiker
---------------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President and
Chief Financial Officer
<PAGE> 104
TRUSTEE:
Dated as of March 16, 1999
SUNTRUST BANK, ATLANTA
By: /s/ Sandra Thompson
--------------------------------
Name: Sandra Thompson
Title: Vice President
Dated as of March 16, 1999
SUNTRUST BANK, ATLANTA
By: /s/ Olga G. Warren
--------------------------------
Name: Olga G. Warren
Title: Vice President
104
<PAGE> 105
[Face of Note]
CUSIP/CINS ____________
10 1/4% Series A Senior Subordinated Notes due 2009
No. 1 $____________
SIMMONS COMPANY
promises to pay to
or registered assigns,
the principal sum of
Dollars on March 15, 2009.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: March 16, 1999
105
<PAGE> 106
SIMMONS COMPANY
By:
Name:
Title:
By:
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
SUNTRUST BANK, ATLANTA,
as Trustee
By: __________________________________
Authorized Signatory
106
<PAGE> 107
[Back of Note]
10 1/4% Series A Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Simmons Company, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 1/4% per
annum from March 16, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually in
arrears on March 15 and September 15 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 15, 1999. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 1 or September
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, SunTrust Bank, Atlanta, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
107
<PAGE> 108
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of March 16, 1999 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $200.0 million
in aggregate principal amount of which $150.0 million are Initial Notes and up
to $50.0 million may be issued as Additional Notes.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this
paragraph 5, at any time prior to March 15, 2002, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of the Notes
ever issued under the Indenture at a redemption price of 110.25% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
any Public Equity Offering; provided that
(1) at least 65% of the Notes ever issued remain outstanding
immediately after the occurrence of such redemption (excluding
Notes held by the Company and its Subsidiaries); and
(2) the notice of redemption with respect to such redemption shall be
mailed at least 30 days but not more than 60 days after the date
of the closing of any such Public Equity Offering.
(b) Except as set forth in clause (a) of this paragraph 5, the
Notes will not be redeemable pursuant to this paragraph 5 at the Company's
option prior to March 15, 2004. After March 15, 2004, the Company may redeem all
or a part of these Notes upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
PERCENTAGE OF
PRINCIPAL
YEAR AMOUNT
---- ------
<S> <C> <C>
2004............................................... 105.125%
2005............................................... 103.417%
2006............................................... 101.708%
</TABLE>
108
<PAGE> 109
2007 and thereafter.................................. 100.000%
(c) Any redemption pursuant to this paragraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.07 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company shall commence an offer to all
Holders of Notes and all holders of other Indebtedness that is pari passu with
the Notes containing provisions similar to those set forth in the Indenture with
respect to offers to purchase or redeem with the proceeds of sales of assets (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes and such other pari passu Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or such Subsidiary) may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes and such other pari passu Indebtedness
tendered exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
109
<PAGE> 110
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, to provide for the
Issuance of Additional Notes in accordance with the limitations set forth in the
Indenture, or to allow any Guarantor to execute a supplemental indenture to the
Indenture and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to the Notes whether or not prohibited by the subordination provisions
of the Indenture; (ii) default in payment when due of principal of or premium,
if any, on the Notes whether or not prohibited by the subordination provisions
of the Indenture, (iii) failure by the Company or any of its Restricted
Subsidiaries to comply with Section 4.07, 4.09, 4.10 or 4.15 of the Indenture
and the continuance of such failure after the receipt by the Company of written
notice from the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes, including Additional Notes, if any, then outstanding of
such default; (iv) failure by the Company or any of its Subsidiaries for 60 days
after written notice is given to the Company by the Trustee or the Holders of at
least 25% in aggregate principal amount of the Notes (including Additional
Notes, if any) then outstanding to comply with any of its other agreements in
the Indenture or the Notes and the continuance of such failure for a period of
60 days after the receipt by the Company of written notice from the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes,
including Additional Notes, if any, then outstanding of such default; (v)
default under certain other agreements relating to Indebtedness of the Company
which default results in
110
<PAGE> 111
the acceleration of such Indebtedness prior to its express maturity; (vi)
certain final judgments for the payment of money that remain undischarged for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Significant Subsidiaries; and (viii) except as
permitted by the Indenture, any Note Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor or any Person acting on its behalf shall
deny or disaffirm its obligations under such Guarantor's Note Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default, to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 16, 1999, between the Company and the parties named
on the signature pages
111
<PAGE> 112
thereof or, in the case of Additional Notes, Holders of Restricted Global Notes
and Restricted Definitive Notes shall have the rights set forth in one or more
registration rights agreements, if any, between the Company and the other
parties thereto, relating to rights given by the Company to the purchasers of
any Additional Notes (collectively, the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without charge a
copy of the Indenture and/or the Registration Rights Agreement. Requests may be
made to:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Telecopier No.: (770) 392-2565
Attention: Treasurer
112
<PAGE> 113
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
113
<PAGE> 114
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
114
<PAGE> 115
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount Signature of
--------------- Principal Amount Principal Amount of this authorized officer of
of of Global Note Trustee or Note
This Global Note This Global Note following such decrease Custodian
--------------------- ---------------------- (Or Increase) -----------------------
---------------------
</TABLE>
115
<PAGE> 116
Indenture Signature Page
* This schedule should be included only if the Note is issued in global form.
EXHIBIT A1
<PAGE> 117
Indenture Signature Page
[Face of RegulationuS Temporary Global Note]
CUSIP/CINS __________
10 1/4% Series A Senior Subordinated Notes due 2009
No. 1 $__________
SIMMONS COMPANY
promises to pay to
or registered assigns,
the principal sum of
Dollars on March 15, 2009.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: March 16, 1999
SIMMONS COMPANY
By:
Name:
Title:
By:
Name:
Title:
(SEAL)
This is one of the Notes referred to
in the within-mentioned Indenture:
SUNTRUST BANK, ATLANTA,
as Trustee
EXHIBIT A1
<PAGE> 118
A1-118
By: __________________________________
Authorized Signatory
EXHIBIT A1
<PAGE> 119
A1-119
[Back of RegulationuS Temporary Global Note]
10 1/4% Series A Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
[Insert the Regulation S Temporary Global Note Legend, pursuant to the
provisions of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Simmons Company, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 10 1/4% per
annum from March 16, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually in
arrears on March 15 and September 15 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be September 15, 1999. The Company shall
pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
Until this RegulationuS Temporary Global Note is exchanged for one or
more RegulationuS Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this RegulationuS Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 1 or September
1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other
EXHIBIT A1
<PAGE> 120
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, SunTrust Bank, Atlanta, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of March 16, 1999 ("Indenture") between the Company and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are obligations of the Company limited to $200.0 million in
aggregate principal amount of which $150.0 million are Initial Notes and up to
$50.0 million may be issued as Additional Notes.
5. OPTIONAL REDEMPTION.
(a) Notwithstanding the provisions of clause (b) of this
paragraph 5, at any time prior to March 15, 2002, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of the Notes
ever issued under the Indenture at a redemption price of 110.25% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
any Public Equity Offering; provided that
(1) at least 65% of the Notes ever issued remain outstanding
immediately after the occurrence of such redemption (excluding
Notes held by the Company and its Subsidiaries); and
(2) the notice of redemption with respect to such redemption shall
be mailed at least 30 days but not more than 60 days after the
date of the closing of any such Public Equity Offering.
(b) Except as set forth in clause (a) of this paragraph 5, the
Notes will not be redeemable pursuant to this paragraph 5 at the Company's
option prior to March 15, 2004. After March 15, 2004, the Company may redeem all
or a part of these Notes upon not less than 30 nor more than 60 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the applicable redemption date, if redeemed during the twelve-month period
beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE OF
---- PRINCIPAL
AMOUNT
--------------
<S> <C> <C>
2004................................................... 105.125%
</TABLE>
EXHIBIT A1
<PAGE> 121
A1-121
2005............................................ 103.417%
2006............................................ 101.708%
2007 and thereafter............................. 100.000%
(c) Any redemption pursuant to this paragraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.07 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase
(the "Change of Control Payment"). Within 10 days following any Change of
Control, the Company shall mail a notice to each Holder setting forth the
procedures governing the Change of Control Offer as required by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company shall commence an offer to all
Holders of Notes and all holders of other Indebtedness that is pari passu with
the Notes containing provisions similar to those set forth in the Indenture with
respect to offers to purchase or redeem with the proceeds of sales of assets (as
"Asset Sale Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate amount of Notes and such other pari passu Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
(or such Subsidiary) may use such deficiency for general corporate purposes. If
the aggregate principal amount of Notes and such other pari passu Indebtedness
tendered exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
EXHIBIT A1
<PAGE> 122
A1-122
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
This RegulationuS Temporary Global Note is exchangeable in whole or
in part for one or more Global Notes only (i) on or after the termination of the
40-day restricted period (as defined in RegulationuS) and (ii) upon presentation
of certificates (accompanied by an Opinion of Counsel, if applicable) required
by Article 2 of the Indenture. Upon exchange of this RegulationuS Temporary
Global Note for one or more Global Notes, the Trustee shall cancel this
RegulationuS Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Note Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Notes and Additional Notes, if any, voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Note Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes and
Additional Notes, if any, voting as a single class. Without the consent of any
Holder of a Note, the Indenture, the Note Guarantees or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation or sale of all or
substantially all of the Company's assets, to make any change that would provide
any additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act, to provide for the
Issuance of Additional Notes in accordance with the limitations set forth in the
Indenture, or to allow any Guarantor to execute a supplemental indenture to the
Indenture and/or a Note Guarantee with respect to the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to the Notes whether or not prohibited by the
EXHIBIT A1
<PAGE> 123
A1-123
subordination provisions of the Indenture; (ii) default in payment when due of
principal of or premium, if any, on the Notes whether or not prohibited by the
subordination provisions of the Indenture, (iii) failure by the Company or any
of its Restricted Subsidiaries to comply with Section 4.07, 4.09, 4.10 or 4.15
of the Indenture and the continuance of such failure after the receipt by the
Company of written notice from the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes, including Additional Notes, if any,
then outstanding of such default; (iv) failure by the Company or any of its
Subsidiaries for 60 days after written notice is given to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes (including Additional Notes, if any) then outstanding to comply with any
of its other agreements in the Indenture or the Notes and the continuance of
such failure for a period of 60 days after the receipt by the Company of written
notice from the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes, including Additional Notes, if any, then outstanding of
such default; (v) default under certain other agreements relating to
Indebtedness of the Company which default results in the acceleration of such
Indebtedness prior to its express maturity; (vi) certain final judgments for the
payment of money that remain undischarged for a period of 60 days; (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries; and (viii) except as permitted by the Indenture, any
Note Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor or any Person acting on its behalf shall deny or disaffirm its
obligations under such Guarantor's Note Guarantee. If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes may declare all the
Notes to be due and payable. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
EXHIBIT A1
<PAGE> 124
A1-124
15. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of
a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 16, 1999, between the Company and the parties named
on the signature pages thereof or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Definitive Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto, relating to rights given by the Company
to the purchasers of any Additional Notes (collectively, the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Telecopier No.: (770) 392-2565
Attention: Treasurer
EXHIBIT A1
<PAGE> 125
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's legal name)
(Insert assignee's soc. sec. or tax I.D. no.)
(Print or type assignee's name, address and zip code)
and irrevocably appoint
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
EXHIBIT A1
<PAGE> 126
A1-126
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
Section 4.10 Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
EXHIBIT A1
<PAGE> 127
SCHEDULE OF EXCHANGES OF REGULATIONuS TEMPORARY GLOBAL NOTE
The following exchanges of a part of this RegulationuS Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this RegulationuS Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase in Principal Amount Signature of
--------------- Principal Amount Principal Amount of this authorized officer of
of of Global Note Trustee or Note
This Global Note This Global Note following such decrease Custodian
--------------------- ---------------------- (Or Increase) -----------------------
---------------------
</TABLE>
<PAGE> 128
FORM OF CERTIFICATE OF TRANSFER
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia
SunTrust Bank, Atlanta
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305
Re: 10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
Reference is hereby made to the Indenture, dated as of March 16, 1999
(the "Indenture"), between Simmons Company, as issuer (the "Company"), and
SunTrust Bank, Atlanta, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE TEMPORARY REGULATIONUS GLOBAL NOTE, THE REGULATIONUS GLOBAL NOTE
OR A DEFINITIVE NOTE PURSUANT TO REGULATIONUS. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and
<PAGE> 129
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of RegulationuS under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the RegulationuS
Global Note, the Temporary RegulationuS Global Note and/or the Definitive Note
and in the Indenture and the Securities Act.
3. CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY
PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATIONUS. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act and
any applicable blue sky securities laws of any state of the United States, and
accordingly the Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in
compliance with the prospectus delivery requirements of the Securities
Act;
or
(d) such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred
<PAGE> 130
beneficial interest or Definitive Note will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the IAI
Global Note and/or the Definitive Notes and in the Indenture and the
Securities Act.
4. CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) CHECK IF TRANSFER IS PURSUANT TO REGULATIONUS. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
<PAGE> 131
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) RegulationuS Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) 144A Global Note (CUSIP ), or
(ii) RegulationuS Global Note (CUSIP ), or
(iii) IAI Global Note (CUSIP ); or
(iv) Unrestricted Global Note (CUSIP ); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-132
<PAGE> 132
FORM OF CERTIFICATE OF EXCHANGE
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia
SunTrust Bank, Atlanta
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305
Re: 10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of March 16, 1999
(the "Indenture"), between Simmons Company, as issuer (the "Company"), and
SunTrust Bank, Atlanta, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount of $____________ in such Note[s] or interests (the "Exchange").
In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the
B-133
<PAGE> 133
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [] 144A Global Note,[ ] RegulationuS Global Note, [] IAI Global Note
with an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer and (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
B-134
<PAGE> 134
EXHIBIT B
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
[Insert Name of Transferor]
By:
Name:
Title:
Dated:
B-135
<PAGE> 135
EXHIBIT B
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia
SunTrust Bank, Atlanta
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305
Re: 10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
Reference is hereby made to the Indenture, dated as of March 16, 1999
(the "Indenture"), between Simmons Company, as issuer (the "Company"), and
SunTrust Bank, Atlanta, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) a beneficial interest in a Global Note, or
(b) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of RegulationuS under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the
B-136
<PAGE> 136
EXHIBIT C
Definitive Note or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
[Insert Name of Accredited Investor]
By:
Name:
Title:
Dated:
C-137
<PAGE> 137
EXHIBIT D
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of March 16, 1999 (the "Indenture") among
Simmons Company and SunTrust Bank, Atlanta, as trustee (the "Trustee"), (a) the
due and punctual payment of the principal of, premium, if any, and interest on
the Notes (as defined in the Indenture), whether at maturity, by acceleration,
redemption or otherwise, the due and punctual payment of interest on overdue
principal and premium, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the Company to the
Holders or the Trustee all in accordance with the terms of the Indenture and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. The obligations of the Guarantors
to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and
the Indenture are expressly set forth in Article 11 of the Indenture and
reference is hereby made to the Indenture for the precise terms of the Note
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
[NAME OF GUARANTOR(S)]
By:
Name:
Title:
D-138
<PAGE> 138
EXHIBIT D
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guaranteeing Subsidiary"), a
subsidiary of Simmons Company (or its permitted successor), a Delaware
corporation (the "Company"), the Company, the other Guarantors (as defined in
the Indenture referred to herein) and SunTrust Bank, Atlanta, as trustee under
the Indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of March 16, 1999 providing for
the issuance of an aggregate principal amount of up to $200.0 million of 10 1/4%
Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental
indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees
as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, the Notes or the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and
interest on the Notes, if any, if lawful, and all other obligations
of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will
be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by
acceleration or
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<PAGE> 139
EXHIBIT D
otherwise. Failing payment when due of any amount so guaranteed or
any performance so guaranteed for whatever reason, the Guarantors
shall be jointly and severally obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or
the Indenture, the absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence presentment,
demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever.
(d) This Note Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and the
Indenture, and the Guaranteeing Subsidiary accepts all obligations of a
Guarantor under the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation to either
the Company or the Guarantors, any amount paid by either to the Trustee or
such Holder, this Note Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to any
right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Note Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in Article 6
of the Indenture, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantors for the purpose of this
Note Guarantee.
(h) The Guarantors shall have the right to seek contribution
from any non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.02 of the Indenture, after giving
effect to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other
Guarantor under Article 11 of the Indenture, this new Note Guarantee shall
be limited to the
D-140
<PAGE> 140
EXHIBIT D
maximum amount permissible such that the obligations of such Guarantor
under this Note Guarantee will not constitute a fraudulent transfer or
conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees that
the Note Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless:
(i) subject to Sections 11.04 and 11.05 of the Indenture, the
Person formed by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under the
Notes, the Indenture and the Note Guarantee on the terms set forth herein
or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the Indenture to be
performed by the Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of the
Indenture as though all of such Note Guarantees had been issued at the date of
the execution hereof.
(c) Except as set forth in Articles 4 and 5 and Section 11.05 of
Article 11 of the Indenture, and notwithstanding clauses (a) and (b) above,
nothing contained in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another
Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all to the capital stock of any Guarantor, in each case to
a Person that is not (either before or after giving effect to such transaction)
a Restricted
D-141
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EXHIBIT D
Subsidiary of the Company, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the event
of a sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Note
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture, including
without limitation Section 4.10 of the Indenture. Upon delivery by the Company
to the Trustee of an Officers' Certificate and an Opinion of Counsel to the
effect that such sale or other disposition was made by the Company in accordance
with the provisions of the Indenture, including without limitation Section 4.10
of the Indenture, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Guarantor from its obligations under its
Note Guarantee.
(b) Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under the Indenture
as provided in Article 11 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the Guaranteeing
Subsidiary, as such, shall have any liability for any obligations of the Company
or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the
Indenture or this Supplemental Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of the
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the SEC that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made solely by the Guaranteeing Subsidiary and the Company.
D-142
<PAGE> 142
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: _______________, ____
[GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
SIMMONS COMPANY
By: _______________________________
Name:
Title:
SUNTRUST BANK, ATLANTA,
as Trustee
By:________________________________
Authorized Signatory
F-143
<PAGE> 143
SCHEDULE I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture
as of the Issue Date:
None.
F-144
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MARCH 16, 1999
BY AND BETWEEN
SIMMONS COMPANY
AND
GOLDMAN, SACHS & CO.
FLEET SECURITIES, INC.
U.S. BANCORP LIBRA, A DIVISION OF
U.S. BANCORP INVESTMENTS, INC.
WARBURG DILLON READ LLC
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and entered into
as of March 16, 1999 by and among Simmons Company, a Delaware corporation (the
"COMPANY"), Goldman, Sachs & Co., Fleet Securities, Inc., U.S. Bancorp Libra, a
division of U.S. Bancorp Investments, Inc. and Warburg Dillon Read LLC (each a
"PURCHASER" and, collectively, the "PURCHASERS"), each of whom has agreed to
purchase the Company's 10 1/4% Senior Subordinated Notes dUE 2009 (the "NOTES")
pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March
10, 1999 (the "PURCHASE AGREEMENT"), by and among the Company and the
Purchasers. In order to induce the Purchasers to purchase the Notes, the Company
has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Purchasers set forth in Section 7 of the Purchase Agreement.
Capitalized terms used herein and not otherwise defined are used as
defined in either of the Indentures (as defined herein).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and Friday which
is not a day on which banking institutions in New York are generally authorized
or obligated by law or executive order to close.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (i) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Exchange
Notes to be issued in the Exchange Offer, (ii) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) hereof and (iii) the delivery by the Company to the
Registrar under the Indenture of Exchange Notes in the same aggregate principal
amount as the aggregate principal amount of Notes tendered by Holders thereof
pursuant to the Exchange Offer.
1
<PAGE> 3
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Exchange Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of the
Notes that are tendered by such Holders in connection with such exchange and
issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to an Exchange Offer, including the related Prospectus.
EXCHANGE NOTES: The Company's 10 1/4% Senior Subordinated Notes due 2009
to be issued pursuant to the Indenture: (x) in the Exchange Offer or (y) as
contemplated by Section 4 hereof.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDENTURE: The indenture, dated the Closing Date, between the Company
and SunTrust Bank, Atlanta, as trustee (the "TRUSTEE"), pursuant to which the
Notes are to be issued, as such indenture is amended or supplemented from time
to time in accordance with the terms thereof.
PARTICIPATING BROKER-DEALER: Any Broker-Dealer that holds Exchange Notes
that were acquired in the Exchange Offer in exchange for Notes that such
Broker-Dealer acquired for its own account as a result of market-making
activities or other trading activities (other than Notes acquired directly from
the Company or any of its Affiliates).
PERSON: An individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of any Exchange Notes pursuant to an Exchange Offer
or (b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) that is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all
2
<PAGE> 4
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SECURITIES: The Notes and the Exchange Notes.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indentures.
TRANSFER RESTRICTED SECURITIES: Each Security, until the earliest to
occur of (a) the date on which such Security is exchanged in an Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Security has been disposed of in accordance with a Shelf Registration Statement,
(c) the date on which such Security is disposed of by a Broker-Dealer pursuant
to the "Plan of Distribution" contemplated by an Exchange Offer Registration
Statement (including delivery of the Prospectus contained therein) or (d) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law or policy of the Commission (after the procedures set forth in
Section 6(a)(i) below have been complied with), the Company shall (i) cause the
Exchange Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date (the "EXCHANGE OFFER FILING DATE"), but in no
event later than 105 days after the Closing Date (such 105th day being the
"FILING DEADLINE"), (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 165 days after the Closing Date (such 165th day being the
"EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Exchange Notes to be
made under
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the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the Exchange
Notes to be offered in exchange for the Notes that are Transfer Restricted
Securities and to permit resales of Exchange Notes by Broker-Dealers that
tendered into the Exchange Offer for Notes that such Broker-Dealer acquired for
its own account as a result of market-making activities or other trading
activities (other than Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Exchange Notes
shall be included in the Exchange Offer Registration Statement. The Company
shall use its best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Exchange
Notes received by such Broker-Dealer in the Exchange Offer and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for sales of Exchange Notes by Broker-Dealers, the
Company agrees to use its best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(a) and 6(c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the date on which the Exchange Offer is Consummated, or such shorter period as
will terminate when all Transfer Restricted Securities
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<PAGE> 6
covered by such Registration Statement have been sold pursuant thereto. The
Company shall promptly provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers promptly upon request, and in no event later
than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law or policy of the Commission (after the Company have complied with
the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities (A) was prohibited by law or Commission policy
from participating in the Exchange Offer or (B) may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such Holder or (C)
is a Broker-Dealer and holds Notes acquired directly from the Company or any of
its Affiliates, and, in each case, such Holder notifies the Company within 20
Business Days following the consummation of the Exchange Offer of the event
described in (A), (B) or(C) then the Company shall:
(x) cause to be filed, on or prior to 45 days after the earlier of
(i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i)
above and (ii) the date on which the Company receives the notice
specified in clause (a)(ii) above, (such earlier date, the "FILING
DEADLINE"), a shelf registration statement pursuant to Rule 415 under
the Act (which may be an amendment to the Exchange Offer Registration
Statement (the "SHELF REGISTRATION STATEMENT")), relating to all
Transfer Restricted Securities, and
(y) shall use its best efforts to cause such Shelf Registration
Statement to become effective on or prior to 90 days after the Filing
Deadline for the Shelf Registration Statement (such 90th day the
"EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law or policy of the
Commission, then the filing of the Exchange Offer Registration Statement shall
be deemed to satisfy the requirements of clause (x) above; provided that, in
such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y) above.
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented and
amended as required by and subject to the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a) and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf Registration
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<PAGE> 7
Statement first becomes effective under the Act, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated within 30 Business Days after the
Exchange Offer Registration Statement is first declared effective by the
Commission or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (iv), a "REGISTRATION DEFAULT"), then the Company hereby
agrees to pay to each Holder of Transfer Restricted Securities affected thereby
liquidated damages in an amount equal to $.05 per week per $1,000 in principal
amount of Transfer Restricted Securities held by such Holder for each week or
portion thereof that the Registration Default continues for the first 90-day
period immediately following the occurrence of such Registration Default. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000 in
principal amount of Transfer Restricted Securities; provided that the Company
shall in no event be required to pay liquidated damages for more than one
Registration Default on the Notes at any given time. Notwithstanding anything to
the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
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<PAGE> 8
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Securities. All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Transfer Restricted
Securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and to
permit the resale of Exchange Notes by Broker-Dealers that tendered in the
Exchange Offer Notes that such Broker-Dealer acquired for its own account as a
result of its market-making activities or other trading activities (other than
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, following the date hereof there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the Commission
allowing the Company to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company hereby agrees to pursue the issuance
of such a decision to the Commission staff level. In connection with
the foregoing, the Company hereby agrees to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer,
each Holder of Transfer Restricted Securities (including, without
limitation, any Holder who is a Broker- Dealer) shall furnish, upon the
request of the Company, prior to the Consummation of the Exchange
Offer, a written representation to the Company (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an Affiliate
of the Company, (B) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to
participate in, a
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<PAGE> 9
distribution of the Exchange Notes to be issued in the Exchange Offer
and (C) it is acquiring the Exchange Notes in its ordinary course of
business. Each Holder using the Exchange Offer to participate in a
distribution of the Exchange Notes hereby acknowledges and agrees that,
if the resales are of Exchange Notes obtained by such Holder in
exchange for Notes acquired directly from the Company or an Affiliate
thereof, it (1) could not, under Commission policy as in effect on the
date of this Agreement, rely on the position of the Commission
enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Commission's letter to SHEARMAN & STERLING dated
July 2, 1993, and similar no-action letters (including, if applicable,
any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements
of the Act in connection with a secondary resale transaction and that
such a secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange
Offer in reliance on the position of the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY
AND CO., INC. (available June 5, 1991) as interpreted in the
Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above,
(B) including a representation that the Company has not entered into
any arrangement or understanding with any Person to distribute the
Exchange Notes to be received in the Exchange Offer and that, to the
best of the Company's information and belief, each Holder participating
in the Exchange Offer is acquiring the Exchange Notes in its ordinary
course of business and has no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-
action letter obtained pursuant to clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT.
In connection with the Shelf Registration Statement,
the Company shall comply with all the provisions of Section 6(c) below and shall
use its best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the intended method
or methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
will prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.
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(c) GENERAL PROVISIONS. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective
and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement curing such
defect, and, if Commission review is required, use its best efforts to
cause such amendment to be declared effective as soon as practicable.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that it is in the best interests of the
Company not to disclose the existence of or facts surrounding any
proposed or pending material corporate transaction or other material
development involving the Company, the Company may allow the Shelf
Registration Statement to fail to be effective and usable as a result
of such nondisclosure for up to 60 days during the two-year period of
effectiveness required by Section 4 hereof, provided that in the event
the Exchange Offer is Consummated, the Company shall not allow the
Exchange Offer Registration Statement to fail to be effective and
usable for a period in excess of 30 days during the one year period of
effectiveness required by Section 3 hereof.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as
may be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus
or for additional information relating thereto, (C) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
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<PAGE> 11
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state securities or Blue Sky laws, the Company shall use its best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to
the purchasers of Transfer Restricted Securities, the Prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to the Purchasers and each selling Holder named in any
Registration Statement or Prospectus in connection with such sale, if
any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of
such Registration Statement), which documents will be subject to the
review and comment of such Persons in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the
selling Holders of the Transfer Restricted Securities covered by such
Registration Statement in connection with such sale, if any, shall
reasonably object within two Business Days after the receipt thereof.
Any such objection shall be deemed to be reasonable if such selling
Holder objects to such filing because such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply
with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders in connection
with such sale, if any, make the Company's representatives available
for discussion of such document and other customary due diligence
matters, and
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<PAGE> 12
include such information in such document prior to the filing thereof
as such selling Holders may reasonably request;
(vii) if a Shelf Registration Statement is filed, make available
at reasonable times for inspection by the selling Holders participating
in any disposition pursuant to such Registration Statement and any
attorney or accountant retained by such selling Holders, all financial
and other records, pertinent corporate documents of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such selling Holder, attorney
or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(viii) if a Shelf Registration Statement is filed and if requested
by any selling Holders in connection with such sale, if any, promptly
include in any Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information
as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
(ix) if a Shelf Registration Statement is filed, furnish to each
selling Holder in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) if a Shelf Registration Statement is filed, deliver to each
selling Holder, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby
consents to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) if a Shelf Registration Statement is filed, upon the request
of any selling Holder, enter into such agreements (including
underwriting agreements) and make such representations and warranties
and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement
contemplated by this Agreement as may be reasonably requested by any
Holder of Transfer Restricted Securities in connection with any sale or
resale pursuant to any applicable Registration Statement and in such
connection, the Company shall:
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(A) upon request of any selling Holder, furnish (or in the case
of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each selling Holder, upon the effectiveness of the
Shelf Registration Statement or upon Consummation of the Exchange
Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company by (x) the President or any Vice President and (y)
a principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Section 7(i) of the Purchase Agreement and such other similar
matters as the selling Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in of
Sections 7(b) and 7(c) of the Purchase Agreement and such
other matter as the selling Holders may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of the
independent public accountants for the Company and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness
of such statements; and that such counsel advises that, on the
basis of the foregoing no facts came to such counsel's
attention that caused such counsel to believe that the
applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration
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Statement, as the case may be, from the Company's independent
accountants, in the customary form and covering matters of the
type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in the comfort letters delivered pursuant to
Section 7(d) of the Purchase Agreement;
(B) set forth in full or incorporated by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with clause (A) above and with any customary conditions contained
in the any agreement entered into by the Company pursuant to this
clause (xi).
If at any time the representations and warranties of the Company set
forth in the certificate contemplated in clause (A)(1) above cease to be true
and correct, the Company shall so advise the Purchasers and the underwriters, if
any, and each selling Holder promptly and, if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Notes covered by
any Shelf Registration Statement contemplated by this Agreement,
Exchange Notes having an aggregate principal amount equal to the
aggregate principal amount of Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Exchange
Notes to be registered in the name of such Holder or in the name of the
purchasers of such Exchange Notes, as the case may be; in return, the
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such
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<PAGE> 15
Transfer Restricted Securities in such denominations and such names as
the selling Holders may request at least two Business Days prior to
such sale of Transfer Restricted Securities;
(xv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company available to the
selling Holders for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential
investors customary "road show" material in a manner consistent with
other new issuances of other securities similar to the Transfer
Restricted Securities;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be
required for such Indentures to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely
manner; and
(xx) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "SUSPENSION
NOTICE"), such Holder will forthwith discontinue disposition of Transfer
14
<PAGE> 16
Restricted Securities pursuant to the applicable Registration Statement until
(i) such Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "RECOMMENCEMENT DATE"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by a number of days equal to the number of days
in the period from and including the date of delivery of the Suspension Notice
to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and, as set forth in Section 7(b), the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Exchange Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being
15
<PAGE> 17
prepared. Such Holders shall be responsible for any and all other out-of-pocket
expenses of the Holders incurred in connection with the registration of the
Securities.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each Holder,
(ii) each Person, if any, who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a "CONTROLLING PERSON")
and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"INDEMNIFIED HOLDER"), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any legal or other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any Holder or any prospective purchaser of Exchange
Notes, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and its directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, to the same extent
as the foregoing indemnity from the Company to each of the Indemnified Holders,
but only with reference to information relating to such Indemnified Holder
furnished in writing to the Company by such Indemnified Holder expressly for use
in any Registration Statement. In no event shall any Indemnified Holder be
liable or responsible for any amount in excess of the amount by which the total
amount received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds the amount
paid by such Indemnified Holder for such Transfer Restricted Securities.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) hereof
(the "INDEMNIFIED PARTY"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), an Indemnified Holder shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees
16
<PAGE> 18
and expenses of such counsel, except as provided below, shall be at the expense
of the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Indemnified Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty Business Days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Indemnified Holders, on the other hand, from their sale of
Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company, on the one
17
<PAGE> 19
hand, and of the Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Indemnified Holder, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or by the Indemnified
Holder, on the other hand, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and judgments referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
or Accreted Value, as applicable, of Transfer Restricted Securities held by each
of the Holders hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant
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<PAGE> 20
to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the Exchange Act,
to make all filings required thereby in a timely manner in order to permit
resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company acknowledges and agrees that any failure by
the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Purchasers or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Sections 3 and 4 hereof.
The Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not previously
entered into any agreement granting any registration rights with respect to its
securities to any Person. The rights granted to the Holders hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date
hereof.
(c) ADJUSTMENTS AFFECTING THE NOTES. The Company shall not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer,
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(e) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Purchasers, on the other hand, and shall have the right to enforce
such agreements directly to the extent they may deem such enforcement necessary
or advisable to protect its rights or the rights of Holders hereunder.
19
<PAGE> 21
(f)NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar
under the Indenture; and
(ii) if to the Company:
Simmons Company
One Concourse Parkway
Atlanta, GA 30328
Telecopier No.: (770) 392-2565
Attention: Jon Daiker
With a copy to:
Ropes & Gray
1 International Place
Boston, MA 02110
Telecopier No.: (617) 951-7050
Attention: Lauren I. Norton
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to Goldman, Sachs &
Co., on behalf of the Purchasers (in the form attached hereto as Exhibit A) and
shall be addressed to: Attention: Matthew Leavitt (Special Execution), 85 Broad
Street, New York, NY 10004.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, that nothing herein shall
be deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indentures. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms
20
<PAGE> 22
and provisions of this Agreement, including the restrictions on resale set forth
in this Agreement and, if applicable, the Purchase Agreement, and such Person
shall be entitled to receive the benefits hereof.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Registration Rights Agreement Signature Page(s) Follow]
21
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SIMMONS COMPANY
By: /s/ J.C. Daiker
-------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President, Chief Financial
Officer
PURCHASERS:
GOLDMAN, SACHS & CO.
FLEET SECURITIES, INC.
U.S. BANCORP LIBRA, A DIVISION OF
U.S. BANCORP INVESTMENTS, INC.
WARBURG DILLON READ LLC
By: /s/ Goldman, Sachs & Co.
------------------------------------
(Goldman, Sachs & Co.)
On behalf of the Purchasers
Registration Rights Agreement Signature Page
<PAGE> 24
EXHIBIT A
NOTICE OF FILING OF
EXCHANGE OFFER REGISTRATION STATEMENT
To: Goldman, Sachs & Co.
Special Execution
85 Broad Street
New York, NY 10004
Attn: Matthew Leavitt
Fax: (212) 357-4451
From: Simmons Company
One Concourse Parkway
Atlanta, GA 30328
Re: 10 1/4% Senior Subordinated Notes due 2009
Date: ___, 199_
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an Exchange Registration Statement/a
Shelf Registration Statement] with the Securities and Exchange Commission. We
currently expect this registration statement to be declared effective within __
Business Days of the date hereof.
<PAGE> 1
Exhibit 4.3
[Form of]
LETTER OF TRANSMITTAL
OF
SIMMONS COMPANY
OFFER TO EXCHANGE ITS
10 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED
FOR AN EQUAL PRINCIPAL AMOUNT OF
ITS 10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE NOT BEEN SO REGISTERED
PURSUANT TO THE PROSPECTUS
DATED ____________, 1999
The Letter of Transmittal, Certificates (as defined below) and any
other required documents should be sent or delivered by each Note holder or his
agent to the Exchange Agent at the address set forth below.
The Exchange Agent for the Exchange Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<S> <C>
By Hand or Registered or Certified Mail: By Hand, Overnight Courier, or Registered
SunTrust Bank, Atlanta or or Certified Mail:
c/o First Chicago Trust Company SunTrust Bank, Atlanta
of New York 25 Park Place, 24th Floor
Corporate Trust, 8th Floor Atlanta, Georgia 30303-2900
14 Wall Street Attn: Corporate Trust Division
New York, New York 10005
</TABLE>
(For Eligible Institutions Only)
By Facsimile:
(404) 588-7335
Confirm Receipt of Notice of Guaranteed Delivery ONLY:
(404) 588-7067
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON _________, ________ __, 1999, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
Capitalized terms used herein but not defined shall have the same
meaning given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Notes (as
defined below) either if Notes are to be forwarded herewith or if tenders of
Notes are to be made by book-entry transfer to the Exchange Agent's account at
The Depository Trust Company ("DTC") pursuant to the procedures set forth in
"The Exchange Offer--Procedures for Tendering Shares" in the Prospectus and an
Agent's message (as defined herein) is not delivered.
<PAGE> 2
Holders of Notes whose certificates ("Certificates") for such Notes are
not immediately available or who cannot deliver their Certificates and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date (as defined in "Exchange Offer -- Expiration Dates; Extensions; Amendments"
of the Prospectus) or who cannot comply with the book-entry transfer procedures
on a timely basis must tender their Notes according to the guaranteed delivery
procedure set forth in "The Exchange Offer--Guaranteed Delivery Procedures" of
the Prospectus.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
List below the Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the certificate numbers and/or the
number of Notes tendered should be listed on a separate signed schedule and
attached hereto.
NOTE: SIGNATURES MUST BE PROVIDED ON THE FOLLOWING PAGE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
ALL TENDERING HOLDERS MUST COMPLETE THIS BOX.
- --------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NOTES TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) (ATTACH ADDITIONAL
APPEAR(S) ON NOTES TENDERED) LIST IF NECESSARY)
- --------------------------------------------------------------------------------
PRINCIPAL
CERTIFICATE AMOUNT OF NOTES
NUMBER(S)* TENDERED**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL:
- --------------------------------------------------------------------------------
*Need not be completed by holders tendering by book-entry transfer.
**All Notes held shall be deemed tendered unless a lesser number is
specified in this column.
- --------------------------------------------------------------------------------
-2-
<PAGE> 3
BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF NOTES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO
THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:_____________________________________________
DTC Account Number:____________________________________________________
Transaction Code Number:_______________________________________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s):___________________________________________
Window Ticket Number (if any):_____________________________________________
Date of Execution of Notice of Guaranteed Delivery:________________________
Name of Institution which Guaranteed Delivery:_____________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution:____________________________________
DTC Account Number:_______________________________________________
Transaction Code Number:__________________________________________
[ ] CHECK HERE IF NOTES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER AND
NON-EXCHANGED NOTES ARE TO BE RETURNED BY CREDITING THE DTC
ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE NOTES FOR YOUR
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES
(A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:______________________________________________________________________
-3-
<PAGE> 4
Address:___________________________________________________________________
___________________________________________________________________________
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Simmons Company, a Delaware corporation
(the "Purchaser"), the above-described principal amount of the Company's
outstanding 10 1/4% Senior Subordinated Notes due 2009 (collectively, the
"Notes") in exchange for a like principal amount of the Company's new 10 1/4%
Series B Senior Subordinated Notes due 2009 (the "Exchange Notes") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated __________, (as the same may be amended or supplemented from time to time,
the "Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Notes as are being tendered
herewith. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Notes to the Company together
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Company, upon receipt by the Exchange Agent, as the undersigned's
agent, of the Exchange Notes to be issued in exchange for such Notes,
(ii) present Certificates for such Notes for transfer, and to transfer the Notes
on the books of the Company, and (iii) receive for the account of the Company
all benefits and otherwise exercise all rights of beneficial ownership of such
Notes, all in accordance with the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE NOTES
TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY
WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF
ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE NOTES TENDERED
HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL,
UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY
OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL
COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE
UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Notes tendered
hereby should be printed above, if they are not already set forth above, as they
appear on the Certificates representing such Notes. The Certificate number(s)
and the Notes that the undersigned wishes to tender should be indicated in the
appropriate boxes above.
If any tendered Notes are not exchanged pursuant to the Exchange Offer for
any reason, or if Certificates are submitted for more Notes than are tendered or
accepted for exchange, Certificates for such nonexchanged or nontendered Notes
will be returned (or, in the case of Notes tendered by book-entry transfer, such
Notes will be credited to an account maintained at DTC), without expense to the
tendering holder, promptly following the expiration or termination of the
Exchange Offer.
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<PAGE> 5
If the undersigned is a broker-dealer holding Notes acquired for its own
account as a result of market-making activities or other trading activities, it
agrees to deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes received in respect of such Notes
pursuant to the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to any one of the
procedures described in "The Exchange Offer--Procedures for Tendering" in the
Prospectus and in the instructions will, upon the Company's acceptance for
exchange of such tendered Notes, constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer. The undersigned recognizes that, under certain circumstances set
forth in the Prospectus, the Company may not be required to accept for exchange
any of the Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Notes, that such Exchange Notes be credited to the account indicated
above maintained at DTC. If applicable, substitute Certificates representing
Notes not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of a book-entry transfer of Notes, will be credited
to the account indicated above maintained at DTC. Similarly, unless otherwise
indicated under "Special Delivery Instructions," please deliver Exchange Notes
to the undersigned at the address shown below the undersigned's signature.
BY TENDERING NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED
HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF
THE COMPANY, (II) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY
PERSON TO PARTICIPATE IN THE DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES
ACT) OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, (III) ANY EXCHANGE
NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY
COURSE OF ITS BUSINESS, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION
(WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. ANY HOLDER OF
OLD CAPITAL SECURITIES WHICH IS NOT A BROKER-DEALER, AND WHICH IS USING THE
EXCHANGE OFFER TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE
SECURITIES ACT) OF NEW CAPITAL SECURITIES, IS HEREBY NOTIFIED (1) THAT IT WILL
NOT BE ABLE TO RELY ON THE POSITION OF THE STAFF OF THE DIVISION OF CORPORATE
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION (THE "STAFF") SET FORTH IN
EXXON CAPITAL HOLDINGS CORPORATION (AVAIL. APRIL 13, 1989) AND SIMILAR LETTERS
AND (2) THAT IT MUST COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF NEW CAPITAL
SECURITIES.
ANY HOLDER OF NOTES WHICH IS A BROKER-DEALER BY TENDERING NOTES PURSUANT TO
THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, REPRESENTS AND
AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF TO
THIRD PARTIES, THAT (A) SUCH NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A
NOMINEE, OR (B) SUCH NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND
IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME)
MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF
SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer (as defined below) in
connection with resales of Exchange Notes received in exchange for Notes, where
such Notes were acquired by such
-5-
<PAGE> 6
Participating Broker-Dealer for its own account as a result of market-making
activities or other trading activities, for a period ending one year after the
Expiration Date (subject to extension under certain limited circumstances
described in the Prospectus) or, the earliest of: (1) the date on which a
person other than a broker-dealer for an Exchange Note has exchanged such note;
(2) following the exchange by a broker-dealer in the Exchange Offer of a Note
for an Exchange Note, the date on which such Exchange Note is sold to purchaser
who receives from such broker-dealer before the date of such sale a copy of the
prospectus contained in the registration statement relating to the Exchange
Offer; (3) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf registration
statement; or (4) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act. In that regard, each
Broker-Dealer who acquired Notes for its own account and as a result of
market-making or other trading activities (a "Participating Broker-Dealer"), by
tendering such Notes and executing this letter of transmittal, agrees that, upon
receipt of notice from the Company of the occurrence of any event or the
discovery of any fact which makes any statement contained or incorporated by
reference therein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend the
sale of Exchange Notes pursuant to the Prospectus until the Company has amended
or supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Company given notice that the sale of the Exchange Notes
may be resumed, as the case may be. If the Company gives such notice to suspend
the sale of the Exchange Notes, it shall extend the one year period referred to
above during which Participating Broker-Dealers are entitled to use the
Prospectus in connection with the resale of Exchange Notes by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the supplemented or amended Prospectus necessary to permit resales of
the Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed, as the case may be.
As a result, a Participating Broker-Dealer who intends to use the Prospectus
in connection with resales of Exchange Notes received in exchange for Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company to
be notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided above or may be
delivered to the Exchange Agent at the address set forth in the Prospectus under
"The Exchange Offer--Exchange Agent."
Holders of Notes whose Notes are accepted for exchange will not receive
Distributions on such Notes and the undersigned waives the right to receive any
Distribution on such Notes accumulated from and after [ ].
Accordingly, holders of Exchange Notes as of the record date for the payment of
Distributions on September 15, 1999 will be entitled to Distributions
accumulated from and after [ ].
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
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<PAGE> 7
- --------------------------------------------------------------------------------
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURES(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Notes hereby tendered or on a security position listing,
or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Company
for the Notes to comply with any restrictions on transfer applicable to the
Notes). If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a fiduciary
capacity or representative capacity, please set forth the signer's full title.
See Instruction 5.
______________________________________________________________
______________________________________________________________
(Signature(s) of Holder(s))
Date____________________, 1999
Name(s)_________________________________________________________________________
________________________________________________________________________________
Capacity or Title_______________________________________________________________
Address________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
________________________________________________________________________________
(Tax Identification Number(s))
- --------------------------------------------------------------------------------
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<PAGE> 8
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Exchange Notes or any To be completed ONLY if Exchange Notes or
Notes that are not tendered are to be issued in the name any Notes that are not tendered are to be sent to
of someone other than the registered holder of the Notes someone other than the registered holder of the
whose name(s) appear(s) above. Notes whose name(s) appear(s) above, or to the
registered holder(s) at an address other than that
shown above.
ISSUE: MAIL:
[ ] Exchange Notes to: [ ] Exchange Notes to:
[ ] Notes not tendered to: [ ] Notes not tendered to:
Name(s):____________________________________________ Name(s):____________________________________________
_____________________________________________________ ____________________________________________________
(PLEASE PRINT) (PLEASE PRINT)
Address:_____________________________________________ Address:____________________________________________
(ZIP CODE) (ZIP CODE)
_____________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE ENCLOSED SUBSTITUTE FORM W-9)
</TABLE>
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<PAGE> 9
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 2 AND 5)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
(PLEASE PRINT OR TYPE)
Full Title______________________________________________________________________
Name of Firm____________________________________________________________________
Address_________________________________________________________________________
(ZIP CODE)
Area Code and Telephone Number__________________________________________________
Dated:_______________________, 1999
- --------------------------------------------------------------------------------
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<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of Letter of Transmittal and Notes; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a) tenders
are to be made pursuant to the procedures for tender by book-entry transfer set
forth in "The Exchange Offer--Procedures for Tendering" in the Prospectus and an
Agent's Message is not delivered or (b) Certificates are to be forwarded
herewith. Timely confirmation of a book-entry transfer of such Notes into the
Exchange Agent's account at DTC, or Certificates as well as this Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its addresses
set forth herein on or prior to the Expiration Date. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by DTC to and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering Participant, which acknowledgment states that such Participant has
received and agrees to be bound by the Letter of Transmittal and that the
Company may enforce the Letter of Transmittal against such Participant. The term
"book-entry confirmation" means a timely confirmation of book-entry transfer of
Notes into the Exchange Agent's account at DTC.
Holders who wish to tender their Notes and (i) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, or (ii) who
cannot deliver their Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent on or prior to the Expiration Date or (iii)
whose Notes are not immediately available may tender their Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures" in the Prospectus. Pursuant to such procedures: (a) such
tender must be made by or through an Eligible Institution (as defined below);
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (c) the Certificates (or
a book-entry confirmation) representing tendered Notes, in proper form for
transfer, together with a Letter of Transmittal (or facsimile thereof or Agent's
Message in lieu thereof), properly completed and duly executed, with any
required signature guarantees and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for
Tendering" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Notes to be properly tendered pursuant to the guaranteed delivery procedure, the
Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the
Expiration Date. As used herein and in the Prospectus, "Eligible Institution"
means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act
as "an eligible guarantor institution," including (as such terms are defined
therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association.
THE METHOD OF DELIVERY OF NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
THE COMPANY WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT
TENDERS. EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF TRANSMITTAL (OR
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<PAGE> 11
FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES ANY RIGHT TO
RECEIVE ANY NOTICE OF THE ACCEPTANCE OF SUCH TENDER.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
holder (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Notes) of Notes tendered herewith, unless such
holder(s) has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions"
above, or
(ii) such Notes are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned
"Description of Notes Tendered" is inadequate, the Certificate number(s) and/or
the principal amount of Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. Partial Tenders and Withdrawal Rights. If less than all the Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Notes which are to be tendered in the box entitled "Principal Amount
of Notes Tendered." In such case, new Certificate(s) for the remainder of the
Notes that were evidenced by your Old Certificate(s) will be sent to the holder
of the Notes, promptly after the Expiration Date. All Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth above or in the Prospectus on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Notes to be withdrawn, the aggregate
principal amount of Notes to be withdrawn, and (if Certificates for Notes have
been tendered) the name of the registered holder of the Notes as set forth on
the Certificate for the Notes, if different from that of the person who tendered
such Notes. If Certificates for the Notes have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Notes, the tendering holder must submit the serial numbers
shown on the particular Certificates for the Notes to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Notes tendered for the account of an Eligible
Institution. If Notes have been tendered pursuant to the procedures for
book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering,"
the notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawal of Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Notes
may not be rescinded. Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Notes which have been tendered but
which are withdrawn will be returned to the holder thereof without cost to such
holder promptly after withdrawal.
-11-
<PAGE> 12
5. Signatures on Letter of Transmittal, Assignments and Endorsements.
If this Letter of Transmittal is signed by the registered holder(s) of the Notes
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the Certificate(s) or on a security position listing
without alteration, enlargement or any change whatsoever.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof or Agent's Message in lieu
thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers 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 must submit proper
evidence satisfactory to the Company, in its sole discretion, of such persons'
authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless Exchange Notes are to be issued in
the name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Notes listed, the Certificates must be endorsed or
accompanied by appropriate bond powers, signed exactly as the name or names of
the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company may require in accordance with the restrictions on transfer
applicable to the Notes. Signatures on such Certificates or bond powers must be
guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to
be issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Notes not exchanged will be returned by mail or, if tendered by
book-entry transfer, by crediting the account indicated above maintained at DTC.
See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Notes which
determination shall be final and binding on all parties. The Company reserves
the absolute right, in its sole and absolute discretion, to reject any and all
tenders determined by it not to be in proper form or the acceptance of which, or
exchange for, may, in the view of counsel to the Company, be unlawful. The
Company also reserves the absolute right, subject to applicable law, to waive
any of the conditions of the Exchange Offer set forth in the Prospectus under
"The Exchange Offer--Conditions of the Exchange Offer" or any conditions or
irregularity in any tender of Notes of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) will be final
and binding. No tender of Notes will be deemed to have been validly made until
all irregularities with respect to such tender have been cured or waived.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent, or any other person shall be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. Questions, Requests for Assistance and Additional Copies. Questions
and requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, this Letter of Transmittal and the Notice
of Guaranteed Delivery may be obtained from the Exchange Agent or from your
broker, dealer, commercial bank, trust company or other nominee.
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<PAGE> 13
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal
income tax law, a holder whose tendered Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the holder or other payee to a $50 penalty. In addition,
payments to such holders or other payees with respect to Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Notes or of the last transferee appearing on the transfers attached to, or
endorsed on, the Notes. If the Notes are registered in more than one name or are
not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
11. Security Transfer Taxes. Holders who tender their Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
-13-
<PAGE> 14
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE.
-14-
<PAGE> 15
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: SUNTRUST BANK, ATLANTA, AS EXCHANGE AGENT
<S> <C> <C>
PART I-PLEASE PROVIDE YOUR TIN IN SOCIAL SECURITY OR EMPLOYER
THE BOX AT RIGHT AND CERTIFY BY IDENTIFICATION NUMBER
SIGNING AND DATING BELOW.
SUBSTITUTE _____________________________________
FORM W-9 (If awaiting TIN write "Applied For")
______________________________________________________________________________________
DEPARTMENT OF THE NAME (PLEASE PRINT)
TREASURY
INTERNAL REVENUE
SERVICE ______________________________________________________________________________________
ADDRESS
PAYOR'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND ______________________________________________________________________________________
CERTIFICATION CITY STATE ZIP CODE
______________________________________________________________________________________
PART II-For Payees NOT subject to backup withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as
instructed therein.
______________________________________________________________________________________
CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
1. The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because either (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
CERTIFICATION INSTRUCTIONS-You must cross out item (2) above if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS
that you were subject to backup withholding you received another notification from the
IRS that you are no longer subject to backup withholding, do not cross out item (2).
(Also see instructions in the enclosed Guidelines.)
Signature:___________________________________________ Date:_____________________, 1999
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE
THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF
SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
PAYOR'S NAME: SUNTRUST BANK, ATLANTA, AS EXCHANGE AGENT
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within sixty (60)
days, 31% of all reportable payments made to me thereafter will be withheld
until I provide a number.
Signature(s): _______________________________________ Date: ____________________
-15-
<PAGE> 1
Exhibit 4.4
[Form of]
NOTICE OF GUARANTEED DELIVERY
FOR TENDER FOR EXCHANGE OF
10 1/4% SENIOR SUBORDINATED NOTES DUE 2009
FOR SERIES B SENIOR SUBORDINATED NOTES DUE 2009
OF
SIMMONS COMPANY
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis, (ii) certificates for the Company's (as defined below) 10 1/4% Senior
Subordinated Notes due 2009 (the "Notes") are not immediately available or (iii)
the Notes, the Letter of Transmittal and all other required documents cannot be
delivered to SunTrust Bank, Atlanta (the "Exchange Agent") on or prior to
_________, 1999 (the "Expiration Date"). This Notice of Guaranteed Delivery may
be delivered by hand, overnight courier or mail, or transmitted by facsimile
transmission, to the Exchange Agent. See "The Exchange Offer -- Guaranteed
Delivery Procedures" in the Prospectus.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT ______ P.M., NEW YORK
CITY TIME, ON ______________, UNLESS EXTENDED. TENDERS
MAY BE WITHDRAWN PRIOR TO _________ P.M., NEW YORK
CITY TIME ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
SUNTRUST BANK, ATLANTA
<TABLE>
<CAPTION>
<S> <C> <C>
By Hand or Registered or Certified Mail: By Hand, Overnight Courier, or Registered
Suntrust Bank, Atlanta or or
C/o First Chicago Trust Company Certified Mail:
of New York Suntrust Bank, Atlanta
Corporate Trust, 8th Floor 25 Park Place, 24th Floor
14 Wall Street Atlanta, Georgia 30303-2900
New York, New York 10005 Attn: Corporate Trust Division
</TABLE>
(For Eligible Institutions Only)
By Facsimile:
(404) 588-7335
Confirm Receipt of Notice of Guaranteed Delivery ONLY:
(404) 588-7067
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY
VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
IF YOU HAVE ANY QUESTIONS REGARDING THIS NOTICE OF GUARANTEED
DELIVERY OR FOR ANY ADDITIONAL INFORMATION, PLEASE CONTACT THE EXCHANGE AGENT AT
(404) 588-7067.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE NEXT PAGE MUST BE COMPLETED
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Simmons Company, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated _______ (as the same may be amended or
supplemented from time to time, the "Prospectus") and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate liquidation amount of Notes set forth
below pursuant to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures".
All authority herein conferred or agreed to be conferred in
this Notice of Guarantee of Delivers and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, and legal representatives of the undersigned and shall not be
affected by and shall survive the death or incapacity of the undersigned.
All authority herein conferred or agreed to be conferred in
this Notice of Guarantee of Delivery and every obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators, and legal representatives of the undersigned and shall not be
affected by and shall survive the death or incapacity of the undersigned.
Aggregate Principal Amount Tendered:
<TABLE>
<CAPTION>
<S> <C>
------------------------------------------ ------------------------------------------------
(Name(s) of Registered Holder(s) - Please Print
------------------------------------------ -----------------------------------------------
(Address of Registered Holder(s))
------------------------------------------ -----------------------------------------------
(Zip Code)
-----------------------------------------------
(Area Code and Telephone No.)
Check box if Notes will be delivered -----------------------------------------------
by book-entry transfer and provide account (Name(s) of Authorized Signatory)
number. -----------------------------------------------
(Capacity)
[ ] The Depository Trust Company
-----------------------------------------------
DTC Account Number:----------------------- (Address(es) of Authorized Signatory)
Date:------------------------------------- -----------------------------------------------
(Area Code and Telephone No.)
-----------------------------------------------
-----------------------------------------------
Signature(s) of Record Holder or Authorized
Signatory)
Dated:-----------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of the Notes tendered hereby exactly as their name(s) appear on the
certificates for such Notes or on a security position listing such holder(s) as
the owner(s) of such Notes, or by person(s) authorized to become registered
holder(s) of such Notes by endorsements and documents submitted with this Notice
of Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
the fiduciary or representative capacity, such person must provide the preceding
-2-
<PAGE> 3
information and, unless waived by the Company, submit with the Letter of
Transmittal evidence satisfactory to the Company of such person's authority to
so act.
-3-
<PAGE> 4
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (1) a bank; (2) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) (a) a credit
union; (4) (a) a national securities exchange, registered securities association
or clearing agency; or (b) (5) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, either the Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Notes to the Exchange Agent's account at The Depository Trust
Company ("DTC"), pursuant to the procedures for book-entry transfer set forth in
the Prospectus, in either case together with one or more properly completed and
duly executed Letter(s) of Transmittal (or facsimile thereof or Agent's Message
in lieu thereof) and any other required documents within three business days
after the date of execution of this Notice of Guaranteed Delivery. The
undersigned acknowledges that it must deliver the Letter(s) of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) and the Notes tendered
hereby to the Exchange Agent within the time period set forth above and that
failure to do so could result in a financial loss to the undersigned.
- --------------------------------------------------------------------------------
Name of Firm:
______________________________________________________________________
Address:________________________________________________________________
______
________________________________________________________________________
______
________________________________________________________________________
______
ZIP CODE
Area Code and Telephone
Number:_____________________________________________________________
AUTHORIZED SIGNATURE
Name:
_____________________________________________________________________________
PLEASE TYPE OR PRINT
Title:
_____________________________________________________________________________
Dated:
_______________________________________________________________________, 1999
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
-4-
<PAGE> 1
Exhibit 4.5
[Form of]
SIMMONS COMPANY
One Concourse Parkway
Atlanta, Georgia 30328
EXCHANGE AGENT AGREEMENT
__________ __, 1999
SunTrust Bank, Atlanta
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Ladies and Gentlemen:
Simmons Company, a Delaware corporation (the "Company"), proposes to
make an offer (the "Exchange Offer") to exchange up to $150,000,000 aggregate
principal amount of its 10 1/4% Series B Senior Subordinated Notes due 2009 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for a like principal amount of its
outstanding 10 1/4% Senior Subordinated Notes due 2009 (the "Notes"), of which
$150,000,000 aggregate principal amount is outstanding. The terms and conditions
of the Exchange Offer as currently contemplated are set forth in a prospectus,
dated ______________, 1999 (the "Prospectus"), a copy of which is attached to
this Agreement as Attachment A, proposed to be distributed to all record holders
of the Notes. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Prospectus.
The Company hereby appoints SunTrust Bank, Atlanta to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to SunTrust Bank, Atlanta. SunTrust Bank,
Atlanta hereby accepts the appointment as Exchange Agent for the purposes of
receiving, accepting for delivery and otherwise acting upon the tenders of the
Notes by the Holders thereof, receiving the Exchange Notes from the Company,
delivering the Exchange Notes to persons participating in the Exchange Offer and
performing any other action to effect the Exchange Offer in accordance with the
terms and procedures set forth in the Prospectus and the Letter of Transmittal.
The Exchange Offer is expected to be commenced by the Company on or
about __________, 1999. The Letter of Transmittal accompanying the Prospectus is
to be used by the
<PAGE> 2
holders of the Notes to accept the Exchange Offer, and contains instructions
with respect to the Exchange Offer.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
__________, 1999 or on such later date or time to which the Company may extend
the Exchange Offer (the "Expiration Date"). Subject to the terms and conditions
set forth in the Prospectus, the Company expressly reserves the right to extend
the Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (promptly confirmed in writing) or written notice to you no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company expressly reserves the right to amend or terminate the
Exchange Offer, and not to accept for exchange any Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified in the Prospectus under the caption "The Exchange
Offer--Conditions of the Exchange Offer." The Company will give oral (promptly
confirmed in writing) or written notice of any amendment, termination or
nonacceptance to you as promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in
accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer," as specifically set forth herein and such duties which are necessarily
incidental thereto; provided, however, that in no way will your general duty to
act in good faith be discharged by the foregoing.
2. You will establish an account with respect to the Notes at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Exchange Offer within two business days after the date of the Prospectus or,
if you already have established an account with the Book-Entry Transfer Facility
suitable for the Exchange Offer, you will identify such pre-existing account to
be used in the Exchange Offer, and any financial institution that is a
participant in the Book-Entry Transfer Facility's systems may make book-entry
delivery of the Notes by causing the Book-Entry Transfer Facility to transfer
such Notes into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates
for the Notes and confirmations of book-entry transfers into your account at the
Book-Entry Transfer Facility and any Agent's Message or other documents
delivered or mailed to you by or for holders of the Notes to ascertain whether:
(i) the Letters of Transmittal and any such other documents are duly executed
and properly completed in accordance with instructions set forth therein and
(ii) the Notes have otherwise been properly tendered. In each case where the
Letter of Transmittal
-2-
<PAGE> 3
or any other document has been improperly completed or executed or any of the
certificates for Notes are not in proper form for transfer or some other
irregularity in connection with the acceptance of the Exchange Offer exists, you
will endeavor to inform the exchanging holder or the Book-Entry Transfer
Facility of the existence of the irregularity and the need for fulfillment of
all requirements and to take any other action as may be necessary or advisable
to cause such irregularity to be corrected. The Exchange Agent is not authorized
to accept any tender of Notes which you reasonably deem to be defective, unless
the Exchange Agent shall have received written notice from the Company as
provided in paragraph 4 hereof that any defect or irregularity in such tender
has been cured or waived and that such tender has been accepted by the Company.
4. Upon the Exchange Agent's determination that any tender is
defective, the Exchange Agent shall notify the Company and, after consultation
with and on the written instructions of the Company, use reasonable efforts to
notify the person tendering such Notes or the Book-Entry transfer Facility, as
the case may be, of such determination. If necessary, the Exchange Agent will
return the certificates evidencing such Notes in the manner described herein.
The Company shall have the absolute right to (i) reject any and all Notes not
properly tendered, (ii) determine whether any tender of Notes is valid and (iii)
reject any Notes the Company's acceptance of which would, in the opinion of
counsel for the Company, be unlawful; it being understood that the Exchange
Agent shall have neither discretion nor responsibility with respect to such
matters. The Company shall also have the right in its sole discretion to waive
any defects, irregularities or conditions of tender as to particular Notes. The
interpretations by the Company of the terms and conditions of the Exchange
Offer, each submitted Letter of Transmittal, each submitted Notice of Guaranteed
Delivery and each other document or instrument submitted to it in connection
with the Exchange Offer (including, without limitation, the determination of
whether any tender of Notes is valid) shall be final and binding. With the
approval of the Chief Executive Officer and President or the Executive Vice
President-Finance and Administration and Chief Financial Officer of the Company
(such approval, if given orally, to be confirmed in writing), you are authorized
to waive any irregularities in connection with any tender of Notes pursuant to
the Exchange Offer.
5. Tenders of Notes may be made only as set forth in the section of the
Prospectus captioned "The Exchange Offer--Procedures for Tendering" or in the
Letter of Transmittal, and Notes shall be considered properly tendered to you
only when tendered in accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Notes which the
Company or any other party designated by the Company in writing shall approve as
having been properly tendered shall be considered to be properly tendered (such
approval, if given orally, shall be confirmed in writing).
6. You shall advise the Company with respect to any Notes delivered
subsequent to the Expiration Date and accept its instructions with respect to
the disposition of such Notes.
7. You shall accept tenders:
-3-
<PAGE> 4
a. in cases where the Notes are registered in two or more
names only if signed by all named holders;
b. in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority to so act is submitted; and
c. from persons other than the registered holder of Notes
provided that customary transfer requirements, including any applicable transfer
taxes, are fulfilled.
You shall accept partial tenders of Notes where so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Notes to the
transfer agent for split-up and return any untendered Notes to the holder (or to
such other person as may be designated in the Letter of Transmittal) as promptly
as practicable after expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will notify you (such notice if given orally, to be promptly
confirmed in writing) of the Company's acceptance, promptly after the Expiration
Date, of all Notes properly tendered and you, on behalf of the Company, will
exchange such Notes for Exchange Notes and cause such Notes to be canceled.
Delivery of Exchange Notes will be made on behalf of the Company by you at the
rate of $1,000 principal amount of Exchange Notes for each $1,000 principal
amount of Notes tendered promptly after notice (such notice if given orally, to
be promptly confirmed in writing) of acceptance of said Notes by the Company;
provided, however, that in all cases, Notes tendered pursuant to the Exchange
Offer will be exchanged only after timely receipt by you of certificates for
such Notes (or confirmation of book-entry transfer into you account at the
Book-Entry Transfer Facility), a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees (or
Agent's Message in lieu thereof) and any other required document. You shall
issue Exchange Notes only in denominations of $1,000 or any integral multiple
thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time on or prior to the Expiration Date.
10. The Company shall not be required to exchange any Notes tendered if
any of the conditions set forth in the Exchange Offer are not met. Notice of any
decision by the Company not to exchange any Notes tendered shall be given (such
notice, if given orally, shall be promptly confirmed in writing) by the Company
to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Notes tendered because of an invalid tender, the
occurrence of certain other events set
-4-
<PAGE> 5
forth in the Prospectus under the caption "The Exchange Offer--Conditions of the
Exchange Offer" or otherwise, you shall as soon as practicable after the
expiration or termination of the Exchange Offer return those certificates for
unaccepted Notes (or effect the appropriate book-entry transfer of the
unaccepted Notes), and return any related required documents and the Letters of
Transmittal relating thereto that are in your possession, to the persons who
deposited them.
12. All certificates for reissued Notes or for unaccepted Notes shall
be forwarded by (a) first-class mail, return receipt requested, under a blanket
surety bond protecting you and the Company from loss or liability arising out of
the non-receipt or non-delivery of such certificates or (b) by registered mail
insured separately for the replacement value of such certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder you:
a. will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of Notes,
and will not be required to and will make no representation as to the validity,
value or genuineness of the Exchange Offer; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing;
b. shall not be obligated to take any legal action hereunder
which might in your reasonable judgment involve any expense or liability, unless
you shall have been furnished with reasonable indemnity;
c. shall not be liable to the Company for any action taken or
omitted by you, or any action suffered by you to be taken or omitted, without
gross negligence, misconduct or bad faith on your part, by reason of or as a
result of the administration of your duties hereunder in accordance with the
terms and conditions of this Agreement or by reason of your compliance with the
instructions set forth herein or with any written or oral instructions delivered
to you pursuant hereto, and may conclusively rely on and shall be fully
protected in acting in good faith in reliance upon any certificate, instrument,
opinion, notice, letter, facsimile or other document or security delivered to
you and reasonably believed by you to be genuine and to have been signed by the
proper party or parties;
d. may reasonably act upon any tender, statement, request,
comment, agreement or other instrument whatsoever not only as to its due
execution and validity and the effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which you shall in
good faith reasonably believe to be genuine or to have been signed or
represented by a proper person or persons;
-5-
<PAGE> 6
e. may conclusively rely on and shall be fully protected in
acting upon written or oral instructions from any officer of the Company with
respect to the Exchange Offer;
f. shall not advise any person tendering Notes pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the market value
or decline or appreciation in market value of any Notes; and
g. may consult with your counsel with respect to any questions
relating to your duties and responsibilities and the written opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by you hereunder in good faith and in
accordance with such advice or written opinion of such counsel.
15. You shall take such action as may from time to time be requested by
the Company or its counsel (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery, or such other forms as may be approved from time
to time by the Company, to all persons requesting such documents and to accept
and comply with telephone requests for information relating to the Exchange
Offer, provided that such information shall relate only to the procedures for
accepting (or withdrawing from) the Exchange Offer. The Company will furnish you
with copies of such documents at your request. All other requests for
information relating to the Exchange Offer shall be directed to the Secretary of
the Company at: One Concourse Parkway, Atlanta, Georgia 30328.
16. You shall advise by facsimile transmission or telephone, and
promptly thereafter confirm in writing to the Company and Ropes & Gray, counsel
for the Company, and such other person or persons as they may request, weekly,
and more frequently, if reasonably requested, up to and including the Expiration
Date, as to the principal amount of the Notes which have been tendered pursuant
to the Exchange Offer and the items received by you pursuant to this Agreement,
separately reporting and giving cumulative totals of the items properly
received, items improperly received and items covered by Notices of Guaranteed
delivery. You shall also provide the Company or any such other person or persons
as the Company may request from time to time prior to the Expiration Date with
such other information as the Company or such other person may reasonably
request. In addition, you shall grant to the Company and such persons as the
Company may request, access to those persons on your staff who are responsible
for receiving tenders, in order to ensure that immediately prior to the
Expiration Date, the Company shall have received information in sufficient
detail to enable them to decide whether to extend the Exchange Offer. You shall
prepare a list of persons who failed to tender or whose tenders were not
accepted and the aggregate principal amount of Notes not tendered or not
accepted and deliver said list to the Company at least seven days prior to the
Expiration Date. You shall also prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of Notes tendered and the
aggregate principal amount of Notes accepted and deliver said list to the
Company.
-6-
<PAGE> 7
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
18. For services rendered as Exchange Agent hereunder you shall be
entitled to a fee of $[ ] and you shall be entitled to reimbursement of your
expenses (including fees and expenses of your counsel, which fees are expected
under normal circumstances to be not in excess of $[ ]) incurred in connection
with the Exchange Offer.
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal attached hereto and further acknowledge that you have examined each
of them to the extent necessary to perform your obligations hereunder. Any
inconsistency between this Agreement, on the one hand, and the Prospectus and
the Letter of Transmittal (as they may be amended from time to time), on the
other hand, shall be resolved in favor of the latter two documents, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent,
which shall be controlled by this Agreement.
20. The Company agrees to indemnify and hold you (and your officers,
directors, employees and agents) harmless in your capacity as Exchange Agent
hereunder against any liability, cost or expense, including reasonable
attorney's fees, arising out of or in connection with the acceptance or
administration of your duties hereunder, including, without limitation, in
connection with any act, omission, delay or refusal made by you in reasonable
reliance upon any signature, enforcement, assignment, certificate, order,
request, notice, instruction or other instrument or document reasonably believed
by you to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Notes reasonably believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders or
effect any transfer of Notes; provided, however, that the Company shall not be
liable for indemnification or otherwise for any loss, liability, cost or expense
to the extent arising out of your gross negligence, willful breach of this
Agreement, willful misconduct or bad faith. In no case shall the Company be
liable under this indemnity with respect to any claim against you unless the
Company shall be notified by you, by letter or cable or by facsimile confirmed
by letter, of the written assertion of a claim against you or of any other
action commenced against you, promptly after you shall have received any such
written assertion or commencement of action. The Company shall be entitled to
participate at its own expense in the defense of any such claim or other action.
You shall not compromise or settle any such action or claim without the consent
of the Company.
21. This Agreement and your appointment as Exchange Agent hereunder
shall be construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be performed entirely within such
state, without regard to conflicts of
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law principles, and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of each of the parties
hereto.
22. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together
constitute one and the same agreement.
23. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
24. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
25. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to the Company, to:
Simmons Company
One Concourse Parkway
Atlanta, Georgia 30328
Attention: John Daiker
Facsimile: (707) 392-2565
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton, Esq.
Facsimile: (617) 951-7050
If to the Exchange Agent, to:
SunTrust Bank, Atlanta
25 Park Place, 24th Floor
Atlanta, Georgia 30303-2900
Attention: Olga Warren
Facsimile: (404) 240-2030
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<PAGE> 9
With a copy to:
Powell Goldstein Frazer & Murphy
191 Peachtree Street, Suite 1600
Atlanta, Georgia 30303
Attention: Gregory H. Worthy
Facsimile: 404-572-6099
26. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 18 and 20 shall survive the termination of this Agreement.
Except as provided in Paragraph 17, upon any termination of this Agreement, you
shall promptly deliver to the Company any funds or property (including, without
limitation, Letters of Transmittal and any other documents relating to the
Exchange Offer) then held by you as Exchange Agent under this Agreement.
27. This Agreement shall be binding and effective as of the date
hereof.
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Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
SIMMONS COMPANY
By:______________________________
Name:
Title:
Accepted as of the date first above written:
SUNTRUST BANK, ATLANTA
as Exchange Agent
By: __________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.1
ESOP STOCK SALE AND EXCHANGE AGREEMENT
This ESOP STOCK SALE AND EXCHANGE AGREEMENT (this "Agreement"), is
dated as of July 22, 1998 by and among SIMMONS HOLDINGS, INC., a Delaware
corporation ("Holdings"), SIMMONS COMPANY, a Delaware corporation (the
"Company"), STATE STREET BANK & TRUST COMPANY, solely in its capacity as Trustee
(the "Trustee") of the Simmons Company Employee Stock Ownership Trust (the
"ESOT") and REM Acquisition, Inc., a Delaware corporation ("MergerCo").
W I T N E S S E T H:
-------------------
WHEREAS, the ESOT is, as of the date hereof, the record and beneficial
owner of 5,663,721 shares of Series A Preferred Stock of the Company, of which
2,250,049 shares are, pursuant to the terms of the Simmons Company Employee
Stock Ownership plan, as amended and restated effective January 17, 1989, and as
further amended through the date hereof (the "ESOP"), allocated to the accounts
of ESOP participants (such shares are referred to herein as the "Allocated
Shares"), and 3,413,672 shares are, pursuant to the terms of the ESOP, not so
allocated (such shares are referred to herein as the "Unallocated Shares" and
together with the Allocated Shares, the "ESOP Shares");
WHEREAS, MergerCo and Holdings entered into an Agreement and Plan of
Merger, dated as of July 16, 1998 (as such agreement may be amended from time to
time, the "Merger Agreement"), which is attached as Exhibit A hereto, pursuant
to which MergerCo will be merged with and into Holdings, with Holdings being the
surviving corporation (the "Merger"). Terms used and not otherwise defined
herein shall have the meanings ascribed to such terms in the Merger Agreement;
WHEREAS, pursuant to the Merger Agreement, the consummation and
effectiveness of the Merger is conditioned in part upon the execution, delivery
and performance of this Agreement;
WHEREAS, the Trustee, as successor to NationsBank, N.A. (South), the
Company and Holdings are parties to a 1996 Stockholders' Agreement dated as of
March 22, 1996 (the "Stockholders' Agreement");
WHEREAS, in connection with the consummation of the Merger, the parties
hereto have agreed, effective as of the Closing hereunder, to terminate the
Stockholders' Agreement and enter into a new stockholders' agreement
substantially in the form of Exhibit B hereto (the "New Stockholders'
Agreement") which, among other things, will provide the Trustee with certain
rights with respect to the ESOP Shares;
NOW THEREFORE, in consideration of the foregoing and the mutual
premises, representatives, warranties, agreements and covenants set forth herein
and in the Merger Agreement, MergerCo Holdings, the Company and the Trustee,
each intending to be legally bound, hereby agree as follows:
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1. PURCHASE AND SALE OF THE ALLOCATED SHARES.
1.1. PURCHASE AND SALE.
(a) Subject to the terms and conditions hereof, on
the Closing Date (as defined below), the Trustee shall sell
(the "Sale") to MergerCo, and MergerCo shall purchase from the
Trustee, all of the shares of Series A Preferred Stock to the
Company that constitute Allocated Shares owned by the ESOT on
the Closing Date (which number of shares shall be 2,250,049
shares), for a purchase price per share in cash of $ 7.1463
(the "Purchase Price"), which is equal to the price per share
that would have been payable to the ESOP pursuant to the
Merger Agreement with respect to a share of Series A Preferred
Stock of the Company if, immediately prior to the Effective
Time, that share had been converted into one share of Common
Stock of the Company and exchanged for shares of Class C
Common Stock of Holdings in accordance with the exchange ratio
set forth in the Stockholders Agreement and had such shares of
Class C Common Stock been converted into the right to receive
the Cash Price pursuant to Section 3.1(c)(ii) of the Merger
Agreement.
(b) Not less than 10 days prior to the Closing Date,
the Trustee and the Company shall notify MergerCo of the
number of Allocated Shares and Unallocated Shares that the
Trustee estimates will be outstanding at the Closing Date
under the ESOP.
1.2. CLOSING.
(a) Subject to the terms and conditions hereof, the
closing of the Sale shall take place immediately prior to the
Effective Time of the Merger and at the same place as the
closing of the Merger under the Merger Agreement (the time and
date of the closing of the Sale shall be referred to herein as
the "Closing Date").
(b) On the Closing Date, the Trustee shall deliver to
MergerCo one or more stock certificates representing the
Allocated Shares to be purchased by MergerCo pursuant to
Section 1.1 in proper form for transfer, accompanied by
appropriate stock powers duly executed in blank, together with
any and all necessary documentary or transfer tax stamps duly
affixed and cancelled and otherwise in form satisfactory to
MergerCo.
(c) On the Closing Date, MergerCo shall deliver to
the Trustee the aggregate Purchase Price for the Allocated
Shares sold pursuant to Section 1.1, in cash by wire transfer
of immediately available funds to such bank account as the
Trustee shall designate in writing to MergerCo at least two
business days prior to the Closing Date.
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2. EXCHANGE OF THE UNALLOCATED SHARES.
2.1. EXCHANGE OF UNALLOCATED SHARES. Subject to the terms and
conditions hereof, the Trustee shall exchange the shares of Series A
Preferred Stock of the Company that constitute Unallocated Shares owned
by the ESOT on the Closing Date (which, for this purpose is assumed to
be approximately 3,413,672 shares) for, and Holdings shall issue to the
Trustee in exchange therefor an aggregate of, 3,484,997 shares of Class
C Stock of Holdings, which is the number determined in accordance with
the exchange ratio for "Exchange Shares" set forth in Section 3.1(c) of
the Stockholders' Agreement as if each Unallocated Share had been
converted into one share of Common Stock of the Company and exchanged
for Class C Stock of Holdings in accordance with the Stockholders
Agreement and the Trustee hereby acknowledges that such Unallocated
Shares shall be shares of Common Stock of Holdings and shall remain
outstanding following the Merger (the "Exchange"). In connection
therewith, the Trustee does hereby waive its right to be redeemed or to
receive any cash consideration as Merger Consideration (as defined in
the Merger Agreement) for any of the Unallocated Shares held thereby,
and agrees that all such Unallocated Shares shall constitute "Rollover
Shares" for all purposes in connection with the Merger.
2.2. CLOSING OF THE EXCHANGE. The closing of the Exchange
shall take place, at the sole option of MergerCo, simultaneously with,
immediately before, or immediately after, the closing of the Sale.
MergerCo shall notify the Trustee two business days prior to the
Closing Date of the order of occurrence of the Sale and Exchange. At
such closing, the Trustee shall deliver to Holdings one or more stock
certificates representing the Unallocated Shares in proper form for
transfer, accompanied by appropriate stock powers duly executed in
blank, together with any and all necessary documentary or transfer tax
stamps duly affixed and cancelled and otherwise in form satisfactory to
MergerCo, and Holdings shall deliver to the Trustee one or more
certificates representing the Shares of Common Stock determined in
accordance with Section 2.1.
3. ADDITIONAL PURCHASE RIGHTS. Subject to the terms and conditions
hereof, if all the conditions set forth in Section 8.1 are satisfied, provided
that the condition set forth in Section 8.1.5(d) is not satisfied, then MergerCo
shall have the right to purchase all but not less than all of the Unallocated
Shares (which shall be Series A Preferred Shares) held by the Trustee and the
Trustee shall be obligated to sell such shares to MergerCo, at the request of
MergerCo, at the Purchase Price per share set forth in Section 1.1, and upon the
same terms and conditions as set forth in Section 1 with respect to the
Allocated Shares.
4. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. As an inducement to
MergerCo to enter into this Agreement and to consummate the transactions
contemplated hereby, the Trustee represents and warrants, as of the date hereof
and as of the Effective Time, to MergerCo as follows:
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4.1. AUTHORITY AND RELATED MATTERS.
(a) The Trustee has full legal right, power, capacity
and authority to execute and deliver this Agreement and all of
the other instruments contemplated hereby, to consummate the
transactions contemplated hereby (including the New
Stockholders' Agreement) and by the Merger Agreement and to
comply with the terms, conditions and provisions hereof and
thereof. This Agreement is, and each other instrument of the
Trustee contemplated hereby (including the New Stockholders'
Agreement) will be, the legal, valid and binding obligation of
the Trustee, enforceable against it in accordance with its
terms.
(b) The ESOT is the record and beneficial owner of
5,663,721 shares of Series A Preferred Stock of the Company,
of which 2,250,049 constitute Allocated Shares and 3,413,672
constitute Unallocated Shares. Except for this Agreement and
the transactions contemplated hereby (including the New
Stockholders' Agreement), and except as disclosed in the
Merger Agreement or the Plan, there are no agreements,
arrangements, warrants, options, puts, calls, rights, option
or other employee benefit plans or other commitments or
understandings of any character to which the ESOT is a party
or by which any of its assets (including the ESOP Shares) is
bound and relating to the issuance, sale, purchase,
redemption, conversion, exchange, registration, voting or
transfer of any ESOP Shares or other securities of Holdings or
the Company. As of the Closing Date and subject to the
Company's releasing the ESOP Shares from the Company's pledge
agreement with the ESOT, the ESOP Shares to be sold to
MergerCo will be transferred to MergerCo free of any
preemptive or subscription rights and free and clear of all
liens, claims, charges, security interests, mortgages,
pledges, easements, conditional sales or other title retention
agreements, defect in title, covenants or other encumbrances
or restrictions of any kind (collectively, "Encumbrances").
(c) Neither the execution and delivery by the Trustee
of this Agreement or of any of the other instruments
contemplated hereby to be executed by it (including the New
Stockholders' Agreement), the consummation by the Trustee of
any of the transactions contemplated hereby, nor compliance by
the Trustee with or fulfillment by the Trustee of the terms,
conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the
terms, conditions or provisions of, or constitute a
default, an event of default or an event creating
rights of acceleration, amendment, termination or
cancellation or a loss of rights under, or result in
the creation or imposition of any Encumbrance upon,
any of the assets or properties of the Trustee or the
ESOT under any charter, by-laws, trust agreement,
partnership agreement or certificate of partnership
or other constitutive documents of the Trustee and
the ESOT
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<PAGE> 5
(including the ESOP), any note, instrument,
agreement, mortgage, lease, license, franchise,
Governmental Permit (as defined in the Merger
Agreement) or judgment, order, award or decree to
which the Trustee or the ESOT is a party or by which
the Trustee or the ESOT (provided that the Trustee
makes no representation with respect to ERISA); or
(ii) require the approval, consent,
authorization or act of, or the making by the Trustee
of any declaration, filing or registration with, any
third Person or any Governmental Body (as defined in
the Merger Agreement).
4.2. NO FINDER. None of the Trustee, the ESOT, or any party
acting on his or its behalf, has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on
account of the transactions contemplated by this Agreement or the
Merger Agreement, except that the Trustee has engaged Houlihan, Lokey,
Howard and Zukin, Inc. ("HL") in connection with the transactions
contemplated by this Agreement and the Merger Agreement.
4.3. ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding or investigation pending or, to the knowledge of the
Trustee, threatened, against the Trustee or the ESOT to consummate the
transactions contemplated hereby or by the Merger Agreement.
4.4. FAIRNESS OPINION. On the date hereof, the ESOT has
received the fairness opinion (the "ESOT Fairness Opinion") of HL to
the effect that the consideration to be received by the ESOT for the
ESOP Shares in connection with the transactions contemplated by this
Agreement and the Merger is not less than fair value and that such
transactions, considered as a whole, is fair to the ESOP from a
financial point of view, and such opinion has not been withdrawn,
qualified or otherwise modified.
4.5. INVESTMENT INTENT. The Trustee is exchanging the
Unallocated Shares hereunder solely for its own account and with no
intention of distributing or reselling the Unallocated Shares of any
part thereof, or interest therein, in any transaction that would be in
violation of the Securities Act of 1933, as amended (the "Securities
Act") or any other securities laws of the United States of America or
any state thereof.
4.6. STATUS AS ACCREDITED INVESTOR. As the Closing Date, the
Trustee will be an "accredited investor" (as that term is defined in
Rule 501 of Regulation D under the Securities Act). The Trustee has
such knowledge and experience in business and financial matters so that
the Trustee is capable of evaluating the merits and risks of the
Exchange and of the investment in Holdings. The Trustee understands the
full nature and risk of an investment in Holdings. The Trustee further
acknowledges that it has had access to the books and records of
Holdings, is generally familiar with the business being conducted by
Holdings and its subsidiaries and has had an opportunity to ask
questions concerning Holdings and its subsidiaries; provided, however,
that nothing herein shall affect the
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<PAGE> 6
representations and warranties of Holdings or the Company hereunder,
any of the obligations of Holdings or the Company, or any the Trustee's
rights under the other provisions of this Agreement. The Trustee
acknowledges that none of MergerCo, Holdings, the Company nor any
Affiliate thereof has made, or will make, and the Trustee has not
relied upon, any representation or warranty, whether express or
implied, of any character, except as expressly set forth herein.
5. REPRESENTATIONS AND WARRANTIES OF MERGERCO. As an inducement to the
Trustee to enter into this Agreement and to consummate the transactions
contemplated hereby, MergerCo represents and warrants to the Trustee as follows:
5.1. ORGANIZATION. MergerCo is a corporation duly organized,
legally existing and in good standing under the laws of the
jurisdiction of its formation and has full corporate power and
authority to own or lease and to operate and use its properties and
assets and to carry on its business as now conducted.
5.2. AUTHORITY.
(a) MergerCo has the requisite power and authority to
execute and deliver this Agreement and all of the other
instruments contemplated hereby to be executed by it
(including the New Stockholders' Agreement), to consummate the
transactions contemplated hereby and to comply with the terms,
conditions and provisions hereof. The execution, delivery and
performance of this Agreement by MergerCo have been duly
authorized and approved by all necessary corporate action on
its behalf and do not require any further authorization or
consent of MergerCo or its stockholders. This Agreement is,
and each other instrument of MergerCo contemplated hereby to
be executed by them (including the New Stockholders'
Agreement) will be, the legal, valid and binding obligation of
MergerCo, enforceable against MergerCo in accordance with
their terms.
(b) Neither the execution and delivery of this
Agreement by MergerCo or any of the other instruments
contemplated hereby, the consummation by MergerCo of any of
the transactions contemplated hereby nor compliance by
MergerCo with or fulfillment by MergerCo of the terms,
conditions and provisions hereof will:
(i) conflict with or result in a breach of
the terms, conditions or provisions of, or constitute
a default, an event of default or an event creating
rights of acceleration, termination or cancellation
or a loss of rights under the charter, or by-laws, or
other constitutive documents of MergerCo or any note,
instrument, agreement, mortgage, lease, license,
franchise, Governmental Permit or judgment, order,
award or decree to which any of its properties is
subject, or by which MergerCo is bound; or
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(ii) require the approval, consent,
authorization or act of, or the making by MergerCo of
any declaration, filing or registration with, any
third person or any Governmental Body, except as
provided under the New Jersey Industrial Site
Recovery Act or under the Hart Scott Rodino Act (the
"H-S-R Act").
5.3. NO FINDER. Neither MergerCo nor any party acting on its
behalf or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions
contemplated by this Agreement.
5.4. ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding or investigation pending, or to the knowledge of MergerCo,
threatened, against MergerCo which might adversely affect or restrict
MergerCo's ability to consummate the transactions contemplated by this
Agreement and the Merger Agreement.
5.5. COMMITMENT LETTERS. To the extent the financing under
this Agreement or the Merger Agreement is to be provided by third
parties, MergerCo has provided the Trustee with complete and correct
copies of the commitment letters (the "Commitment Letters") relating to
the provisions of such financing.
5.6. GOVERNMENTAL CONSENTS. No consent, approval or
authorization of, or declaration, filing or registration with, any
governmental or regulatory authority (other than filings pursuant to
the H-S-R Act) is required to be made or obtained by MergerCo in
connection with the execution, delivery and performance of this
Agreement.
5.7. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of MergerCo under the Merger Agreement are true and correct
as of the date thereof except for (i) representations and warranties
that speak as of a specific date or time which need only be true and
correct as of such date or time and (ii) representations and warranties
which are not qualified by a Material Adverse Effect (as defined in the
Merger Agreement) or otherwise by material adversity (which need be
true and correct in all material respects only).
5.8. CERTAIN TRANSACTIONS OR ARRANGEMENTS. Except for
arrangements and agreements previously disclosed to the Trustee or as
expressly contemplated by this Agreement, the Commitment Letters and
the Merger Agreement immediately following the Closing Date, neither
MergerCo nor any of its respective affiliates will be, directly or
indirectly, a party to any agreement, arrangement or understanding with
Holdings or any of its subsidiaries.
6. REPRESENTATIONS AND WARRANTIES OF HOLDINGS AND THE COMPANY. As an
inducement to the Trustee to enter into this Agreement and to consummate the
Exchange contemplated hereby, each of the Holdings and the Company hereby
represent and warrant to the Trustee as and to the
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extent provided in Sections 4.1, 4.2, 4.4(a) (first three sentences only),
4.4(b) and 4.5 of the Merger Agreement.
7. COVENANTS
7.1. CERTAIN AGREEMENTS. Each of the parties hereto shall use
his or its commercially reasonable best efforts to consummate the
transactions contemplated by this Agreement and the Merger Agreement.
Each party shall promptly notify the others of any action suit or
proceeding that shall be instituted or threatened against such party to
restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Each party shall promptly
notify the other parties of any lawsuit, claim, proceedings or
investigation that may be threatened, brought, asserted or commenced
after the date hereof against Holdings, the Company or any Subsidiary
that would have been required to be disclosed under Section 4.3, 5.4 or
6 hereof, and, in the case of any of the foregoing pending on the date
hereof, of any material development in respect thereto. Each of the
parties hereto, shall give prompt notice to the other parties of (a)
any notice or other communication received by any such Person from any
Governmental Body or third Person alleging that the consent of such
Governmental Body or third Person is or may be required in connection
with the transactions contemplated by this Agreement, (b) the
occurrence of any event or circumstance which could have a Material
Adverse Effect, and of which such party has knowledge, (c) the breach
of any representation, warranty, covenant or other material agreement
of any such party contained herein or (d) any amendments or supplements
to, or waivers or consents under, the Merger Agreement; provided,
however that notice of any such amendments, supplements, waivers or
consents shall be given to the Trustee at least two business days prior
to the adoption, granting or execution thereof.
7.2. GOVERNMENTAL FILINGS. The Trustee, Holdings, the Company
and MergerCo shall cooperate with each other in filing any necessary
applications, reports or other documents with any federal or state
agencies, authorities or bodies (domestic or foreign) having
jurisdiction with respect to this Agreement and the transactions
contemplated hereby, and in seeking necessary consultation with and
prompt favorably action by, including required consents of, any such
agencies, authorities or bodies.
7.3. AGREEMENTS. The Company and the Trustee shall cooperate
to amend, effective as of the Effective Time, the ESOP, the Trust
Agreement and any other documents which MergerCo reasonably determines
are made necessary or desirable to implement the transactions
contemplated herein including, but not limited to, the following:
(a) The amendment of the Consolidated ESOP Loan
Agreement, dated March 22, 1996 (the "Loan Agreement"), and
the Consolidated Pledge Agreement dated March 22, 1996 (the
"Pledge Agreement"), to provide that $1,000,000 of the final
repayment of principal with respect to that loan made by the
Company to the
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<PAGE> 9
ESOT as described in the Loan Agreement (the "ESOP Loan") will
be extended through a date which is the earlier of:
(i) the seventh anniversary of the Closing
Date;
(ii) the sale of all or substantially all of
the assets of the Company; the merger of Holdings or
the Company with or into another person where
Holdings or the Company, as applicable, is not the
surviving entity; the sale in a single transaction or
series of related transactions, of shares of common
stock or Holdings or the Company, but not in the
aggregate, representing 90% or more of such then
outstanding common stock; or the liquidation or
dissolution of Holdings or the Company; or
(iii) a Holdings IPO (as defined in the New
Stockholders' Agreement)
(b) The amendment of the Loan Agreement to delete
Section 12 thereof.
(c) The amendment of the Loan Agreement and related
pledge agreement to provide for the release of the Unallocated
Shares if sold pursuant to Section 3 or a substitution of the
Common Stock of Holdings to be received in the Merger for the
Unallocated Shares as collateral for the Loan if the Exchange
is consummated.
(d) The amendment of the ESOP to delete the last
sentence of Section 5.04(f) thereof.
(e) With respect to shares of Common Stock
distributed to participants and "put" back to the Company or
the Trust in accordance with statutory put rights, the
addition of provisions that calculate the put price with
reference to an enterprise value basis, without the
application of any minority discounts.
(f) The amendment of the ESOP to include a provision
whereby the proceeds of the sale of the Allocated Shares by
the ESOP as contemplated herein will be allocated to the
Profit Sharing Component of Participants' Accounts (each as
defined in the ESOP) and will not be available for, or be
required to be invested in, stock of Holdings or of the
Company.
Notwithstanding the foregoing, no amendment to the ESOP, the Trust
Agreement or any other document shall be made which would limit or eliminate the
protections currently affecting the ESOT as to the circumstances under which the
ESOP Loan may be declared in default; the limitation on the ability to use
dividend payments made with respect shares of employer securities held by the
ESOT to repay the ESOP Loan; and the general prohibitions on repaying the ESOP
Loan using the
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<PAGE> 10
proceeds of a sale of the assets of the suspense account. In addition, the
suspense account shall remain in effect and amounts held therein will be
continued to be invested in stock of Holdings.
7.4. INVESTIGATION OF HOLDINGS, THE COMPANY AND MERGERCO BY
THE TRUSTEE. Holdings, the Company and MergerCo shall afford to the
officers, employees and authorized representatives of the Trustee
(including, without limitation, independent public accountants,
attorneys, environmental consultants and engineers) reasonable access
during normal business hours to the offices, properties, employees and
business and financial records (including computer files, retrieval
programs and similar documentation) of Holdings, the Company and
MergerCo to the extent the Trustee shall reasonably deem necessary or
desirable and shall furnish to the Trustee or its authorized
representatives, such additional information concerning Holdings, the
Company and MergerCo and their properties, assets, businesses and
operations as shall be reasonably requested, including all such
information as shall be necessary to enable the Trustee or its
representatives to verify the accuracy of the representations and
warranties contained in Section 6, to verify that the covenants of
Holdings, the Company and MergerCo have been complied with, and to
determine whether the conditions set forth in Section 8 have been
satisfied. The Trustee covenants that such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operations of Holdings, the Company and MergerCo. No investigation by
the Trustee or its representatives hereunder shall affect the
representations and warranties of Holdings, the Company and MergerCo.
Nothing in this section shall be interpreted so as to grant MergerCo
the right to perform invasive or subsurface investigations of the
properties.
8. CONDITIONS.
8.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF TRUSTEE. The
obligations of the Trustee to consummate the transactions contemplated
by this Agreement shall, at its option, be subject to the satisfaction
on or prior to the Closing Date, of the following conditions:
8.1.1 NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach of
covenants by MergerCo, Holdings or the Company in the
performance of any of their covenants and agreements herein;
each of the representations and warranties of MergerCo,
Holdings and the Company contained to in this Agreement and of
MergerCo contained in the Merger Agreement shall be true and
correct as of the Closing Date as though made as of the
Closing Date, except for (i) representations and warranties
that speak as of a specific date or time which need only be
true and correct as of such date or time, (ii) representations
and warranties which are not qualified by Material Adverse
Effect or otherwise by material adversity (which need be true
and correct except for such inaccuracies as in the aggregate
(together with the inaccuracies referred to in the following
clause (iii)) would not have a Material Adverse Effect), (iii)
representations and warranties which are qualified by Material
Adverse Effect or otherwise by material adversity shall also
be true and correct without regard to such qualification
except for such inaccuracies
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as in the aggregate (together with the inaccuracies referred
to in the preceding clause (ii)) would not have a Material
Adverse Effect, (iv) the representations and warranties set
forth in Section 4.2 shall be true and correct, and (v)
changes therein specifically permitted by this Agreement and
the Merger Agreement and there shall have been delivered to
the Trustee a certificate to such effect, dated the Closing
Date, and signed by the President or other senior executive
officer of Merger Co., Holdings and the Company.
8.1.2 LITIGATION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any
court or other Governmental Body of competent jurisdiction
that is in effect that restrains or prohibits the consummation
of the transactions or other material obligations of the
parties hereto as contemplated hereby, and no proceedings
seeking any such relief or seeking material damages with
respect to the transactions contemplated hereby shall be
threatened or pending by any Governmental Body of competent
jurisdiction.
8.1.3 MERGER AGREEMENT. The Merger Agreement shall not
have been terminated and shall be scheduled to be consummated
immediately after the consummation of the Sale. In the event
that following the consummation of the transactions
contemplated by this Agreement, the Merger Agreement shall be
terminated or the Merger shall not be consummated, all
obligations of the Trustee hereunder shall cease and all
actions taken by the Trustee under this Agreement (including
amendments, waivers, exchanges or sales) shall be deemed void
ab initio and the Trustee and each other party to this
Agreement shall be restored to its legal, contractual and
ownership position immediately prior to entering into this
Agreement.
8.1.4 ADDITIONAL CONDITION WITH RESPECT TO THE SALE. The
Trustee's obligations to consummate the Sale shall be subject
to the satisfaction of the additional condition that (i) the
closing under the Sale be consummated concurrently immediately
or before the closing under the Exchange (unless MergerCo
shall have exercised its right to purchase all of the ESOP
Shares as set forth under Section 1.3) and (ii) either the
Exchange must occur or MergerCo must purchase the Unallocated
Shares pursuant to, and subject to the terms and conditions
set forth or referred to in, Section 1.3. In the event that
notwithstanding the fact, that the conditions to the Sale
shall be satisfied under this Agreement, the Trustee shall
have determined that any conditions to the Exchange set forth
in Section 8.1.5 of this Agreement shall not have been
satisfied or MergerCo shall not have exercised its additional
right, if applicable, to purchase all the Unallocated Shares
as provided under Section 1.3, the Trustee's and MergerCo's
obligation to consummate the Sale shall automatically be
terminated and rescinded and the Trustee's actions with
respect thereto (including amendments, waivers, exchanges or
sales) shall be void ab initio and the Trustee and each other
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<PAGE> 12
party to this Agreement shall be restored to its legal,
contractual and ownership position immediately prior to
entering into this Agreement.
8.1.5 ADDITIONAL CONDITIONS WITH RESPECT TO THE EXCHANGE.
The Trustee's obligations to consummate the Exchange
shall be subject to the satisfaction of the following additional conditions:
(a) at the Closing Date, each of the representations
and warranties of Holdings and the Company contained in the
Merger Agreement shall be true and correct as of the Closing
Date as though made as of the Closing Date, except for (i)
representations and warranties that speak as of a specific
date or time which need only be true and correct as of such
date or time, (ii) representations and warranties which are
not qualified by Material Adverse Effect or otherwise by
material adversity (which need be true and correct except for
such inaccuracies as in the aggregate (together with the
inaccuracies referred to in the following clause (iii)) would
not have a Material Adverse Effect), (iii) representations and
warranties which are qualified by Material Adverse Effect or
otherwise by material adversity shall also be true and correct
without regard to such qualification except for such
inaccuracies as in the aggregate (together with the
inaccuracies referred to in the preceding clause (ii)) would
not have a Material Adverse Effect and (v) changes therein
specifically permitted by the Merger Agreement.
(b) the outstanding capital stock of the Surviving
Corporation following the consummation of the Merger under the
Merger Agreement and the transactions contemplated hereby
shall be as described in the Commitment Letters and the pro
forma information delivered to the Trustee on July 20, 1998 by
MergerCo and the Trustee shall have received a certificate of
the Surviving Corporation signed by the President or any other
senior executive officer of the Surviving Corporation setting
forth the capitalization of the Surviving Corporation
following the consummation of the Merger under the Merger
Agreement and confirming that the price per share of Common
Stock of MergerCo paid by the sole stockholder of MergerCo is
not less than the implied price per share being paid by the
Trustee for each share of Common Stock of Holdings in the
Exchange.
(c) no amendment shall have been made to the Merger
Agreement that adversely affects the rights of the Trustee or
the ESOT hereunder without the prior written consent of the
Trustee.
(d) the Trustee shall not have determined that, due
to facts and circumstances arising after the date hereof, the
consummation of the transactions contemplated hereby or by the
Merger Agreement would constitute a "Prohibited Transaction"
within the meaning of Section 4975 of the Code or Section 406
of
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<PAGE> 13
ERISA, such determination to be made in good faith, based upon
consultation with the Trustee's financial advisor and legal
counsel and consistent with the written opinion of the
Trustee's legal counsel;
(e) The Trustee shall have received the legal
opinions, dated as of the Closing Date, of Jones, Day, Reavis
& Pogue as counsel to the Company, and Ropes & Gray as counsel
to MergerCo and the Surviving Corporation (as defined in the
Merger Agreement), as applicable, with respect to the matters
set forth on Exhibit I hereto, such opinions to be in form and
substance reasonably satisfactory to the Trustee; and
(f) the indebtedness and other credit arrangements
incurred or made by Holdings or the Company shall be
materially in the amount and on the terms provided to the
Trustee in the Commitment Letters.
8.1.6 STOCKHOLDERS AGREEMENT. The parties thereto, other
than the Trustee on behalf of the ESOT and ESOP, shall have
executed and delivered the Stockholders Agreement.
8.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF MERGERCO. The
obligations of MergerCo to consummate the transactions contemplated by
this Agreement shall, at its option, be subject to the satisfaction on
or prior to the Closing Date, of the following conditions:
8.2.1 NO MISREPRESENTATIONS OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach of
covenants by the Trustee, Holdings or the Company in the
performance of any of their covenants and agreements herein;
each of the representations and warranties of the Trustee,
Holdings and the Company contained in this Agreement shall be
true and correct as of the Closing Date as though made as of
the Closing Date, except for (i) representations and
warranties that speak as of a specific date or time which need
only be true and correct as of such date or time, (ii)
representations and warranties which are not qualified by
materiality or Material Adverse Effect and which need be true
and correct in all material respects only, and (iii) changes
therein specifically permitted by this Agreement and the
Merger Agreement; and there shall have been delivered to
MergerCo a certificate to such effect, dated the Closing Date,
and signed by the President or other senior executive officer
of the Trustee, Holdings and the Company.
8.2.2 LITIGATION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any
court or other Governmental Body of competent jurisdiction
that is in effect that restrains or prohibits the consummation
of the transactions or other material obligations of the
parties hereto as contemplated hereby, and no proceedings
seeking any such relief or seeking material damages with
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<PAGE> 14
respect to the transactions contemplated hereby shall be
threatened or pending by any Governmental Body of competent
jurisdiction.
8.2.3 MERGER AGREEMENT. The Merger Agreement shall not
have been terminated and shall be scheduled to be consummated
immediately after the consummation of the Sales, and the
conditions precedent to MergerCo's obligations under the
Merger Agreement shall have been satisfied or waived and
MergerCo shall have received such assurances to that effect as
it may reasonably request. In the event that following the
consummation of the transactions contemplated by this
Agreement the Merger has not occurred, all obligations of
MergerCo hereunder shall cease and all actions taken by
MergerCo under this Agreement (including amendments, waivers,
exchanges or sales) shall be deemed void ab initio and
MergerCo and each other party to this Agreement shall be
restored to its legal, contractual and ownership position
immediately prior to entering into this Agreement.
8.2.4 ADDITIONAL CONDITIONS WITH RESPECT TO THE SALE.
MergerCo's obligations to consummate the Sale shall be subject
to the satisfaction of the additional condition that the
closing under the Sale be consummated concurrently with,
immediately before, or immediately after the closing under the
Exchange (unless MergerCo shall have exercised its right to
purchase all of the ESOP Shares as set forth in Section 3). In
the event that notwithstanding that fact that the conditions
to he Sale shall be satisfied under this agreement, the
Trustee shall have determined that any conditions to the
Exchange set forth in Section 8.1.5 of this Agreement shall
not have been satisfied or MergerCo shall not have exercised
its additional right, if applicable, to purchase all the
Unallocated Shares as provided under Section 3, the Trustee's
and MergerCo's obligation to consummate the Sale shall
automatically be terminated and rescinded and the Trustee's
actions with respect thereto (including amendments, waivers,
exchanges or sales) shall be void ab initio and the Trustee
and each other party to this Agreement shall be restored to
its legal, contractual and ownership position immediately
prior to entering into this Agreement.
8.2.5 STOCKHOLDERS AGREEMENT. The Trustee, on behalf
of the ESOP and ESOT, and Holdings shall have executed and
delivered the Stockholders Agreement.
8.3. CONDITIONS PRECEDENT TO OBLIGATIONS OF HOLDINGS AND THE
COMPANY. The obligations of Holdings and the Company to consummate the
transactions contemplated by this Agreement shall, at their respective
option, be subject to the satisfaction at or prior to the Closing Date,
of the following conditions:
8.3.1 NO MISREPRESENTATIONS OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach of
covenants by the Trustee and MergerCo
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<PAGE> 15
in the performance of any of their covenants and agreements
herein; each of the representations and warranties of the
Trustee and MergerCo contained in this Agreement shall be true
and correct as of the Closing Date as though made as of the
Closing Date, except for (i) representations and warranties
that speak as of a specific date or time which need only be
true and correct as of such date or time and (ii)
representations and warranties which are not qualified
Material Adverse Effect or otherwise by material adversity
(which need be true and correct except for such inaccuracies
as in the aggregate (together with the inaccuracies referred
to in the following clause (iii)) would not have a Material
Adverse Effect), (iii) representations and warranties which
are qualified by Material Adverse Effect or otherwise by
material adversity shall also be true and correct without
regard to such qualification except for such inaccuracies as
in the aggregate (together with the inaccuracies referred to
in the preceding clause (ii)) would not have a Material
Adverse Effect and (iv) changes therein specifically permitted
by this Agreement and the Merger Agreement and there shall
have been delivered to Holdings a certificate to such effect,
dated the Closing Date, and signed by the President or other
senior executive officer of the Trustee and MergerCo.
8.3.2 LITIGATION. At the Closing Date, there shall be no
injunction, restraining order or decree of any nature of any
court or other Governmental Body of competent jurisdiction
that is in effect that restrains or prohibits the consummation
of the transactions or other material obligations of the
parties hereto as contemplated hereby, and no proceedings
seeking any such relief or seeking material damages with
respect to the transactions contemplated hereby shall be
threatened or pending by any Governmental Body of competent
jurisdiction.
8.3.3 MERGER AGREEMENT. The Merger Agreement shall not
have been terminated and shall be scheduled to be consummated
immediately after the consummation of the Sale. In the event
that following the consummation of the transactions
contemplated by this Agreement, the Merger Agreement shall be
terminated or the Merger shall not be consummated, all
obligations of Holdings or the Company hereunder shall cease
and all actions taken by Holdings or the Company under this
Agreement (including amendments, waivers, exchanges, sales)
shall be deemed void ab initio and Holdings, the Company and
each other party to this Agreement shall be restored to its
legal, contractual and ownership position immediately prior to
entering into this Agreement.
9. ADDITIONAL CONSENTS.
9.1. CONSENT TO THE MERGER. The Trustee hereby consents to the
terms of the Merger as set forth in the Merger Agreement, and
acknowledges that such consent shall constitute a final and irrevocable
waiver of any further rights that the Trustee may otherwise have
pursuant to the Stockholders' Agreement as the same applies to the
Merger.
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<PAGE> 16
10. GENERAL.
10.1. NON-SURVIVAL OF REPRESENTATIONS. Warranties and
Agreements. All representations and warranties in this Agreement shall
terminate at the earlier of (i) the consummation of the transactions
contemplated hereby and (ii) the termination of this Agreement in
accordance with Section 10.2. All covenants and agreements set forth in
this Agreement shall survive in accordance with their terms.
10.2. TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement (i) may be terminated at any
time prior to the Closing Date by the mutual consent of the parties
hereto and (ii) shall terminate automatically upon the earlier
termination of the Merger Agreement in accordance with section 9.1
thereof; provided, however, that if pursuant to the terms thereof, the
Merger Agreement is amended by the parties thereof to extend its
termination date beyond September 30, 1998, this Agreement may only be
extended for the same period with the prior consent of the Trustee,
which consent shall not be unreasonably withheld. In the event that
this Agreement shall be terminated pursuant to this Section, all
obligations of the parties under this Agreement (other than under this
Section and Section 10.1) shall be terminated without liability or
penalty on the part of any party or its officers or directors to any
other party, other than may result from any willful and material breach
by a party of this Agreement.
10.3. NOTICES. All notices and other communications given or
made pursuant to this Agreement shall be in writing and shall be deemed
to have been duly given or made (a) five business days after being sent
by registered or certified mail, return receipt requested, (b) upon
delivery, if hand delivered, (c) one business day after being sent by
prepaid overnight carrier with guaranteed delivery, with a record of
receipt, or (d) upon transmission with confirmed delivery if sent by
cable, telegram, facsimile or telecopy to the parties at the following
addresses (or at such other addresses as shall be specified by the
parties by like notice):
(a) If to MergerCo:
REM Acquisition, Inc.
c/o Fenway Partners, Inc.
152 West 57th Street
New York, New York 10019
Attention: Richard C. Dresdale
Telecopy: 212-581-1205
with copies to:
Ropes & Gray
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<PAGE> 17
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Telecopy: 617-951-7050
(b) if to the Company:
One Concourse Parkway Suite 600
Atlanta, GA 30328
Attention: Zenon S. Nie
Telecopy: 770-392-2565
with copies to:
(i) Roger W. Franklin
(at the address listed above)
and
(ii) Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street NE
Atlanta, GA 30308
Attention: Lizanne Thomas, Esq.
Telecopy: 404-581-8330
(c) if to Holdings:
c/o Investcorp International, Inc.
280 Park Avenue
New York, NY 10017
Attention: Christopher I. O'Brien
Telecopy: 212-983-7073
with a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Attention: Sean P. Griffiths, Esq.
Telecopy: 212-351-4035
(d) if to the Trustee:
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<PAGE> 18
State Street Bank & Trust Company
Batterymarch Park III
Three Pine Hill Drive
Quincy, MA 02169
Attn: Kelly Q. Driscoll
Telecopy: 617-376-7313
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15272
Attention: Charles R. Smith, Esq.
Telecopy: 412-355-6501
10.4. PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid
under applicable law, but in the case that any provision contained
herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been
contained herein unless the deletion of such provision or provisions
would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.
10.5. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered
an original instrument, but all of which shall be considered one and
the same agreement, and shall become binding when one or more
counterparts have been signed by each of the parties and delivered to
each of the Trustee, Holdings and MergerCo.
10.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with ERISA and the laws of the State of
Delaware without regard to principles of conflicts of laws.
10.7. ASSIGNMENT: SUCCESSORS AND ASSIGNS. Neither this
Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior
written consent of the other parties, except that MergerCo may, without
the prior written consent of the other parties, assign its rights
hereunder (but, not its obligations) in whole or in part to one or more
other special purpose entities formed for investment by MergerCo.
Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors or assigns, heirs, legatees, distributees, executors,
administrators and guardians. Nothing in this Agreement, expressed
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<PAGE> 19
or implied, is intended or shall be construed upon any Person any
right, remedy or claim under or by reason of this Agreement.
10.8. TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of
this Agreement. All references to"Sections" in this Agreement refer to
Sections of this Agreement unless the context otherwise clearly
indicates.
10.9. KNOWLEDGE. In each provision of this Agreement in which
a representation or warranty is qualified to the "knowledge" of a
Person or to the "best of the knowledge" of a person, unless otherwise
stated in such provision, each such phrase means that the Person does
not have actual knowledge after due investigation thereof of any state
of facts which is different from the facts described in the warranty or
representation.
10.10. ENTIRE AGREEMENT: AMENDMENTS. This Agreement contains
the entire understanding of the parties hereto with regard to the
subject matter contained herein. The parties hereto, by mutual
agreement in writing, may amend, modify and supplement this Agreement.
Any such agreement shall be validly and sufficiently authorized for
purposes of this Agreement if it is signed by the Trustee, MergerCo,
Holdings and the Company.
10.11. WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party
or parties entitled to the benefit thereof. The failure of any party
hereto to enforce at any time any provision of this Agreement shall not
be construed to be a waiver of such provision, nor in any way to affect
the validity of this Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No Waiver of
any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
10.12. SPECIFIC PERFORMANCE. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of
the parties under this Agreement may be enforced by a decree of
specific performance issues by a court of competent jurisdiction. Such
a remedy shall, however, not be exclusive, and shall be in addition to
any other remedies which any party may have under this Agreement or
otherwise.
10.13. STOCKHOLDER AGREEMENT. On or prior to the closing
hereunder or under the Merger Agreement, Holdings shall not enter into
any agreement with another stockholder of Holdings (other than the
Trustee or the Principal Stockholder or a management stockholder) with
provisions relating to tag-along rights and drag-along obligations and
registration rights for resales of Common Stock of Holdings after the
Closing Date that are more favorable to such stockholder than the
rights and obligations of the Trustee under the Stockholders Agreement.
For purposes of this Section 10.13 "Principal Stockholder" shall have
the meaning set forth in the Stockholder Agreement.
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<PAGE> 20
[ESOP Stock Sale and Exchange Agreement]
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 22nd day of July, 1998.
SIMMONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Zenon S. Nie
--------------------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware corporation
By: /s/ Zenon S. Nie
--------------------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
STATE STREET BANK AND TRUST
COMPANY, AS TRUSTEE OF THE
SIMMONS COMPANY EMPLOYEE
STOCK OWNERSHIP TRUST
By: /s/ Kelly Q. Driscoll
--------------------------------------------
Name: Kelly Q. Driscoll
Title: Vice President
REM ACQUISITION, INC., a Delaware corporation
By: /s/ Gregory P. Meredith
--------------------------------------------
Name: Gregory P. Meredith
Title: Vice President
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<PAGE> 21
[ESOP Stock Sale and Exchange Agreement]
EXHIBIT I
Form of Legal Opinions
Pursuant to Section 8.1.5(e) of the Agreement, the Trustee shall receive legal
opinions, dated as of the Closing Date, from Jones, Day, Reavis & Pogue, as
counsel to the Company, __________, as counsel to Holdings and from Ropes & Gray
as counsel to MergerCo and the Surviving Corporation, as applicable, subject to
usual and customary qualifications and assumptions, with respect to the
following matters.
A. The Company:
1. Each of the Company and Holdings 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 Holdings and the Company as of the date hereof and prior to the
Closing Date are as set forth in the Agreement. To our knowledge, as of the date
hereof all of the shares of capital stock of Holdings and the Company are duly
and validly issued, fully paid and nonassessable, and free of any statutory
preemptive rights. Except for the agreements disclosed or entered into in
connection with the Agreement or referenced therein, to our knowledge neither
Holdings nor the Company is 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 or exchange of any shares of capital stock of Holdings or the
Company.
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. Each of Holdings and the Company has the corporate power and
authority to execute, deliver and perform the terms and provisions of the
Agreement, the Merger Agreement and the New Stockholders' Agreement (the
"Transaction Documents") and each of Holdings and the Company has taken or
caused to be taken all necessary corporate action to authorize the same.
4. The Transaction Documents have been duly executed and delivered
by each of Holdings and the Company.
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<PAGE> 22
[ESOP Stock Sale and Exchange Agreement]
5. Neither the execution and delivery by Holdings or the Company of
the Transaction Documents nor the performance by Holdings or the Company of
their respective obligations thereunder violates any provision of the
Certificate of Incorporation or Bylaws of Holdings or the Company, each as
amended and restated to date.
B. MergerCo
1. MergerCo has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Delaware, with corporate power
and authority to own or lease its properties and to conduct its business as
currently conducted.
2. The authorized capital stock and the number of shares of capital
stock issued and outstanding of MergerCo as of the date hereof and after giving
effect to the Merger is ________________. 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.
3. MergerCo has the corporate power and authority to execute,
deliver and perform the terms and provisions of the Agreement and the New
Stockholders' Agreement and any other agreement or document made pursuant
thereto and they have taken or caused to be taken all necessary corporate action
to authorize the same.
4. Each Transaction Document to which MergerCo is a party has been
duly executed and delivered by MergerCo.
5. Neither the execution and delivery by MergerCo of the Transaction
Documents, nor the performance by it of its obligations thereunder, violates any
provision of the Certificate of Incorporation or Bylaws of MergerCo, or, to our
knowledge, any agreement or other arrangement to which MergerCo is a party or by
which its properties is bound.
6. The Merger has been consummated and according to the records of
Holdings ____ shares of Common Stock are held by the Trustee, which shares are
duly authorized, validly issued and fully paid and non-assessable. The other
shares held of record of Holdings are, to our knowledge, as set forth in the
Agreement.
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<PAGE> 1
Exhibit 10.2
AMENDMENT NO. 1
TO
ESOP STOCK SALE AND EXCHANGE AGREEMENT
This AMENDMENT NO. 1 TO THE ESOP STOCK SALE AND EXCHANGE AGREEMENT is
dated as of September 25, 1998 by and among SIMMONS HOLDINGS, INC., a Delaware
corporation ("Holdings"), SIMMONS COMPANY, a Delaware corporation (the
"Company"), STATE STREET BANK & TRUST COMPANY, solely in its capacity as Trustee
(the "Trustee") of the Simmons Company Employee Stock Ownership Trust (the
"ESOT") and REM Acquisition, Inc., a Delaware corporation ("MergerCo").
W I T N E S S E T H:
--------------------
WHEREAS, Holdings, the Company, the Trustee and MergerCo are parties to
the ESOP Stock Sale and Exchange Agreement dated as of July 22, 1998 (the "ESOP
Agreement"); and
WHEREAS, such parties desire to amend the ESOP Agreement as set forth
herein; and
WHEREAS, terms defined in the ESOP Agreement and not otherwise defined
herein are used with the meanings so defined;
NOW THEREFORE, in consideration of the mutual agreements set forth
herein the parties hereto do hereby agree as follows:
1. All references to "Agreement" in the ESOP Agreement shall refer to
the ESOP Agreement as amended from time to time.
2. Section 1.1 of the ESOP Agreement is hereby amended such that the
phrase "for a purchase price per share in cash of $7.1463" shall instead read
"for a purchase price per share in cash of $6.8663."
3. Section 2.1 of the ESOP Agreement is hereby amended such that the
phrase "Holdings shall issue to the Trustee in exchange therefore an aggregate
of 3,484,997 shares of Class C Stock of Holdings" shall instead read "Holdings
shall issue to the Trustee in exchange therefore an aggregate of 3,482,036
shares of Class C Stock of Holdings."
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<PAGE> 2
4. Section 4.4 of the ESOP Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 4.4 FAIRNESS OPINION. On September 24, 1998, the ESOT has
received the fairness opinion (the "ESOT Fairness Opinion") of HL to the effect
that the consideration to be received by the ESOT for the ESOP Shares in
connection with the transactions contemplated by this Agreement and the Merger
is not less than fair value and that such transactions, considered as a whole,
is fair to the ESOP from a financial point of view, and such opinion has not
been withdrawn, qualified or otherwise modified."
5. Section 5.5 is hereby amended such that the phrase "commitment
letters (the"Commitment Letters") relating to the provisions of such financing"
shall instead read "the commitment letters (the "Commitment Letters") dated
September 22, 1998, true and complete copies of which were provided to the
Trustee on September 23, 1998, relating to the provisions of such financing."
6. Section 8.1.5(b) is hereby amended such that the phrase "in the
Commitment Letters and the pro forma information delivered to the Trustee on
July 20, 1998" shall instead read "in the Commitment Letters and the pro forma
information delivered to the Trustee on September 23, 1998."
7. The Trustee, by its execution hereof, hereby consents pursuant to
Section 8.1.5(c) of the ESOP Agreement to Amendment No. 1 to the Agreement and
Plan of Merger dated as of September 22, 1998 and hereby agrees pursuant to
Section 10.2 to extend the term of the ESOP Agreement to October 30, 1998.
8. This Amendment shall be effective immediately. As modified hereby,
the ESOP Agreement remains in full force and effect in all respects.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the day and year first above written.
SIMMONS HOLDINGS, INC., a Delaware corporation
By: /s/ Zenon S. Nie
---------------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware corporation
By: /s/ Zenon S. Nie
---------------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
AS TRUSTEE OF THE SIMMONS COMPANY EMPLOYEE
STOCK OWNERSHIP TRUST
By: /s/ Kelly Q. Driscoll
---------------------------------------
Name: Kelly Q. Driscoll
Title: Vice President
REM ACQUISITION, INC., a Delaware corporation
By: /s/ Gregory P. Meredith
---------------------------------------
Name: Gregory P. Meredith
Title: Vice President
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<PAGE> 1
Exhibit 10.3
1998 STOCKHOLDERS' AGREEMENT
----------------------------
AGREEMENT, dated as of October 29,1998 (this "Agreement"), by and among
Simmons Holdings, Inc., a Delaware corporation ("Holdings"), Simmons Company, a
Delaware corporation (the "Company"), Simmons Holdings, LLC, a Delaware limited
liability company, the parties listed on Exhibit A hereto (collectively, the
"Investcorp Stockholders") and State Street Bank & Trust Company, solely as
trustee of the Simmons Company Employee Stock Ownership Trust (the "Trust"),
established pursuant to the Agreement of Trust for the Simmons Company Employee
Stock Ownership Plan, dated as of January 17, 1989, as amended, adopted as part
of the Simmons Company Employee Stock Ownership Plan (the "Plan"), or any
successor trustee thereunder (the "Trustee"). This Agreement shall automatically
become effective on the date (the "Effective Date") of, and simultaneously with,
the closing of the transactions under the Merger Agreement and the Exchange
Agreement (as such terms are hereinafter defined).
WHEREAS, the Company, Holdings and REM Acquisition, Inc., a Delaware
corporation ("MergerCo") have entered into an Agreement and Plan of Merger,
dated as of July 16, 1998, as amended from time to time (the "Merger
Agreement"), pursuant to which, among other things, subject to the terms and
conditions thereof, MergerCo has agreed to merge with and into Holdings in a
transaction intended to be accounted for as a recapitalization with Holdings as
the surviving corporation (the "Merger").
WHEREAS, Holdings, the Company and the Trustee as successor in interest
to NationsBank N.A. (South), are parties to a 1996 Stockholders' Agreement,
dated as of March 22, 1996 (the "Old Stockholders' Agreement"), granting the
Trustee certain rights with respect to the shares of Series A Preferred Stock of
the Company owned by the Trust.
WHEREAS, in connection with the Merger, Holdings, the Company and the
Trustee desire to terminate the Old Stockholders' Agreement.
WHEREAS, in connection with the Merger, MergerCo, Holdings, the Company
and the Trustee have entered into an ESOP Stock Sale and Exchange Agreement,
dated as of July 22, 1998, as amended on September 25, 1998 (the "Exchange
Agreement"), pursuant to which MergerCo has agreed to purchase certain shares of
Series A Preferred Stock of the Company owned by the Trust that constitute
Allocated Shares (as defined in the Exchange Agreement) and the Trustee has
agreed to exchange certain shares of Series A Preferred Stock of the Company
owned by the Trust that constitute Unallocated Shares (as defined in the
Exchange Agreement) for shares of Class C Stock of Holdings which shall be
converted into shares of Common Stock of Holdings.
WHEREAS, the parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of certain shares of capital stock of
Holdings.
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Accordingly, in consideration of the premises and of the terms and
conditions herein contained, the parties hereto mutually agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlled by, controlling or under common control with such Person.
For the purposes of this definition, "control", when used with respect to any
Person, means the power to directly or indirectly direct the management and
policies of such person, whether through the ownership of voting securities, by
contract or otherwise; the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning ascribed thereto in the Preamble
hereof.
"Business Day" means any day other than a Saturday, Sunday, federal
holiday or other day on which commercial banks in New York City are authorized
or required to close under the laws of the State of New York.
"Certificate of Incorporation" means the Certificate of Incorporation
of Holdings.
"Common Stock" shall mean the shares of common stock, par value $.0l
per share, of Holdings and the shares of Class B common stock, par value $.01
per share, of Holdings.
"Company" shall mean Simmons Company, a Delaware corporation.
"Covered Sale" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Drag-Along Right" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Duly Endorsed" shall mean that a stock certificate is duly endorsed in
blank by the Person or Persons in whose name such certificate is registered or
that such certificate is accompanied by a duly executed stock or security
assignment, separate from the certificate itself, with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Effective Date" shall have the meaning ascribed thereto in the
Preamble hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
"Exchange Agreement" shall have the meaning ascribed thereto in the
Preamble hereof.
"Fair Value Price" shall mean, with respect to each share of Common
Stock, an amount equal to the fair market value (valued on a going concern
basis) of a share of such stock, as determined in good faith by the Board of
Directors of Holdings, without applying any discounts for minority interests,
marketability or for legal or contractual restrictions on transferability.
"Holdings" shall have the meaning ascribed thereto in the Preamble
hereof.
"Holdings IPO" shall mean the consummation of the initial underwritten
public offering of common stock of Holdings, pursuant to a registration
statement that was declared effective under the Securities Act.
"Investcorp Affiliate Transferee" shall have the meaning ascribed
thereto in Section 4.2.1.
"Investcorp Representative" shall have the meaning ascribed thereto in
Section 5.4.
"Investcorp Shares" shall mean the Registrable Securities held by the
Investcorp Stockholders.
"Investcorp Stockholders" shall have the meaning ascribed thereto in
the Preamble hereof.
"Joinder Agreement" shall have the meaning ascribed thereto in Section
4.2.1.
"Merger Agreement" shall have the meaning ascribed thereto in the
Preamble.
"Participant Transferee" shall have the meaning ascribed thereto in
Section 2.3.
"Permitted Investcorp Transferee" shall have the meaning ascribed
thereto in Section 4.2.1.
"Person" shall mean an individual, partnership, joint venture,
corporation, trust, unincorporated organization, government, or any department
or agency thereof, or any other similar entity.
"Plan" shall have the meaning ascribed thereto in the Preamble hereof.
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"Principal Stockholder" shall mean Simmons Holdings, LLC, a Delaware
limited liability company controlled by affiliates of Fenway Partners, Inc.,
which now or hereafter holds shares of Holdings.
"Principal Stockholder Consideration" shall have the meaning ascribed
thereto in Section 2.1(a) hereof.
"Principal Stockholder Shares" shall mean the shares of Common Stock
beneficially owned by the Principal Stockholder or any of its Affiliates or any
of transferees.
"Registrable Securities" shall mean shares of Common Stock that are
held by the Trustee, the Investcorp Stockholders and the Principal Stockholder
Shares, collectively. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (ii) such securities shall
have been sold in open market transactions pursuant to Rule 144 (or any
successor provision) under the Securities Act, (iii) such securities shall have
been otherwise transferred to a Third Party (except as permitted pursuant to
Article IV hereof) or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with Article III of this Agreement, including
without limitation (i) all SEC and stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees
and expenses of complying with securities or blue sky laws (including reasonable
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the Registrable Securities), (iii) all printing, messenger
and delivery expenses, (iv) the fees and disbursements of counsel for Holdings
and of Holdings' independent public accountants, including the expenses of any
special audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (v) any costs and disbursements of underwriters
customarily paid by issuers or sellers of securities and the reasonable fees and
expenses of any special experts retained by Holdings in connection with such
performance and compliance, including any fee payable to a qualified independent
underwriter within the meaning of the rules of the NASD, but excluding
underwriting discounts and commissions and transfer taxes, if any, and (vi)
internal expenses of Holdings (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
PROVIDED, HOWEVER, that each stockholder who beneficially owns (or holds, in the
case of the Trustee) any Registrable Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such stockholder's Registrable Securities pursuant to a
registration statement effected pursuant to this Agreement.
"Requisite Share Number" means at least 10% of the outstanding
Registrable Securities with an aggregate Fair Value Price of at least $15
million.
"SEC" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act or the Exchange Act.
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"Section 2.1 Event" shall have the meaning ascribed thereto by Section
2.1(a) hereof.
"Section 3.1 Maximum Number" shall have the meaning ascribed thereto in
Section 3.1(e) hereof.
"Section 3.1 Notice" shall have the meaning ascribed thereto in Section
3.1(a) hereof.
"Section 3.1 Request" shall have the meaning ascribed thereto in
Section 3.1(a) hereof.
"Section 3.2 Notice" shall have the meaning ascribed thereto in Section
3.2(a) hereof.
"Section 3.2 Sale Number" shall have the meaning ascribed thereto in
Section 3.2(c) hereof.
"Section 3.6 Notice" shall have the meaning ascribed thereto in Section
3.6(b) hereof.
"Section 3.6 Sale Number" shall have the meaning ascribed thereto in
Section 3.6(d) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.
"Subsequent Grantee" shall have the meaning ascribed thereto in Section
3.6(b) hereof.
"Subsequent Stockholders" shall have the meaning ascribed thereto in
Section 3.2(c) hereof.
"Tag-Along Right" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Third Party" shall mean a Person not Affiliated with Holdings.
"Third Party Registration Right" shall have the meaning ascribed
thereto in Section 3.6(b) hereof.
"Trust" shall have the meaning ascribed thereto in the Preamble hereof.
"Trustee" shall have the meaning ascribed thereto in the Preamble
hereof.
"Trustee Shares" shall mean the Registrable Securities held by the
Trustee in its capacity as Trustee of the Trust.
"Withdrawal Election" shall have the meaning ascribed thereto in
Section 3.1(e) hereof.
ARTICLE II
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TAG-ALONG AND DRAG-ALONG RIGHTS
Section 2.1 SALE OF COMMON STOCK TO A THIRD PARTY.
(a) If at any time, or from time to time, the Principal Stockholder
proposes to sell for its own account (other than in a sale pursuant to a
registration statement under the Securities Act) shares of Common Stock (a
"Section 2.1 Event") to a Third Party that is not an Affiliate of the Principal
Stockholder and, following such sale, the Principal Stockholder ceases to own,
in the aggregate, at least seventy-five percent (75%) of the shares of Common
Stock acquired by the Principal Stockholder on the Effective Date (each such
sale, a "Covered Sale"), each of the Trustee and the Investcorp Stockholders
shall have the right to participate with respect to the shares of Common Stock
that each holds, respectively (a "Tag-Along Right"), and the Principal
Stockholder or such Third Party shall have the right to require the Trustee and
the Investcorp Stockholders to participate with respect to such shares (a
"Drag-Along Right"), in each such sale on a pro rata basis (based on (i) the
aggregate number of shares of Common Stock to be sold by the Principal
Stockholder in such Covered Sale and any related transactions (but not in any
other sales) compared to (ii) the aggregate number of Principal Stockholder
Shares then owned by the Principal Stockholder, as appropriately adjusted for
any stock dividends, stock splits, reverse stock splits, combinations,
recapitalizations and similar events occurring after the Effective Date) for the
same consideration per share, and otherwise on the same terms (the "Principal
Stockholder Consideration"), as the Principal Stockholder sell their shares of
Common Stock; PROVIDED, HOWEVER, that the Principal Stockholder or Third Party
shall only be entitled to exercise its Drag-Along Right hereunder pursuant to a
Covered Sale by the Principal Stockholder or its Affiliates of at least 80% of
the shares of Common Stock acquired by the Principal Stockholder on the
Effective Date.
(b) Notwithstanding anything to the contrary contained in this Section
2.1, the Trustee's obligation to participate in a sale on exercise of a
Drag-Along Right shall be subject to the Trustee's determination that its
participation in such a sale is not imprudent or in violation of applicable law.
(c) Prior to or within two calendar days following the occurrence of a
Section 2.1 Event, the Principal Stockholder, in its sole discretion, may notify
the Trustee and the Investcorp Stockholders in writing of its intention to
consummate or of the occurrence of such Section 2.1 Event (which notice shall
set forth the terms upon which such Section 2.1 Event is intended to be or shall
have been consummated) in the manner and upon the terms and conditions provided
in this Section 2.1(c). If the Principal Stockholder, in its sole discretion,
shall have given prior written notice to the Trustee and the Investcorp
Stockholders of its intention to engage in a Section 2.1 Event, then each of the
Trustee and the Investcorp Stockholders shall have 15 calendar days from the
receipt of such notice within which to exercise its Tag-Along Rights pursuant to
this Section 2.1, and the failure of the Trustee or the Investcorp Stockholders
to notify the Principal Stockholder of its intention to exercise its Tag-Along
Rights within such 15 calendar days shall operate as a waiver of such Tag-Along
Rights of the Trustee or the Investcorp Stockholders, as applicable; PROVIDED,
HOWEVER, that the Principal Stockholder having delivered written notice of its
intention to engage in a Section 2.1 Event shall not be construed as providing
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any assurance that a Section 2. 1 Event shall be consummated, and the delivery
of such notice shall not give rise to any rights on the part of the Trustee or
the Investcorp Stockholders, other than those expressly set forth in this
Agreement. If the Principal Stockholder, in its sole discretion, shall not have
given prior written notice of their intention to engage in a Section 2. 1 Event,
then the Principal Stockholder shall notify the Trustee and the Investcorp
Stockholders in writing of the occurrence of a Section 2.1 Event not later than
two calendar days following the consummation of such Section 2.1 Event, and each
of the Trustee and the Investcorp Stockholders shall have 15 calendar days from
the receipt of such notice within which to exercise their Tag-Along Rights
pursuant to this Section 2.1. The failure of either of the Trustee or the
Investcorp Stockholders to notify the Principal Stockholder of its intention to
exercise its respective Tag-Along Rights within such 15 calendar days shall
operate as a waiver of such Tag-Along Rights of the Trustee or the Investcorp
Stockholders, as applicable. The delivery of any notice regarding a Section 2.1
Event pursuant to the provisions of this Section 2.1 shall not operate as a
waiver of the Principal Stockholder's or a Third Party's Drag-Along Rights in
respect of the Section 2.1 Event specified in such notice. In the case of a
Third Party's exercise of its Drag-Along Rights pursuant to the provisions of
this Section 2.1, the Third Party shall deliver written notice to each of the
Trustee and the Investcorp Stockholders, not later than two calendar days
following the occurrence of a Section 2.1 Event, with respect to which such
Drag-Along Rights have been exercised, of its intention to exercise such
Drag-Along Rights in respect of such Section 2. 1 Event. The consummation of any
transaction pursuant to the Third Party's exercise of its Drag-Along Rights
shall occur within 15 calendar days following the delivery of the notice
specified in this Section 2.1(c).
(d) The Principal Stockholder shall not enter into a transaction which
would constitute a Section 2.1 Event unless the Third Party shall have agreed in
writing, prior to the consummation of such transaction, to be bound by the
Tag-Along Rights provided in this Section 2.1 applicable to that transfer;
PROVIDED, HOWEVER, that such agreement shall not be construed as providing any
assurance that a Section 2.1 Event shall be consummated and shall not give rise
to any liability on the part of Holdings to the Trustee or the Investcorp
Stockholders. The Principal Stockholder (and any subsequent transferee bound by
the provisions of this sentence) shall not transfer any shares of Common Stock
(other than in a sale pursuant to a registration statement under the Securities
Act) in a transaction that constitutes a Covered Sale or in a transaction with
an Affiliate, unless prior to such transfer, the transferee or Affiliates, as
the case may be, agrees in writing, in form and substance satisfactory to the
Trustee, the Investcorp Stockholders and Holdings, to be bound by the provisions
of this Section 2.1 as if such transferee were a "Principal Stockholder" solely
for purposes of this Article 2 and Article III. Upon consummation of a Covered
Sale by the Principal Stockholder at which Tag-Along Rights have been exercised
or waived hereunder, the shares of Common Stock sold thereunder shall be deemed
free and clear of any further Tag-Along Rights hereunder.
Section 2.2 LEGEND ON CERTIFICATES. Each certificate representing
shares of Common Stock from time to time issued and outstanding shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE PROVISIONS OF THE 1998 STOCKHOLDERS' AGREEMENT DATED AS OF
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OCTOBER __, 1998 AMONG SIMMONS HOLDINGS, INC., THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, AS AMENDED AND IN EFFECT
FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
SIMMONS HOLDINGS, INC. AND WILL BE MAILED TO A STOCKHOLDER WITHOUT
CHARGE WITHIN FIVE DAYS AFTER RECEIPT BY SIMMONS HOLDINGS INC. OF A
WRITTEN REQUEST THEREFOR FROM SUCH STOCKHOLDER).
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE
SECURITIES AND "BLUE SKY" LAWS OR (B) IF SIMMONS HOLDINGS, INC. HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION
AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO SIMMONS HOLDINGS, INC.,
TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER
AND SUCH STATE SECURITIES AND BLUE SKY LAWS.
Section 2.3 REMOVAL OF LEGEND. Upon termination of this Agreement, a
Holdings IPO or a distribution pursuant to the Plan of any of the Trustee Shares
to a participant of the Plan (a "Participant Transferee"), Holdings shall, upon
request by the Trustee immediately prior to the above events, issue a new
certificate representing the shares of Common Stock held by the Trustee or to be
distributed to the Participant Transferee with the following legend:
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE
SECURITIES AND "BLUE SKY" LAWS OR (B) IF SIMMONS HOLDINGS, INC. HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION
AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO SIMMONS HOLDINGS, INC.,
TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER
AND SUCH STATE SECURITIES (OR BLUE SKY) LAWS.
In addition, upon any distribution pursuant to the Plan of any of the
Trustee Shares to a Participant Transferee prior to a Holdings IPO, Holdings
shall place the following legend, if applicable, upon the certificate
representing the shares of Common Stock distributed to such Participant
Transferee:
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE SUBJECT TO A RIGHT OF FIRST REFUSAL IN FAVOR OF THE
TRUSTEE OF THE SIMMONS COMPANY EMPLOYEE STOCK OWNERSHIP
TRUST AND SIMMONS HOLDINGS, INC. ON THE TERMS AND SUBJECT TO
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THE CONDITIONS DESCRIBED IN THE SIMMONS COMPANY EMPLOYEE
STOCK OWNERSHIP PLAN (A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF SIMMONS HOLDINGS, INC. AND IS AVAILABLE FOR
INSPECTION UPON REQUEST).
ARTICLE III
REGISTRATION RIGHTS
Section 3.1 REGISTRATION ON REQUEST OF THE TRUSTEE.
(a) REQUEST BY THE TRUSTEE. Once Holdings shall have completed
a Holdings IPO, and only if a Holdings IPO shall have been completed, upon the
written request (the "Section 3.1 Request") of the Trustee that Holdings effect
the registration under the Securities Act of at least the Requisite Share Number
of such Trustee's Registrable Securities, Holdings will promptly give written
notice of such requested registration (a "Section 3.1 Notice") to all other
stockholders who beneficially own (or hold, in the case of the Trustee) any
Registrable Securities, and thereupon will use its best efforts to effect, as
promptly as practicable (but in no event later than 120 calendar days after
Holdings receives the Section 3.1 Request), the registration under the
Securities Act of:
(i) the Registrable Securities that Holdings has been
requested to register by the Section 3.1 Request, and
(ii) all other Registrable Securities that Holdings has been
requested to register by any other holders of Registrable Securities by
written request given to Holdings within 15 calendar days after the
giving of the Section 3.1 Notice,
all to the extent necessary to permit the disposition of the Registrable
Securities so to be registered pursuant to an underwritten public offering;
PROVIDED, HOWEVER, that (A) Holdings shall not be obligated to file a
registration statement relating to a registration request under this Section 3.1
at a time when Holdings is then in the process of registering any other
securities or within a period of 180 calendar days after the effective date of
any other registration statement of Holdings (other than, in each case,
registration statements on Form S-4 or Form S-8, or any successor or similar
forms), (B) Holdings shall not be obligated to effect more than one registration
statement pursuant to this Section 3.1 during the term of this Agreement, and
(C) Holdings may postpone filing a registration statement relating to a
registration request under this Section 3.1 for a reasonable period (not in
excess of 90 calendar days after such filing would otherwise be required under
this Section 3.1 and provided that a new 90 day period shall be deemed to
commence upon the occurrence of any new event that would entitle Holdings to
postpone filing a registration statement pursuant to this subclause C), if in
its judgment such filing would require the disclosure of material information
that Holdings has a bona fide business purpose for preserving as confidential.
If, within 10 business days following such request, the Principal Stockholder
shall have made a request to Holdings to register any of its Registrable
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Securities, then Holdings shall include in the registration statement all
Registrable Securities requested to be registered by the Trustee and the
Principal Stockholder and all such Registrable Securities of the Principal
Stockholder shall be treated as Trustee Shares for purposes of this Section 3.1.
(b) REGISTRATION STATEMENT FORM. Registrations under this
Section 3.1 shall be on such appropriate registration form of the SEC for the
disposition of the Registrable Securities in an underwritten public offering as
shall be selected by Holdings and shall be reasonably acceptable to the Trustee.
(c) EXPENSES. Holdings shall pay all Registration Expenses in
connection with a registration requested pursuant to this Section 3.1.
(d) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 3.1 will not be deemed to have been effected unless it
has become effective; PROVIDED, HOWEVER, that if, after a registration has
become effective, the offering of Registrable Securities pursuant to such
registration is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
registration will be deemed not to have been effected.
(e) PRIORITY IN REQUESTED REGISTRATIONS. If the managing
underwriter for a requested registration pursuant to this Section 3.1 shall
advise Holdings in writing that, in its opinion, the number of Registrable
Securities requested to be included in such registration exceeds the number (the
"Section 3.1 Maximum Number") that can be sold in an orderly manner in such
offering within a price range acceptable to stockholders who beneficially own
(or holds, in the case of the Trustee) Registrable Securities representing in
the aggregate at least the Requisite Share Number, then the number of such
Registrable Securities to be included in such registration shall be allocated
first to the Trustee Shares and the Investcorp Shares pro rata based on the
total number of such shares held by each of the Trustee and the Investcorp
Stockholders, respectively, (until the Section 3.1 Maximum Number of Shares are
registered) and, then, if the number of such Trustee Shares and Investcorp
Shares to be registered is less than the Section 3.1 Maximum Number, shall be
allocated pro rata among all stockholders who beneficially own any Registrable
Securities and request that Registrable Securities be included in such
registration on the basis of the relative number of shares of such Registrable
Securities each such stockholder has requested to be included in such
registration (until the Section 3.1 Maximum Number of such shares is met). If,
as a result of the proration provisions of this subsection 3.1(e), any
stockholder who beneficially owns any Registrable Securities shall not be
entitled to include all Registrable Securities in a registration that such
stockholder has requested be included, such stockholder may elect to withdraw
his request to include Registrable Securities in such registration (a
"Withdrawal Election"); PROVIDED, HOWEVER, that a Withdrawal Election shall be
irrevocable and, after making a Withdrawal Election, a stockholder shall no
longer have any right to include Registrable Securities in the registration as
to which such Withdrawal Election was made.
(f) TERMINATION BY HOLDINGS. If as a result of Withdrawal
Elections (but after Holdings shall have included in such registration in place
of such withdrawn Registrable Securities such additional Registrable Securities
held by other stockholders whose Registrable
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Securities were excluded as a result of the proration provisions of subsection
3.1(e)), less than the Requisite Share Number of Registrable Securities are
requested to be included in a registration, Holdings may, at its election, give
written notice to all stockholders who have requested that Registrable
Securities be included in a registration and who have not made a Withdrawal
Election that Holdings has determined not to proceed with such registration and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such abandoned registration, without prejudice,
however, to the stockholders' rights to have Registrable Securities registered
pursuant to this Section 3.1 in the future.
Section 3.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If Holdings at
any time proposes to register any shares of Common Stock under the Securities
Act for sale for its own account (other than a registration on Form S-4 or Form
S-8, or any successor or similar forms) in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will promptly give written notice to all stockholders who
beneficially own, or who hold, in the case of the Trustee, any Registrable
Securities of its intention to do so, of the registration form of the SEC that
has been selected by Holdings and of such holders' rights under this Section 3.2
(the "Section 3.2 Notice"). Holdings will use its best efforts to include in the
proposed registration all Registrable Securities that Holdings is requested in
writing, within 15 calendar days after the Section 3.2 Notice is given, to
register by the stockholders thereof; PROVIDED, HOWEVER, that (i) if, at any
time after giving written notice of its intention to register shares of Common
Stock and prior to the effective date of the registration statement filed in
connection with such registration, Holdings shall determine for any reason not
to register such shares of Common Stock, Holdings may, at its election, give
written notice of such determination to all stockholders who beneficially own,
or who hold, in the case of the Trustee, any Registrable Securities and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such abandoned registration, and (ii) in case of a
determination by Holdings to delay registration of shares of Common Stock,
Holdings shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other shares of
Common Stock.
(b) EXPENSES. Holdings shall pay all Registration Expenses in
connection with a registration requested pursuant to this Section 3.2.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter for a registration pursuant to this Section 3.2 that involves an
underwritten offering shall advise Holdings in writing that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number (the "Section 3.2 Sale Number") that can be sold in an orderly manner in
such offering within a price range acceptable to Holdings, then Holdings shall
include in such offering (i) first, all the securities Holdings proposes to
register, and (ii) second, to the extent that the Registrable Securities to be
included by Holdings are less than the Section 3.2 Sale Number, all Registrable
Securities requested to be included by all stockholders who beneficially own (or
hold, in the case of the Trustee) any Registrable Securities and by any other
Persons to whom incidental registration rights may be granted on or after the
Effective Date (the "Subsequent Stockholders"); PROVIDED, HOWEVER, that if the
sum of the number of such
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Registrable Securities and the number of such securities held by such Subsequent
Stockholders exceeds the Section 3.2 Sale Number less the number of securities
included pursuant to clause (i) hereof, then the number of such Registrable
Securities included in such registration shall be allocated pro rata among all
requesting stockholders who beneficially own (or hold, in the case of the
Trustee) any Registrable Securities and among all Subsequent Stockholders, on
the basis of the relative number of shares of such Registrable Securities each
such stockholder and Subsequent Stockholder has requested to be included in such
registration (until the Section 3.2 Sale Number of such shares is registered).
If, as a result of the proration provisions of this subsection 3.2(c), any such
stockholder or Subsequent Stockholder shall not be entitled to include all
Registrable Securities in a registration pursuant to this Section 3.2 that such
stockholder or Subsequent Stockholder has requested be included, such
stockholder or Subsequent Stockholder may make a Withdrawal Election; PROVIDED,
HOWEVER, that such Withdrawal Election shall be irrevocable and, after making a
Withdrawal Election, such stockholder or Subsequent Stockholder shall no longer
have any right to include Registrable Securities in the registration as to which
such Withdrawal Election was made.
Section 3.3 Registration Procedures. If and wherever Holdings is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Article III,
Holdings will, as soon as practicable:
(a) promptly prepare and file with the SEC (in any event
within 120 calendar days after the end of the period within which requests for
registration may be given to Holdings), the requisite registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective; PROVIDED, HOWEVER,
that Holdings may discontinue any registration of its securities that is being
effected pursuant to Section 3.2 at any time prior to the effective date of the
registration statement relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period (which in no event shall exceed 120 calendar days) as any seller of
such Registrable Securities shall request and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement during such period;
(c) furnish to each seller of such Registrable Securities and
each underwriter, if any, of the securities being sold by such seller with such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller and
underwriter may reasonably request in order to facilitate the public sale of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities representing more than 15% of the total number of
securities covered by such registration statement or any managing underwriter
shall
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<PAGE> 13
reasonably request, and do any and all other acts and things that may be
necessary or advisable to enable such seller and each managing underwriter, if
any, to consummate the disposition in such jurisdictions of such Registrable
Securities owned by such seller; PROVIDED, HOWEVER, that Holdings shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the requirements of
this clause (d) be obligated to be so qualified, to subject itself to taxation
in any such jurisdiction or to consent to general service of process in any such
jurisdiction;
(e) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of Holdings'
becoming aware that the prospectus, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and at
the request of any such seller promptly prepare and furnish to such seller a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(f) comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months,
but not more than 18 months, beginning with the first day of Holdings' first
calendar quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(g) use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on the principal
securities exchange on which similar equity securities issued by Holdings are
then listed or eligible for listing, if the listing of such securities is then
permitted under the rules of such exchange;
(h) provide a transfer agent and registrar for all such
Registrable Securities covered by such registration statement not later than the
effective date of such registration statement;
(i) in connection with any underwritten offering, enter into
an underwriting agreement with the underwriter of such offering in the form
customary for such underwriter for similar offerings, including such
representations and warranties by Holdings, provisions regarding the delivery of
opinions of counsel for Holdings and accountants' letters, provisions regarding
indemnification and contribution, and such other terms and conditions as are at
the time customarily contained in such underwriter's underwriting agreements for
similar offerings. Such sellers of Registrable Securities shall be required to
make such representations and warranties to and agreements with Holdings and the
underwriters as maybe necessary, in the discretion of Holdings or the
underwriters, to effect such registration;
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<PAGE> 14
(j) upon receipt of such confidentiality agreements as
Holdings may reasonably request, make available for inspection by any seller of
such Registrable Securities covered by such registration statement and by any
attorney, accountant or other agent retained by any such seller, all pertinent
financial and other records, pertinent corporate documents and properties of
Holdings and its subsidiaries, and cause all of Holdings' and its subsidiaries'
officers, directors and employees to supply all information reasonably requested
by any such seller, attorney, accountant or agent in connection with such
registration statement; and
(k) permit any holder of Registrable Securities who, in the
sole judgment, exercised in good faith, of such holder, might be deemed to be a
controlling person of Holdings, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to Holdings in writing, that in the judgment of such holder,
as aforesaid, should be included.
Holdings may require each seller of Registrable Securities as to which
any registration is being effected to furnish Holdings such information
regarding such seller and the distribution of such securities and such other
information as may be required to be disclosed therein under the securities laws
as Holdings may from time to time reasonably request in writing.
Each holder of Registrable Securities agrees that upon receipt of any
notice from Holdings of the happening of any event of the kind described in
clause (e) of this Section 3.3 such holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause (e) of this
Section 3.3, and, if so directed by Holdings, such holder will deliver to
Holdings (at Holdings' expense) all copies, other than permanent file copies
then in such holder's possession, of the prospectus covering such Registrable
Securities that was in effect prior to such amendment or supplement. In the
event Holdings shall give any such notice, the period set forth in clause (b) of
this Section 3.3 shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to clause (e) of
this Section 3.3 to and including the date when each seller of Registrable
Securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by clause (e) of this
Section 3.3.
Section 3.4 INDEMNIFICATION. In the event of any registration of any
securities of Holdings under the Securities Act pursuant to Section 3.1 or 3.2
hereof, Holdings, each seller of any Registrable Securities covered by such
registration statement, and each other Person who participates as an
underwriter, if any, in the offering or sale of such securities and each other
Person, shall enter into mutually acceptable agreements providing customary
indemnification and contribution provisions.
Section 3.5 UNDERWRITERS. Holdings shall have the right to select any
nationally recognized investment banker to act as the underwriter in any public
offering of Registrable Securities pursuant to Sections 3.1 or 3.2 hereof to
administer the offering.
Section 3.6 ADDITIONAL REGISTRATION RIGHTS PROVISIONS.
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<PAGE> 15
(a) Nothing in this Article III shall be read to prohibit or
prevent (i) Holdings from granting additional demand or incidental registration
rights to any Person after the effective date hereof, including the incidental
registration rights set forth in Section 3.2 hereof, or (ii) the registration by
Holdings from time to time of any Principal Stockholders Shares.
(b) If at any time on or following the Effective Date,
Holdings shall grant to any holder of Common Stock (including the Principal
Stockholder which, as of the date hereof, has no such registration rights)
registration rights (a "Subsequent Grantee") in respect of shares of Common
Stock beneficially owned by such holder ("Third Party Registration Rights")
which rights shall have been exercised by such Subsequent Grantee, Holdings
shall promptly give written notice of the exercise of such Third Party
Registration Rights to the Principal Stockholder, to the Investcorp Stockholders
and to the Trustee (the "Section 3.6 Notice"), who shall have the right (subject
to the provisions of Section 3.6(d) hereof) to include in the proposed
registration all Registrable Securities beneficially owned by the Principal
Stockholder or the Investcorp Stockholders or held by the Trustee that Holdings
is requested in writing, within 15 days after the Section 3.6 Notice is given,
by the Principal Stockholder or the Investcorp Stockholders or by the Trustee to
register; PROVIDED, HOWEVER, that (i) if, at any time after the Principal
Stockholder, the Investcorp Stockholders or the Trustee shall have given written
notice of their intention to register shares of Common Stock and prior to the
effective date of the registration statement filed in connection with such
registration, Holdings shall determine for any reason not to register such
shares of Common Stock, Holdings may, at its election, give written notice of
such determination to the Principal Stockholder, the Investcorp Stockholders and
the Trustee and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such abandoned registration, and (ii)
in case of a determination by Holdings to delay registration of shares of Common
Stock, Holdings shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other shares of
Common Stock.
(c) EXPENSES. Holdings shall pay all Registration Expenses in
connection with each registration of Registrable Securities requested pursuant
to this Section 3.6.
(d) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing
underwriter for a registration pursuant to this Section 3.6 that involves an
underwritten offering shall advise Holdings in writing that, in its opinion, the
number of securities requested to be included in such registration exceeds the
number (the "Section 3.6 Sale Number") that can be sold in an orderly manner in
such offering within a price range acceptable to Holdings and Subsequent
Grantees, Holdings shall include in such offering (i) first, all the securities
proposed to be registered by the Subsequent Grantee (including the Principal
Stockholder or any of their Affiliates), (ii) second, to the extent that the
Registrable Securities to be included by the Subsequent Grantees (including the
Principal Stockholder or any of their Affiliates) are less than the Section 3.6
Sale Number, all Registrable Securities sought to be registered by Holdings, and
(iii) third, to the extent that the sum of the Registrable Securities to be
included by the Subsequent Grantees (including the Principal Stockholder or any
of their Affiliates) and by Holdings are less than the Section 3.6 Sale Number,
all Registrable Securities requested to be included by the Principal
Stockholder, the Investcorp Stockholders, the Trustee and by any other Person or
Persons upon whom registration rights have been conferred; PROVIDED, HOWEVER,
that if the sum of the number of
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<PAGE> 16
Registrable Securities to be registered pursuant to clause (iii) above after
giving effect to clauses (i) and (ii) exceeds the Section 3.6 Sale Number, then
the number of Registrable Securities requested by the Principal Stockholder, the
Investcorp Stockholders, the Trustee and by any other Person or Persons upon
whom registration rights have been conferred to be included in such registration
shall be allocated pro rata among the Principal Stockholder, the Investcorp
Stockholders, the Trustee and such other Person or Persons, on the basis of the
relative number of shares of such Registrable Securities the Principal
Stockholder, the Investcorp Stockholders, the Trustee and each such Person has
requested to be included in such registration. If, as a result of the proration
provisions of this subsection 3.6(d), the Principal Stockholder, the Investcorp
Stockholders, or the Trustee shall not be entitled to include all Registrable
Securities in a registration pursuant to this Section 3.6 that the Principal
Stockholder, the Investcorp Stockholders, or the Trustee have requested be
included, the Principal Stockholder, the Investcorp Stockholders, or the Trustee
may make a Withdrawal Election; PROVIDED, HOWEVER, that such Withdrawal Election
shall be irrevocable and, after making a Withdrawal Election, the Principal
Stockholder, the Investcorp Stockholders or the Trustee shall no longer have any
right to include Registrable Securities in the registration as to which such
Withdrawal Election was made.
(e) Except as set forth in subsection 3.6(b) hereof and
notwithstanding any other provision of this Agreement, the grant by Holdings of
any additional demand registration rights (or the registration of any Principal
Stockholder Shares) shall not give rise to any piggyback or incidental
registration rights on the part of any stockholders who beneficially own (or
hold, in the case of the Trustee) any Registrable Securities in respect of the
exercise of such additional demand registration rights by the holders thereof
(or the registration of any Principal Stockholder Shares).
(f) Notwithstanding any other provision of this Agreement, (i)
without the consent of the Principal Stockholder, Holdings shall not be required
to register any securities unless shares of Common Stock have prior thereto
been, or simultaneously therewith are being, registered on a Form other than
Form S-4 or Form S-8 (or any successor or similar form) (it being acknowledged
by the Trustee and the Investcorp Stockholders that the Principal Stockholder
shall have the exclusive right to determine when such initial registration shall
occur), and (ii) Holdings may register the Principal Stockholder Shares at any
time without the consent of the Trustee or the Investcorp Stockholders.
ARTICLE IV
PERMITTED TRANSFEREES
Section 4.1. TRANSFERS BY TRUSTEE. Nothing in this Agreement shall
limit the distribution of shares of Common Stock by the Trustee to Participant
Transferees. Once so distributed, any such shares shall no longer be subject to
any of the rights, obligations or other provisions of this Agreement. The
Trustee hereby consents to the extent its consent is required, to the imposition
by the Company of a right of first refusal on shares of Common Stock distributed
to Participant Transferees as contemplated by Section 5.04(e) of the Plan.
Nothing in this Agreement shall
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<PAGE> 17
limit the transfer of shares of Common Stock by the Trustee to persons other
than Participant Transferees, subject to Section 2.3 and the first sentence of
Section 5.2.
Section 4.2. TRANSFERS BY INVESTCORP STOCKHOLDERS. No transfer of
Common Stock held by the Investcorp Stockholders is permitted except in the
manner and on the terms set forth in this Article IV. Notwithstanding the
foregoing, any Investcorp Stockholder may transfer any or all shares of Common
Stock owned of record by such Investcorp Stockholder as set forth below:
4.2.1. PERMITTED INVESTCORP TRANSFEREES. An Investcorp
Stockholder may transfer any or all shares of Common Stock owned of record by
such Investcorp Stockholder to an Affiliate of such Investcorp Stockholder (an
"Investcorp Affiliate Transferee"). With the prior consent of Holdings, which
consent shall not be unreasonably withheld, any Investcorp Stockholder may
transfer any or all shares of Common Stock owned of record by such Investcorp
Stockholder to a Third Party (such transferees, together with the Investcorp
Affiliate Transferees, "Permitted Investcorp Transferees"); PROVIDED, HOWEVER,
that no transfer of Common Stock to any Permitted Investcorp Transferee shall be
effective unless such Permitted Investcorp Transferee has delivered to Holdings
a written acknowledgment and agreement in form and substance reasonably
satisfactory to Holdings (such agreement, a "Joinder Agreement") that such
shares of Common Stock to be received by such Permitted Investcorp Transferee
shall continue to be subject to all of the provisions of this Agreement and that
such Permitted Investcorp Transferee shall have all of the rights and be subject
to all of the obligations under this Agreement of the transferring Investcorp
Stockholder prior to the transfer, and shall be bound by and a party to this
Agreement. Holdings hereby consents to the transfer of shares of Common Stock by
the Investcorp Stockholders listed on Exhibit A hereto to SH Investment Limited
subject to the execution by SH Investment Limited of a Joinder Agreement and the
Certificate of Ownership dated as of the date hereof.
4.2.2. TAG-ALONG AND DRAG-ALONG TRANSFERS. Any holder of Common Stock
may transfer any or all of such shares of Common Stock in accordance with the
provisions, terms and conditions of Article II hereof.
4.2.3. PERIOD. The foregoing provisions of this Article IV shall
expire on the occurrence of a Holdings IPO.
ARTICLE V
MISCELLANEOUS
Section 5.1 TERMINATION OF OLD STOCKHOLDERS' AGREEMENT. Upon the
effectiveness of this Agreement, the Old Stockholders' Agreement shall
automatically be terminated and of no further force and effect and the parties
to the Old Stockholders' Agreement shall have no further rights or obligations
thereunder.
Section 5.2 BINDING EFFECT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors,
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<PAGE> 18
assigns and transferees except as set forth in Article IV and Section 2.1(d),
and except to the extent that the terms of this Agreement limit or otherwise
restrict the transferability of any rights or obligations hereunder. The
provisions of this Agreement shall be binding upon the parties hereto and their
respective heirs, legal representatives, successors and assigns, except as set
forth in Article IV, and shall not be for the benefit of any other Person.
Section 5.3 WAIVER AND AMENDMENT. Any party hereto may waive its rights
under this Agreement at any time, and Holdings may waive its rights under this
Agreement with respect to any party hereto at any time; provided that no waiver
by Holdings shall operate to waive Holdings' rights under this Agreement with
respect to any party hereto not named in such waiver. Any agreement on the part
of any such party to any such waiver by Holdings shall be valid only if set
forth in an instrument in writing signed by such party. This Agreement may be
amended or waived only by a written instrument signed by (a) Holdings, (b)
stockholders owning of record a majority of the then outstanding Principal
Stockholder Shares, (c) the Investcorp Stockholders and (d) so long as it owns
shares of Common Stock, the trustee under the Plan which trustee shall be an
independent corporate trustee. All parties hereto shall be bound by any
amendment or waiver approved as prescribed in the foregoing sentence from and
after the date of the receipt of a written notice from Holdings setting forth
such amendment or waiver and reciting its approval or waiver, as the case may
be, whether or not shares of Common Stock held by any stockholder shall have
been marked to indicate such consent.
Section 5.4 INVESTCORP STOCKHOLDER REPRESENTATIVE. Each of the
Investcorp Stockholders hereby appoints Investcorp Management Services Limited
(the "Investcorp Representative") or its designee (as appointed in writing), as
the agent, proxy and attorney in fact for the Investcorp Stockholders for all
purposes under this Agreement (including, without limitation, full power and
authority to act on the Investcorp Stockholders' behalf) (i) to give or receive
any notices or other communications required or permitted under the terms and
conditions of this Agreement (and such notice shall be deemed to have been duly
given when delivered or received, as applicable, by the Investcorp
Representative pursuant to the terms of this Agreement) and (ii) to execute and
deliver, should it elect to do so in its sole discretion, on behalf of the
Investcorp Stockholders, any amendment to this Agreement so long as such
amendments shall apply to all Investcorp Stockholders, and (iii) to take all
other actions to be taken by or on behalf of the Investcorp Stockholders and
exercise any and all rights which the Investcorp Stockholders are permitted or
required to do or exercise under this Agreement.
Section 5.5 NOTICES. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
when delivered, if delivered personally, or when deposited in the mail, if sent
by registered or certified mail, return receipt requested, postage prepaid, and
when received, if delivered otherwise, to the party to whom it is directed at
the following addresses:
(a) If to Holdings, to:
Simmons Holdings, Inc.
c/o Fenway Partners, Inc.
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<PAGE> 19
152 West 57th Street
New York, New York 10019
Attn: Richard C. Dresdale
Telecopy: 212-757-0609
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Lauren I. Norton, Esq.
Telecopy: 617-951-7050
(b) If to the Trustee, to:
State Street Bank & Trust Company
Batterymarch Park III
Three Pine Hill Drive
Quincy, MA 02169
Attn: Kelly Q. Driscoll
Telecopy: 617-376-7313
with a copy to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15272
Attn: Charles R. Smith, Esq.
Telecopy: 412-355-6501
(c) If to the Principal Stockholder, to:
Simmons Holdings LLC
c/o Fenway Partners, Inc.
152 West 57th Street
New York, New York 10019
Attn: Richard C. Dresdale
Telecopy: 212-757-0609
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<PAGE> 20
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn.: Lauren I. Norton, Esq.
Telecopy: 617-951-7050
(d) If to the Company, to:
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
Attn: Zenon S. Nie
Telecopy: 770-392-2565
with copies to:
Jones Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street NE
Atlanta, GA 30308
Attn: Lizanne Thomas, Esq.
Telecopy: 404-581-8330
(e) If to the Investcorp Stockholders:
c/o Investcorp Management Services Limited
P.O. Box 5430
Investcorp House
Manama, Bahrain
Telephone: 011-973-532-000
Telecopy: 011-973-530-816
Attention: Rick Lukens
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Telephone: (212) 351-4000
Telecopy: (212) 351-4035
Attention: David B. Rosenauer, Esq.
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<PAGE> 21
and
Investcorp International, Inc.
280 Park Avenue
New York, NY 10017
Telephone: (212) 599-4700
Telecopy: (212) 983-7073
Attention: John M. Kenney
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 5.6 APPLICABLE LAW. The laws of the State of Delaware shall
govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under principles of
conflicts of law.
Section 5.7 INTEGRATION. This Agreement and the documents referred to
herein or delivered pursuant hereto, which form a part hereof, contain the
entire understanding of the parties with respect to its subject matter. There
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof other than
those expressly set forth herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to its subject matter.
Section 5.8 DESCRIPTIVE HEADINGS. Etc. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, (a) words of any gender shall be deemed to include each
other gender; (b) words using the singular or plural number shall also include
the plural or singular number, respectively; and (c) references to "hereof,"
"herein," "hereby" and similar terms shall refer to this entire Agreement.
Section 5.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 5.10 SEVERABILITY. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect and for any reason, the validity, legality and
enforceability of such provision, paragraph, word, clause, phrase or sentence in
every other respect, and of the other remaining provisions, paragraphs, words,
clauses, phrases or sentences hereof, shall not be in any way impaired, it being
intended that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
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<PAGE> 22
Section 5.11 TERM. This Agreement (other than the provisions of Article
III hereof which shall terminate on the fifth anniversary date of the
consummation a Holdings IPO) shall terminate (i) with respect to the Trustee, on
the date the Trustee no longer holds shares of Common Stock and (ii) with
respect to each Investcorp Stockholder, on the date such Investcorp Stockholder
no longer holds shares of Common Stock.
Section 5.12 INJUNCTIVE RELIEF. It is hereby agreed and acknowledged
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that, in the event of any such failure, an aggrieved person
will be irreparably damaged and will not have an adequate remedy at law. Any
such person shall therefore be entitled to injunctive relief, including specific
performance, to enforce such obligations, without the posting of any bond, and,
if any action should be brought in equity to enforce any of the provisions of
this Agreement, none of the parties hereto shall raise the defense that there is
an adequate remedy at law.
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<PAGE> 23
[1998 Stockholders' Agreement/ESOT]
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date first above
written.
SIMMONS HOLDINGS, INC., a
Delaware corporation
By: /s/ Zenon S. Nie
----------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY, a Delaware corporation
By: /s/ Zenon S. Nie
----------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS COMPANY EMPLOYEE STOCK
OWNERSHIP TRUST
By: State Street Bank and Trust Company
solely in its capacity as Trustee
By: /s/ Kelly Q. Driscoll
------------------------
Name: Kelly Q. Driscoll
Title: Vice President
SIMMONS HOLDINGS, LLC
By: /s/ Richard C. Dresdale
----------------------------
Name: Richard C. Dresdale
Title: An Authorized Person
BALLET LIMITED, a Cayman Islands DENARY LIMITED, a Cayman Islands
corporation corporation
By:............................. By:....................................
Name: Name:
Title: Title:
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<PAGE> 24
[1998 Stockholders' Agreement/ESOT]
GLEAM LIMITED, a Cayman Islands HIGHLANDS LIMITED, a Cayman Islands
corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
NOBLE LIMITED, a Cayman Islands OUTRIGGER LIMITED, a Cayman Islands
corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
QUILL LIMITED, a Cayman Islands RADIAL LIMITED, a Cayman Islands
corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
SHORELINE LIMITED, a Cayman Islands ZINNIA LIMITED, a Cayman Islands
corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
INVESTCORP INVESTMENT EQUITY ASHFORD LIMITED, a Cayman Islands
LIMITED, a Cayman Islands corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
CHAMBLEE LIMITED, a Cayman Islands FAIRBURN LIMITED, a Cayman Islands
corporation corporation
By:............................ By:....................................
Name: Name:
Title: Title:
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<PAGE> 25
[1998 Stockholders' Agreement/ESOT]
PEACH LIMITED, a Cayman Islands INVESTCORP SIMMONS HOLDINGS L.P.,
corporation a Cayman Islands Limited Partnership
By:............................ By:....................................
Name: Name:
Title: Title:
CONNOISSEUR HOLDINGS LIMITED, CONNOISSEUR EQUITY LIMITED, a
a Cayman Islands corporation Cayman Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
EQUITY SIMA LIMITED, a Cayman EQUITY SIMB LIMITED, a Cayman
Islands corporation Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
FOUNDATION EQUITY LIMITED, FOUNDATION HOLDINGS LIMITED, a
a Cayman Islands corporation Cayman Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
SIMMONS EQUITY LIMITED, a SIMMONS HOLDINGS LIMITED, a Cayman
Cayman Islands corporation Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
SIMMONS INVESTMENTS LIMITED, SPRING EQUITY LIMITED, a Cayman
a Cayman Islands corporation Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
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<PAGE> 26
[1998 Stockholders' Agreement/ESOT]
SPRING INVESTMENTS LIMITED, a SPRING INTERNATIONAL LIMITED,
Cayman Islands corporation a Cayman Islands corporation
By:............................ By:....................................
Name: Name:
Title: Title:
CHEMICAL NOMINEES (GUERNSEY)
LIMITED
By:............................
Name:
Title:
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EXHIBIT A
STOCKHOLDER AGREEMENT
NAME AND ADDRESS OF
STOCKHOLDER
Ashford Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Chamblee Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Fairburn Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Peach Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Investcorp Simmons Holdings Limited L.P.
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Connoisseur Holdings Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
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Connoisseur Equity Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Equity SIMA Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Equity SIMB Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Foundation Equity Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Foundation Holdings Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Simmons Equity Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Simmons Holdings Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
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<PAGE> 29
Simmons Investments Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Spring Equity Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Spring Investments Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Spring International Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Chemical Nominees (Guernsey) Limited
P.O. Box 127
Chase House, Grenville Street
St. Helier, Jersey JE4-8QH
Channel Islands
Investcorp Investment Equity Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Ballet Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
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Denary Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Gleam Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Highlands Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Noble Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Outrigger Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Quill Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Radial Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
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Shoreline Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
Zinnia Limited
West Wind Building
P.O. Box 1111
Harbour Drive
Grand Cayman, Cayman Islands B.W.I.
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<PAGE> 1
Exhibit 10.4
1998 STOCKHOLDERS' AGREEMENT
----------------------------
The undersigned, SH Investment Limited, a Cayman Islands corporation
("Transferee"), does hereby enter into that certain 1998 Stockholders' Agreement
dated as of October 29, 1998 (the "Stockholders' Agreement", a copy of which is
attached hereto as Exhibit "A"; capitalized terms used and not defined herein
shall have the meanings ascribed to such terms in the Stockholders' Agreement),
by and among Simmons Holdings, Inc., a Delaware corporation ("Holdings"),
Simmons Company, a Delaware corporation (the "Company"), State Street Bank and
Trust Company, solely as trustee of the Simmons Company Employee Stock Ownership
Trust (the "Trust") and the certain additional investors listed on Exhibit A to
the Stockholders' Agreement (such additional investors, collectively, the
"Investcorp Stockholders"), as of this 29th day of October, 1998.
WHEREAS, Holdings, the Company, MergerCo, the Trust and the Investcorp
Stockholders did enter into the Stockholders' Agreement, pursuant to which those
stockholders party to the Stockholders' Agreement were granted certain rights
pertaining to their holdings of Holdings capital stock (the "Holdings Stock");
WHEREAS, each of the holders of Holdings Stock listed on Exhibit "B" hereto
(collectively, the "Transferors") desires to transfer all of its shares of
Holdings Stock (the "Transfer Shares") to the Transferee pursuant to transfer
agreements of even date herewith; and
WHEREAS, the Stockholders' Agreement provides that the transfers by the
Transferors contemplated hereby are permitted pursuant to the terms thereof,
subject to Transferee's executing this Agreement and subjecting itself and the
Transfer Shares to the terms and conditions of the Stockholders' Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein, and the
mutual premises, representations, warranties, agreements and covenants set forth
in the Stockholders' Agreement, Transferee does hereby enter into the
Stockholders' Agreement as an "Investcorp Stockholder" as defined therein, and
does subject itself to all of the rights and obligations provided as to
Investcorp Stockholders in the Stockholders' Agreement, all as of this 29th day
of October, 1998.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned has hereunto set its hand on behalf of
Transferee as of this 29th day of October, 1998.
SH INVESTMENT LIMITED, a
Cayman Island corporation
By: /s/ Sydney J. Coleman
----------------------
The Director Limited
Director
<PAGE> 1
Exhibit 10.5
1998 STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of October 29, 1998 (this "Agreement"), by and
among Simmons Holdings, Inc., a Delaware corporation ("Holdings"), Simmons
Holdings, LLC, a Delaware limited liability company ("Simmons LLC") and the
parties listed on Exhibit A hereto (each, a "Management Stockholder," and
collectively, the "Management Stockholders"). This Agreement shall automatically
become effective on the date (the "Effective Date") of, and simultaneously with,
the closing of the transactions under the Merger Agreement and the Exchange
Agreement (as such terms are hereinafter defined).
WHEREAS, the Company, Holdings and REM Acquisition, Inc., a Delaware
corporation ("MergerCo") have entered into an Agreement and Plan of Merger,
dated as of July 16, 1998, as amended from time to time (the "Merger
Agreement"), pursuant to which, among other things, subject to the terms and
conditions thereof, MergerCo has agreed to merge with and into Holdings in a
transaction intended to be accounted for as a recapitalization with Holdings as
the surviving corporation (the "Merger").
WHEREAS, in connection with the Merger, MergerCo, Holdings, Simmons
Company, a Delaware corporation (the "Company") and the State Street Bank &
Trust Company, solely as trustee of the Simmons Company Employee Stock Ownership
Trust (the "Trust"), established pursuant to the Agreement of Trust for the
Simmons Company Employee Stock Ownership Plan, dated as of January 17, 1989, as
amended, adopted as part of the Simmons Company Employee Stock Ownership Plan
(the "Plan"), or any successor trustee thereunder (the "Trustee") have entered
into an ESOP Stock Sale and Exchange Agreement, dated as of July 22, 1998, as
amended on September 25, 1998 (the "Exchange Agreement"), pursuant to which
MergerCo has agreed to purchase certain shares of Series A Preferred Stock of
the Company owned by the Trust that constitute Allocated Shares (as defined in
the Exchange Agreement) and the Trustee has agreed to exchange certain shares of
Series A Preferred Stock of the Company owned by the Trust that constitute
Unallocated Shares (as defined in the Exchange Agreement) for shares of Class C
Stock of Holdings which shall be converted into shares of Common Stock of
Holdings.
WHEREAS, Holdings, the Company, Simmons LLC, the Trustee and the
parties listed on Schedule A thereto have entered into that certain Stockholders
Agreement of even date herewith (the "ESOP/Investcorp Stockholders' Agreement").
WHEREAS, the parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of certain shares of capital stock of
Holdings.
Accordingly, in consideration of the premises and of the terms and
conditions herein contained, the parties hereto mutually agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlled by, controlling or under common control with such Person.
For the purposes of this definition, "control", when used with respect to any
Person, means the power to directly or indirectly direct the management and
policies of such person, whether through the ownership of voting securities, by
contract or otherwise; the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning ascribed thereto in the Preamble
hereof.
"Approved Retirement" shall mean the retirement of a Management
Stockholder on or after his or her sixty-fifth (65th) birthday or, if earlier,
either for Good Reason or if approved by the Board of Directors of Holdings.
"Approved Sale" shall mean a transaction or a series of related
transactions which results in a bona fide, unaffiliated change of beneficial
ownership of the Company or its business of greater than 50% (disregarding for
this purpose any disparate voting rights attributable to the outstanding stock
of Holdings), whether pursuant to the sale of the stock of Holdings or the
Company, the sale of the assets of the Company, or a merger or consolidation
involving Holdings or the Company; PROVIDED, HOWEVER, that for purposes of this
Agreement, an Approved Sale shall not mean the Merger.
"Business Day" means any day other than a Saturday, Sunday, federal
holiday or other day on which commercial banks in New York City are authorized
or required to close under the laws of the State of New York.
"Certificate of Incorporation" means the Certificate of Incorporation
of Holdings.
"Common Stock" shall mean the shares of common stock, par value $.0l
per share, of Holdings and the shares of Class B common stock, par value $.01
per share, of Holdings, owned by Persons as a result of the Merger or
hereinafter acquired.
"Company" shall mean Simmons Company, a Delaware corporation.
"Covered Sale" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Disability" shall mean a Management Stockholder becomes physically or
mentally incapacitated or disabled so that he or she is unable to perform for
the Company or a Subsidiary substantially the same services as he or she
performed prior to incurring such
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incapacity or disability or to devote his or her full working time or use his or
her best efforts to advance the business and welfare of the Company or a
Subsidiary for an aggregate period of six months during any 12-month period.
"Drag-Along Right" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Duly Endorsed" shall mean that a stock certificate is duly endorsed in
blank by the Person or Persons in whose name such certificate is registered or
that such certificate is accompanied by a duly executed stock or security
assignment, separate from the certificate itself, with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Effective Date" shall have the meaning ascribed thereto in the
Preamble hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ESOP/Investcorp Stockholders' Agreement" shall have the meaning
ascribed thereto in the Preamble hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
"Exchange Agreement" shall have the meaning ascribed thereto in the
Preamble hereof.
"Fair Market Value" shall mean the value determined in good faith by
Holdings' Board of Directors. If the Board determination is challenged by a
Management Stockholder, a mutually acceptable investment banker or appraiser
shall establish the Fair Market Value. If the Management Stockholder and
Holdings cannot agree upon an investment banker or appraiser each shall choose
an investment banker or appraiser and the two investment bankers or appraisers
shall choose a third investment banker or appraiser who alone shall establish
the Fair Market Value. The Fair Market Value shall be based on an assumed sale
of 100% of the outstanding capital stock of Holdings (without reduction for
minority discount or lack of liquidity of the Common Stock) and shall be
determined using customary criteria generally employed within the investment
banking community at the time such determination is made for valuing an entity
similar to Holdings. The investment banker's or appraiser's determination shall
be conclusive and binding on the Principal Stockholder, Holdings and the
Management Stockholder. Holdings shall bear all costs incurred in connection
with the services of such investment banker or appraiser unless the Fair Market
Value established by the investment banker or appraiser is (i) less than or
equal to 110% of the Board of Directors' determination, in which case the
Management Stockholder shall promptly pay or reimburse Holdings for such costs
or (ii) greater than 110% but less than 125% of the Board of Directors'
determination, in
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which case the Management Stockholder shall promptly pay or reimburse Holdings
for 50% of such costs.
"Fair Value Price" shall mean, with respect to each share of Common
Stock, an amount equal to the fair market value (valued on a going concern
basis) of a share of such stock, as determined in good faith by the Board of
Directors of Holdings, without applying any discounts for minority interests,
marketability or for legal or contractual restrictions on transferability.
"Good Reason" shall mean (i) the assignment to a Management Stockholder
of any duties inconsistent with such Management Stockholder's position
(including status, offices, titles and reporting requirements), (ii) a demotion
in the job title of a Management Stockholder, (iii) a reduction in the
compensation paid to a Management Stockholder, unless such reduction is
comparable to an across-the-board reduction applicable to all senior management
employees of the Company due to adverse business circumstances, (iv) a request
of a Management Stockholder to relocate his office to a distance of greater than
seventy-five (75) miles from the present site of his office, or (v) any other
action by the Company which results in a material diminution in the position,
authority, duties or responsibilities of a Management Stockholder.
"Holdings" shall have the meaning ascribed thereto in the Preamble
hereof.
"Holdings Note" shall have the meaning ascribed thereto in Section
4.2(a).
"Initial Public Offering" shall mean the effectiveness of a
registration statement under the Securities Act covering any of the capital
stock of Holdings or the Company (other than preferred stock that is not
convertible into common stock) and the completion of a sale of such stock
thereunder, if as a result of such sale (i) Holdings or the Company becomes a
reporting company under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended, and (ii) such stock is traded on the New York Stock Exchange
or the American Stock Exchange, or is quoted on the Nasdaq Stock Market or is
traded or quoted on any other national stock exchange or securities system.
"Lock-Up Period" shall mean in the case of an Initial Public Offering,
the 180-day period commencing on the effective date of the registration
statement covering capital stock of Holdings or the Company sold in such Initial
Public Offering, and, in the case of any subsequent registered offering, the
90-day period commencing on the effective date of the registration statement
relating to such offering, or, in either case, such lesser period as may be
agreed upon with the underwriters of such offering.
"Management Representative" shall have the meaning ascribed thereto in
Section 5.4.
"Management Stockholder" or "Management Stockholders" shall have the
meanings ascribed thereto in the Preamble.
"Merger Agreement" shall have the meaning ascribed thereto in the
Preamble.
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"Permitted Transferee" shall have the meaning ascribed thereto in
Section 3.1.
"Person" shall mean an individual, partnership, joint venture,
corporation, trust, unincorporated organization, government, or any department
or agency thereof, or any other similar entity.
"Plan" shall have the meaning ascribed thereto in the Preamble hereof.
"Principal Stockholder" shall mean Simmons Holdings, LLC, a Delaware
limited liability company controlled by affiliates of Fenway Partners, Inc.,
which now or hereafter holds shares of Holdings.
"Principal Stockholder Consideration" shall have the meaning ascribed
thereto in Section 2.1(a) hereof.
"Principal Stockholder Shares" shall mean the shares of Common Stock
beneficially owned by the Principal Stockholder or any of its Affiliates or any
of its transferees.
"Prior Stockholder Agreements" shall have the meaning ascribed thereto
in Section 5.1.
"Put Date" shall have the meaning ascribed thereto in Section 4.2(a).
"Repurchase Disability" shall have the meaning ascribed thereto in
Section 4.2(a).
"Repurchase Period"shall have the meaning ascribed thereto in Section
4.1(a).
"Repurchase Price" shall have the meaning ascribed thereto in Section
4.1(a).
"Second Repurchase Period" shall have the meaning ascribed thereto in
Section 4.1(a).
"SEC" shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act or the Securities
and Exchange Act of 1934, as amended.
"Section 2.1 Event" shall have the meaning ascribed thereto by Section
2.1(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.
"Simmons LLC" shall have the meaning ascribed thereto in the Preamble
hereof.
"Stock Option Agreement" shall have the meaning ascribed thereto in
Section 4.1(a).
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"Subsidiary" shall mean any joint venture, corporation, partnership or
other entity as to which Holdings or the Company, whether directly or
indirectly, has more than 50% of the (i) voting rights or (ii) rights to capital
or profits.
"Tag-Along Right" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Termination Date" shall mean the date on which a Management
Stockholder ceases to be employed by the Company or any Affiliate of the Company
for any reason; PROVIDED, HOWEVER, that the Management Stockholder shall not be
considered to have ceased to be employed by the Company or any Affiliate of the
Company if he or she continues to be employed by the Company or any Subsidiary.
"Third Party" shall mean a Person not Affiliated with Holdings.
"Trust" shall have the meaning ascribed thereto in the Preamble hereof.
"Trustee" shall have the meaning ascribed thereto in the Preamble
hereof.
ARTICLE II
TAG-ALONG AND DRAG-ALONG RIGHTS
Section 2.1 SALE OF COMMON STOCK TO A THIRD PARTY.
(a) If at any time, or from time to time, the Principal Stockholder
proposes to sell for its own account (other than in a sale pursuant to a
registration statement under the Securities Act) shares of Common Stock (a
"Section 2.1 Event") to a Third Party that is not an Affiliate of the Principal
Stockholder and, following such sale, the Principal Stockholder ceases to own,
in the aggregate, at least seventy-five percent (75%) of the shares of Common
Stock acquired by the Principal Stockholder on the Effective Date (each such
sale, a "Covered Sale"), each of the Management Stockholders shall have the
right to participate with respect to the shares of Common Stock that each holds,
respectively (a "Tag-Along Right"), and the Principal Stockholder or such Third
Party shall have the right to require the Management Stockholders to participate
with respect to such shares (a "Drag-Along Right"), in each such sale on a pro
rata basis (based on (i) the aggregate number of shares of Common Stock to be
sold by the Principal Stockholder in such Covered Sale and any related
transactions (but not in any other sales) compared to (ii) the aggregate number
of Principal Stockholder Shares then owned by the Principal Stockholder, as
appropriately adjusted for any stock dividends, stock splits, reverse stock
splits, combinations, recapitalizations and similar events occurring after the
Effective Date) for the same consideration per share, and otherwise on the same
terms (the "Principal Stockholder Consideration"), as the Principal Stockholder
sells its shares of Common Stock; PROVIDED, HOWEVER, that the Principal
Stockholder or Third Party shall only be entitled to exercise its Drag-Along
Right hereunder pursuant to a Covered Sale by the Principal Stockholder or its
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Affiliates of at least 80% of the shares of Common Stock acquired by the
Principal Stockholder on the Effective Date.
(b) Prior to or within two calendar days following the occurrence of a
Section 2.1 Event, the Principal Stockholder, in its sole discretion, may notify
the Management Stockholders in writing of its intention to consummate or of the
occurrence of such Section 2.1 Event (which notice shall set forth the terms
upon which such Section 2.1 Event is intended to be or shall have been
consummated) in the manner and upon the terms and conditions provided in this
Section 2.1(b). If the Principal Stockholder, in its sole discretion, shall have
given prior written notice to the Management Stockholders of its intention to
engage in a Section 2.1 Event, then the Management Stockholders shall have 15
calendar days from the receipt of such notice within which to exercise their
Tag-Along Rights pursuant to this Section 2.1, and the failure of each of the
Management Stockholders to notify the Principal Stockholder of its intention to
exercise its Tag-Along Right within such 15 calendar days shall operate as a
waiver of such Tag-Along Right; PROVIDED, HOWEVER, that the Principal
Stockholder having delivered written notice of its intention to engage in a
Section 2.1 Event shall not be construed as providing any assurance that a
Section 2. 1 Event shall be consummated, and the delivery of such notice shall
not give rise to any rights on the part of the Management Stockholders, other
than those expressly set forth in this Agreement. If the Principal Stockholder,
in its sole discretion, shall not have given prior written notice of its
intention to engage in a Section 2. 1 Event, then the Principal Stockholder
shall notify the Management Stockholders in writing of the occurrence of a
Section 2.1 Event not later than two calendar days following the consummation of
such Section 2.1 Event, and the Management Stockholders shall have 15 calendar
days from the receipt of such notice within which to exercise their Tag-Along
Rights pursuant to this Section 2.1. The failure of each of the Management
Stockholders to notify the Principal Stockholder of its intention to exercise
its Tag-Along Right within such 15 calendar days shall operate as a waiver of
such Tag-Along Right. The delivery of any notice regarding a Section 2.1 Event
pursuant to the provisions of this Section 2.1 shall not operate as a waiver of
the Principal Stockholder's or a Third Party's Drag-Along Rights in respect of
the Section 2.1 Event specified in such notice. In the case of a Third Party's
exercise of its Drag-Along Rights pursuant to the provisions of this Section
2.1, the Third Party shall deliver written notice to the Management
Stockholders, not later than two calendar days following the occurrence of a
Section 2.1 Event, with respect to which such Drag-Along Rights have been
exercised, of its intention to exercise such Drag-Along Rights in respect of
such Section 2. 1 Event. The consummation of any transaction pursuant to the
Third Party's exercise of its Drag-Along Rights shall occur within 15 calendar
days following the delivery of the notice specified in this Section 2.1(c).
(c) The Principal Stockholder shall not enter into a transaction which
would constitute a Section 2.1 Event unless the Third Party shall have agreed in
writing, prior to the consummation of such transaction, to be bound by the
Tag-Along Right provided in this Section 2.1 applicable to that transfer;
PROVIDED, HOWEVER, that such agreement shall not be construed as providing any
assurance that a Section 2.1 Event shall be consummated and shall not give rise
to any liability on the part of Holdings to the Management Stockholders. The
Principal Stockholder (and any subsequent transferee bound by the provisions of
this sentence) shall not transfer any shares of Common Stock (other than in a
sale pursuant to a registration statement under the
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Securities Act) in a transaction that constitutes a Covered Sale or in a
transaction with an Affiliate, unless prior to such transfer, the transferee or
Affiliates, as the case may be, agrees in writing, in form and substance
satisfactory to the Management Stockholders and Holdings, to be bound by the
provisions of this Section 2.1 as if such transferee were a "Principal
Stockholder" solely for purposes of this Article II. Upon consummation of a
Covered Sale by the Principal Stockholder at which Tag-Along Rights have been
exercised or waived hereunder, the shares of Common Stock sold thereunder shall
be deemed free and clear of any further Tag-Along Rights hereunder.
Section 2.2 LEGEND ON CERTIFICATES. Each certificate representing
shares of Common Stock from time to time issued and outstanding shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF THE 1998 STOCKHOLDERS' AGREEMENT DATED AS OF OCTOBER 29,
1998 AMONG SIMMONS HOLDINGS, INC., THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, AS AMENDED AND IN EFFECT FROM TIME TO TIME
(A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF SIMMONS HOLDINGS,
INC. AND WILL BE MAILED TO A STOCKHOLDER WITHOUT CHARGE WITHIN FIVE
DAYS AFTER RECEIPT BY SIMMONS HOLDINGS INC. OF A WRITTEN REQUEST
THEREFOR FROM SUCH STOCKHOLDER).
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE
SECURITIES AND "BLUE SKY" LAWS OR (B) IF SIMMONS HOLDINGS, INC. HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION
AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO SIMMONS HOLDINGS, INC.,
TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER
AND SUCH STATE SECURITIES AND BLUE SKY LAWS.
Section 2.3 REMOVAL OF LEGEND. Upon termination of this Agreement or an
Initial Public Offering, Holdings shall, upon request by the Management
Stockholders immediately prior to the above events, issue a new certificate
representing the shares of Common Stock held by the Management Stockholders with
the following legend:
NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE
SECURITIES AND "BLUE SKY" LAWS OR (B) IF SIMMONS HOLDINGS, INC. HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION
AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO SIMMONS HOLDINGS, INC.,
TO THE
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EFFECT THAT SUCH TRANSFER IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND SUCH
STATE SECURITIES AND BLUE SKY LAWS.
ARTICLE III
TRANSFER RIGHTS
Section 3.1. RESTRICTIONS ON TRANSFERS OF SHARES. Subject to Article IV
hereof, prior to the earlier of (i) the termination of the Lock-Up Period
following an Initial Public Offering or (ii) an Approved Sale, the shares of
Common Stock shall not be transferable or transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) except that
each of the Management Stockholders may transfer his or her shares of Common
Stock to his or her spouse, child, estate, personal representative, heir or
successor or to a trust for the benefit of such Management Stockholder or his or
her spouse, child or heir (a "Permitted Transferee"). This Agreement shall be
binding on and enforceable against any person who is a Permitted Transferee of
the shares of Common Stock of Holdings. The stock certificates issued to
evidence shares of Common Stock hereunder shall bear a legend referring to this
Agreement and the restrictions contained herein.
ARTICLE IV
REPURCHASE OF SHARES
Section 4.1. PURCHASE OF SHARES UPON TERMINATION OF MANAGEMENT
STOCKHOLDER.
(a) In the event that the Termination Date occurs for any reason prior
to an Initial Public Offering or an Approved Sale, subject to Section 4.2 below,
the shares of Common Stock of Holdings issued and outstanding to such Management
Stockholder shall be subject to repurchase as follows:
i. Holdings, during the sixty (60) days following the
Termination Date (the "Repurchase Period"), shall
have a one-time right to purchase all, but not less
than all, of the shares of Common Stock.
ii. If Holdings does not elect to purchase the shares of
Common Stock during the Repurchase Period, then the
Principal Stockholder, during the thirty (30) days
following the expiration of the Repurchase Period
(the "Second Repurchase Period"), shall have a
one-time right to purchase all, but not less than
all, of the shares of Common Stock.
iii. The purchase price (the "Repurchase Price") for each
shares of Common Stock shall be the Fair Market
Value.
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<PAGE> 10
iv. If Holdings or the Principal Stockholder elects to
purchase the shares of Common Stock, it shall notify
the Management Stockholder at or before the end of
the Repurchase Period or, in the case of the
Principal Stockholder, the Second Repurchase Period,
and the Repurchase Price shall be paid in cash at a
time set by Holdings or the Principal Stockholder, as
the case may be, which time shall be within thirty
(30) days after the end of the Repurchase Period or
Second Repurchase Period, as the case may be,
provided that the Management Stockholder has
presented to Holdings or the Principal Stockholder a
Duly Endorsed certificate.
v. The shares of Common Stock shall be transferred to
Holdings or the Principal Stockholder, as applicable,
free and clear of all liens, encumbrances, mortgages,
pledges, security interests, restrictions, prior
assignments and claims of any kind or nature
whatsoever except those created by the Certificate of
Incorporation, the stock option agreement, if any,
between a Management Stockholder and Holdings dated
as of October __, 1998, as amended from time to time
(the "Stock Option Agreement")the ESOP/Investcorp
Stockholders' Agreement or this Agreement. If
Holdings or the Principal Stockholder does not
purchase the shares of Common Stock, the restrictions
on transfer thereof contained in Article 3 of this
Agreement shall terminate and be of no further force
and effect. Notwithstanding the Management
Stockholder's failure to deliver the Duly Endorsed
certificate, the shares of Common Stock represented
thereby shall be deemed to be owned by Holdings or
the Principal Stockholder, as applicable, upon (A)
the payment by Holdings or the Principal Stockholder,
as applicable, of the purchase price to the
Management Stockholder or his or her Permitted
Transferee or (B) notice to the Management
Stockholder or such Permitted Transferee that
Holdings or the Principal Stockholder, as applicable,
is holding the purchase price in the United States
for the account of the Management Stockholder or such
Permitted Transferee, and upon such payment or notice
(x) the Management Stockholder and such Permitted
Transferee will have no further rights in or to such
shares of Common Stock, (y) Holdings or the Principal
Stockholder, as applicable, shall be entitled to
specific performance of such Management Stockholder's
or such Permitted Transferee's obligation to deliver
such Duly Endorsed certificates, and (z) the
Management Stockholder and his or her Permitted
Transferee shall be jointly and severally liable for
all reasonable attorneys' fees and other costs and
expenses incurred by Holdings or the Principal
Stockholder, as applicable, in enforcing its right to
repurchase the shares of Common Stock hereunder and
shall pay to Holdings or the Principal Stockholder,
as applicable, promptly upon demand, the amount of
all such fees and expenses.
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<PAGE> 11
vi. The Management Stockholder or his or her Permitted
Transferee shall not be obligated to transfer any
shares of Common Stock to Holdings or the Principal
Stockholder, as applicable, unless, concurrently with
the repurchase of such shares of Common Stock
hereunder, Holdings or the Principal Stockholder, as
the case may be, repurchases all of the shares of
Common Stock owned of record by the Management
Stockholder or his or her Permitted Transferee.
Section 4.2. MANAGEMENT STOCKHOLDER PUT RIGHT.
(a) If a Management Stockholder's Termination Date occurs prior to an
Initial Public Offering or an Approved Sale due to a Management Stockholder's
death, Disability or Approved Retirement, or in the event of an Approved Sale
(substituting 75% for 50% in such definition) in which substantially all of the
proceeds of such Approved Sale are not reinvested in a similar or like business
to the manufacturing of bedding products within one (1) year of such Approved
Sale, the Management Stockholder or his or her representative shall have a
one-time right to require Holdings to purchase all, but not less than all, of
the shares of Common Stock at Fair Market Value, PROVIDED, THAT such right must
be exercised within one-hundred-eighty (180) days after the Termination Date,
or, in the case of an Approved Sale, the first anniversary of such Approved
Sale. The Repurchase Price shall be paid on the Put Date, which date shall be
the later of (i) the thirtieth (30th) day after Holdings has received notice of
the Management Stockholder's election to exercise his or her put right, or (ii)
the day that the Management Stockholder presents to Holdings the Duly Endorsed
certificate, and shall be paid in the form of cash or, at the option of Holdings
in the event the purchase is following the Management Stockholder's death,
disability or Approved Retirement, a combination of an amount of cash equal to
the cost of the repurchased Common Stock and the issuance of a Holdings Note
("Holdings Note") the principal amount of which is equal to the difference
between the Repurchase Price for the Common Stock and the cost of the Common
Stock, bearing interest at a rate equal to the rate at which interest is
calculated at such time pursuant to the then-current senior credit facility of
the Company or Holdings, as appropriate, provided that such rate shall in no
event exceed ten percent (10%) per annum; provided further that up to fifty
percent (50%) of any interest payment shall, at the option of Holdings, be
payable in additional Holdings Notes of like tenor. All Holdings Notes shall
mature on the earliest to occur of (x) the third anniversary of the date on
which the Holdings Note is issued, (y) the sale of stock of Holdings pursuant to
an Initial Public Offering, or (z) an Approved Sale. The shares of Common Stock
shall be transferred to Holdings free and clear of all liens, encumbrances,
mortgages, pledges, security interests, restrictions, prior assignments and
claims of any kind or nature whatsoever except those created by the Certificate
of Incorporation, the Stock Option Agreement or this Agreement. Notwithstanding
anything to the contrary in the foregoing, Holdings' obligation to repurchase
any of the shares of Common Stock shall be suspended if (i) such repurchase
would render Holdings unable to meet its obligations in the ordinary course of
business; (ii) Holdings is prohibited from doing so by applicable law
restricting the purchase by a corporation of its own shares; or (iii) such
repurchase would constitute a breach of or default or event of default under, or
is otherwise prohibited by, the terms of any loan agreement or other agreement
or instrument to which Holdings or any of its Subsidiaries is a party, any of
such events constituting a "Repurchase Disability." In the event of
-11-
<PAGE> 12
a Repurchase Disability, Holdings shall repurchase the shares of Common Stock as
soon as reasonably practicable after all Repurchase Disabilities cease to exist
(and Holdings may also elect, but shall have no obligation, to cause its nominee
to repurchase such shares while any Repurchase Disabilities continue to exist).
In the event that Holdings suspends its obligation to repurchase shares of
Common Stock pursuant to a Repurchase Disability, then, upon repurchase of the
shares, Holdings shall pay to the Management Stockholder or his or her
representative (as applicable) an additional amount equal to interest on the
original repurchase price calculated at the Applicable Federal Rate (as set
forth in Section 1274 of the Code or the Treasury Regulations promulgated
thereunder) from the date the repurchase would have occurred but for such
Repurchase Disability to (but not including) the date such repurchase actually
occurs.
(b) For so long as a Management Stockholder or his or her Permitted
Transferee owns the shares of Common Stock, Holdings agrees that it shall, upon
the written request of a Management Stockholder, provide such Management
Stockholder with annual financial statements of Holdings promptly upon the
completion of the preparation of such statements. The annual financial
statements shall be accompanied by an audit report by Holdings' independent
accountants.
ARTICLE V
MISCELLANEOUS
Section 5.1 TERMINATION OF PRIOR STOCKHOLDER AGREEMENTS. Upon the
effectiveness of this Agreement, any agreement between Holdings and any
Management Stockholder that governs the rights or obligations of such Management
Stockholder with respect to any class of capital stock of Holdings and that was
entered into prior to the Effective Date ("Prior Stockholder Agreements") shall
automatically be terminated and of no further force and effect and the parties
to such Prior Stockholder Agreements shall have no further rights or obligations
thereunder.
Section 5.2. BINDING EFFECT; NO THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns and transferees except as set
forth in Section 2.1(c), and except to the extent that the terms of this
Agreement limit or otherwise restrict the transferability of any rights or
obligations hereunder. The provisions of this Agreement shall be binding upon
the parties hereto and their respective heirs, successors and assigns, and shall
not be for the benefit of any other Person.
Section 5.3 WAIVER AND AMENDMENT. Any party hereto may waive its rights
under this Agreement at any time, and Holdings may waive its rights under this
Agreement with respect to any party hereto at any time; provided that no waiver
by Holdings shall operate to waive Holdings' rights under this Agreement with
respect to any party hereto not named in such waiver. Any agreement on the part
of any such party to any such waiver by Holdings shall be valid only if set
forth in an instrument in writing signed by such party. This Agreement may be
amended or waived only by a written instrument signed by (a) Holdings, (b)
stockholders owning of record a
-12-
<PAGE> 13
majority of the then outstanding Principal Stockholder's Shares and (c) the
Management Stockholders. All parties hereto shall be bound by any amendment or
waiver approved as prescribed in the foregoing sentence from and after the date
of the receipt of a written notice from Holdings setting forth such amendment or
waiver and reciting its approval or waiver, as the case may be, whether or not
shares of Common Stock held by any stockholder shall have been marked to
indicate such consent.
Section 5.4 MANAGEMENT STOCKHOLDER REPRESENTATIVE. Each of the
Management Stockholders hereby appoints Zenon S. Nie (the "Management
Representative") or its designee (as appointed in writing), as the agent, proxy
and attorney in fact for the Management Stockholders for all purposes under this
Agreement (including, without limitation, full power and authority to act on the
Management Stockholders' behalf) (i) to give or receive any notices or other
communications required or permitted under the terms and conditions of this
Agreement (and such notice shall be deemed to have been duly given when
delivered by the Management Representative pursuant to the terms of this
Agreement) and (ii) to execute and deliver, should it elect to do so in its sole
discretion, on behalf of the Management Stockholders, any amendment to this
Agreement so long as such amendments shall apply to all parties to this
Agreement, and (iii) to take all other actions to be taken by or on behalf of
the Management Stockholders and exercise any and all rights which the Management
Stockholders are permitted or required to do or exercise under this Agreement.
Section 5.5 NOTICES. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
when delivered, if delivered personally, or when deposited in the mail, if sent
by registered or certified mail, return receipt requested, postage prepaid, and
when received, if delivered otherwise, to the party to whom it is directed at
the following addresses:
(a) If to Holdings, to:
Simmons Holdings, Inc.
c/o Fenway Partners, Inc.
152 West 57th Street
New York, New York 10019
Attn: Richard C. Dresdale
Telecopy: 212-757-0609
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Lauren I. Norton, Esq.
Telecopy: 617-951-7050
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<PAGE> 14
(b) If to the Management Stockholders, to them at:
Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
Attn: Zenon S. Nie
Telecopy: 770-392-2565
with copies to:
Jones Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street NE
Atlanta, GA 30308
Attn: Lizanne Thomas, Esq.
Telecopy: 404-581-8330
(c) If to the Principal Stockholder, to:
Simmons Holdings, LLC
c/o Fenway Partners, Inc.
152 West 57th Street
New York, New York 10019
Attn: Richard C. Dresdale
Telecopy: 212-757-0609
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn.: Lauren I. Norton, Esq.
Telecopy: 617-951-7050
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 5.6 APPLICABLE LAW. The laws of the State of Delaware shall
govern the interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under principles of
conflicts of law.
Section 5.7 INTEGRATION. This Agreement, the ESOP/Investment
Stockholders' Agreement and the documents referred to herein or delivered
pursuant hereto, which form a part hereof, contain the entire understanding of
the parties with respect to its subject matter. There
-14-
<PAGE> 15
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof other than
those expressly set forth herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to its subject matter.
Section 5.8 DESCRIPTIVE HEADINGS. ETC. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, (a) words of any gender shall be deemed to include each
other gender; (b) words using the singular or plural number shall also include
the plural or singular number, respectively; and (c) references to "hereof,"
"herein," "hereby" and similar terms shall refer to this entire Agreement.
Section 5.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 5.10 SEVERABILITY. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect and for any reason, the validity, legality and
enforceability of such provision, paragraph, word, clause, phrase or sentence in
every other respect, and of the other remaining provisions, paragraphs, words,
clauses, phrases or sentences hereof, shall not be in any way impaired, it being
intended that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
Section 5.11 TERM. This Agreement shall terminate, with respect to each
Management Stockholder, on the date on which such Management Stockholder no
longer holds shares of Common Stock.
Section 5.12 INJUNCTIVE RELIEF. It is hereby agreed and acknowledged
that it will be impossible to measure in money the damages that would be
suffered if the parties fail to comply with any of the obligations herein
imposed on them and that, in the event of any such failure, an aggrieved person
will be irreparably damaged and will not have an adequate remedy at law. Any
such person shall therefore be entitled to injunctive relief, including specific
performance, to enforce such obligations, without the posting of any bond, and,
if any action should be brought in equity to enforce any of the provisions of
this Agreement, none of the parties hereto shall raise the defense that there is
an adequate remedy at law.
-15-
<PAGE> 16
[1998 Stockholders' Agreement]
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
or caused this Agreement to be executed on its behalf as of the date first above
written.
SIMMONS HOLDINGS, INC.
By: /s/ Zenon S. Nie
----------------------------------
Name: Zenon S. Nie
Title: Chief Executive Officer
SIMMONS HOLDINGS, LLC
By:/s/ Richard C. Dresdale
----------------------------------
Name: Richard C. Dresdale
Title: An Authorized Person
-16-
<PAGE> 17
[1998 Stockholders' Agreement]
MANAGEMENT STOCKHOLDERS AND OPTIONHOLDERS:
/s/ William L. Ayers IV
------------------------------------
Name: William L. Ayers IV
/s/ R. Kenneth Barton
------------------------------------
Name: R. Kenneth Barton
/s/ Leo T. Brennan
------------------------------------
Name: Leo T. Brennan
/s/ Jonathan C. Daiker
------------------------------------
Name: Jonathan C. Daiker
/s/ Roger W. Franklin
------------------------------------
Name: Roger W. Franklin
/s/ James P. Maher
------------------------------------
Name: James P. Maher
/s/ Cleve B. Murphy
------------------------------------
Name: Cleve B. Murphy
/s/ Zenon S. Nie
------------------------------------
Name: Zenon S. Nie
/s/ Martin R. Passaglia
------------------------------------
Name: Martin R. Passaglia
/s/ Gary G. Pleasant
------------------------------------
Name: Gary G. Pleasant
/s/ Joseph Ulicny
------------------------------------
Name: Josephy Ulicny
/s/ Douglas G. Applegate
------------------------------------
Name: Douglas G. Applegate
/s/ Wesley H. Brinkman
------------------------------------
Name: Wesley H. Brinkman
/s/ James H. Brooks
------------------------------------
Name: James H. Brooks
-17-
<PAGE> 18
[1998 Stockholders' Agreement]
/s/ Danny E. Cantrell
------------------------------------
Name: Danny E. Cantrell
/s/ Patrick Castricone
------------------------------------
Name: Patrick Castricone
/s/ Mark Chambless
------------------------------------
Name: Mark Chambless
/s/ Stephen C. Clayton
------------------------------------
Name: Stephen C. Clayton
/s/ Paul F. Cowie, Jr.
------------------------------------
Name: Paul F. Cowie, Jr.
/s/ Andrew R. Cuppia
------------------------------------
Name: Andrew R. Cuppia
/s/ Robert S. Dohm
------------------------------------
Name: Robert S. Dohm
/s/ William E. Elliott
------------------------------------
Name: William E. Elliott
/s/ John R. Giambalvo
------------------------------------
Name: John R. Giambalvo
/s/ Joyce H. Glover
------------------------------------
Name: Joyce H. Glover
/s/ Gerald P. Grippando
------------------------------------
Name: Gerald P. Grippando
/s/ Robert W. Hellyer
------------------------------------
Name: Robert W. Hellyer
/s/ Donald J. Hofmann
------------------------------------
Name: Donald J. Hofmann
/s/ Ronald G. Hutchinson
------------------------------------
Name: Ronald G. Hutchinson
/s/ Robert M. Katz
------------------------------------
Name: Robert M. Katz
-18-
<PAGE> 19
[1998 Stockholders' Agreement]
/s/ Ken Kessler
------------------------------------
Name: Ken Kessler
/s/ Robert W. Lachenmeier
------------------------------------
Name: Robert W. Lachenmeier
/s/ Paul R. Leber Jr.
------------------------------------
Name: Paul R. Leber Jr.
/s/ Paul E. Messerschmitt
------------------------------------
Name: Paul E. Messerschmitt
/s/ Richard M. Messner
------------------------------------
Name: Richard M. Messner
/s/ John Miller
------------------------------------
Name: John Miller
/s/ Roger E. Murray
------------------------------------
Name: Roger E. Murray
/s/ Gerald F. Newman
------------------------------------
Name: Gerald F. Newman
/s/ Hector M. O'sorio
------------------------------------
Name: Hector M. O'sorio
/s/ Harold M. Parsons
------------------------------------
Name: Harold M. Parsons
/s/ John P. Peterken
------------------------------------
Name: John P. Peterken
/s/ Rocco J. Poliseo
------------------------------------
Name: Rocco J. Poliseo
/s/ Roderick J. Saunders
------------------------------------
Name: Roderick J. Saunders
/s/ Gary L. Senese
------------------------------------
Name: Gary L. Senese
/s/ Howard Silverstone
------------------------------------
Name: Howard Silverstone
-19-
<PAGE> 20
[1998 Stockholders' Agreement]
/s/ Shawn J. Slattery
------------------------------------
Name: Shawn J. Slattery
/s/ James J. Tobin
------------------------------------
Name: James J. Tobin
/s/ David Woodhead
------------------------------------
Name: David Woodhead
-20-
<PAGE> 21
Exhibit A
Stockholder Agreement
NAME OF
STOCKHOLDER
- --------------------
William L. Ayers, IV
R. Kenneth Barton
Leo T. Brennan
Jonathan C. Daiker
Roger W. Franklin
James P. Maher
Cleve B. Murphy
Zenon S. Nie
Martin R. Passaglia
Gary G. Pleasant
Joseph Ulicny
Douglas G. Applegate
Wesley H. Brinkman
James H. Brooks
Danny E. Cantrell
Patrick Castricone
Mark Chambless
Stephen C. Clayton
Paul F. Cowie, Jr.
Andrew R. Cuppia
Robert S. Dohm
William E. Elliott
John R. Giambalvo
Joyce H. Glover
-21-
<PAGE> 22
Gerald P. Grippando
Robert W. Hellyer
Donald J. Hofmann
Ronald G. Hutchinson
Robert M. Katz
Ken Kessler
Robert W.
Lachenmeier
Paul R. Leber Jr.
Paul E. Messerschmitt
Richard M. Messner
John Miller
Roger E. Murray
Gerald F. Newman
Hector M. O'Sorio
Harold M. Parsons
John P. Peterken
Rocco J. Poliseo
Roderick J. Saunders
Gary L. Senese
Howard Silverstone
Shawn J. Slattery
James J. Tobin
David Woodhead
-22-
<PAGE> 1
Exhibit 10.6
================================================================================
CREDIT AND GUARANTY AGREEMENT
dated as of October 29, 1998
among,
SIMMONS COMPANY,
as Borrower,
SIMMONS HOLDINGS, INC. AND CERTAIN SUBSIDIARIES OF COMPANY,
as Guarantors,
THE FINANCIAL INSTITUTIONS LISTED HEREIN,
as Lenders,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Joint Lead Arranger and as Syndication Agent,
WARBURG DILLON READ LLC,
as a Joint Lead Arranger,
and
UBS A.G., STAMFORD BRANCH,
as Administrative Agent
--------------------------------------------------------
$270,000,000 TERM LOAN AND REVOLVING LOAN FACILITIES
--------------------------------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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SECTION 1. DEFINITIONS; INTERPRETATION.....................................................................2
1.1. Defined Terms..........................................................................2
1.2. Accounting Terms......................................................................34
1.3. Interpretation, etc...................................................................34
SECTION 2. CREDIT EXTENSIONS..............................................................................34
2.1. Term Loans............................................................................34
2.2. Revolving Loans and Swing Line Loans..................................................34
2.3. Letters of Credit.....................................................................37
2.4. Pro Rata Shares.......................................................................41
2.5. Use of Proceeds.......................................................................42
2.6. Notes; Register; Lenders' Books and Records...........................................42
2.7. Interest Payments.....................................................................43
2.8. Conversion; Continuation..............................................................44
2.9. Post-Maturity Interest................................................................45
2.10. Fees..................................................................................45
2.11. Scheduled Payments....................................................................46
2.12. Voluntary Prepayments/Commitment Reductions...........................................49
2.13. Mandatory Prepayments/Commitment Reductions...........................................50
2.14. Application of Prepayments and Reductions of Commitments..............................52
2.15. Collateral Proceeds; Guaranty Payments................................................53
2.16. General Provisions Regarding Payments.................................................54
2.17. Ratable Sharing.......................................................................55
2.18. Making or Maintaining Eurodollar Rate Loans...........................................55
2.19. Increased Costs; Capital Adequacy.....................................................57
2.20. Taxes; Withholding, Etc...............................................................58
2.21. Capital Adequacy Adjustment...........................................................59
2.22. Obligation to Mitigate................................................................60
2.23. Defaulting Lenders....................................................................60
2.24. Removal or Replacement of a Lender....................................................61
SECTION 3. CONDITIONS PRECEDENT...........................................................................62
3.1. Closing Date..........................................................................62
3.2. Conditions to Each Credit Extension...................................................68
SECTION 4. REPRESENTATIONS AND WARRANTIES.................................................................69
4.1. Organization and Powers...............................................................70
4.2. Qualification and Good Standing.......................................................70
4.3. Subsidiaries..........................................................................70
4.4. Authorization of Borrowing; No Conflict...............................................70
4.5. Governmental Consents.................................................................70
</TABLE>
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4.6. Binding Obligation....................................................................71
4.7. Valid Issuance of Holdings Common Stock, the Senior Subordinated Bridge Notes,
the Senior Subordinated Notes, the Junior Subordinated Notes and the Holdings
Notes.................................................................................71
4.8. Financial Condition...................................................................71
4.9. No Material Adverse Change; No Restricted Junior Payments.............................72
4.10. Litigation; Adverse Facts.............................................................72
4.11. Payment of Taxes......................................................................72
4.12. Title to Properties; Real Property....................................................72
4.13. Collateral............................................................................73
4.14. Environmental.........................................................................74
4.15. No Defaults; Material Contracts.......................................................74
4.16. Governmental Regulation...............................................................74
4.17. Margin Stock..........................................................................74
4.18. Employee Matters......................................................................75
4.19. Employee Benefit Plans................................................................75
4.20. Certain Fees..........................................................................75
4.21. Solvency..............................................................................75
4.22. Related Agreements....................................................................75
4.23. Year 2000 Matters.....................................................................76
4.24. Disclosure............................................................................76
4.25. Intellectual Property.................................................................76
SECTION 5. AFFIRMATIVE COVENANTS..........................................................................77
5.1. Financial Statements and Other Reports................................................77
5.2. Corporate Existence, etc..............................................................80
5.3. Payment of Taxes and Claims...........................................................80
5.4. Maintenance of Properties.............................................................80
5.5. Insurance.............................................................................81
5.6. Inspection Rights; Lender Meeting.....................................................81
5.7. Compliance with Laws, Etc.............................................................81
5.8. Environmental Matters.................................................................81
5.9. Subsidiaries..........................................................................83
5.10. Interest Rate Protection..............................................................84
5.11. Year 2000 Matters.....................................................................84
5.12. Conforming Leasehold Interests; Matters Relating to Additional
Real Property Collateral..............................................................85
5.13. Further Assurances....................................................................86
SECTION 6. NEGATIVE COVENANTS.............................................................................87
6.1. Indebtedness..........................................................................87
6.2. Liens.................................................................................89
6.3. Investments...........................................................................90
</TABLE>
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<PAGE> 4
<TABLE>
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6.4. Contingent Obligations................................................................91
6.5. Restricted Payments...................................................................92
6.6. Financial Covenants...................................................................94
6.7. Fundamental Changes; Asset Sales and Acquisitions.....................................97
6.8. Consolidated Capital Expenditures.....................................................98
6.9. Sales and Lease-Backs.................................................................99
6.10. Transactions with Shareholders and Affiliates........................................100
6.11. Amendments or Waivers of Certain Documents...........................................100
6.12. Conduct of Company Business..........................................................101
6.13. Special Covenants of Holdings........................................................101
6.14. Fiscal Year..........................................................................101
6.15. Stay, Extension and Usury Laws.......................................................101
SECTION 7. GUARANTY......................................................................................102
7.1. Guaranty of the Obligations..........................................................102
7.2. Limitation on Amount Guarantied......................................................102
7.3. Payment by Guarantors................................................................103
7.4. Liability of Guarantors Absolute.....................................................103
7.5. Waivers by Guarantors................................................................105
7.6. Guarantors' Rights of Subrogation, Contribution, Etc.................................106
7.7. Subordination of Other Obligations...................................................106
7.8. Continuing Guaranty..................................................................107
7.9. Authority of Guarantors or Company...................................................107
7.10. Financial Condition of Company.......................................................107
7.11. Bankruptcy, Etc......................................................................107
7.12. Discharge of Guaranty Upon Sale of Guarantor.........................................108
SECTION 8. EVENTS OF DEFAULT.............................................................................108
8.1. Events of Default....................................................................108
8.2. Certain Option of Lenders............................................................112
SECTION 9. AGENTS........................................................................................112
9.1. Appointment of Agents................................................................112
9.2. Powers and Duties....................................................................113
9.3. General Immunity.....................................................................113
9.4. Agent Entitled to Act as Lender......................................................114
9.5. Lenders' Representations and Warranties..............................................114
9.6. Right to Indemnity...................................................................114
9.7. Successor Administrative Agent and Swing Line Lender.................................115
9.8. Collateral Documents and Guaranties..................................................115
SECTION 10. MISCELLANEOUS.................................................................................117
10.1. Notices..............................................................................117
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.2. Expenses.............................................................................117
10.3. Indemnity............................................................................118
10.4. Set-Off..............................................................................118
10.5. Amendments and Waivers...............................................................119
10.6. Successors and Assigns; Participations...............................................120
10.7. Independence of Covenants............................................................123
10.8. Survival of Representations, Warranties and Agreements...............................123
10.9. No Waiver; Remedies Cumulative.......................................................123
10.10. Marshalling; Payments Set Aide.......................................................123
10.11. Severability.........................................................................124
10.12. Obligations Several; Independent Nature of Lenders' Rights...........................124
10.13. Headings.............................................................................124
10.14. APPLICABLE LAW.......................................................................124
10.15. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.......................................124
10.16. WAIVER OF JURY TRIAL.................................................................125
10.17. Confidentiality......................................................................125
10.18. Counterparts; Effectiveness..........................................................126
10.19. Maximum Amount.......................................................................126
</TABLE>
-iv-
<PAGE> 6
SCHEDULES:
1.1(a) Management Investors
1.1(b) Term Loan Amounts, Revolving Loan Commitments and Pro
Rata Shares
3.1(e) Closing Date Mortgaged Property
4.1 Subsidiaries of Holdings
4.10 Certain Litigation
4.12 Real Property Assets
4.15 Material Contracts
4.25 Intellectual Property Litigation
6.1 Certain Existing Indebtedness
6.2 Certain Existing Liens
6.4 Certain Existing Contingent Obligations
EXHIBITS:
A-1 Funding Notice
A-2 Conversion/Continuation Notice
A-3 Request for Issuance
B-1 Tranche A Term Loan Note
B-2 Tranche B Term Loan Note
B-3 Tranche C Term Loan Note
B-4 Revolving Note
B-5 Swing Line Note
C Compliance Certificate
D-1 Opinion of Ropes & Gray
D-2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
E Assignment Agreement
F Certificate Re Non-Bank Status
G Solvency Certificate
H Closing Date Certificate
I Counterpart Agreement
J Pledge and Security Agreement
K Mortgage
L Collateral Access Agreement
M Certain Adjustments to EBITDA
N Terms of Certain Other Indebtedness
O Recapitalization Expenses
-v-
<PAGE> 7
CREDIT AND GUARANTY AGREEMENT
This CREDIT AND GUARANTY AGREEMENT dated as of October 29, 1998, is
entered into by and among SIMMONS COMPANY, a Delaware corporation ("COMPANY" or
"BORROWER"), SIMMONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"), and
CERTAIN SUBSIDIARIES OF COMPANY PARTY HERETO, as Guarantors, GOLDMAN SACHS
CREDIT PARTNERS L.P. ("GSCP"), as a joint lead arranger and as syndication agent
(in such capacity, "SYNDICATION AGENT"), THE FINANCIAL INSTITUTIONS LISTED ON
THE SIGNATURE PAGES HERETO (together with each such institution's successors and
permitted assigns, each a "LENDER"), WARBURG DILLON READ LLC ("WARBURG"), as a
joint lead arranger, and UBS A.G., STAMFORD BRANCH ("UBS"), as administrative
agent for Lenders (together with its permitted successors in such capacity,
"ADMINISTRATIVE AGENT").
R E C I T A L S
---------------
WHEREAS, Fenway and the Other Investors have formed REM Acquisition,
Inc., a Delaware corporation ("MERGER CORP."), for the purpose of engaging with
Holdings and Company in a series of Recapitalization transactions, including the
Merger (capitalized terms used herein having the meanings assigned to those
terms in SECTION 1.1), whereby Fenway and the Other Investors will acquire not
less than 75% of the aggregate voting power of all outstanding capital stock of
Holdings;
WHEREAS, Company, a wholly owned subsidiary of Holdings, has requested
Lenders to extend, and Lenders have agreed to extend, certain credit facilities
in an aggregate principal amount of $270,000,000 to Company, the proceeds of
which will be used, together with (a) not less than $128,100,000 of the net cash
proceeds of the Equity Financing contributed by Fenway and the Other Investors
in the Merger, a portion of which will be used by Merger Corp. to acquire from
the ESOP the 2,250,049 shares of Company's Series A Preferred Stock allocated to
the accounts of ESOP participants and the balance of which will be contributed
by Holdings to Company, (b) not less than $75,000,000 in cash proceeds of the
Senior Subordinated Bridge Loans, (c) not less than $30,000,000 in cash proceeds
of the Junior Subordinated Notes to be purchased and held by Fenway's Affiliate,
Simmons Holdings, LLC, a Delaware limited liability company, and (d) not less
than $10,000,000 in cash proceeds from the sale of the Holdings Notes to be
purchased and held by Fenway's Affiliate, Simmons Holdings, LLC, a Delaware
limited liability company, to permit the consummation of the Recapitalization
and the Merger, to refinance certain existing Indebtedness of Company, to pay
related fees and expenses and to provide financing for working capital and other
general corporate purposes of Company and its Subsidiaries;
WHEREAS, pursuant to the Recapitalization transactions, (i) Merger
Corp. will merge with and into Holdings, with Holdings being the surviving
corporation and the owner of 100% of the outstanding capital stock of Company,
(ii) Fenway and the Other Investors will acquire not less than 75% of the
outstanding capital stock of Holdings in the Merger, (iii) the ESOP will convert
its 3,413,672 unallocated shares of Company's Series A Preferred Stock into
approximately 3,482,036 unallocated shares of Holdings' Class C Common Stock
which will be converted in the Merger into
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<PAGE> 8
3,482,036 shares of unallocated common stock of Holdings and will retain such
unallocated shares with an estimated value of $23,400,000, (iv) the Management
Investors will retain shares (or options to acquire shares) of common stock of
Holdings with an estimated value of approximately $16,500,000 and (v) affiliates
of Investcorp. will retain approximately 1,336,998 shares of common stock of
Holdings with an estimated value of $9,000,000;
WHEREAS, Company desires to secure all of the Obligations by granting
to Administrative Agent, on behalf of Lenders, a First Priority Lien on certain
of its real and substantially all of its personal property, including a pledge
of all of the capital stock of each of its Domestic Subsidiaries and 65% of the
capital stock of each of its Foreign Subsidiaries which is directly owned by
Company; and
WHEREAS, Holdings and certain Subsidiaries of Company desire to
guarantee the Obligations and to secure their guaranties by granting to
Administrative Agent, on behalf of Lenders, a First Priority Lien on certain of
its real and substantially all of their respective personal property, including
(i) a pledge of all of the capital stock of Company and (ii) a pledge of all of
the capital stock of each Domestic Subsidiary which is a Subsidiary Guarantor
and 65% of the capital stock of each Foreign Subsidiary which is directly owned
by a Subsidiary Guarantor.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Holdings, Company, each of its
Subsidiaries party hereto, Lenders and Agents agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION
1.1. DEFINED TERMS. The following terms used herein, including (except
to the extent specifically stated otherwise) the preamble, recitals, exhibits
and schedules hereto, shall have the following meanings:
"ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the offered rate (rounded upward to the nearest
1/16 of one percent) appearing on the Dow J ones/Telerate Monitor on Telerate
Access Service Page 3750 (British Bankers Association Settlement Rate) (or if
such page or service is not available, any page reasonably determined by
Administrative Agent to be the successor thereto) at or about 10:00 a.m. (New
York time) on such Interest Determination Date for U.S. dollar deposits of
amounts in same day funds comparable to the principal amount of the Eurodollar
Rate Loan for which the Adjusted Eurodollar Rate is then being determined with
maturities comparable to such Interest Period, BY (ii) the difference of (1) a
percentage equal to 100%, MINUS (2) the stated maximum rate of all reserve
requirements (including any marginal, emergency, supplemental, special or other
reserves) applicable on such Interest Rate Determination Date to any member bank
of the Federal Reserve System in respect of "Eurocurrency liabilities" as
defined in Regulation D (or any successor category of liabilities under
Regulation D). If for any reason the portion of the Adjusted Eurodollar Rate
determined by reference to the mechanics of clause (i) of this definition is
unavailable, as determined by Administrative Agent, such portion of
2
<PAGE> 9
Adjusted Eurodollar Rate for the applicable Interest Period shall mean the
offered quotation (rounded upward to the nearest 1/16 of one percent) to first
class banks in the London interbank market by UBS for U.S. dollar deposits of
amounts in same day funds comparable to the principal amount of the Eurodollar
Rate Loan of UBS for which the Adjusted Eurodollar Rate is then being determined
with maturities comparable to such Interest Period as of approximately 10:00
a.m. (New York time) on such Interest Rate Determination Date.
"ADMINISTRATIVE AGENT" has the meaning assigned to that term in the
preamble hereto.
"ADVERSE PROCEEDING" means any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including any Environmental Claims),
whether pending or, to the knowledge of Company or its Material Subsidiaries,
threatened against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries.
"AFFECTED LENDER" has the meaning assigned to that term in SECTION
2.18(b).
"AFFILIATE", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "CONTROL" (including, with
correlative meanings, the terms "CONTROLLING", "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"AGENT" means each of Syndication Agent, Joint Lead Arrangers and
Administrative Agent.
"AGREEMENT" means this Credit and Guaranty Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time.
"APPLICABLE COMMITMENT FEE PERCENTAGE" means 0.50% per annum.
"APPLICABLE MARGIN" means (i) 2.25% per annum for Tranche B Term Loans
which are Base Rate Loans and 2.50% per annum for Tranche C Term Loans which are
Base Rate Loans, (ii) 3.25% per annum for Tranche B Term Loans which are
Eurodollar Rate Loans and 3.50% per annum for Tranche C Term Loans which are
Eurodollar Rate Loans, and (iii) for Tranche A Term Loans, Revolving Loans and
Swing Line Loans, (a) from the Closing Date until the date of delivery of
financial statements for the period ending on the last day of the first complete
Fiscal Quarter to end after the Closing Date, 1.75% per annum in the case of
Tranche A Term Loans, Revolving Loans and Swing Line Loans which are Base Rate
Loans, and 2.75% per annum in the case of Tranche A Term Loans and Revolving
Loans which are Eurodollar Rate Loans, and (b) thereafter, the applicable
percentage per annum determined by reference to the Leverage Ratio in effect
from time to time as set forth below:
3
<PAGE> 10
<TABLE>
<CAPTION>
APPLICABLE MARGIN FOR
TRANCHE A TERM LOANS APPLICABLE MARGIN FOR TRANCHE
AND A TERM LOANS, REVOLVING
REVOLVING LOANS WHICH LOANS AND SWING LINE LOANS
LEVERAGE RATIO ARE EURODOLLAR LOANS WHICH ARE BASE RATE LOANS
<S> <C> <C>
>4.25:1.00 2.75% 1.75%
>3.75:1.00 and <=4.25:1.00 2.50% 1.50%
>3.25:1.00 and <=3.75:1.00 2.25% 1.25%
<=3.25:1.00 2.00% 1.00%
================================ =================================== ============================================
</TABLE>
; PROVIDED, (a) no change in the Applicable Margin shall be effective until
three Business Days after the date on which Administrative Agent receives the
financial statements and a Compliance Certificate pursuant to SECTION 5.1(d)
calculating the Leverage Ratio, and (b) the Applicable Margin for Tranche A Term
Loans, Revolving Loans and Swing Line Loans shall be the applicable percentage
per annum amount set forth opposite the greatest Leverage Ratio above, in each
case for so long (but only for so long) as Company has not submitted to
Administrative Agent the information described in clause (A) when required under
SECTION 5.1(d).
"ASSET SALE" means a sale, lease or sub-lease (as lessor or sublessor),
transference or disposition to any Person other than Company or any of its
wholly-owned Subsidiaries, in one transaction or a series of transactions, of
all or any part of Company or any of its Subsidiaries' businesses, properties or
assets, including, without limitation, a sale, transference or other disposition
of any Security of Company or any of its Subsidiaries, other than (i) inventory
sold in the ordinary course of business, and (ii) obsolete, worn out or surplus
property sold in the ordinary course of business (or, in the case of leased or
sub-leased properties, properties which are no longer useful or necessary in
Company's or its Subsidiaries' business), whether now owned or hereafter
acquired.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement in the form of
EXHIBIT E.
"AUTHORIZED OFFICERS" means, as applied to any corporation, (i) its
chairman of the board (if an officer) or president or one of its board-elected
vice presidents, and (ii) its chief financial officer or treasurer.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.
"BASE RATE" means, at any time, the higher of (i) the Prime Rate, and
(ii) the rate equal to the sum of (a) 0.50%, PLUS (b) the Federal Funds
Effective Rate.
"BASE RATE LOAN" means a Loan bearing interest at a rate determined by
reference to the Base Rate.
4
<PAGE> 11
"BENEFICIARY" means Administrative Agent, each of the other Agents,
each of the Lenders, and each Lender Counterparty.
"BORROWER" has the meaning assigned to that term in the preamble
hereof.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in such state are authorized or required by
law or other governmental action to close, and with respect to all notices,
determinations, fundings and payments in connection with the Adjusted Eurodollar
Rate or any Eurodollar Rate Loans, that is also a day for trading by and between
banks in Dollar deposits in the London interbank market.
"CAPITAL LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CASH" means money, currency or a credit balance in any demand or
deposit account.
"CASH EQUIVALENTS" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after such
date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and having, at the time of the
acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year after such date and issued or accepted by any Lender or by any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia that (a) is at least "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (b) has Tier 1 capital (as defined in such regulations) of not
less than $100,000,000; and (v) shares of any money market mutual fund that (a)
invests substantially all of its assets in the types of investments referred to
in clauses (i) and (iv) above or in Dollars, (b) has net assets of not less than
$500,000,000, and (c) has the highest rating obtainable from either S&P or
Moody's.
"CERTIFICATE OF MERGER" means the Certificate of Merger dated as of
October 29, 1998 by and between Merger Corp. and Holdings, in the form delivered
to Agents and Lenders prior to or concurrently with their execution of this
Agreement and as such Certificate of Merger may be amended from time to time
thereafter to the extent permitted under SECTION 6.11.
"CERTIFICATE RE NON-BANK STATUS" means a certificate in the form of
EXHIBIT F.
5
<PAGE> 12
"CFO CERTIFICATION" means, with respect to the financial statements for
which such certification is required, the certification of the chief financial
officer of Company that such financial statements fairly present, in all
material respects, the financial condition of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash flows for
the periods indicated, subject to changes resulting from audit and normal
year-end adjustments.
"CLASS" means (i) with respect to Lenders, each following class of
Lenders: (a) Lenders having Tranche A Term Loan Exposure, (b) Lenders having
Tranche B Term Loan Exposure, (c) Lenders having Tranche C Term Loan Exposure,
and (d) Lenders having Revolving Credit Exposure (including Swing Line Lender),
and (ii) with respect to Loans, each of the following class of Loans: (a)
Tranche A Term Loans, (b) Tranche B Term Loans, (c) Tranche C Term Loans, and
(D) Revolving Loans (including Swing Line Loans).
"CLOSING DATE" means the date on which the Term Loans are made.
"CLOSING DATE CERTIFICATE" means a certificate in the form of EXHIBIT
H.
"CLOSING DATE MORTGAGED PROPERTY" has the meaning assigned to that term
in SECTION 3.1(e).
"COLLATERAL" means all of the properties and assets (including capital
stock) in which Liens are purported to be granted by the Collateral Documents.
"COLLATERAL ACCESS AGREEMENT" means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgment or agreement of any landlord
or mortgagee in respect of any Real Property Asset where any Collateral is
located or any warehouseman or processor in possession of any inventory of any
Credit Party, substantially in the form of EXHIBIT L annexed hereto with such
changes thereto as may be agreed to by Administrative Agent in the reasonable
exercise of its discretion.
"COLLATERAL DOCUMENTS" means the Pledge and Security Agreement, the
Mortgages and any other documents, instruments or agreements delivered by any
Credit Party pursuant to this Agreement or any of the other Credit Documents in
order to grant or perfect Liens on any assets of such Credit Party as security
for the Obligations.
"COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
any of its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"COMMITMENTS" means, collectively, the Swing Line Loan Commitments and
the Revolving Loan Commitments.
"COMPANY" has the meaning assigned to that term in the preamble hereof.
"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT C.
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<PAGE> 13
"CONFIDENTIAL INFORMATION MEMORANDUM" means that certain Confidential
Information Memorandum with respect to the Revolving Loan Commitments and the
Term Loans prepared by Company dated October 1998.
"CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest
as to which the lessor has agreed in writing for the benefit of Administrative
Agent (which writing has been delivered to Administrative Agent), whether under
the terms of the applicable lease, under the terms of a Landlord Consent and
Estoppel, or otherwise, to the matters described in the definition of "Landlord
Consent and Estoppel", which interest, if a subleasehold or sub-subleasehold
interest, is not subject to any contrary restrictions contained in a superior
lease or sublease.
"CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum of the
amounts for such period of (i) Consolidated Net Income, PLUS (to the extent the
amounts described in clauses (ii) through (ix) were deducted in calculating
Consolidated Net Income) (ii) Consolidated Interest Expense, PLUS (iii)
provisions for taxes based on income, PLUS (iv) total depreciation expense, PLUS
(v) total amortization expense, PLUS (vi) Management Fees, PLUS (vii) ESOP
expenses, PLUS (viii) the aggregate amount of the fees, costs and expenses
(including without limitation bonus payments) paid by Company in connection with
the consummation of the Recapitalization as set forth on EXHIBIT O for such
period, PLUS (ix) other non-cash items reducing Consolidated Net Income
(including without limitation non-cash purchase accounting adjustments and debt
extinguishment costs but excluding accruals of expenses and the establishment of
reserves in the ordinary course of business) LESS other non-cash items
increasing Consolidated Net Income (other than accruals of revenue or reversals
of reserves in the ordinary course of business), all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP; PROVIDED, that for any calculation of the foregoing made
for the period set forth on EXHIBIT M, such calculation shall be adjusted as set
forth thereon.
"CONSOLIDATED ADJUSTED EBITDAR" means, for any period, the sum of the
amounts for such period of (i) Consolidated Adjusted EBITDA PLUS (ii)
Consolidated Rental Payments, each of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP;
PROVIDED, that for any calculation of the foregoing made for the period set
forth on EXHIBIT M, such calculation shall be adjusted as set forth thereon.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of
(i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of Capital
Leases which is capitalized on the consolidated balance sheet of Company and its
Subsidiaries) by Company and its Subsidiaries during that period that, in
conformity with GAAP, are included in "additions to property, plant or
equipment" or comparable items reflected in the consolidated statement of cash
flows of Company and its Subsidiaries; PROVIDED, HOWEVER, that Consolidated
Capital Expenditures shall not include any expenditures by Company or any of its
Subsidiaries during that period in connection with a Permitted Acquisition.
"CONSOLIDATED CASH INTEREST EXPENSE" means, for any period,
Consolidated Interest Expense for such period excluding, however, any interest
expense not payable in Cash (including amortization
7
<PAGE> 14
of discount and amortization of debt issuance costs), but excluding, however,
any amounts referred to in SECTION 2.10 payable on or before the Closing Date.
"CONSOLIDATED CURRENT ASSETS" means, as at any date of determination,
the total assets of Company and its Subsidiaries on a consolidated basis that
may properly be classified as current assets in conformity with GAAP, excluding
Cash and Cash Equivalents.
"CONSOLIDATED CURRENT LIABILITIES" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis that may properly be classified as current liabilities in
conformity with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if
positive) equal to the difference of (i) the sum, without duplication, of the
amounts for such period of (a) Consolidated Adjusted EBITDA, PLUS (b) the
Consolidated Working Capital Adjustment, MINUS (ii) the sum, without
duplication, of the amounts for such period of (a) voluntary and scheduled
repayments of Consolidated Total Debt (excluding repayments of Revolving Loans
or Swing Line Loans except to the extent the Revolving Loan Commitments are
permanently reduced in connection with such repayments), PLUS (b) Consolidated
Capital Expenditures (net of any proceeds of any related financings with respect
to such expenditures), PLUS (c) Consolidated Cash Interest Expense, PLUS (d) the
provision for current taxes based on income of Company and its Subsidiaries and
payable in cash with respect to such period, PLUS (e) Management Fees actually
paid in cash during such period, PLUS (f) the cash portion of any purchase price
payments by Company or any of its Subsidiaries in connection with any Permitted
Acquisition made during such period, PLUS (g) an amount equal to $10,000,000 in
Fiscal Year 1999, $10,000,000 in Fiscal Year 2000 and $10,000,000 in Fiscal Year
2001.
"CONSOLIDATED FIXED CHARGES" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Cash Interest
Expense, and (ii) Consolidated Rental Payments, all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Subsidiaries on a
consolidated basis with respect to all outstanding Indebtedness of Company and
its Subsidiaries, including all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such period
determined in conformity with GAAP; PROVIDED, there shall be excluded the sum of
(i) the income (or loss) of any Person (other than a Subsidiary of Company) in
which any other Person (other than Company or any of its Subsidiaries) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to Company or any of its Subsidiaries by such Person
during such period; PLUS (ii) the income (or loss) of any Person accrued prior
to the date it becomes a Subsidiary of Company or is merged into
8
<PAGE> 15
or consolidated with Company or any of its Subsidiaries or that Person's assets
are acquired by Company or any of its Subsidiaries; PLUS (iii) the income of any
Subsidiary of Company to the extent that the declaration or payment of dividends
or similar distributions by that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Subsidiary; PLUS (iv) any after-tax gains or losses attributable to Asset
Sales or returned surplus assets of any Pension Plan; PLUS (v) (to the extent
not included in clauses (i) through (iv) above) any net extraordinary gains or
net non-cash extraordinary losses.
"CONSOLIDATED RENTAL PAYMENTS" means, for any period, the total rent
expense of Company and its Subsidiaries, determined on a consolidated basis for
Company and its Subsidiaries in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED TOTAL SENIOR DEBT" means, as at any date of
determination, Consolidated Total Debt LESS Subordinated Indebtedness.
"CONSOLIDATED WORKING CAPITAL" means, as at any date of determination,
the excess of Consolidated Current Assets over Consolidated Current Liabilities.
"CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any period on a
consolidated basis, the amount (which may be a negative number) by which
Consolidated Working Capital as of the beginning of such period exceeds (or is
less than) Consolidated Working Capital as of the end of such period.
"CONTINGENT OBLIGATION", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Hedge Agreements. Contingent Obligations shall include (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of
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any agreement described under subclauses (X) or (Y) of this sentence, the
primary purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported or, if less, the amount to which
such Contingent Obligation is specifically limited (including any netting of
obligations under Hedge Agreements).
"CONTRACTUAL OBLIGATION" means, as applied to any Person, any provision
of any Security issued by that Person or of any material indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"CONVERSION/CONTINUATION NOTICE" means a notice in the form of EXHIBIT
A-2.
"COUNTERPART AGREEMENT" means a counterpart agreement in the form of
EXHIBIT I.
"CREDIT DOCUMENT" means any of this Agreement, the Notes, any documents
or certificates executed by Company in favor of Issuing Bank relating to the
Letters of Credit, the Collateral Documents and all other documents, instruments
or agreements executed and delivered by a Credit Party for the benefit of
Agents, Issuing Bank or any Lender in connection herewith.
"CREDIT EXTENSION" means the making of a Loan or the issuing of a
Letter of Credit.
"CREDIT EXTENSION DATE" means the date of a Credit Extension.
"CREDIT PARTY" means each Person (other than any Agent, Issuing Bank or
any Lender or any other representative thereof) from time to time party to a
Credit Document.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement, futures contract, option contract, synthetic cap or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a party
and which is designed to hedge against fluctuations in currency values and not
for speculative purposes.
"DEFAULT" means a condition or event that, after notice or lapse of
time or both, would constitute an Event of Default.
"DEFAULTING LENDER" has the meaning assigned in SECTION 2.23.
"DEFAULT EXCESS" means, with respect to any Defaulting Lender, the
excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate
outstanding principal amount of Revolving Loans of all Lenders (calculated as if
all Defaulting Lenders (other than such Defaulting Lender) had funded all of
their respective Defaulted Revolving Loans) over the aggregate outstanding
principal amount of all Revolving Loans of such Defaulting Lender.
"DEFAULT PERIOD" means, with respect to any Defaulting Lender, the
period commencing on the date of the applicable Funding Default and ending on
the earliest of the following dates: (i) the
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date on which all Commitments are cancelled or terminated and/or the Obligations
are declared or become immediately due and payable, (ii) the date on which (a)
the Default Excess with respect to such Defaulting Lender shall have been
reduced to zero (whether by the funding by such Defaulting Lender of any
Defaulted Revolving Loans of such Defaulting Lender or by the non-pro rata
application of any voluntary or mandatory prepayments of the Revolving Loans in
accordance with the terms of SECTION 2.12 or SECTION 2.13 or by a combination
thereof) and (b) such Defaulting Lender shall have delivered to Company and
Administrative Agent a written reaffirmation of its intention to honor its
obligations hereunder with respect to its Commitment, and (iii) the date on
which Company, Administrative Agent and Requisite Lenders waive all Funding
Defaults of such Defaulting Lender in writing.
"DOLLARS" and the sign "$" mean the lawful money of the United States
of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary of Company organized under
the laws of any jurisdiction within the United States of America.
"ELIGIBLE ASSETS" has the meaning assigned to that term in SECTION
2.13(a).
"ELIGIBLE ASSIGNEE" means (i) a commercial bank, savings and loan
association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including insurance companies,
mutual funds and lease financing companies; and (ii) any Lender, any Affiliate
of any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed or advised by the same investment advisor
as such Lender or by an Affiliate of such investment advisor; PROVIDED, no
Affiliate of Company shall be an Eligible Assignee.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in
Section 3(3) of ERISA which is (currently or hereafter) or within the prior 6
years was maintained or contributed to by Company, any of its Subsidiaries or
any of their respective ERISA Affiliates.
"ENVIRONMENTAL CLAIM" means any investigation, notice, notice of
violation, claim, action, suit, proceeding, demand, abatement order or other
order or directive (conditional or otherwise), by any governmental authority or
any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law; (ii) in connection with any
Hazardous Material or any actual or alleged Hazardous Materials Activity; or
(iii) in connection with any actual or alleged damage, injury, threat or harm to
health, safety, natural resources or the environment.
"ENVIRONMENTAL LAWS" means any and all federal or state (or any
subdivision of either of them), statutes, ordinances, orders, rules,
regulations, guidance documents, judgments, Governmental Authorizations, or any
other requirements of governmental authorities relating to (i) environmental
matters, including those relating to any Hazardous Materials Activity; (ii) the
generation, use, storage, transportation or disposal of Hazardous Materials; or
(iii) occupational safety and health, industrial hygiene, land use or the
protection of human, plant or animal health or welfare, in any manner applicable
to Company or any of its Subsidiaries or any Facility.
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"EQUITY FINANCING" means the issuance by Holdings or the retention by
existing stockholders of Holdings of not less than $177.0 million of common
equity in connection with the Merger, which equity shall consist of (i) the
contribution by Fenway and the Other Investors in the Merger of not less than
$128,100,000 in cash in exchange for outstanding common stock of Merger Corp.,
(ii) the retention by the Management Investors of shares (or options to acquire
shares) of the common stock of Holdings with an estimated value of approximately
$16,500,000, (iii) the conversion by the ESOP of its 3,413,672 shares of the
Company's Series A Preferred Stock which is not allocated to the accounts of
ESOP participants into approximately 3,482,036 unallocated shares of Holdings'
Class C Common Stock which will be converted in the Merger into 3,482,036 shares
of unallocated common stock of Holdings and the retention of such unallocated
shares with an estimated value of $23,400,000 and (iv) the retention by certain
affiliates of Investcorp of approximately 1,336,998 shares of common stock of
Holdings with an estimated value of $9,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor thereto.
"ERISA AFFILIATE" means, as applied to any Person, (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated service group within the meaning of Section 414(m)
or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of Company or any of its
Subsidiaries shall continue to be considered an ERISA Affiliate of Company or
such Subsidiary within the meaning of this definition with respect to the period
such entity was an ERISA Affiliate of Company or such Subsidiary and with
respect to liabilities arising after such period for which Company or such
Subsidiary could be liable under the Internal Revenue Code or ERISA.
"ERISA EVENT" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the filing by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company, any of its Subsidiaries or any of their respective ERISA
Affiliates from any Pension Plan with two or more contributing sponsors or the
termination of any such Pension Plan resulting in liability pursuant to Section
4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to
terminate any Pension Plan, or the occurrence of any event or condition which
might constitute grounds under ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan; (vi) the imposition of liability
on Company, any of its Subsidiaries or any of their respective ERISA Affiliates
pursuant
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to Section 4062(e) or 4069 of ERISA or by reason of the application of Section
4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or
any of their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan that could reasonably be expected to result in material liability therefor,
or the receipt by Company, any of its Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(viii) the occurrence of an act or omission which could give rise to the
imposition on Company, any of its Subsidiaries or any of their respective ERISA
Affiliates of material fines, penalties, taxes or related charges under Chapter
43 of the Internal Revenue Code or under Section 406, 409, Section 502(c), (i)
or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix)
the assertion of a material claim (other than routine claims for benefits)
against any Employee Benefit Plan other than a Multiemployer Plan or the assets
thereof, or against Company, any of its Subsidiaries or any of their respective
ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from
the Internal Revenue Service of notice of the failure of any Pension Plan (or
any other Employee Benefit Plan intended to be qualified under Section 401(a) of
the Internal Revenue Code) to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan to
qualify for exemption from taxation under Section 501(a) of the Internal Revenue
Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n)
of the Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.
"ESOP" means the Simmons Company Employee Stock Ownership Plan, as
amended or restated effective January 17, 1989 and as it may be further amended
or restated from time to time.
"ESOP STOCK SALE AGREEMENT" means that certain ESOP Stock Sale and
Exchange Agreement dated as of July 22, 1998 (as amended by Amendment No. 1
thereto, dated as of September 25, 1998) by and among Holdings, Company, Merger
Corp. and State Street Bank & Trust Company, solely in its capacity as trustee
of the ESOP trust, as in effect on the Closing Date and as such agreement may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under SECTION 6.11.
"EURODOLLAR RATE LOAN" means a Loan bearing interest at a rate
determined by reference to the Adjusted Eurodollar Rate.
"EVENT OF DEFAULT" means each of the events set forth in SECTION 8.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXISTING INDENTURE" means that certain Indenture regarding the
Existing Notes dated as of April 18, 1996 by and between Company and SunTrust
Bank, Atlanta, as trustee, as in effect on the Closing Date.
"EXISTING NOTES" means the 10-3/4% Series A Senior Subordinated Notes
due 2006 of Company.
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"FACILITIES" means any real property (including all buildings, fixtures
or other improvements located thereon) now, hereafter or (except with respect to
SECTION 5 and SECTION 6) heretofore owned, leased, operated or used by Company
or any of its Subsidiaries or any of their respective predecessors or
Affiliates.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"FENWAY" means Fenway Partners Capital Fund, L.P. and Fenway Partners
Capital Fund II, L.P., each a Delaware limited partnership.
"FENWAY AGREEMENT" means that certain Advisory Agreement dated as of
October 29, 1998 by and among Holdings, Company and Fenway Partners, Inc., as in
effect on the Closing Date and as such agreement may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under SECTION 6.11.
"FINANCIAL PLAN" has the meaning assigned to that term in SECTION
5.1(k).
"FIRST PRIORITY" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien on such Collateral (other than Permitted
Encumbrances and Liens permitted pursuant to SECTION 6.2) and (ii) such Lien is
the only Lien (other than Permitted Encumbrances and Liens permitted pursuant to
SECTION 6.2) to which such Collateral is subject.
"FISCAL QUARTER" means a fiscal quarter of any Fiscal Year.
"FISCAL YEAR" means the fiscal year of Company and its Subsidiaries
ending on the last Saturday of each calendar year or, at the option of Company,
December 31 of each calendar year.
"FOREIGN SUBSIDIARY" means any Subsidiary of Company organized under
the laws of any jurisdiction outside the United States of America.
"FUNDING DEFAULT" shall have the meaning ascribed thereto in SECTION
2.23.
"FUNDING AND PAYMENT OFFICE" means (i) the office of Administrative
Agent located at the address set forth on the Administrative Agent's signature
page hereto, or (ii) such other office of Administrative Agent as may from time
to time hereafter be designated as such in a written notice delivered by
Administrative Agent to Company and each Lender.
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"FUNDING NOTICE" means a notice substantially in the form of EXHIBIT
A-1.
"GAAP" means United States generally accepted accounting principles in
effect as of the date of determination thereof.
"GOVERNMENTAL ACT" means any act or omission, whether rightful or
wrongful, of any present or future DE JURE or DE FACTO government or
governmental authority.
"GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any federal, state
or local governmental authority, agency or court.
"GSCP" has the meaning assigned to that term in the preamble hereto.
"GUARANTOR" means Holdings and each Subsidiary Guarantor.
"GUARANTY" means the Guaranty of each Guarantor set forth in SECTION 7.
"HAZARDOUS MATERIALS" means any chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority or which may or could pose a hazard to the health and safety of the
owners, occupants or any Persons in the vicinity of any Facility or to the
indoor or outdoor environment.
"HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or
threatened activity, event or occurrence involving any Hazardous Materials,
including the use, manufacture, possession, storage, holding, presence,
existence, location, Release, threatened Release, discharge, placement,
generation, transportation, processing, construction, treatment, abatement,
removal, remediation, disposal, disposition or handling of any Hazardous
Materials, and any corrective action or response action with respect to any of
the foregoing.
"HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency
Agreement designed to hedge against fluctuations in interest rates or currency
values, respectively and not for speculative purposes.
"HISTORICAL FINANCIAL STATEMENTS" means (i) the audited financial
statements of Company and its Subsidiaries for the three Fiscal Years ending
most recently prior to the Closing Date, consisting of a consolidated balance
sheet and the related consolidated statements of income, stockholders' equity
and cash flows for such Fiscal Years; and (ii) unaudited financial statements of
Company and its Subsidiaries for the period from December 27, 1997 through and
as at the end of the month most recently ended prior to the Closing Date,
consisting of a consolidated balance sheet and the related consolidated
statements of income, stockholders' equity and cash flows for the period ending
on such date, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
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changes resulting from audit and normal year-end adjustments in the case of such
unaudited financial statements.
"HOLDINGS" has the meaning assigned to that term in the preamble
hereto.
"HOLDINGS COMMON STOCK" means the common stock of Holdings, par value
$0.01 per share.
"HOLDINGS NOTES" means the increasing rate 15% Junior Subordinated
Notes due 2011 issued by Holdings in the aggregate principal amount of
$10,000,000 and governed by the terms of the Securities Purchase Agreement.
"HOLDINGS NOTES DOCUMENTS" means the Holdings Notes, the Securities
Purchase Agreement and each other document executed in connection with the
Holdings Notes, as each such document may be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under SECTION 6.11.
"INDEBTEDNESS", as applied to any Person, means, without duplication
(i) all indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services (excluding any such obligations incurred
under ERISA), which purchase price is (a) due more than six months from the date
of incurrence of the obligation in respect thereof (other than trade payables
which (x) are due more than six months from the date of incurrence in the
ordinary course of business and (y) are not past due) or (b) evidenced by a note
or similar written instrument, and (v) all indebtedness secured by any Lien on
any property or asset owned by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person. Obligations under Interest Rate
Agreements and Currency Agreements constitute (X) in the case of Hedge
Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and
in neither case constitute Indebtedness.
"INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities,
obligations, losses, damages (including natural resource damages), penalties,
actions, judgments, suits, claims (including Environmental Claims), costs
(including the costs of any investigation, study, sampling, testing, abatement,
cleanup, removal, remediation or other response action necessary to remove,
remediate, clean up or abate any Hazardous Materials Activity), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising
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out of (i) this Agreement or the other Credit Documents or the transactions
contemplated hereby or thereby (including Lenders' agreement to make Credit
Extensions or the use or intended use of the proceeds thereof or the use or
intended use of any thereof, or any enforcement of any of the Credit Documents
(including any sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranty)); (ii) the statements contained
in the commitment letter delivered by any Lender to Company with respect
thereto; or (iii) any Environmental Claim or any Hazardous Materials Activity
relating to or arising from, directly or indirectly, any past or present
activity, operation, land ownership, or practice of Company or any of its
Subsidiaries.
"INDEMNITEE" has the meaning assigned to that term in SECTION 10.3.
"INTELLECTUAL PROPERTY" means all patents, trademarks, servicemarks,
tradenames, copyrights, mask works, trade secrets, technology, know-how and
processes and rights of publicity used in or necessary for the conduct of the
business of Company and its Subsidiaries as currently conducted that are
material to the condition (financial or otherwise), business or operations of
Company and its Subsidiaries, individually or in the aggregate.
"INTEREST PAYMENT DATE" means with respect to (i) any Base Rate Loan,
each March 30, June 30, September 30 and December 30 of each year, commencing on
the first such date to occur after the Closing Date; and (ii) any Eurodollar
Rate Loan, the last day of each Interest Period applicable to such Loan;
PROVIDED, in the case of each Interest Period of longer than three months
"INTEREST PAYMENT DATE" shall also include each date that is three months, or an
integral multiple thereof, after the commencement of such Interest Period.
"INTEREST PERIOD" means, in connection with a Eurodollar Rate Loan, an
interest period of one-, two-, three- or six-months, as selected by Company in
the applicable Notice, (i) initially, commencing on the Credit Extension Date or
Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter,
commencing on the day on which the immediately preceding Interest Period
expires; PROVIDED, (a) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless no further Business Day occurs in such month, in
which case such Interest Period shall expire on the immediately preceding
Business Day; (b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to
clauses (c) through (f) of this definition, end on the last Business Day of a
calendar month; (c) no Interest Period with respect to any portion of any Class
of Term Loans shall extend beyond the such Class's Term Loan Expiration Date;
(d) no Interest Period with respect to any portion of the Revolving Loans shall
extend beyond the Revolving Loan Commitment Termination Date; (e) no Interest
Period with respect to any portion of a Class of Term Loans shall extend beyond
a date on which Company is required to make a scheduled payment of principal of
such Class of Term Loans, unless the sum of (1) the aggregate principal amount
of such Class of Term Loans that are Base Rate Loans, PLUS (2) the aggregate
principal amount of such Class of Term Loans that are Eurodollar Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the principal
amount required to be paid on such Class of Term Loans on such date; and (f) no
Interest Period with respect to any portion of the Revolving Loans shall extend
beyond the date on which a permanent reduction of the Revolving Loan Commitments
is scheduled to occur
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unless the sum of (1) the aggregate principal amount of Revolving Loans that are
Base Rate Loans, PLUS (2) the aggregate principal amount of Revolving Loans that
are Eurodollar Rate Loans with Interest Periods expiring on or before such date,
PLUS (3) the excess of the Revolving Loan Commitments then in effect over the
aggregate principal amount of Revolving Loans then outstanding equals or exceeds
the permanent reduction of the Revolving Loan Commitments that is scheduled to
occur on such date.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement to which Company or any of its Subsidiaries is a party
and which is designed to hedge against fluctuations in interest rates and not
for speculative purposes.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any successor
statute.
"INVESTMENT" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any of the Securities of any other Person (including any Subsidiary
of Company); (ii) any direct or indirect redemption, retirement, purchase or
other acquisition for value, by any Subsidiary of Company from any Person (other
than Company or any of its Subsidiaries), of any equity Securities of such
Subsidiary; (iii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business) or capital contribution
by Company or any of its Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business; or (iv) Interest Rate Agreements or Currency Agreements not
constituting Hedge Agreements. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment.
"ISSUING BANK" means, with respect to any Letter of Credit, the Lender
which issues such Letter of Credit.
"JOINT LEAD ARRANGER" means each of GSCP and Warburg, each in its
capacity as joint lead arranger.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether in corporate, partnership or other legal form; PROVIDED, in
no event shall any corporate Subsidiary of any Person be considered to be a
Joint Venture to which such Person is a party.
"JUNIOR SUBORDINATED NOTES" means the increasing rate 13% (initially 7%
in cash and 6% in kind) Junior Subordinated Notes due 2010 issued by Company in
the aggregate principal amount of up to $30,000,000 and governed by the terms of
the Securities Purchase Agreement.
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"JUNIOR SUBORDINATED NOTES DOCUMENTS" means the Junior Subordinated
Notes, the Securities Purchase Agreement and each other document executed in
connection with the Junior Subordinated Notes, as each such document may be
amended, restated, supplemented or otherwise modified from time to time to the
extent permitted under SECTION 6.11.
"LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold
Property, a letter, certificate or other instrument in writing from the lessor
under the related lease, satisfactory in form and substance to Administrative
Agent, pursuant to which such lessor agrees, for the benefit of Administrative
Agent, (i) that without any further consent of such lessor or any further action
on the part of the Credit Party holding such Leasehold Property, such Leasehold
Property may be encumbered pursuant to a Mortgage and may be assigned to
Administrative Agent, any Lender or Affiliate of either at a foreclosure sale or
in a transfer in lieu of such a sale, (ii) that lessor will reasonably consent
to the assignment of the Leasehold Property to a third party purchaser at a
foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent
third party assignee if Administrative Agent, any Lender, or an Affiliate of
either so acquires such Leasehold Property), (iii) that such lessor shall not
terminate such lease as a result of a monetary or payment default by such Credit
Party thereunder without first giving Administrative Agent notice of such
default and a reasonable period to cure such default (or, in the case of a
non-monetary or non-payment default, without first giving the Administrative
Agent such period as may reasonably be required to cure such default), (iv) to
the matters contained in a Collateral Access Agreement, and (v) to such other
matters relating to such Leasehold Property as Administrative Agent may
reasonably request, in each case with such changes or omissions as may be agreed
to by the Administrative Agent in the reasonable exercise of its discretion.
"LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party
as lessee under any lease of real property, other than any such leasehold
interest designated from time to time by Administrative Agent in its reasonable
discretion as not being required to be included in the Collateral.
"LENDER" has the meaning assigned to that term in the preamble hereto;
PROVIDED, the term "LENDERS" shall include Swing Line Lender unless the context
otherwise requires.
"LENDER COUNTERPARTY" means each Lender, Joint Lead Arranger or any of
their respective Affiliates counterparty to a Hedge Agreement.
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Bank for
the account of Company pursuant to SECTION 2.3.
"LETTER OF CREDIT SUBLIMIT" means the lesser of (i) $15,000,000 and
(ii) the aggregate amount of the Revolving Loan Commitments then in effect.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is, or at any time thereafter may
become, available for drawing under all
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Letters of Credit then outstanding, PLUS (ii) the aggregate amount of all
drawings under Letters of Credit honored by Issuing Bank and not theretofore
reimbursed by or on behalf of Company.
"LEVERAGE RATIO" means the ratio of (i) Consolidated Total Debt as of
the last day of any Fiscal Quarter to (II) Consolidated Adjusted EBITDA for the
four-Fiscal Quarter period then ended, in each case as set forth in the most
recent Compliance Certificate delivered by Company to Administrative Agent
pursuant to SECTION 5.1(d).
"LIEN" means any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"LOAN" means a Tranche A Term Loan, a Tranche B Term Loan, a Tranche C
Term Loan, a Revolving Loan or a Swing Line Loan.
"MANAGEMENT FEES" means (i) with respect to annual management fees
payable by Company pursuant to the Fenway Agreement, an amount for any Fiscal
Year not to exceed the lesser of (1) 0.25% of the annual net sales of Company
for the prior Fiscal Year and (2) $2,250,000, PLUS (ii) any other fees payable
by Company in connection with other transactions pursuant to the Fenway
Agreement; PROVIDED, that solely for purposes of calculations made pursuant to
clause (vi) of the definition of Consolidated Adjusted EBITDA, such other
transaction fees shall not exceed 1.5% of the aggregate transaction value for
any such other transactions.
"MANAGEMENT INVESTORS" means the management officers and employees of
Company and its Subsidiaries identified as Management Investors on SCHEDULE
1.1(a) annexed hereto.
"MARGIN STOCK" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of Company and its Subsidiaries, taken as a whole, or (ii) the
impairment (other than as a result of circumstances covered by clause (i) above)
of the ability of Company or any of its Subsidiaries to perform, or
Administrative Agent or Lenders to enforce, the Obligations in any material
respect.
"MATERIAL CONTRACT" means any contract or other arrangement to which
Company or any of its Subsidiaries is a party (other than the Credit Documents)
for which breach, nonperformance, cancellation or failure to renew could have a
Material Adverse Effect.
"MATERIAL SUBSIDIARY" means each Subsidiary of Company now existing or
hereafter acquired or formed by Company or its Subsidiaries which, on a
consolidated basis for such Subsidiary and its Subsidiaries, (i) for the most
recent Fiscal Year accounted for more than 5% of the consolidated revenues of
Company and its Subsidiaries or (ii) as at the end of such Fiscal Year, was the
owner of more than 5% of the consolidated assets of Company and its
Subsidiaries.
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"MERGER" means the merger of Merger Corp. with and into Holdings in
accordance with the terms of the Recapitalization Agreement and the Certificate
of Merger, with Holdings being the surviving corporation in such Merger.
"MERGER CORP." has the meaning assigned to that term in the recitals to
this Agreement.
"MORTGAGE" means (i) a security instrument (whether designated as a
deed of trust or a mortgage or by any similar title) executed and delivered by
any Credit Party, substantially in the form of EXHIBIT K annexed hereto or in
such other form as may be approved by Administrative Agent in its sole
discretion, in each case with such changes thereto as may be recommended by
Administrative Agent's local counsel based on local laws or customary local
mortgage or deed of trust practices, or (ii) at Administrative Agent's option,
in the case of an Additional Mortgaged Property (as defined in SECTION 5.12), an
amendment to an existing Mortgage, in form satisfactory to Administrative Agent,
adding such Additional Mortgaged Property to the Real Property Assets encumbered
by such existing Mortgage, in either case as such security instrument or
amendment may be amended, restated, supplemented or otherwise modified from time
to time. "MORTGAGES" means all such instruments, collectively.
"MORTGAGED PROPERTY" means a Closing Date Mortgaged Property (as
defined in SECTION 3.1(e)) or an Additional Mortgaged Property (as defined in
SECTION 5.12).
"MORTGAGE POLICY" means a Closing Date Mortgage Policy (as defined in
SECTION 3.1(e)) or an Additional Mortgage Policy (as defined in SECTION 5.12).
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a
"multiemployer plan" as defined in Section 3(37) of ERISA.
"NARRATIVE REPORT" means, with respect to the financial statements for
which such narrative report is required, a narrative report describing the
operations of Company and its Subsidiaries in the form prepared for presentation
to senior management thereof for the applicable month, Fiscal Quarter or Fiscal
Year and for the period from the beginning of the then current Fiscal Year to
the end of such period to which such financial statements relate.
"NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, an
amount equal to the difference of (i) Cash payments (including any Cash received
by way of deferred payment pursuant to, or by monetization of, a note receivable
or otherwise, but only as and when so received) received from such Asset Sale,
MINUS (ii) any bona fide direct costs incurred in connection with such Asset
Sale, including (a) income taxes reasonably estimated to be actually payable
within two years of the date of such Asset Sale as a result of any gain
recognized in connection with such Asset Sale and (b) payment of the outstanding
principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) that is secured by a Lien on the stock or
assets in question and that is required to be repaid under the terms thereof as
a result of such Asset Sale.
"NET INSURANCE/CONDEMNATION PROCEEDS" means the difference of (i) any
Cash payments or proceeds received by Company or any of its Subsidiaries (a)
under any business interruption or
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casualty insurance policy in respect of a covered loss thereunder or (b) as a
result of the taking of any assets of Company or any of its Subsidiaries by any
Person pursuant to the power of eminent domain, condemnation or otherwise, or
pursuant to a sale of any such assets to a purchaser with such power under
threat of such a taking, MINUS, in each case, (ii)(a) any actual and reasonable
documented costs incurred by Company or any of its Subsidiaries in connection
with the adjustment or settlement of any claims of Company or such Subsidiary in
respect thereof and (b) income taxes reasonably estimated to be actually payable
within two years of the date of such event giving rise to such Net Insurance/
Condemnation Proceeds as a result of any gain recognized in connection with such
event; PROVIDED, HOWEVER, that the receipt by Company and its Subsidiaries from
the Closing Date through the date of determination of up to an aggregate of
$10,000,000 in Net Insurance/Condemnation Proceeds of business interruption
insurance described in clause (a) above shall not be "Net Insurance/Condemnation
Proceeds" for purposes of SECTION 2.13(a).
"NON-GUARANTOR SUBSIDIARY" means (i) each of the Subsidiaries
identified as a Non-Subsidiary Guarantor on SCHEDULE 4.1 annexed hereto and (ii)
each Person that becomes a Subsidiary of Company after the date hereof and, in
accordance with SECTION 5.9, is not required to become a Subsidiary Guarantor;
PROVIDED, HOWEVER, that any such Subsidiary shall cease to be a Non-Guarantor
Subsidiary if it is or at any time becomes a Material Subsidiary or if it
otherwise ceases to be a Non-Guarantor Subsidiary pursuant to SECTION 5.9.
"NOTE" means a Tranche A Term Loan Note, a Tranche B Term Loan Note, a
Tranche C Term Loan Note, a Revolving Note or a Swing Line Note.
"NOTICE" means a Funding Notice, a Request for Issuance, or a
Conversion/Continuation Notice.
"OBLIGATIONS" means, with respect to any Credit Party, obligations of
such Credit Party, whether now existing or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, whether due or not
due, and however arising under or in connection with this Agreement and any
other Credit Documents and any Hedge Agreements with one or more Lender
Counterparties, including those arising under successive borrowing transactions
hereunder which shall either continue the Obligations of such Credit Party from
time to time or renew them after they have been satisfied and including interest
which, but for the filing of a petition in bankruptcy with respect to such
Credit Party, would have accrued on any Obligation, whether or not a claim is
allowed against such Credit Party for such interest in the related bankruptcy
proceeding.
"OPERATING LEASE" means, as applied to any Person, any lease (including
leases that may be terminated by the lessee at any time but excluding any such
lease under which that Person is the lessor) of any property (whether real,
personal or mixed) that is not a Capital Lease.
"OTHER INVESTORS" means such Persons other than Fenway identified as
"Other Investors" on SCHEDULE 1.1(a) annexed hereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
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"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"PERMITTED ACQUISITION" means an acquisition of stock, equity
securities or assets made pursuant to SECTION 6.7(v).
"PERMITTED ENCUMBRANCES" means the following types of Liens (excluding
any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA, any such Lien relating to or imposed in connection
with any Environmental Claim, and any such Lien expressly prohibited by any
applicable terms of any of the Collateral Documents): (i) Liens for taxes,
assessments or governmental charges or claims the payment of which is not, at
the time, required by SECTION 5.3; (ii) statutory Liens of landlords, statutory
Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen,
mechanics, repairmen, workmen and materialmen, and other Liens imposed by law,
in each case incurred in the ordinary course of business (a) for amounts not yet
overdue or (b) for amounts that are overdue and that (in the case of any such
amounts overdue for a period in excess of 30 days) are being contested in good
faith by appropriate proceedings, so long as (1) such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made for any such contested amounts, and (2) in the case of a Lien with respect
to any portion of the Collateral, such contest proceedings operate to stay the
sale of any portion of the Collateral on account of such Lien; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance, old age pensions and other types
of social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts, trade
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money), so long as no
foreclosure, sale or similar proceedings have been commenced with respect to any
portion of the Collateral on account thereof; (iv) any attachment or judgment
Lien not constituting an Event of Default under SECTION 8.1(h); (v) leases or
subleases granted to third parties in accordance with any applicable terms of
the Collateral Documents and not interfering in any material respect with the
ordinary conduct of the business of Company or any of its Subsidiaries or
resulting in a material diminution in the value of any Collateral as security
for the Obligations; (vi) easements, rights-of-way, restrictions, encroachments,
and other minor defects or irregularities in title, in each case which do not
and will not interfere in any material respect with the ordinary conduct of the
business of Company or any of its Subsidiaries or result in a material
diminution in the value of any Collateral as security for the Obligations; (vii)
any (a) interest or title of a lessor or sublessor under any lease permitted
hereunder, (b) restriction, Lien or encumbrance that the interest or title of
such lessor or sublessor may be subject to, or (c) subordination of the interest
of the lessee or sublessee under such lease to any restriction, Lien or
encumbrance referred to in the preceding clause (b); (viii) Liens arising from
filing UCC financing statements relating solely to leases permitted by this
Agreement; (ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (x) any zoning or similar law or right reserved to or
vested in any governmental office or agency to control or regulate the use of
any real property; (xi) Liens securing obligations (other than obligations
representing Indebtedness for borrowed money) under operating, reciprocal
easement or similar agreements entered into in the ordinary course of business
of Company and its Subsidiaries; and (xii) licenses of patents, trademarks and
other intellectual property rights granted by Company or any of its Subsidiaries
in the ordinary
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course of business and not interfering in any material respect with the ordinary
conduct of the business of Company or such Subsidiary.
"PERMITTED LIENS" means each of the Liens permitted pursuant to SECTION
6.2.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions
thereof) and agencies or other administrative or regulatory bodies thereof.
"PLAN OF CORRECTION" means a plan which Company reasonably believes
will result in a substantial elimination of Year 2000 Problems before any
processing failure of a System or of Systems due to Year 2000 Problems which
might have a Material Adverse Effect and, in the case of all Systems critical to
the business or operations of Company and its Subsidiaries, a substantial
elimination of Year 2000 Problems by June 30, 1999.
"PLEDGE AND SECURITY AGREEMENT" means the Pledge and Security Agreement
entered into by and among Company, Guarantors and Administrative Agent dated as
of the date hereof, substantially in the form of EXHIBIT J annexed hereto, as
such Pledge and Security Agreement may hereafter be amended, restated,
supplemented or otherwise modified from time to time.
"PLEDGED COLLATERAL" means the "Pledged Collateral" as defined in the
Pledge and Security Agreement.
"PRIME RATE" means the rate that the Administrative Agent announces
from time to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. The Administrative Agent or any
other Lender may make commercial loans or other loans at rates of interest at,
above or below the Prime Rate.
"PRO RATA SHARE" means (i) with respect to all payments, computations
and other matters relating to the Tranche A Term Loan of any Lender, the
percentage obtained by DIVIDING (a) the Tranche A Term Loan Exposure of that
Lender BY (b) the aggregate Tranche A Term Loan Exposure of all Lenders, (ii)
with respect to all payments, computations and other matters relating to the
Tranche B Term Loan of any Lender, the percentage obtained by DIVIDING (a) the
Tranche B Term Loan Exposure of such Lender BY (b) the aggregate Tranche B Term
Loan Exposure of all Lenders, (iii) with respect to all payments, computations
and other matters relating to the Tranche C Term Loan of any Lender, the
percentage obtained by DIVIDING (a) the Tranche C Term Loan Exposure of such
Lender BY (b) the aggregate Tranche C Term Loan Exposure of all Lenders, (iv)
with respect to all payments, computations and other matters relating to the
Revolving Loan Commitment or Revolving Loans of any Lender or any Letters of
Credit issued or participation therein purchased by any Lender or any
participation in any Swing Line Loans purchased by any Lender, the percentage
obtained by DIVIDING (a) the Revolving Credit Exposure of that Lender BY (b) the
aggregate
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Revolving Credit Exposure of all Lenders, and (V) for all other purposes with
respect to each Lender, the percentage obtained by DIVIDING (a) the sum of the
Tranche A Term Loan Exposure of that Lender, PLUS the Tranche B Term Loan
Exposure of that Lender, PLUS the Tranche C Term Loan Exposure of that Lender,
PLUS the Revolving Credit Exposure of that Lender, BY (B) the sum of the
aggregate Tranche A Term Loan Exposure of all Lenders, PLUS the aggregate
Tranche B Term Loan Exposure of all Lenders, PLUS the aggregate Tranche C Term
Loan Exposure of all Lenders, PLUS the aggregate Revolving Credit Exposure of
all Lenders, in any such case as the applicable percentage may be adjusted by
assignments permitted pursuant to SECTION 10.6. The initial Pro Rata Share of
each Lender for purposes of each of clauses (i), (ii), (iii), (iv) and (v) of
the preceding sentence is set forth opposite the name of that Lender in SCHEDULE
1.1(b) annexed hereto.
"PROPOSED REINVESTMENT PROCEEDS" has the meaning assigned to that term
in SECTION 2.13(a).
"RCRA" means the Resource Conservation and Recovery Act and any state
equivalents, as any of the same may be amended from time to time, and any
successors thereto.
"REAL PROPERTY ASSET" means, at any time of determination, any interest
then owned by any Credit Party in any real property.
"RECAPITALIZATION" means the transactions contemplated by the
Recapitalization Agreement.
"RECAPITALIZATION AGREEMENT" means that certain Agreement and Plan of
Merger dated as of July 16, 1998 (as amended by Amendment No. 1 dated as of
September 22, 1998 and Amendment No. 2 dated as of October 26, 1998) by and
among Holdings, Company and Merger Corp., in the form delivered to Agents and
Lenders prior to their execution of this Agreement and as such agreement may be
further amended from time to time thereafter to the extent permitted under
SECTION 6.11.
"RECAPITALIZATION FINANCING REQUIREMENTS" means the aggregate of all
amounts necessary (i) to pay the cash portion of the Recapitalization, (ii) to
refinance all Indebtedness outstanding under Company's existing Credit
Agreement, dated as of March 22, 1996 among Company, the lenders party thereto
and The Chase Manhattan Bank, as administrative agent, (iii) to refinance and
discharge the Existing Notes and (iv) to pay Transaction Costs.
"RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect
to which a Record Document (as hereinafter defined) has been recorded in all
places necessary or desirable, in Administrative Agent's reasonable judgment, to
give constructive notice of such Leasehold Property to third-party purchasers
and encumbrancers of the affected real property. For purposes of this
definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold
Property, (i) the lease evidencing such Leasehold Property or a memorandum
thereof, executed and acknowledged by the owner of the affected real property,
as lessor, or (ii) if such Leasehold Property was acquired or subleased from the
holder of a Recorded Leasehold Interest, the applicable assignment or sublease
document, executed and acknowledged by such holder, in each case in form
sufficient to give such constructive notice upon recordation and otherwise in
form reasonably satisfactory to Administrative Agent.
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"REFUNDED SWING LINE LOAN" has the meaning assigned to that term in
SECTION 2.2(e).
"REFUNDING NOTICE" has the meaning assigned to that term in SECTION
2.2(e).
"REGISTER" has the meaning assigned to that term in SECTION 2.6.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REIMBURSEMENT DATE" has the meaning assigned to that term in SECTION
2.3(d).
"RELATED AGREEMENTS" means, collectively, the Recapitalization
Agreement, the Stockholders Agreements, the ESOP Stock Sale Agreement, the
Certificate of Merger, the Senior Subordinated Bridge Loan Documents, the Senior
Subordinated Notes Documents, the Junior Subordinated Notes Documents, the
Holdings Notes Documents, the Fenway Agreement and all documents relating to any
of the foregoing.
"RELEASE" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of any Hazardous Material into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Material), including the
movement of any Hazardous Material through the air, soil, surface water or
groundwater.
"REQUEST FOR ISSUANCE" means a notice in the form of EXHIBIT A-3.
"REQUISITE CLASS LENDERS" means, at any time of determination (i) for
the Class of Lenders having Tranche A Term Loan Exposure, Lenders having or
holding more than 50% of the sum of the aggregate Tranche A Term Loan Exposure
of all Lenders, (ii) for the Class of Lenders having Tranche B Term Loan
Exposure, Lenders having or holding more than 50% of the sum of the aggregate
Tranche B Term Loan Exposure of all Lenders, (iii) for the Class of Lenders
having Tranche C Term Loan Exposure, Lenders having or holding more than 50% of
the sum of the aggregate Tranche C Term Loan Exposure of all Lenders, and (iv)
for the Class of Lenders having Revolving Credit Exposure, Lenders having or
holding more than 50% of the sum of the aggregate Revolving Credit Exposure of
all Lenders.
"REQUISITE LENDERS" means Lenders having or holding more than 50% of
the sum of (i) the aggregate Tranche A Term Loan Exposure of all Lenders, PLUS
(ii) the aggregate Revolving Credit Exposure of all Lenders, PLUS (iii) the
aggregate Tranche B Term Loan Exposure of all Lenders, PLUS (iv) the aggregate
Tranche C Term Loan Exposure of all Lenders.
"RESPONSIBLE OFFICER" means any of the chairman of the board, the
president, the chief executive officer, the chief financial officer, any senior
or executive vice president, the general counsel, the treasurer, the principal
financial officer or principal accounting officer, the secretary or the
treasurer of Holdings, Company or, as applicable, any Subsidiary of Company.
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"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and (iv)
any payment or prepayment of principal of, premium, if any, or interest on, or
redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
"REVOLVING CREDIT EXPOSURE" means, with respect to any Lender as of any
date of determination (i) prior to the termination of the Revolving Loan
Commitments, such Lender's Revolving Loan Commitment; and (ii) after the
termination of the Revolving Loan Commitments, the sum of (a) the aggregate
outstanding principal amount of the Revolving Loans of such Lender, PLUS (b) in
the case of Issuing Bank, the aggregate Letter of Credit Usage in respect of all
Letters of Credit (net of any participation purchased by Lenders in such Letters
of Credit or any unreimbursed drawing thereunder), PLUS (c) the aggregate amount
of all participation purchased by such Lender in any outstanding Letters of
Credit or any unreimbursed drawing under any Letter of Credit, PLUS (d) in the
case of Swing Line Lender, the aggregate outstanding principal amount of all
Swing Line Loans (net of any participation therein purchased by other Lenders),
PLUS (e) the aggregate amount of all participations purchased by such Lender in
any outstanding Swing Line Loans.
"REVOLVING LOAN" means a Loan made by a Lender to Company pursuant to
SECTION 2.2(a)(i).
"REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make
Revolving Loans to Company pursuant to SECTION 2.2(a)(i) and "REVOLVING LOAN
COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount
of each Lender's Revolving Loan Commitment is initially as set forth opposite
the name of that Lender in SCHEDULE 1.1(b) annexed hereto, and may be adjusted
or reduced pursuant to the terms and conditions hereof. As of the Closing Date,
the aggregate amount of the Revolving Loan Commitments shall be $80,000,000.
"REVOLVING LOAN COMMITMENT PERIOD" means the period from the Closing
Date to but excluding the Revolving Loan Commitment Termination Date.
"REVOLVING LOAN COMMITMENT TERMINATION DATE" means the earliest to
occur of (i) the sixth anniversary of the Closing Date, (ii) the date the
Revolving Loan Commitments are permanently reduced to zero pursuant to SECTION
2.12(b), SECTION 2.13 or SECTION 2.14, and (iii) the date of the termination of
the Revolving Loan Commitments pursuant to SECTION 8.1.
"REVOLVING LOAN LENDER" means a Lender having a Revolving Loan
Commitment.
"REVOLVING NOTE" means a promissory note in the form of EXHIBIT B-4, as
it may be amended, restated, supplemented or otherwise modified from time to
time.
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"SECURITIES" means any stock, shares, partnership or other similar
interests, voting trust certificates, certificates of interest or participation
in any profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or unsecured,
convertible, subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, shares or participations
in temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"SECURITIES PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement dated as of October 29, 1998 by and among Holdings, Company and
Simmons Holdings, LLC, a Delaware limited liability company, pursuant to which
the Junior Subordinated Notes and the Holdings Notes are issued, as in effect on
the Closing Date and as such agreement may thereafter be amended, restated,
supplemented or otherwise modified from time to time to the extent permitted
under Section 6.11.
"SENIOR DEBT LEVERAGE RATIO" means the ratio of (i) Consolidated Total
Senior Debt as of the last day of any Fiscal Quarter to (ii) Consolidated
Adjusted EBITDA for the four-Fiscal Quarter period then ended, in each case as
set forth in the most recent Compliance Certificate delivered by Company to
Administrative Agent pursuant to SECTION 5.1(d).
"SENIOR SUBORDINATED BRIDGE LOAN AGREEMENT" means that certain Senior
Subordinated Increasing Rate Loan Agreement dated as of October 29, 1998 by and
between Company and West Street Fund I, L.L.C., an affiliate of GSCP, and UBS
A.G., Stamford Branch, pursuant to which the Senior Subordinated Bridge Loans
are made, as in effect on the Closing Date and as such agreement may thereafter
be amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under SECTION 6.11.
"SENIOR SUBORDINATED BRIDGE LOAN DOCUMENTS" means the Senior
Subordinated Bridge Loan Agreement, the Senior Subordinated Bridge Notes, the
Senior Subordinated Bridge Loan Guaranties and each other document executed in
connection with the Senior Subordinated Bridge Loans, as each such document may
be amended, restated, supplemented or otherwise modified from time to time to
the extent permitted under SECTION 6.11.
"SENIOR SUBORDINATED BRIDGE LOAN GUARANTIES" means, collectively, each
of the guaranties by Subsidiaries of Company of Company's obligations with
respect to the Senior Subordinated Bridge Loans as set forth in the Senior
Subordinated Bridge Loan Agreement, in each case with such changes thereto when
executed as are permitted under SECTION 6.11 and as each such guaranty may
thereafter be amended, restated, supplemented or otherwise modified from time to
time to the extent permitted under SECTION 6.11.
"SENIOR SUBORDINATED BRIDGE LOANS" means the $75,000,000 in initial
aggregate principal amount of Indebtedness in respect of "Bridge Loans" (as such
term is defined in the Senior
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Subordinated Bridge Loan Agreement) incurred by Company pursuant to the Senior
Subordinated Bridge Loan Agreement, and shall include any "Term Loans" (as such
term is defined in the Senior Subordinated Bridge Loan Agreement) or "Exchange
Notes" (as such term is defined in the Senior Subordinated Bridge Loan
Agreement) into which such Initial Loans are converted.
"SENIOR SUBORDINATED BRIDGE NOTES" means the promissory notes of
Company issued pursuant to the Senior Subordinated Bridge Loan Agreement and
evidencing the Senior Subordinated Bridge Loans, as such notes may be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under SECTION 6.11.
"SENIOR SUBORDINATED NOTE DOCUMENTS" means the Senior Subordinated Note
Indenture, the Senior Subordinated Notes and each other document executed in
connection with the Senior Subordinated Notes, as each such document may be
amended, restated, supplemented or otherwise modified from time to time to the
extent permitted under SECTION 6.11.
"SENIOR SUBORDINATED NOTE INDENTURE" means the indenture pursuant to
which the Senior Subordinated Notes will be issued, with such terms concerning
maturities, amortization schedules, covenants, defaults, remedies, subordination
provisions, transfer restrictions and other material terms which, taken as a
whole, are no less favorable to the Lenders than the corresponding terms of the
Senior Subordinated Bridge Loan Documents and are otherwise reasonably
satisfactory to Administrative Agent, with interest payable thereon not to
exceed 15% per annum (and the cash portion of which shall not exceed 13% per
annum), as such indenture may thereafter be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under SECTION 6.11.
"SENIOR SUBORDINATED NOTES" means the permanent Senior Subordinated
Notes of Company in the aggregate principal amount not to exceed $105,000,000
(plus the amount of accrued interest and premium, if any, of the Indebtedness
refinanced thereby, together with reasonable fees and expenses related to such
refinancing) and issued pursuant to the Senior Subordinated Note Indenture to
refinance all or any portion of the Senior Subordinated Bridge Notes and/or the
Junior Subordinated Notes, with such changes thereto when executed as are
permitted under SECTION 6.11 and as such notes may thereafter be amended,
restated, supplemented or otherwise modified from time to time to the extent
permitted under SECTION 6.11.
"SOLVENCY CERTIFICATE" means a certificate in the form of EXHIBIT G.
"SOLVENT" means, with respect to any Person, that as of the date of
determination both (i) (a) the then fair saleable value of the property of such
Person is (1) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (2) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (c) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such Person is
"solvent" within the meaning given that term and similar terms
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under applicable laws relating to fraudulent transfers and conveyances. For
purposes of this definition, the amount of any contingent liability at any time
shall be computed as the amount that, in light of all of the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of Company or any of its Subsidiaries, (ii) the
obligations of third party insurers of Company or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring third party
insurers, (iii) performance, payment, deposit or surety obligations of Company
or any of its Subsidiaries, in any case if required by law or governmental rule
or regulation or in accordance with custom and practice in the industry, and
(iv) such other obligations of Company and its Subsidiaries as may be reasonably
acceptable to Administrative Agent; PROVIDED that Standby Letters of Credit may
not be issued for the purpose of supporting (a) trade payables or (b)
Indebtedness constituting "antecedent debt" (as that term is used in Section 547
of the Bankruptcy Code).
"STOCKHOLDERS AGREEMENTS" mean those certain Stockholders Agreements as
amended through the Closing Date (i) by and among Holdings, Fenway, the ESOP,
Investcorp and the other Persons listed therein and Company and (ii) by and
among Holdings, the Management Investors and the other Persons listed therein,
each as in effect on the Closing Date, and as such agreements may be amended
from time to time thereafter to the extent permitted under SECTION 6.11.
"SUBORDINATED INDEBTEDNESS" means (i) the Indebtedness of Company under
the Senior Subordinated Bridge Loan Documents and the Senior Subordinated Notes
Documents, (ii) the Indebtedness of Company under the Junior Subordinated Notes
Documents, (iii) any Indebtedness permitted under SECTION 6.1(vii), and (iv) any
other Indebtedness of Company or any of its Subsidiaries subordinated in right
of payment to the Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions
and other material terms in form and substance satisfactory to Administrative
Agent and Requisite Lenders.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person or Persons (whether
directors, managers, trustees or other Persons performing similar functions)
having the power to direct or cause the direction of the management and policies
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof.
"SUBSIDIARY GUARANTOR" means any Subsidiary of Company that is a party
hereto as of the Closing date or becomes a party to the Guaranty at any time
after the Closing Date pursuant to SECTION 5.9.
"SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term
in SECTION 9.8(c).
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"SWING LINE LENDER" means Wachovia Bank, National Association in its
capacity as Swing Line Lender hereunder, together with its permitted successors
and assigns in such capacity.
"SWING LINE LOAN" means a Loan made by Swing Line Lender to Company
pursuant to SECTION 2.2(a)(ii).
"SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender
to make Swing Line Loans to Company pursuant to SECTION 2.2(a)(ii).
"SWING LINE NOTE" means a promissory note substantially in the form of
EXHIBIT B-5, as it may be amended, restated, supplemented or otherwise modified
from time to time.
"SWING LINE SUBLIMIT" means the lesser of (i) $10,000,000, and (ii) the
aggregate amount of Revolving Loan Commitments then in effect.
"SYNDICATION AGENT" has the meaning assigned to that term in the
preamble hereto.
"SYSTEMS" means any of the hardware, firmware or software systems
associated with information processing and delivery, operations or services
(E.G., security and alarms, elevators, communications, and HVAC) operated by,
provided to or otherwise reasonably necessary to the business or operations of
Company and its Subsidiaries.
"TAX" means any present or future tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature and whatever called, by whomsoever, on
whomsoever and wherever imposed, levied, collected, withheld or assessed;
PROVIDED, "TAX ON THE OVERALL NET INCOME" of a Person shall be construed as a
reference to a tax imposed by the jurisdiction in which that Person is organized
or in which that Person's principal office (and/or, in the case of a Lender, its
lending office) is located or in which that Person (and/or, in the case of a
Lender, its lending office) is deemed to be doing business on all or part of the
net income, profits or gains (whether worldwide, or only insofar as such income,
profits or gains are considered to arise in or to relate to a particular
jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its
lending office).
"TERM LOAN " means a Tranche A Term Loan, a Tranche B Term Loan or a
Tranche C Term Loan.
"TITLE COMPANY" means, collectively, First American Title Insurance
Company and/or one or more other title insurance companies reasonably
satisfactory to Syndication Agent and Administrative Agent.
"TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any date
of determina tion, the sum of (i) the aggregate principal amount of all
outstanding Revolving Loans (other than Revolving Loans made for the purpose of
repaying any Refunded Swing Line Loans or reimbursing Issuing Bank for any
amount drawn under any Letter of Credit but not yet so applied), PLUS (ii) the
aggregate principal amount of all outstanding Swing Line Loans, PLUS (iii) the
Letter of Credit Usage.
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"TRANCHE A LENDER" means a Lender making a Tranche A Term Loan on the
Closing Date.
"TRANCHE A TERM LOAN " means a Loan made by a Lender to Company
pursuant to SECTION 2.1(a).
"TRANCHE A TERM LOAN AMOUNT" means the amount of the Tranche A Term
Loan to be lent by a Lender to Company. The Tranche A Term Loan Amount of each
Lender is initially as set forth opposite the name of that Lender in SCHEDULE
1.1(b) annexed hereto, and may be adjusted or reduced pursuant to the terms and
conditions hereof. As of the Closing Date, the aggregate amount of the Tranche A
Term Loan Amounts shall be $70,000,000.
"TRANCHE A TERM LOAN EXPIRATION DATE" means the earlier of (i) the
sixth anniversary of the Closing Date, and (ii) the date that all Tranche A Term
Loans shall become due and payable in full hereunder, whether by acceleration or
otherwise.
"TRANCHE A TERM LOAN EXPOSURE" means, with respect to any Lender, as of
any date of determination, the outstanding principal amount of the Tranche A
Term Loans of such Lender; PROVIDED, at any time prior to the making of the
Tranche A Term Loans, the Tranche A Term Loan Exposure of any Lender shall be
equal to such Lender's Tranche A Term Loan Amount.
"TRANCHE A TERM LOAN NOTE" means a promissory note substantially in the
form of EXHIBIT B-1, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"TRANCHE B LENDER" means a Lender making a Tranche B Term Loan on the
Closing Date.
"TRANCHE B TERM LOAN " means a Loan made by a Lender to Company
pursuant to SECTION 2.1(b).
"TRANCHE B TERM LOAN AMOUNT" means the amount of the Tranche B Term
Loan to be lent by a Lender to Company. The Tranche B Term Loan Amount of each
Lender is initially as set forth opposite the name of that Lender in SCHEDULE
1.1(b) annexed hereto, and may be adjusted or reduced pursuant to the terms and
conditions hereof. As of the Closing Date, the aggregate amount of the Tranche B
Term Loan Amounts shall be $70,000,000.
"TRANCHE B TERM LOAN EXPIRATION DATE" means the earlier of (i) the
seventh anniversary of the Closing Date, and (ii) the date that all Tranche B
Term Loans shall become due and payable in full hereunder, whether by
acceleration or otherwise.
"TRANCHE B TERM LOAN EXPOSURE" means, with respect to any Lender, as of
any date of determination, the outstanding principal amount of the Tranche B
Term Loans of such Lender; PROVIDED, at any time prior to the making of the
Tranche B Term Loans, the Tranche B Term Loan Exposure of any Lender shall be
equal to such Lender's Tranche B Term Loan Amount.
"TRANCHE B TERM LOAN NOTE" means a promissory note substantially in the
form of EXHIBIT B-2, as it may be amended, restated, supplemented or otherwise
modified from time to time.
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"TRANCHE C LENDER" means a Lender making a Tranche C Term Loan on the
Closing Date.
"TRANCHE C TERM LOAN " means a Loan made by a Lender to Company
pursuant to SECTION 2.1(c).
"TRANCHE C TERM LOAN AMOUNT" means the amount of the Tranche C Term
Loan to be lent by a Lender to Company. The Tranche C Term Loan Amount of each
Lender is initially as set forth opposite the name of that Lender in SCHEDULE
1.1(b) annexed hereto, and may be adjusted or reduced pursuant to the terms and
conditions hereof. As of the Closing Date, the aggregate amount of the Tranche C
Term Loan Amounts shall be $50,000,000.
"TRANCHE C TERM LOAN EXPIRATION DATE" means the earlier of (i) the
eighth anniversary of the Closing Date, and (ii) the date that all Tranche C
Term Loans shall become due and payable in full hereunder, whether by
acceleration or otherwise.
"TRANCHE C TERM LOAN EXPOSURE" means, with respect to any Lender, as of
any date of determination, the outstanding principal amount of the Tranche C
Term Loans of such Lender; PROVIDED, at any time prior to the making of the
Tranche C Term Loans, the Tranche C Term Loan Exposure of any Lender shall be
equal to such Lender's Tranche C Term Loan Amount.
"TRANCHE C TERM LOAN NOTE" means a promissory note substantially in the
form of EXHIBIT B-3, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"TRANSACTION COSTS" means the fees, costs and expenses payable by
Company on or before the Closing Date in connection with the transactions
contemplated by the Credit Documents and the Related Agreements.
"TYPE" means (i) with respect to either Term Loans or Revolving Loans,
a Base Rate Loan or a Eurodollar Rate Loan, and (ii) with respect to Swing Line
Loans, a Base Rate Loan.
"UBS" has the meaning assigned to that term in the preamble hereto.
"UCC" means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.
"UNFUNDED BENEFIT LIABILITIES" has the meaning assigned to that term in
SECTION 4.19.
"WARBURG" has the meaning assigned to that term in the preamble hereto.
"YEAR 2000 PROBLEMS" means limitations in the capacity or readiness to
handle date information for years beginning January 1, 2000 of any of the
Systems.
1.2. ACCOUNTING TERMS. Except as otherwise expressly provided herein,
all accounting terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP. Financial statements and other
information required to be delivered by Company to Lenders
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pursuant to SECTION 5.1(a), 5.1(b) and 5.1(c) shall be prepared in accordance
with GAAP as in effect at the time of such preparation (and delivered together
with the reconciliation statements provided for in SECTION 5.1(e), if
applicable); PROVIDED, HOWEVER, that all calculations in connection with the
definitions, covenants and other provisions hereof shall utilize accounting
principles and policies in conformity with those used to prepare the Historical
Financial Statements.
1.3. INTERPRETATION, ETC. Any of the terms defined herein may, unless
the context otherwise requires, be used in the singular or the plural, depending
on the reference. References herein to any Section, Exhibit or Schedule shall be
to a Section, an Exhibit and a Schedule, respectively, hereof unless otherwise
specifically provided. The use herein of the word "INCLUDE" or "INCLUDING", when
following any general statement, term or matter, shall not be construed to limit
such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
nonlimiting language (such as "WITHOUT LIMITATION" or "BUT NOT LIMITED TO" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that fall within the broadest
possible scope of such general statement, term or matter.
SECTION 2. CREDIT EXTENSIONS
2.1. TERM LOANS. Subject to the terms and conditions hereof, each
Lender severally agrees to lend to Company, on or before October 30, 1998, (a) a
Tranche A Term Loan in an amount equal to such Lender's Tranche A Term Loan
Amount, (b) a Tranche B Term Loan in an amount equal to such Lender's Tranche B
Term Loan Amount, and (c) a Tranche C Term Loan in an amount equal to such
Lender's Tranche C Term Loan Amount, in each case to be used for the purposes
identified in SECTION 2.5. Any amount borrowed under this SECTION 2.1 and
subsequently repaid or prepaid may not be reborrowed.
2.2. REVOLVING LOANS AND SWING LINE LOANS. (a) During the Revolving
Loan Commitment Period, subject to the terms and conditions hereof, (i) each
Lender severally agrees to make Revolving Loans to Company in the aggregate
amount up to but not exceeding such Lender's Revolving Loan Commitment, and (ii)
Swing Line Lender hereby agrees to make Swing Line Loans to Company in an
aggregate amount up to but not exceeding the Swing Line Sublimit, in each case
to be used for the purposes identified in SECTION 2.5. Amounts borrowed pursuant
to this SECTION 2.2 may be repaid and reborrowed during the Revolving Loan
Commitment Period. Each Lender's Revolving Loan Commitment, and Swing Line
Lender's Swing Line Loan Commitment, shall expire on the Revolving Loan
Commitment Termination Date and all Revolving Loans and all Swing Line Loans and
all other amounts owed hereunder with respect to the Revolving Loans, the Swing
Line Loans, the Revolving Loan Commitments and the Swing Line Loan Commitment
shall be paid in full no later than such date. Notwithstanding the foregoing,
the Revolving Loan Commitments and the Swing Line Loan Commitment shall expire
immediately and without further action on October 30, 1998 if the Term Loans are
not made on or before that date.
(b) Except pursuant to SECTION 2.2(e) or SECTION 2.3(d), (i) Base Rate
Revolving Loans shall be made in an aggregate minimum amount of $500,000 and
integral multiples of $100,000 in
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excess of that amount, (ii) Eurodollar Rate Revolving Loans shall be made in an
aggregate minimum amount of $2,000,000 and integral multiples of $500,000 in
excess of that amount, and (iii) Swing Line Loans shall be made in an aggregate
minimum amount of $250,000 and integral multiples of $100,000 in excess of that
amount. Anything contained herein to the contrary notwithstanding, in no event
shall the Total Utilization of Revolving Loan Commitments at any time exceed the
Revolving Loan Commitments then in effect.
(c) Whenever Company desires that Lenders make Loans, Company shall
deliver to Administrative Agent a fully executed and delivered Funding Notice no
later than 12:00 Noon (New York City time) (i) at least three Business Days in
advance of the proposed Credit Extension Date in the case of a Eurodollar Rate
Loan; and (ii) at least one Business Day in advance of the proposed Credit
Extension Date in the case of a Base Rate Loan; PROVIDED, whenever Company
desires that Swing Line Lender make a Swing Line Loan, it shall deliver to
Administrative Agent a Funding Notice no later than 12:00 Noon (New York City
time) on the proposed Credit Extension Date. Except as otherwise provided
herein, a Funding Notice for a Eurodollar Rate Loan (or telephonic notice in
lieu thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith. Promptly after receipt by Administrative Agent of a Funding Notice
(or telephonic notice in lieu thereof), Administrative Agent shall notify each
Lender or Swing Line Lender, as the case may be, of the proposed borrowing.
(d) Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York City time) on the
applicable Credit Extension Date, and Swing Line Lender shall make the amount of
its Swing Line Loan available to Administrative Agent not later than 2:30 P.M.
(New York City time) on the applicable Credit Extension Date, in each case by
wire transfer of same day funds in Dollars, at the Funding and Payment Office
(or, in the case of Swing Line Loans, at such other place as Administrative
Agent, Company and Swing Line Lender may approve). Except as provided herein,
upon satisfaction or waiver of the conditions precedent specified herein,
Administrative Agent shall make the proceeds of such Loans available to Company
on the applicable Credit Extension Date by causing an amount of same day funds
in Dollars equal to the proceeds of all such Loans received by Administrative
Agent from Lenders or Swing Line Lender, as the case may be, to be credited to
the account of Company at the Funding and Payment Office (or, in the case of
Swing Line Loans, at such other place as Administrative Agent, Company and Swing
Line Lender may approve).
(e) With respect to any Swing Line Loan that has not been voluntarily
prepaid by Company, Swing Line Lender may, at any time in its sole and absolute
discretion, deliver to Administrative Agent (with a copy to Company), no later
than 10:00 A.M. (New York City time) on the first Business Day in advance of the
proposed Credit Extension Date, a notice (the "REFUNDING NOTICE") (which shall
be deemed to be a Funding Notice given by Company) requesting Lenders to make
Base Rate Revolving Loans on such Credit Extension Date in an amount equal to
the amount of such Swing Line Loans (each, a "REFUNDED SWING LINE LOAN")
outstanding on the date of such Refunding Notice. Anything contained herein to
the contrary notwithstanding, the proceeds of such Revolving Loans made by
Lenders shall be immediately delivered by Administrative Agent solely to Swing
Line Lender and applied to repay a corresponding amount of the applicable
Refunded Swing Line Loans. Company hereby authorizes Administrative Agent and
Swing Line Lender to charge
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Company's accounts, if any, with Administrative Agent and Swing Line Lender (up
to the amount available in each such account) in order to immediately pay Swing
Line Lender the amount of the Refunded Swing Line Loans to the extent the
proceeds of such Revolving Loans made by Lenders are not sufficient to repay in
full the Refunded Swing Line Loans. If any portion of any such amount paid to
Swing Line Lender should be recovered by or on behalf of Company from Swing Line
Lender in bankruptcy, by assignment for the benefit of creditors or otherwise,
the loss of the amount so recovered shall be ratably shared among all Lenders in
the manner contemplated by SECTION 10.4.
(f) If for any reason (i) Revolving Loans are not made upon the request
of Swing Line Lender as provided in SECTION 2.2(e) in an amount sufficient to
repay any amounts owed to Swing Line Lender in respect of any outstanding Swing
Line Loans; or (ii) the Revolving Loan Commitments are terminated at a time when
any Swing Line Loans are outstanding, then, in either case, each Lender shall be
deemed to, and hereby agrees to, have purchased a participation in such
outstanding Swing Line Loans in an amount equal to its Pro Rata Share
(calculated, in the case of the foregoing clause (ii), immediately prior to such
termination of the Revolving Loan Commitments) of the unpaid amount of such
Swing Line Loans together with accrued interest thereon. Upon one Business Day's
notice from Swing Line Lender, each Lender shall deliver to Swing Line Lender an
amount equal to its respective participation in same day funds at the Funding
and Payment Office. In order to further evidence such participation (and without
prejudice to the effectiveness of the participation provisions set forth above),
each Lender agrees to enter into a separate participation agreement at the
request of Swing Line Lender in form and substance reasonably satisfactory to
Swing Line Lender. In the event any Lender fails to make available to Swing Line
Lender the amount of such Lender's participation as provided herein, Swing Line
Lender shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the rate customarily used by Swing Line Lender
for the correction of errors among banks for three Business Days and thereafter
at the Base Rate. In the event Swing Line Lender receives a payment of any
amount in which other Lenders have purchased participations as provided herein,
Swing Line Lender shall promptly distribute to each such other Lender its Pro
Rata Share of such payment.
(g) Anything contained herein to the contrary notwithstanding, each
Lender's obligation to make Revolving Loans for the purpose of repaying any
Refunded Swing Line Loans, and each Lender's obligation to purchase a
participation in any unpaid Swing Line Loans, shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense or other right which such Lender may
have against Swing Line Lender, any Credit Party or any other Person for any
reason whatsoever; (ii) the occurrence or continuation of an Event of Default or
a Default; (iii) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Company or any of its
Subsidiaries; (iv) any breach hereof or any other Credit Document by any party
thereto; or (v) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing; PROVIDED, such obligations of each
Lender are subject to the condition that (1) Swing Line Lender believed in good
faith that all conditions under SECTION 3 to the making of the applicable
Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be,
were satisfied at the time such Refunded Swing Line Loans or unpaid Swing Line
Loans were made, or (2) the satisfaction of any such condition not satisfied had
been waived in accordance with SECTION 10.5 prior to or at the time such
Refunded Swing Line Loans or other unpaid Swing Line Loans were made.
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2.3. LETTERS OF CREDIT. (a) During the Revolving Loan Commitment
Period, subject to the terms and conditions hereof, Company may request from
time to time that one or more Lenders issue Letters of Credit for the account of
Company for the purposes specified in the definitions of Commercial Letters of
Credit and Standby Letters of Credit; PROVIDED that all such Letters of Credit
shall provide for sight drawings. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, any one or more Lenders may, but (except as provided herein)
shall not be obligated to, issue such Letters of Credit in accordance with the
provisions hereof; PROVIDED, Company shall not request that any Lender issue,
and no Lender shall issue: (i) any Letter of Credit if, after giving effect to
such issuance, the Total Utilization of Revolving Loan Commitments would exceed
the Revolving Loan Commitments then in effect; (ii) any Letter of Credit if,
after giving effect to such issuance, the Letter of Credit Usage would exceed
the Letter of Credit Sublimit then in effect; (iii) any Standby Letter of Credit
having an expiration date later than the earlier of (1) the Revolving Loan
Commitment Termination Date and (2) the date which is one year from the date of
issuance of such Standby Letter of Credit. Notwithstanding the foregoing,
Issuing Bank may agree that a Standby Letter of Credit will automatically be
extended for one or more successive periods not to exceed one year each unless
Issuing Bank elects not to extend for any such additional period; PROVIDED,
Issuing Bank shall elect not to extend such Standby Letter of Credit if it has
knowledge that an Event of Default has occurred and is continuing at the time
Issuing Bank must elect whether or not to allow such extension; (iv) any
Commercial Letter of Credit having an expiration date (a) later than the earlier
of (1) the Revolving Loan Commitment Termination Date and (2) the date which is
180 days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the Lender issuing the Letter of Credit in its
reasonable discretion; or (v) any Letter of Credit denominated in a currency
other than Dollars.
(b) Whenever Company desires the issuance of a Letter of Credit, it
shall deliver to Administrative Agent a Request for Issuance no later than 12:00
Noon (New York City time) at least three Business Days (in the case of Standby
Letters of Credit) or five Business Days (in the case of Commercial Letters of
Credit), or in each case such shorter period as may be agreed to by Issuing Bank
in any particular instance, in advance of the proposed date of issuance. Issuing
Bank, in its reasonable discretion, may require changes in the text of the
proposed Letter of Credit or any such documents; PROVIDED, that no Letter of
Credit shall require payment against a conforming demand for payment to be made
thereunder on the same business day (under the laws of the jurisdiction in which
the office of Issuing Bank to which such demand for payment is required to be
presented is located) that such demand for payment is presented if such
presentation is made after 10:00 A.M. (in the time zone of such office of
Issuing Bank) on such business day. Upon receipt by Administrative Agent of a
Request for Issuance pursuant to this Section, in the event Administrative Agent
elects to issue such Letter of Credit, Administrative Agent shall promptly so
notify Company, and Administrative Agent shall be Issuing Bank with respect
thereto. In the event that Administrative Agent, in its sole discretion, elects
not to issue such Letter of Credit, Administrative Agent shall promptly so
notify Company, whereupon Company may request any other Lender to issue such
Letter of Credit by delivering to such Lender a copy of the applicable Request
for Issuance. Any Lender so requested to issue such Letter of Credit shall
promptly notify Company and Administrative Agent whether or not, in its sole
discretion, it has elected to issue such Letter of Credit, and any such Lender
which so elects to issue such Letter of Credit shall be the Issuing Lender with
respect thereto. In the
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event that all other Lenders shall have declined to issue such Letter of Credit,
notwithstanding the prior election of Administrative Agent not to issue such
Letter of Credit, Administrative Agent shall be obligated to issue such Letter
of Credit and shall be Issuing Bank with respect thereto, notwithstanding the
fact that the Letter of Credit Usage with respect to such Letter of Credit and
with respect to all other Letters of Credit issued by Administrative Agent, when
aggregated with Administrative Agent's outstanding Revolving Loans and Swing
Line Loans, may exceed Administrative Agent's Revolving Loan Commitment then in
effect. Upon satisfaction or waiver of the conditions set forth in SECTION 3.2,
Issuing Bank shall issue the requested Letter of Credit in accordance with
Issuing Bank's standard operating procedures. Upon the issuance of any Letter of
Credit, Issuing Bank shall promptly notify each Lender of such issuance, which
notice shall be accompanied by a copy of such Letter of Credit and the amount of
such Lender's respective participation in such Letter of Credit pursuant to
SECTION 2.3(e). Within fifteen (15) days after the end of each calendar quarter
ending after the Closing Date, so long as any Letter of Credit shall have been
outstanding during such month, Issuing Bank shall deliver to each Lender a
report setting forth for such month the daily aggregate amount available to be
drawn under the Letters of Credit that were outstanding during such quarter.
(c) In determining whether to honor any drawing under any Letter of
Credit by the beneficiary thereof, Issuing Bank shall be responsible only to
examine the documents delivered under such Letter of Credit with reasonable care
so as to ascertain whether they appear on their face to be in accordance with
the terms and conditions of such Letter of Credit. As between Company and
Issuing Bank, Company assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit issued by Issuing Bank by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, Issuing Bank shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) failure of the beneficiary of any such Letter of Credit to
comply fully with any conditions required in order to draw upon such Letter of
Credit, except to the extent that such failure is the result of the gross
negligence or willful misconduct of the Issuing Bank; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuing Bank, including any Governmental Acts,
and none of the above shall affect or impair, or prevent the vesting of, any of
Issuing Bank's rights or powers hereunder. Without limiting the foregoing and in
furtherance thereof, any action taken or omitted by Issuing Bank under or in
connection with the Letters of Credit or any documents and certificates
delivered thereunder, if taken or omitted in good faith, shall not put Issuing
Bank under any resulting liability to Company. Notwithstanding anything to the
contrary contained in this SECTION 2.3(c), Company shall retain any
38
<PAGE> 45
and all rights it may have against Issuing Bank for any liability arising solely
out of the gross negligence or willful misconduct of Issuing Bank.
(d) In the event Issuing Bank has determined to honor a drawing under a
Letter of Credit, it shall immediately notify Company and Administrative Agent,
and Company shall reimburse Issuing Bank on or before the Business Day
immediately following the date on which such drawing is honored (the
"REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal to the
amount of such honored drawing; PROVIDED, anything contained herein to the
contrary notwithstand ing, (i) unless Company shall have notified Administrative
Agent and Issuing Bank prior to 11:00 A.M. (New York City time) on the date such
drawing is honored that Company intends to reimburse Issuing Bank for the amount
of such honored drawing with funds other than the proceeds of Revolving Loans,
Company shall be deemed to have given a timely Funding Notice to Administrative
Agent requesting Lenders having a Revolving Loan Commitment to make Revolving
Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars
equal to the amount of such honored drawing, and (ii) subject to satisfaction or
waiver of the conditions specified in SECTION 3.2, Lenders having a Revolving
Loan Commitment shall, on the Reimbursement Date, make Revolving Loans that are
Base Rate Loans in the amount of such honored drawing, the proceeds of which
shall be applied directly by Administrative Agent to reimburse Issuing Bank for
the amount of such honored drawing; and PROVIDED FURTHER, if for any reason
proceeds of Revolving Loans are not received by Issuing Bank on the
Reimbursement Date in an amount equal to the amount of such honored drawing,
Company shall reimburse Issuing Bank, on demand, in an amount in same day funds
equal to the excess of the amount of such honored drawing over the aggregate
amount of such Revolving Loans, if any, which are so received. Nothing in this
SECTION 2.3(d) shall be deemed to relieve any Lender having a Revolving Loan
Commitment from its obligation to make Revolving Loans on the terms and
conditions set forth herein, and Company shall retain any and all rights it may
have against any such Lender resulting from the failure of such Lender to make
such Revolving Loans under this SECTION 2.3(d).
(e) Immediately upon the issuance of each Letter of Credit, each Lender
having a Revolving Loan Commitment shall be deemed to have irrevocably
purchased, and hereby agrees to irrevocably purchase, from Issuing Bank a
participation in such Letter of Credit and any drawings honored thereunder in an
amount equal to such Lender's Pro Rata Share (with respect to the Revolving Loan
Commitments) of the maximum amount which is or at any time may become available
to be drawn thereunder. In the event that Company shall fail for any reason to
reimburse Issuing Bank as provided in SECTION 2.3(d), Issuing Bank shall
promptly notify each such Lender of the unreimbursed amount of such honored
drawing and of such Lender's respective participation therein based on such
Lender's Pro Rata Share of the Revolving Loan Commitments. Each such Lender
shall make available to Issuing Bank an amount equal to its respective
participation, in Dollars and in same day funds, at the office of Issuing Bank
specified in such notice, not later than 12:00 Noon (New York City time) on the
first business day (under the laws of the jurisdiction in which such office of
Issuing Bank is located) after the date notified by Issuing Bank. In the event
that any Lender having a Revolving Loan Commitment fails to make available to
Issuing Bank on such business day the amount of such Lender's participation in
such Letter of Credit as provided in this SECTION 2.3(e), Issuing Bank shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the rate customarily used by Issuing Bank for the correction
of errors among banks
39
<PAGE> 46
for three Business Days and thereafter at the Base Rate. Nothing in this SECTION
2.3(e) shall be deemed to prejudice the right of any Lender to recover from
Issuing Bank any amounts made available by such Lender to Issuing Bank pursuant
to this Section in the event that it is determined by the final judgment of a
court of competent jurisdiction that the payment with respect to a Letter of
Credit in respect of which payment was made by such Lender constituted gross
negligence or willful misconduct on the part of Issuing Bank. In the event
Issuing Bank shall have been reimbursed by other Lenders pursuant to this
SECTION 2.3(e) for all or any portion of any drawing honored by Issuing Bank
under a Letter of Credit, such Issuing Bank shall distribute to each Lender
which has paid all amounts payable by it under this SECTION 2.3(e) with respect
to such honored drawing such Lender's Pro Rata Share of all payments
subsequently received by Issuing Bank from Company in reimbursement of such
honored drawing when such payments are received. Any such distribution shall be
made to a Lender at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender may
request.
(f) The obligation of Company to reimburse Issuing Bank for drawings
honored under the Letters of Credit issued by it and to repay any Revolving
Loans made by Lenders pursuant to SECTION 2.3(d) and the obligations of Lenders
under SECTION 2.3(e) shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms hereof under all circumstances including
any of the following circumstances: (i) any lack of validity or enforceability
of any Letter of Credit; (ii) the existence of any claim, set-off, defense or
other right which Company or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons for whom
any such transferee may be acting), Issuing Bank, Lender or any other Person or,
in the case of a Lender, against Company, whether in connection herewith, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between Company or one of its Subsidiaries and the
beneficiary for which any Letter of Credit was procured); (iii) any draft or
other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; (iv) payment by Issuing Bank under
any Letter of Credit against presentation of a draft or other document which
does not substantially comply with the terms of such Letter of Credit, except
where such payment constitutes gross negligence or willful misconduct on the
part of the Issuing Bank; (v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or any of its Subsidiaries; (vi) any breach of this Agreement or any other
Credit Document by any party thereto; (vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing; or (viii) the fact
that an Event of Default or a Default shall have occurred and be continuing;
PROVIDED, in each case, that payment by Issuing Bank under the applicable Letter
of Credit shall not have constituted gross negligence or willful misconduct of
Issuing Bank under the circumstances in question.
(g) In addition to amounts payable as provided herein, Company hereby
agrees to protect, indemnify, pay and save harmless Issuing Bank from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which Issuing Bank may incur or
be subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit by Issuing Bank, other than as a result of (1) the gross
negligence or willful misconduct of Issuing Bank, or (2) subject to the
following clause (ii), the wrongful dishonor by Issuing Bank of a proper demand
for
40
<PAGE> 47
payment made under any Letter of Credit issued by it, or (ii) the failure of
Issuing Bank to honor a drawing under any such Letter of Credit as a result of
any Governmental Act.
2.4. PRO RATA SHARES. All Loans made and all participations purchased
pursuant to SECTION 2.2 and SECTION 2.3 shall be made or purchased, as the case
may be, by Lenders simulta neously and proportionately to their respective Pro
Rata Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in such other Lender's obligation to make a Loan
requested hereunder or purchase a participation required hereby nor shall the
Revolving Loan Commitment or Term Loan amount of any Lender be increased or
decreased as a result of a default by any other Lender in such other Lender's
obligation to make a Loan requested hereunder or purchase a participation
required hereby. Unless Administrative Agent shall have been notified by any
Lender prior to the applicable Credit Extension Date that such Lender does not
intend to make available to Administrative Agent the amount of such Lender's
Loan requested on such Credit Extension Date, Administrative Agent may assume
that such Lender has made such amount available to Administrative Agent on such
Credit Extension Date and Administrative Agent may, in its sole discretion, but
shall not be obligated to, make available to Company a corresponding amount on
such Credit Extension Date. If such corresponding amount is not in fact made
available to Administrative Agent by such Lender, Administrative Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon, for each day from such Credit Extension Date
until the date such amount is paid to Administrative Agent, at the customary
rate set by Administrative Agent for the correction of errors among banks for
three Business Days and thereafter at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify Company and Company shall immediately
pay such corresponding amount to Administrative Agent together with interest
thereon, for each day from such Credit Extension Date until the date such amount
is paid to Administrative Agent, at the rate payable hereunder for Base Rate
Loans. Nothing in this SECTION 2.4 shall be deemed to relieve any Lender from
its obligation to fulfill its Revolving Loan Commitments or its commitments to
make Term Loans hereunder or to prejudice any rights that Company may have
against any Lender as a result of any default by such Lender hereunder.
2.5. USE OF PROCEEDS. The proceeds of (a) the Term Loans shall be
applied by Company to fund a portion of the Recapitalization Financing
Requirements and (b) the Revolving Loans and Swing Line Loans shall be applied
by Company for acquisition financing expenses related to the Recapitalization
and for working capital and general corporate purposes (including Permitted
Acquisitions) of Company and its Subsidiaries. No portion of the proceeds of any
Credit Extension shall be used by Company or any of its Subsidiaries in any
manner that might cause such Credit Extension or the application of such
proceeds to violate Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation thereof or to
violate the Exchange Act, in each case as in effect on the date or dates of such
Credit Extension and such use of proceeds.
2.6. NOTES; REGISTER; LENDERS' BOOKS AND RECORDS. Company shall execute
and deliver (a) to (i) each Tranche A Lender a Tranche A Term Loan Note in the
principal amount of such Lender's Tranche A Term Loan Amount, with appropriate
insertions therein, (ii) each Tranche B Lender a Tranche B Term Loan Note in the
principal amount of such Lender's Tranche B Term Loan
41
<PAGE> 48
Amount, with appropriate insertions therein, (iii) each Tranche C Lender a
Tranche C Term Loan Note in the principal amount of such Lender's Tranche C Term
Loan Amount, with appropriate insertions therein, and (iv) and each Revolving
Loan Lender a Revolving Note in the principal amount of such Lender's Revolving
Loan Commitment, with appropriate insertions therein; and (b) to Swing Line
Lender a Swing Line Note in the principal amount of the Swing Line Sublimit,
with appropriate insertions therein. Administrative Agent shall maintain, at its
address referred to in SECTION 10.1, a register for the recordation of the names
and addresses of Lenders and the Revolving Loan Commitments and Loans of each
Lender from time to time (the "REGISTER"). The Register shall be available for
inspection by Company or any Lender at any reasonable time and from time to time
upon reasonable prior notice. Administrative Agent shall record in the Register
the Revolving Loan Commitments and the Loans, and each repayment or prepayment
in respect of the principal amount of the Loans, and any such recordation shall
be conclusive and binding on Company and each Lender, absent demonstrable error;
PROVIDED, failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Revolving Loan Commitment or
Company's Obligations in respect of any Loan. Company hereby designates the
Administrative Agent to serve as Company's agent solely for purposes of
maintaining the Register as provided in this SECTION 2.6, and Company hereby
agrees that, to the extent the Administrative Agent serves in such capacity, the
Administrative Agent and its officers, directors, employees, agents and
affiliates shall constitute Indemnitees for all purposes. Each Lender shall
record on its internal records, including its Notes, the amount of the Loans
made by it and each repayment and prepayment in respect thereof. Any such
recordation shall be conclusive and binding on Company, absent demonstrable
error; PROVIDED, failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitments or Company's Obligations
in respect of any applicable Loans; and PROVIDED FURTHER, in the event of any
inconsistency between the Register and any Lender's records, the recordations in
the Register shall govern. Company, Administrative Agent and Lenders shall deem
and treat the Persons listed as Lenders in the Register as the holders and
owners of the corresponding Revolving Loan Commit ments and Loans listed therein
for all purposes hereof
2.7. INTEREST PAYMENTS. (a) Except as otherwise set forth herein, each
Class of Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at the sum
of (x) the applicable interest rate for the Type of Loan of such Class PLUS (y)
the Applicable Margin for such Type of Loan of such Class. The Type of any Loan
(except a Swing Line Loan), and the Interest Period with respect to any
Eurodollar Rate Loan, shall be selected by Company and notified to
Administrative Agent and Lenders pursuant to the applicable Funding Notice or
Conversion/Continuation Notice, as the case may be; PROVIDED, that each Loan
made on the Closing Date initially shall be made as a Base Rate Loan and, until
the date which is sixty (60) days following the Closing Date (or, if earlier,
the date on which Syndication Agent notifies Company in writing that it has
concluded its primary syndication of the Loans and Commitments), shall be
maintained as either (1) Eurodollar Rate Loans having an Interest Period of not
more than one month or (2) Base Rate Loans. If on any day a Loan is outstanding
with respect to which notice has not been delivered to Administrative Agent in
accordance with the terms hereof specifying the applicable basis for determining
the rate of interest, then for that day such Loan shall be a Base Rate Loan.
Notwithstanding anything contained herein to the contrary, in connection with
Eurodollar Rate Loans (i) there shall be no more than 16 Interest Periods
outstanding at any time; (ii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the
42
<PAGE> 49
applicable Funding Notice or Conversion/Continuation Notice, Company shall be
deemed to have selected an Interest Period of one month; and (iii) the aggregate
amount of all Eurodollar Rate Loans having the same Interest Period shall not be
less than $2,000,000 and integral multiples of $1,000,000 in excess of that
amount. As soon as practicable after 10:00 A.M. (New York City time) on each
Interest Rate Determination Date, Administrative Agent shall determine (which
determination shall, absent demonstrable error, be final, conclusive and binding
upon all parties) the interest rate that shall apply to the Eurodollar Rate
Loans for which an interest rate is then being determined for the applicable
Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing) to Company and each Lender.
(b) Company agrees to pay to Issuing Bank, with respect to drawings
honored under any Letter of Credit honored by it, interest on the amount paid by
Issuing Bank in respect of each such honored drawing from the date such drawing
is honored to but excluding the date such amount is reimbursed by or on behalf
of Company at a rate equal to (i) for the period from the date such drawing is
honored to but excluding one day after the applicable Reimbursement Date, (1)
the Base Rate, PLUS (2) the Applicable Margin for Base Rate Revolving Loans, and
(ii) thereafter, a rate which is 2% per annum in excess of the rate of interest
otherwise payable hereunder with respect to Revolving Loans that are Base Rate
Loans.
(c) Interest payable hereunder shall be computed on the basis of a
360-day year, in each case for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; PROVIDED, if a Loan is repaid on the same day on
which it is made, one day's interest shall be paid on that Loan.
(d) Except as otherwise set forth herein, interest on each Loan shall
be payable in arrears on and to (i) each Interest Payment Date applicable to
that Loan; (ii) any prepayment of that Loan, to the extent accrued on the amount
being prepaid; and (iii) at maturity, including final maturity; PROVIDED, in the
event any Swing Line Loan or any Revolving Loan that is a Base Rate Loan is
prepaid pursuant to SECTION 2.12(a), interest accrued on such Swing Line Loan or
Revolving Loan through the date of such prepayment shall be payable on the next
succeeding Interest Payment Date applicable to Base Rate Loan, or, if earlier,
at final maturity.
(e) Interest payable pursuant to SECTION 2.7(b) shall be payable on
demand or, if no demand is made, on the date on which the related drawing
honored under a Letter of Credit is reimbursed in full. Promptly upon receipt by
Issuing Bank of any payment of interest pursuant to SECTION 2.7(b), (i) Issuing
Bank shall distribute to each Lender, out of the interest received by Issuing
Bank in respect of the period from the date such drawing is honored to but
excluding the date on which Issuing Bank is reimbursed for the amount of such
drawing (including any such reimbursement out of the proceeds of any Revolving
Loans), the amount that such Lender would have been entitled
43
<PAGE> 50
to receive in respect of the letter of credit fee that would have been payable
in respect of such Letter of Credit for such period if no drawing had been
honored under such Letter of Credit, and (ii) in the event Issuing Bank shall
have been reimbursed by Lenders for all or any portion of such honored drawing,
Issuing Bank shall distribute to each Lender which has paid all amounts payable
by it under SECTION 2.3(e) with respect to such honored drawing such other
Lender's Pro Rata Share of any interest received by Issuing Bank in respect of
that portion of such honored drawing so reimbursed by Lenders for the period
from the date on which Issuing Bank was so reimbursed by Lenders to but
excluding the date on which such portion of such honored drawing is reimbursed
by Company. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof or at
such other address as such Lender may request.
2.8. CONVERSION; CONTINUATION. Company shall have the option (a) to
convert at any time all or any part of any Class of Loans from one Type of Loan
to another Type of Loan, PROVIDED, that partial conversions of Base Rate Loans
shall be in the aggregate principal amount of $1,000,000 and integral multiples
of $100,000 in excess of that amount and the aggregate principal amount of the
resulting Eurodollar Rate Loans outstanding in respect of any one Interest
Period shall be at least $2,000,000 and integral multiples of $1,000,000 in
excess of that amount; or (b) upon the expiration of any Interest Period
applicable to a Eurodollar Rate Loan, to continue all or any portion of such
Loan as a Eurodollar Rate Loan; PROVIDED, (1) a Eurodollar Rate Loan may only be
converted into a Base Rate Loan on the expiration date of an Interest Period
applicable thereto and (2) the aggregate principal amount of the resulting
Eurodollar Rate Loans outstanding in respect of any one Interest Period shall be
at least $2,000,000 and integral multiples of $1,000,000 in excess of that
amount. Company shall deliver a Conversion/Continuation Notice to Administrative
Agent no later than 10:00 A.M. (New York City time) at least one Business Day in
advance of the proposed conversion date (in the case of a conversion to a Base
Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan). Except as otherwise provided herein, a
Conversion/Continuation Notice for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to effect a conversion or continuation in accordance therewith. After the
occurrence of and during the continuation of a Default or an Event of Default,
unless the Requisite Lenders otherwise consent, (i) Company may not elect to
have a Loan be made or maintained as, or converted to, a Eurodollar Rate Loan
after the expiration of any Interest Period then in effect for that Loan; and
(ii) any Funding Notice or Conversion/Continuation Notice given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.9. POST-MATURITY INTEREST. Any principal payments on the Loans not
paid when due and, to the extent permitted by applicable law, any interest
payments on the Loans or any fees or other amounts owed hereunder not paid when
due, in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest (including
post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable on demand at a rate which is 2% per annum in
excess of the interest rate otherwise payable at maturity hereunder with respect
to the applicable Loans (or, in the case of any such fees and other amounts, at
a rate which is 2% per annum in excess of the interest rate otherwise payable
hereunder for Base Rate Loans); PROVIDED, in the case of Eurodollar Rate Loans,
upon the expiration of the
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<PAGE> 51
Interest Period in effect at the time any such increase in interest rate is
effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and
shall thereafter bear interest payable upon demand at a rate which is 2% per
annum in excess of the interest rate otherwise payable hereunder for Base Rate
Loans. Payment or acceptance of the increased rates of interest provided for in
this SECTION 2.9 is not a permitted alternative to timely payment and shall not
constitute a waiver of any Event of Default or otherwise prejudice or limit any
rights or remedies of Administrative Agent or any Lender.
2.10. FEES. (a) Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share,
commitment fees for the Revolving Loan Commitment Period equal to the product of
(i) the average of the daily difference between (1) the Revolving Loan
Commitments, MINUS (2) the sum of (A) the aggregate principal amount of
outstanding Revolving Loans (but not any outstanding Swing Line Loans) PLUS (B)
the Letter of Credit Usage, MULTIPLIED BY the (ii) Applicable Commitment Fee
Percentage. All such commitment fees shall be calculated on the basis of a
360-day year and the actual number of days elapsed and shall be payable
quarterly in arrears on March 30, June 30, September 30 and December 30 of each
year, commencing on the first such date to occur after the Closing Date, and on
the Revolving Loan Commitment Termination Date.
(b) Company agrees to pay (i) a fronting fee, payable directly to
Issuing Bank for its own account, equal to the greater of (1) $500, and (2)
0.25% per annum of the aggregate daily amount available to be drawn under all
Letters of Credit issued by it, and (ii) a letter of credit fee, payable to
Administrative Agent for the account of Lenders having Revolving Credit
Exposure, equal to the product of (1) the Applicable Margin for Eurodollar Rate
Revolving Loans, MULTIPLIED BY (2) the daily amount available to be drawn under
all such Letters of Credit, each such fee to be payable in arrears on and to
(but excluding) each March 30, June 30, September 30 and December 30 of each
year and computed on the basis of a 360-day year for the actual number of days
elapsed. Without duplication of the foregoing fees, Company agrees to pay
documentary and processing charges payable directly to Issuing Bank for its own
account in accordance with Issuing Bank's standard schedule for such charges in
effect at the time of such issuance, amendment, transfer or payment, as the case
may be. For purposes of calculating any fees payable under this Section, the
daily amount available to be drawn under any Letter of Credit shall be
determined as of the close of business on any date of determination. Promptly
upon receipt by Administrative Agent of any amount described in clause (ii)
above, Administrative Agent shall distribute to each Lender its Pro Rata Share
(determined with respect to the Revolving Loan Commitments) of such amount.
(c) Company agrees to pay to Syndication Agent and Administrative Agent
such other fees in the amounts and at the times separately agreed upon between
Company, Syndication Agent and Administrative Agent.
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<PAGE> 52
2.11. SCHEDULED PAYMENTS. (a) Company shall make principal payments on
the Tranche A Term Loans in installments on the dates and in the amounts set
forth below:
<TABLE>
<CAPTION>
DATE AMOUNT
================================================== ======================================
<S> <C>
December 31, 1999 $2,500,000
March 31, 2000 2,500,000
June 30, 2000 2,500,000
September 30, 2000 2,500,000
December 31, 2000 2,500,000
March 31, 2001 2,500,000
June 30, 2001 2,500,000
September 30, 2001 2,500,000
December 31, 2001 3,750,000
March 31, 2002 3,750,000
June 30, 2002 3,750,000
September 30, 2002 3,750,000
December 31, 2002 3,750,000
March 31, 2003 3,750,000
June 30, 2003 3,750,000
September 30, 2003 3,750,000
December 31, 2003 5,000,000
March 31, 2004 5,000,000
June 30, 2004 5,000,000
Sixth Anniversary of Closing Date 5,000,000
================================================== ======================================
</TABLE>
Notwithstanding the foregoing, (i) such scheduled installments shall be reduced
in connection with any voluntary or mandatory prepayments of the Term Loans in
accordance herewith; and (ii) Tranche A Term Loans and all other amounts owed
hereunder with respect thereto shall be paid in full no later than the Tranche A
Term Loan Expiration Date, and the final installment payable by Company in
respect thereof on such date shall be in an amount sufficient to repay all
amounts owing by Company hereunder with respect to the Tranche A Term Loans.
(b) Company shall make principal payments on the Tranche B Term Loans
in installments on the dates and in the amounts set forth below:
46
<PAGE> 53
<TABLE>
<CAPTION>
DATE AMOUNT
================================================== ======================================
<S> <C>
December 31, 1998 $200,000
March 31, 1999 200,000
June 30, 1999 200,000
September 30, 1999 200,000
December 31, 1999 200,000
March 31, 2000 200,000
June 30, 2000 200,000
September 30, 2000 200,000
December 31, 2000 200,000
March 31, 2001 200,000
June 30, 2001 200,000
September 30, 2001 200,000
December 31, 2001 200,000
March 31, 2002 200,000
June 30, 2002 200,000
September 30, 2002 200,000
December 31, 2002 200,000
March 31, 2003 200,000
June 30, 2003 200,000
September 30, 2003 200,000
December 31, 2003 200,000
March 31, 2004 200,000
June 30, 2004 200,000
September 30, 2004 200,000
December 31, 2004 16,300,000
March 31, 2005 16,300,000
June 30, 2005 16,300,000
Seventh Anniversary of Closing Date 16,300,000
================================================== ======================================
</TABLE>
Notwithstanding the foregoing, (i) such scheduled installments shall be reduced
in connection with any voluntary or mandatory prepayments of the Term Loans in
accordance herewith; and (ii) Tranche B Term Loans and all other amounts owed
hereunder with respect thereto shall be paid in full no later than the Tranche B
Term Loan Expiration Date, and the final installment payable by Company in
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<PAGE> 54
respect thereof on such date shall be in an amount sufficient to repay all
amounts owing by Company hereunder with respect to the Tranche B Term Loans.
(c) Company shall make principal payments on the Tranche C Term Loans
in installments on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
DATE AMOUNT
==================================================== ====================================
<S> <C>
December 31, 1998 $125,000
March 31, 1999 125,000
June 30, 1999 125,000
September 30, 1999 125,000
December 31, 1999 125,000
March 31, 2000 125,000
June 30, 2000 125,000
September 30, 2000 125,000
December 31, 2000 125,000
March 31, 2001 125,000
June 30, 2001 125,000
September 30, 2001 125,000
December 31, 2001 125,000
March 31, 2002 125,000
June 30, 2002 125,000
September 30, 2002 125,000
December 31, 2002 125,000
March 31, 2003 125,000
June 30, 2003 125,000
September 30, 2003 125,000
December 31, 2003 125,000
March 31, 2004 125,000
June 30, 2004 125,000
September 30, 2004 125,000
December 31, 2004 125,000
March 31, 2005 125,000
June 30, 2005 125,000
September 30, 2005 125,000
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
DATE AMOUNT
==================================================== ====================================
<S> <C>
December 31, 2005 11,625,000
March 31, 2006 11,625,000
June 30, 2006 11,625,000
Eighth Anniversary of Closing Date 11,625,000
==================================================== ====================================
</TABLE>
Notwithstanding the foregoing, (i) such scheduled installments shall be reduced
in connection with any voluntary or mandatory prepayments of the Term Loans in
accordance herewith; and (ii) Tranche C Term Loans and all other amounts owed
hereunder with respect thereto shall be paid in full no later than the Tranche C
Term Loan Expiration Date, and the final installment payable by Company in
respect thereof on such date shall be in an amount sufficient to repay all
amounts owing by Company hereunder with respect to the Tranche C Term Loans.
2.12. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) Company may,
upon written or telephonic notice to Administrative Agent on or prior to 12:00
Noon (New York City time) on the date of prepayment, which notice, if
telephonic, shall be promptly confirmed in writing, at any time and from time to
time prepay any Swing Line Loan on any Business Day in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples of $500,000 in
excess of that amount. Company may, upon not less than one Business Day's prior
written or telephonic notice, in the case of Base Rate Loans, and three Business
Days' prior written or telephonic notice, in the case of Eurodollar Rate Loans,
in each case given to Administrative Agent by 12:00 Noon (New York City time) on
the date required and, if given by telephone, promptly confirmed in writing to
Administrative Agent (which original written or telephonic notice Administrative
Agent will promptly transmit by telefacsimile or telephone to each Lender), at
any time and from time to time prepay any Term Loans or Revolving Loans on any
Business Day in whole or in part in an aggregate minimum amount of $2,000,000
and integral multiples of $1,000,000 in excess of that amount in the case of
Term Loans and $1,000,000 and integral multiples of $500,000 in excess of that
amount in the case of Revolving Loans; PROVIDED, HOWEVER, that a Eurodollar Rate
Loan may only be prepaid on the expiration of the Interest Period applicable
thereto unless Company pays Lenders any amount required pursuant to SECTION
2.18(c) on the date of such prepayment. Notice of prepayment having been given
as aforesaid, the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date specified therein.
(b) Company may, upon not less than three Business Days' prior written
or telephonic notice confirmed in writing to Administrative Agent (which
original written or telephonic notice Administrative Agent will promptly
transmit by telefacsimile or telephone to each Lender), at any time and from
time to time terminate in whole or permanently reduce in part, without premium
or penalty, the Revolving Loan Commitments in an amount up to the amount by
which the Revolving Loan Commitments exceed the Total Utilization of Revolving
Loan Commitments at the time of such proposed termination or reduction;
PROVIDED, any such partial reduction of the Revolving Loan Commitments shall be
in an aggregate minimum amount of $2,000,000 and integral multiples of
$1,000,000 in excess of that amount. Company's notice to Administrative Agent
shall designate the date (which shall be a Business Day) of such termination or
reduction and the amount of any partial
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<PAGE> 56
reduction, and such termination or reduction of the Revolving Loan Commitments
shall be effective on the date specified in Company's notice and shall reduce
the Revolving Loan Commitment of each Lender proportionately to its Pro Rata
Share.
2.13. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) No later than
the first Business Day following the date of receipt by Holdings, Company or any
of its Subsidiaries of any Net Asset Sale Proceeds or Net Insurance/Condemnation
Proceeds, Company shall prepay the Loans and/or the Revolving Loan Commitments
shall be permanently reduced in an aggregate amount equal to such Net Asset Sale
Proceeds or Net Insurance/Condemnation Proceeds, as the case may be; PROVIDED,
(i) so long as no Default or Event of Default shall have occurred and be
continuing, and (ii) to the extent that Net Asset Sale Proceeds and Net
Insurance/Condemnation Proceeds from the Closing Date through the applicable
date of determination do not exceed $5,000,000, Company may deliver to
Administrative Agent an Officers' Certificate setting forth (1) that portion of
such Net Asset Sale Proceeds or Net Insurance/Condemnation Proceeds (such
portion being the "PROPOSED REINVESTMENT PROCEEDS") that Company or such
Subsidiary intends to reinvest (or enter into a contract to reinvest) in
equipment or other productive assets of the general type used in the business of
Company and its Subsidiaries, which may include, in the case of any Proposed
Reinvestment Proceeds which related to Net Insurance/Condemnation Proceeds, the
repair, restoration or replacement of the applicable assets of Company or its
Subsidiaries (such equipment and other assets being "ELIGIBLE ASSETS") within
180 days of such date of receipt and (2) the proposed use of such Proposed
Reinvestment Proceeds and such other information with respect to such
reinvestment as Administrative Agent may reasonably request, and Company shall,
or shall cause one or more of its Subsidiaries to, promptly apply such Proposed
Reinvestment Proceeds to such reinvestment purposes; PROVIDED FURTHER, that
during such period prior to reinvestment in Eligible Assets such Proposed
Reinvestment Proceeds shall be applied to prepay outstanding Revolving Loans
(without a reduction in Revolving Loan Commitments) to the full extent thereof.
In the event Administrative Agent shall receive any Net Insurance/Condemnation
Proceeds in its capacity as loss payee pursuant to SECTION 5.5, Company hereby
authorizes Administrative Agent to apply all such amounts in accordance with
this SECTION 2.13(a); PROVIDED, if Company shall elect to exercise its option to
reinvest any such proceeds pursuant to the first sentence of this SECTION
2.13(a, Company shall give notice to Administrative Agent of such election and
Administrative Agent shall pay over to Company such proceeds and Company shall
reinvest such proceeds in accordance with the terms of such sentence.
(b) On the date of receipt by Holdings or Company of the Cash proceeds
from the issuance of any equity Securities of Holdings, Company or any of its
Subsidiaries, Company shall prepay the Loans and/or the Revolving Loan
Commitments shall be permanently reduced in an aggregate amount equal to 100% of
such proceeds, net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith, including reasonable legal
fees and expenses; PROVIDED, during any period in which the Leverage Ratio
(determined for any such period by reference to the most recent Compliance
Certificate delivered pursuant to SECTION 5.1(d) calculating the Leverage Ratio)
shall be 3.75:1.00 or less, Company shall be required to make the prepayment
and/or reduction required hereby in an amount equal to 75% of such net proceeds,
and PROVIDED FURTHER that no such prepayment or commitment reduction shall be
required with respect to such proceeds that are received in a private offering
or placement (x) to the extent that such proceeds do not exceed $25,000,000 in
the aggregate and are utilized to finance Permitted Acquisitions and
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<PAGE> 57
(y) to the extent that such proceeds are utilized to refinance the Junior
Subordinated Notes, the Senior Subordinated Bridge Loan and/or the Holdings
Notes.
(c) On the date of receipt by Holdings or Company of the Cash proceeds
from the issuance of any debt Securities (other than the proceeds of
Indebtedness permitted under SECTION 6.1 or Section 6.13(c)) of Holdings,
Company or its Subsidiaries, Company shall prepay the Loans and/or the
Commitments shall be permanently reduced in an aggregate amount equal to equal
to 100% of such proceeds, net, in the case of any such issuance, of underwriting
discounts and commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses.
(d) On the date of return to Company or any of its Subsidiaries of any
surplus assets of any Pension Plan of Company or any of its Subsidiaries,
Company shall prepay the Loans and/or the Commitments shall be permanently
reduced in an aggregate amount equal to 100% of such returned surplus assets,
net of transaction costs and expenses incurred in obtaining such return,
including incremental taxes payable as a result thereof.
(e) In the event that there shall be Consolidated Excess Cash Flow for
any Fiscal Year (commencing with Fiscal Year 1999), Company shall, no later than
ninety (90) days after the end of such Fiscal Year, prepay the Loans and/or the
Commitments shall be permanently reduced in an aggregate amount equal to 75% of
such Consolidated Excess Cash Flow; PROVIDED, during any period in which the
Leverage Ratio (determined for any such period by reference to the most recent
Compliance Certificate delivered pursuant to SECTION 5.1(d) calculating the
Leverage Ratio) shall be 3.75:1.00 or less, Company shall be required to make
the prepayment and/or reduction required hereby in an amount equal to 50% of
such Consolidated Excess Cash Flow.
(f) Company shall from time to time prepay FIRST, the Swing Line Loans,
and SECOND, the Revolving Loans to the extent necessary so that the Total
Utilization of Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect.
(g) In addition to any of the prepayments required pursuant to the
foregoing provisions of this SECTION 2.13, Company shall prepay the Loans and/or
permanently reduce the Revolving Loan Commitments in amounts and on dates so as
to minimize or eliminate any mandatory prepayment otherwise required pursuant to
the terms of Subordinated Indebtedness if and to the extent such other
prepayment can be eliminated or minimized as a result of a prepayment pursuant
to this SECTION 2.13(g).
(h) Concurrently with any prepayment of the Loans and/or reduction of
the Commitments pursuant to SECTIONS 2.13(a) through 2.13(e), Company shall
deliver to Administrative Agent a certificate by its Authorized Officers
demonstrating the calculation of the amount of the applicable net proceeds or
Consolidated Excess Cash Flow, as the case may be, that gave rise to such
prepayment and/or reduction.
2.14. APPLICATION OF PREPAYMENTS AND REDUCTIONS OF COMMITMENTS. (a) Any
voluntary prepayments made pursuant to SECTION 2.12 shall be applied as
specified by Company in the
51
<PAGE> 58
applicable notice of prepayment; PROVIDED, in the event Company fails to specify
the Loans to which any such prepayment shall be applied, such prepayment shall
be applied FIRST, to repay outstanding Swing Line Loans to the full extent
thereof, SECOND to repay outstanding Revolving Loans to the full extent thereof,
and THIRD to prepay the Tranche A Term Loans, the Tranche B Term Loans and the
Tranche C Term Loans on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and shall be applied on a pro rata basis
(in accordance with the respective outstanding principal amounts thereof) to
each scheduled installment of principal of the Tranche A Term Loans or Tranche B
Term Loans or the Tranche C Term Loans, as the case may be, that is unpaid at
the time of such prepayment.
(b) Any amount (the "APPLIED AMOUNT") required to be paid pursuant to
SECTION 2.13 shall be applied FIRST, to prepay the Tranche A Term Loans, the
Tranche B Term Loans and the Tranche C Term Loans on a pro rata basis (in
accordance with the respective outstanding principal amounts thereof) and shall
be applied on a pro rata basis (in accordance with the respective outstanding
principal amounts thereof) to each scheduled installment of principal of the
Tranche A Term Loans or Tranche B Term Loans or the Tranche C Term Loans, as the
case may be, that is unpaid at the time of such prepayment, SECOND, to the
extent of any remaining portion of the Applied Amount, to prepay the Swing Line
Loans to the full extent thereof and to permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, THIRD, to the extent of any
remaining portion of the Applied Amount, to prepay the Revolving Loans to the
full extent thereof and to further permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, and FOURTH, to the extent of any
remaining portion of the Applied Amount, to further permanently reduce the
Revolving Loan Commitments to the full extent thereof.
(c) Anything contained herein to the contrary notwithstanding, so long
as any Tranche A Term Loans are outstanding, in the event Company is required to
make any mandatory prepayment (a "WAIVABLE MANDATORY PREPAYMENT") of the Tranche
B Term Loans or the Tranche C Term Loans pursuant to SECTION 2.13, not less than
three Business Days prior to the date (the "REQUIRED PREPAYMENT DATE") on which
Company is required to make such Waivable Mandatory Prepayment, Company shall
notify Administrative Agent of the amount of such prepayment, and Administrative
Agent will promptly thereafter notify each Lender holding an outstanding Tranche
B Term Loan or Tranche C Term Loan of the amount of such Lender's Pro Rata Share
of such Waivable Mandatory Prepayment and such Lender's option to refuse such
amount. Each such Lender may exercise such option by giving written notice to
Company and Administrative Agent of its election to do so on or before the first
Business Day (the "CUTOFF DATE") prior to the Required Prepayment Date (it being
understood that any Lender which does not notify Company and Administrative
Agent of its election to exercise such option on or before the Cutoff Date shall
be deemed to have elected, as of the Cutoff Date, not to exercise such option).
On the Required Prepayment Date, Company shall pay to Administrative Agent the
amount of the Waivable Mandatory Prepayment, which amount shall be applied (i)
in an amount equal to that portion of the Waivable Mandatory Prepayment payable
to those Lenders that have elected not to exercise such option, to prepay the
Tranche B Term Loans and/or Tranche C Term Loans, as the case may be, of such
Lenders (which prepayment shall be applied to the scheduled installments of
principal of the Tranche B Term Loans and/or the Tranche C Term Loans, as the
case may be, in accordance with SECTION 2.14(a)), and (ii) in an amount equal to
that portion of the Waivable Mandatory Prepayment otherwise payable to those
Lenders that have
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<PAGE> 59
elected to exercise such option, to prepay the Tranche A Term Loans (which
prepayment shall be applied to the scheduled installments of principal of the
Tranche A Term Loans in accordance with SECTION 2.14(a)). The foregoing
provisions of this SECTION 2.14(c) shall not apply to Revolving Loans or the
Revolving Loan Commitments.
(d) Considering each Class of Loans being prepaid separately, any
prepayment thereof shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans, in each case in a manner
which minimizes the amount of any payments required to be made by Company
pursuant to SECTION 2.18(c); PROVIDED, so long as no Event of Default shall have
occurred and then be continuing, Company may elect that the remainder of such
prepayments (after application to all Base Rate Loans) be deposited in a cash
collateral account and applied thereafter to prepay any Eurodollar Rate Loans at
the earliest expiration of the Interest Periods applicable thereto. Company
hereby grants to Administrative Agent, for the benefit of such Lenders, a
security interest in all amounts in which Company has any right, title or
interest which are from time to time on deposit in such cash collateral account
and expressly waives all rights (which rights Company hereby acknowledges and
agrees are vested exclusively in the Administrative Agent) to exercise dominion
or control over any such amounts.
2.15. COLLATERAL PROCEEDS; GUARANTY PAYMENTS. (a) Except as otherwise
provided herein, all proceeds received by Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral after the occurrence and during the continuance of an Event of
Default, may, in the discretion of Administrative Agent, be held by
Administrative Agent as Collateral for, and/or (then or at any time thereafter)
applied in full or in part by Administrative Agent against, the "Secured
Obligations" or "Obligations" (each as defined in the applicable Collateral
Documents) in the following order of priority: FIRST, to the payment of all
costs and expenses of such sale, collection or other realization, including
reasonable compensation to Administrative Agent and its agents and counsel, and
all other expenses, liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which Administrative Agent
is entitled to indemnification under such Collateral Documents and hereunder and
all advances made by Administrative Agent thereunder for the account of the
applicable Credit Party, and to the payment of all costs and expenses paid or
incurred by Administrative Agent in connection with the exercise of any right or
remedy under such Collateral Document or hereunder, all in accordance with the
terms hereof; SECOND, to the extent of any excess such proceeds, to the payment
of all other such Secured Obligations for the ratable benefit of the holders
thereof; and THIRD, to the extent of any excess such proceeds, to the payment to
or upon the order of such Credit Party or to whosoever may be lawfully entitled
to receive the same or as a court of competent jurisdiction may direct.
(b) All payments received by Administrative Agent under the Guaranty
shall be applied promptly from time to time by Administrative Agent in the
following order of priority: FIRST, to the payment of the costs and expenses of
any collection or other realization under the Guaranty, including reasonable
compensation to Administrative Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by Administrative Agent in
connection therewith, all in accordance with the terms of the Guaranty and this
Agreement; SECOND, to the extent of any excess such payments, to the payment of
all other Obligations for the ratable benefit of the holders thereof;
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<PAGE> 60
and THIRD, to the extent of any excess such payments, to the payment to the
applicable Guarantor or to whosoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
2.16. GENERAL PROVISIONS REGARDING PAYMENTS. All payments by Company of
principal, interest, fees and other Obligations shall be made in Dollars in same
day funds, without defense, set-off or counterclaim, free of any restriction or
condition, and delivered to Administrative Agent not later than 12:00 Noon (New
York City time) on the date due at the Funding and Payment Office for the
account of Lenders; funds received by Administrative Agent after that time on
such due date shall be deemed to have been paid by Company on the next
succeeding Business Day. All payments in respect of the principal amount of any
Loan (other than voluntary prepayments of Revolving Loans and Swing Line Loans)
shall include payment of accrued interest on the principal amount being repaid
or prepaid, and all such payments (and, in any event, any payments in respect of
any Loan on a date when interest is due and payable with respect to such Loan)
shall be applied to the payment of interest before application to principal.
Administrative Agent shall promptly distribute to each Lender, at its primary
address set forth on its signature page hereto or at such other address as such
Lender may request, its Pro Rata Share of all payments and prepayments of
principal and interest due hereunder, together with all other amounts due
thereto, including, without limitation, all fees payable thereto, received by
Administrative Agent. Notwithstanding the foregoing provisions hereof, if any
Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any
Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any
Eurodollar Rate Loans, Administrative Agent shall give effect thereto in
apportioning payments received thereafter. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the payment of interest hereunder
or of the commitment fees hereunder, as the case may be. Notwithstanding
anything to the contrary herein, payments of amounts deposited in the collateral
account pursuant to SECTION 2.14(d) shall be deemed to have been paid by Company
on the later of (a) the date such amounts are so deposited, and (b) if Company
elects to apply such amounts in accordance with SECTION 2.14(d), the applicable
date or dates such amounts are applied to prepay Eurodollar Rate Loans. Company
hereby authorizes Administrative Agent to charge Company's accounts with
Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest, fees and expenses due hereunder
(subject to sufficient funds being available in its accounts for that purpose).
2.17. RATABLE SHARING. Lenders hereby agree among themselves that if
any of them shall, whether by voluntary payment (other than a voluntary
prepayment of Loans made and applied in accordance with the terms hereof), by
realization upon security, through the exercise of any right of set-off or
banker's lien, by counterclaim or cross action or by the enforcement of any
right under the Credit Documents or otherwise, or as adequate protection of a
deposit treated as cash collateral under the Bankruptcy Code, receive payment or
reduction of a proportion of the aggregate amount of principal, interest,
amounts payable in respect of Letters of Credit, fees and other amounts then due
and owing to such Lender hereunder or under the other Credit Documents
(collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than
the proportion received by any other Lender in respect of the Aggregate Amounts
Due to such other Lender, then the Lender receiving such proportionately greater
payment shall (i) notify Administrative Agent and each other
54
<PAGE> 61
Lender of the receipt of such payment and (ii) apply a portion of such payment
to purchase participations (which it shall be deemed to have purchased from each
seller of a participation simultaneously upon the receipt by such seller of its
portion of such payment) in the Aggregate Amounts Due to the other Lenders so
that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders
in proportion to the Aggregate Amounts Due to them; PROVIDED, if all or part of
such proportionately greater payment received by such purchasing Lender is
thereafter recovered from such Lender upon the bankruptcy or reorganization of
Company or otherwise, those purchases shall be rescinded and the purchase prices
paid for such participations shall be returned to such purchasing Lender ratably
to the extent of such recovery, but without interest. Company expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder.
2.18. MAKING OR MAINTAINING EURODOLLAR RATE LOANS. (a) In the event
that Administrative Agent shall have reasonably determined (which determination
shall be final and conclusive and binding upon all parties hereto), on any
Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that
by reason of circumstances affecting the London interbank market adequate and
fair means do not exist for ascertaining the interest rate applicable to such
Loans on the basis provided for in the definition of Adjusted Eurodollar Rate,
Administrative Agent shall on such date give notice (by telefacsimile or by
telephone confirmed in writing) to Company and each Lender of such
determination, whereupon (i) no Loans may be made as, or converted to,
Eurodollar Rate Loans until such time as Administrative Agent notifies Company
and Lenders that the circumstances giving rise to such notice no longer exist,
which notice shall be given as soon as reasonably practicable and (ii) any
Funding Notice or Conversion/Continuation Notice given by Company with respect
to the Loans in respect of which such determination was made shall be deemed to
be rescinded by Company.
(b) In the event that on any date any Lender shall have reasonably
determined (which determination shall be final and conclusive and binding upon
all parties hereto but shall be made only after consultation with Company and
Administrative Agent) that the making, maintaining or continuation of its
Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such
Lender in good faith with any law, treaty, governmental rule, regulation,
guideline or order (or would conflict with any such treaty, governmental rule,
regulation, guideline or order not having the force of law even though the
failure to comply therewith would not be unlawful), or (ii) has become
impracticable, or would cause such Lender material hardship, as a result of
contingencies occurring after the date hereof which materially and adversely
affect the London interbank market or the position of such Lender in that
market, then, and in any such event, such Lender shall be an "AFFECTED LENDER"
and it shall on that day give notice (by telefacsimile or by telephone confirmed
in writing) to Company and Administrative Agent of such determination (which
notice Administrative Agent shall promptly transmit to each other Lender).
Thereafter (1) the obligation of the Affected Lender to make Loans as, or to
convert Loans to, Eurodollar Rate Loans shall be suspended until such notice
shall be withdrawn by the Affected Lender, (2) to the extent such determination
by the Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the
Affected Lender shall make such Loan as (or
55
<PAGE> 62
convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected
Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the
"AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration
of the Interest Period then in effect with respect to the Affected Loans or when
required by law, and (4) the Affected Loans shall automatically convert into
Base Rate Loans on the date of such termination. Notwithstanding the foregoing,
to the extent a determination by an Affected Lender as described above relates
to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding
Notice or a Conversion/Continuation Notice, Company shall have the option,
subject to the provisions of SECTION 2.18(c), to rescind such Funding Notice or
Conversion/Continuation Notice as to all Lenders by giving notice (by
telefacsimile or by telephone confirmed in writing) to Administrative Agent of
such rescission on the date on which the Affected Lender gives notice of its
determination as described above (which notice of rescission Administrative
Agent shall promptly transmit to each other Lender). Except as provided in the
immediately preceding sentence, nothing in this SECTION 2.18(b) shall affect the
obligation of any Lender other than an Affected Lender to make or maintain Loans
as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms
hereof.
(c) Company shall compensate each Lender, upon written request by such
Lender (which request shall set forth the basis for requesting such amounts),
for all reasonable losses, expenses and liabilities (including any interest paid
by such Lender to lenders of funds borrowed by it to make or carry its
Eurodollar Rate Loans and any loss, expense or liability sustained by such
Lender in connection with the liquidation or re-employment of such funds but
excluding any loss solely attributable to the failure to receive the Applicable
Margin on a Eurodollar Rate Loan for any period after (x) the date specified for
such Eurodollar Rate Loan in the case of clause (i) below and (y) the date such
Eurodollar Rate Loans are prepaid or converted in the case of clause (ii) below)
which such Lender may sustain: (i) if for any reason (other than a default by
such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Funding Notice or a telephonic request for borrowing, or
a conversion to or continuation of any Eurodollar Rate Loan does not occur on a
date specified therefor in a Conversion/Continuation Notice or a telephonic
request for conversion or continuation; (ii) if any prepayment or other
principal payment or any conversion of any of its Eurodollar Rate Loans occurs
on a date prior to the last day of an Interest Period applicable to that Loan;
or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on
any date specified in a notice of prepayment given by Company.
(d) Any Lender may make, carry or transfer Eurodollar Rate Loans at,
to, or for the account of any of its branch offices or the office of an
Affiliate of such Lender.
(e) Calculation of all amounts payable to a Lender under this SECTION
2.18 and under SECTION 2.19 shall be made as though such Lender had actually
funded each of its relevant Eurodollar Rate Loans through the purchase of a
Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i)
of the definition of Adjusted Eurodollar Rate in an amount equal to the amount
of such Eurodollar Rate Loan and having a maturity comparable to the relevant
Interest Period and through the transfer of such Eurodollar deposit from an
offshore office of such Lender to a domestic office of such Lender in the United
States of America; PROVIDED, each Lender may fund each of its Eurodollar Rate
Loans in any manner it sees fit and the foregoing assumptions shall be utilized
only for the purposes of calculating amounts payable under this SECTION 2.18 and
under SECTION 2.19.
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2.19. INCREASED COSTS; CAPITAL ADEQUACY. Subject to the provisions of
SECTION 2.20 (which shall be controlling with respect to the matters covered
thereby), in the event that any Lender (which term shall include Issuing Bank
for purposes of this SECTION 2.19) shall reasonably determine (which
determination shall, absent demonstrable error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
date hereof, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law): (a) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such Lender)
with respect hereto or any of its obligations hereunder or any payments to such
Lender (or its applicable lending office) of principal, interest, fees or any
other amount payable hereunder; (b) imposes, modifies or holds applicable any
reserve (including any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, or advances or loans by, or other credit (including letters of
credit) extended by, or any other acquisition of funds by, any office of such
Lender (other than any such reserve or other requirements with respect to
Eurodollar Rate Loans that are reflected in the definition of Adjusted
Eurodollar Rate); or (c) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Lender (or its applicable lending office) or
its obligations hereunder or the London interbank market; and the result of any
of the foregoing is to increase the cost to such Lender of agreeing to make,
making or maintaining Loans hereunder or to reduce any amount received or
receivable by such Lender (or its applicable lending office) with respect
thereto; then, in any such case, Company shall promptly pay to such Lender, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender in its reasonable discretion
shall determine) as may be necessary to compensate such Lender for any such
increased cost or reduction in amounts received or receivable hereunder. Such
Lender shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to such Lender under this SECTION 2.19, which statement
shall be conclusive and binding upon all parties hereto absent demonstrable
error.
2.20. TAXES; WITHHOLDING, ETC. (a) All sums payable by any Credit Party
hereunder and the other Credit Documents shall (except to the extent required by
law) be paid free and clear of, and without any deduction or withholding on
account of, any Tax (other than a Tax on the overall net income of any Lender)
imposed, levied, collected, withheld or assessed by or within the United States
of America or any political subdivision in or of the United States of America or
any other jurisdiction from or to which a payment is made by or on behalf of any
Credit Party or by any federation or organization of which the United States of
America or any such jurisdiction is a member at the time of payment.
(b) If any Credit Party or any other Person is required by law to make
any deduction or withholding on account of any such Tax from any sum paid or
payable by any Credit Party to Administrative Agent or any Lender under any of
the Credit Documents: (i) Company shall notify
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Administrative Agent of any such requirement or any change in any such
requirement as soon as Company becomes aware of it; (ii) Company shall pay any
such Tax before the date on which penalties attach thereto, such payment to be
made (if the liability to pay is imposed on any Credit Party) for its own
account or (if that liability is imposed on Administrative Agent or such Lender,
as the case may be) on behalf of and in the name of Administrative Agent or such
Lender; (iii) the sum payable by such Credit Party in respect of which the
relevant deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction, withholding
or payment, Administrative Agent or such Lender, as the case may be, receives on
the due date a net sum equal to what it would have received had no such
deduction, withholding or payment been required or made; and (iv) within 30 days
after paying any sum from which it is required by law to make any deduction or
withholding, and within 30 days after the due date of payment of any Tax which
it is required by clause (ii) above to pay, Company shall deliver to
Administrative Agent evidence satisfactory to the other affected parties of such
deduction, withholding or payment and of the remittance thereof to the relevant
taxing or other authority; PROVIDED, no such additional amount shall be required
to be paid to any Lender under clause (iii) above with respect to any deductions
or withholding applicable as of the date hereof (in the case of each Lender
listed on the signature pages hereof) or the effective date of the Assignment
Agreement pursuant to which such Lender became a Lender (in the case of each
other Lender) in respect of payments to such Lender.
(c) Each Lender that is organized under the laws of any jurisdiction
other than the United States or any state or other political subdivision thereof
a "NON-US LENDER") shall deliver to Administrative Agent for transmission to
Company, on or prior to the Closing Date (in the case of each Lender listed on
the signature pages hereof) or on or prior to the date of the Assignment
Agreement pursuant to which it becomes a Lender (in the case of each other
Lender), and at such other times as may be necessary in the determination of
Company or Administrative Agent (each in the reasonable exercise of its
discretion), (i) two original copies of Internal Revenue Service Form 1001 or
4224 (or any successor forms), properly completed and duly executed by such
Lender, together with any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder to
establish that such Lender is not subject to deduction or withholding of United
States federal income tax with respect to any payments to such Lender of
principal, interest, fees or other amounts payable under any of the Credit
Documents, or (ii) if such Lender is not a "bank" or other Person described in
Section 881(c)(3) of the Internal Revenue Code and cannot deliver either
Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, a
Certificate re Non-Bank Status together with two original copies of Internal
Revenue Service Form W-8 (or any successor form), properly completed and duly
executed by such Lender, together with any other certificate or statement of
exemption or reduction required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is exempt from or
entitled to a reduction in the amount of deduction or withholding of United
States federal income tax with respect to any payments to such Lender of
interest payable under any of the Credit Documents. Each Lender required to
deliver any forms, certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to this SECTION 2.20(c) hereby
agrees, from time to time after the initial delivery by such Lender of such
forms, certificates or other evidence, whenever a lapse in time or change in
circumstances renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Lender shall promptly deliver to
Administrative Agent
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for transmission to Company two new original copies of Internal Revenue Service
Form 1001 or 4224, or a Certificate re Non-Bank Status and two original copies
of Internal Revenue Service Form W-8, as the case may be, properly completed and
duly executed by such Lender, together with any other certificate or statement
of exemption or reduction required in order to confirm or establish that such
Lender is exempt from or entitled to a reduction in the amount of deduction or
withholding of United States federal income tax with respect to payments to such
Lender under the Credit Documents, or notify Administrative Agent and Company of
its inability to deliver any such forms, certificates or other evidence. Company
shall not be required to pay any additional amount to any Non-US Lender under
SECTION 2.20(b)(iii), but only to the extent deduction or withholding is a
result of such Lender's failure to satisfy the requirements of the second
sentence of this SECTION 2.20(c); PROVIDED, if such Lender shall have satisfied
the requirements of the first sentence of this SECTION 2.20(c) on the Closing
Date or on the date of the Assignment Agreement pursuant to which it became a
Lender, as applicable, nothing in this last sentence of SECTION 2.20(c) shall
relieve Company of its obligation to pay any additional amounts otherwise
payable pursuant to SECTION 2.19 in the event that, as a result of any change in
any applicable law, treaty or governmental rule, regulation or order, or any
change in the interpretation, administration or application thereof, such Lender
is no longer properly entitled to deliver forms, certificates or other evidence
at a subsequent date establishing the fact that such Lender is not subject to
withholding as described herein.
2.21. CAPITAL ADEQUACY ADJUSTMENT. If any Lender (which term shall
include Issuing Bank for purposes of this SECTION 2.21) shall have determined
that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding
capital adequacy, or any change therein or in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its applicable lending office) with any guideline, request or
directive regarding capital adequacy (whether or not having the force of law) of
any such governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such Lender or
any corporation controlling such Lender as a consequence of, or with reference
to, such Lender's Loans or Commitments or Letters of Credit or participations
therein or other obligations hereunder with respect to the Loans or the Letters
of Credit to a level below that which such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness, phase-in,
applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy),
then from time to time, within five Business Days after receipt by Company from
such Lender of the statement referred to in the next sentence, Company shall pay
to such Lender such additional amount or amounts as will compensate such Lender
or such controlling corporation on an after-tax basis for such reduction. Such
Lender shall deliver to Company (with a copy to Administrative Agent) a written
statement, setting forth in reasonable detail the basis of the calculation of
such additional amounts, which statement shall be conclusive and binding upon
all parties hereto absent demonstrable error.
2.22. OBLIGATION TO MITIGATE. Each Lender (which term shall include
Issuing Bank for purposes of this SECTION 2.22) agrees that, as promptly as
practicable after the officer of such Lender responsible for administering its
Loans or Letters of Credit, as the case may be, becomes aware of the occurrence
of an event or the existence of a condition that would cause such Lender to
become
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an Affected Lender or that would entitle such Lender to receive payments under
SECTION 2.19 or 2.20, it will, to the extent not inconsistent with the internal
policies of such Lender and any applicable legal or regulatory restrictions, use
reasonable efforts (i) to make, issue, fund or maintain its Credit Extensions,
including any Affected Loans, through another office of such Lender, or (ii)
take such other measures as such Lender may deem reasonable, if as a result
thereof the circumstances which would cause such Lender to be an Affected Lender
would cease to exist or the additional amounts which would otherwise be required
to be paid to such Lender pursuant to SECTION 2.19 or 2.20 would be materially
reduced and if, as determined by such Lender in its sole discretion, the making,
issuing, funding or maintaining of such Commitments, Loans or Letters of Credit
through such other office or in accordance with such other measures, as the case
may be, would not otherwise materially adversely affect such Commitments, Loans
or Letters of Credit or the interests of such Lender; PROVIDED, such Lender will
not be obligated to utilize such other office pursuant to this SECTION 2.22
unless Company agrees to pay all incremental expenses incurred by such Lender as
a result of utilizing such other office as described in clause (i) above. A
certificate as to the amount of any such expenses payable by Company pursuant to
this SECTION 2.22 (setting forth in reasonable detail the basis for requesting
such amount) submitted by such Lender to Company (with a copy to Administrative
Agent) shall be conclusive absent demonstrable error.
2.23. DEFAULTING LENDERS. Anything contained herein to the contrary
notwithstanding, in the event that any Lender (a "DEFAULTING LENDER") defaults
(a "FUNDING DEFAULT") in its obligation to fund any Revolving Loan (a "DEFAULTED
REVOLVING LOAN") as a result of the appointment of a receiver or conservator
with respect to such Lender at the direction or request of any regulatory agency
or authority, then (a) during any Default Period with respect to such Defaulting
Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes
of voting on any matters (including the granting of any consents or waivers)
with respect to any of the Credit Documents; (b) to the extent permitted by
applicable law, until such time as the Default Excess with respect to such
Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment
of the Revolving Loans shall, if Company so directs at the time of making such
voluntary prepayment, be applied to the Revolving Loans of other Lenders as if
such Defaulting Lender had no Revolving Loans outstanding and the Revolving
Credit Exposure of such Defaulting Lender were zero, and (ii) any mandatory
prepayment of the Revolving Loans shall, if Company so directs at the time of
making such mandatory prepayment, be applied to the Revolving Loans of other
Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such
Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting
Lender, it being understood and agreed that Company shall be entitled to retain
any portion of any mandatory prepayment of the Revolving Loans that is not paid
to such Defaulting Lender solely as a result of the operation of the provisions
of this clause (b); (c) such Defaulting Lender's Revolving Loan Commitment and
outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the
Letter of Credit Usage shall be excluded for purposes of calculating the
commitment fee payable to Lenders pursuant in respect of any day during any
Default Period with respect to such Defaulting Lender, and such Defaulting
Lender shall not be entitled to receive any commitment fee pursuant to SECTION
2.10 with respect to such Defaulting Lender's Commitment in respect of any
Default Period with respect to such Defaulting Lender; and (d) the Total
Utilization of Revolving Loan Commitments as at any date of determination shall
be calculated as if such Defaulting Lender had funded all Defaulted Revolving
Loans of such Defaulting Lender. No Revolving Loan Commitment of any Lender
shall be increased or otherwise affected,
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and, except as otherwise expressly provided in this SECTION 2.23, performance by
Company of its obligations hereunder and the other Credit Documents shall not be
excused or otherwise modified as a result of any Funding Default or the
operation of this SECTION 2.23. The rights and remedies against a Defaulting
Lender under this SECTION 2.23 are in addition to other rights and remedies
which Company may have against such Defaulting Lender with respect to any
Funding Default and which Administrative Agent or any Lender may have against
such Defaulting Lender with respect to any Funding Default.
2.24. REMOVAL OR REPLACEMENT OF A LENDER. Anything contained herein to
the contrary notwithstanding, in the event that: (a) any Lender (an
"INCREASED-COST LENDER") shall give notice to Company that such Lender is an
Affected Lender or that such Lender is entitled to receive payments under
SECTION 2.19, SECTION 2.20 or SECTION 2.21, the circumstances which have caused
such Lender to be an Affected Lender or which entitle such Lender to receive
such payments shall remain in effect, and such Lender shall fail to withdraw
such notice within five Business Days after Company's request for such
withdrawal; or (b) any Lender shall become a Defaulting Lender, the Default
Period for such Defaulting Lender shall remain in effect, and such Defaulting
Lender shall fail to cure the default as a result of which it has become a
Defaulting Lender within five Business Days after Company's request that it cure
such default; or (c) in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions hereof as
contemplated by SECTION 10.5(b) or SECTION 10.5(c), the consent of Requisite
Lenders shall have been obtained but the consent of one or more of such other
Lenders (each a "NON-CONSENTING LENDER") whose consent is required shall not
have been obtained, and the failure to obtain Non-Consenting Lenders' consents
does not result solely from the exercise of Non-Consenting Lenders' rights (and
the withholding of any required consents by Non-Consenting Lenders) pursuant to
SECTION 10.5(d); then, with respect to each such Increased-Cost Lender,
Defaulting Lender or Non-Consenting Lender (the "TERMINATED LENDER"), Company
may, by giving written notice to Administrative Agent and any Terminated Lender
of its election to do so: (i) (1) elect to terminate the Commitment, if any, of
such Terminated Lender upon receipt by such Terminated Lender of such notice,
and (2) prepay on the date of such termination any outstanding Loans made by
such Terminated Lender, together with accrued and unpaid interest thereon and
any other amounts payable to such Terminated Lender hereunder pursuant to
SECTION 2.18(c), 2.19, 2.20 or 2.21 or otherwise; PROVIDED, in the event such
Terminated Lender has any Loans outstanding at the time of such termination, the
written consent of Administrative Agent and Requisite Lenders (which consent
shall not be unreasonably withheld or delayed) shall be required in order for
Company to make the election set forth in this clause (i); or (ii) elect to
cause such Terminated Lender (and such Terminated Lender hereby irrevocably
agrees) to assign its outstanding Loans and its Commitment, if any, in full to
one or more Eligible Assignees (each a "REPLACEMENT LENDER") in accordance with
the provisions of SECTION 10.6 (except that Company shall be liable to
Administrative Agent for any processing or recordation fee payable under SECTION
10.6); PROVIDED, (1) on the date of such assignment, Company shall pay any
amounts payable to such Terminated Lender pursuant to SECTION 2.18(c), 2.19,
2.20 or 2.21 or otherwise as if it were a prepayment and (2) in the event such
Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall
consent, at the time of such assignment, to each matter in respect of which such
Terminated Lender was a Non-Consenting Lender; PROVIDED, (A) Company may not
make either of the elections set forth in clauses (i) or (ii) above with respect
to any Non-Consenting Lender unless Company also makes one of such elections
with respect to each other Terminated Lender
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which is a Non-Consenting Lender and (I) Company may not make either of such
elections with respect to any Terminated Lender that is also Issuing Bank
unless, prior to the effectiveness of such election, Company shall have caused
each outstanding Letter of Credit issued thereby to be cancelled. Upon the
prepayment of all amounts owing to any Terminated Lender and the termination of
such Terminated Lender's Commitment, if any, (B) the definition of "Commitments"
shall be deemed modified to reflect any corresponding changes in the
Commitments, and (C) such Terminated Lender shall no longer constitute a
"Lender" for purposes hereof; PROVIDED, any rights of such Terminated Lender to
indemnification hereunder shall survive as to such Terminated Lender.
SECTION 3. CONDITIONS PRECEDENT
3.1. CLOSING DATE. The obligations of Lenders to make any Credit
Extension to be made on the Closing Date are subject to the satisfaction, or
waiver in accordance with SECTION 10.5, of the following conditions on or before
the Closing Date:
(a) CREDIT DOCUMENTS. Administrative Agent shall have received
sufficient copies of each Credit Document, originally executed and delivered by
each applicable Credit Party, for each Lender and its counsel.
(b) ORGANIZATIONAL DOCUMENTS, ETC. Administrative Agent shall have
received sufficient copies of each of the following documents, originally
executed and delivered by each Credit Party, as applicable, for each Lender and
its counsel: (i) certified copies of the Certificate or Articles of
Incorporation of such Person, together with a good standing certificate from the
Secretary of State of its jurisdiction of incorporation and each other state in
which such Person is qualified as a foreign corporation to do business and, to
the extent generally available, a certificate or other evidence of good standing
as to payment of any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, each dated the Closing Date or a
recent date prior thereto; (ii) copies of the Bylaws of such Person, certified
as of the Closing Date by such Person's corporate secretary or an assistant
secretary; (iii) resolutions of the Board of Directors of such Person approving
and authorizing the execution, delivery and performance of the Credit Documents
to which it is a party, certified as of the Closing Date by the corporate
secretary or an assistant secretary of such Person as being in full force and
effect without modification or amendment; (iv) signature and incumbency
certificates of the officers of such Person executing the Credit Documents to
which it is a party, dated the Closing Date; and (v) such other documents as
Agents may reasonably request.
(c) GOVERNMENTAL AUTHORIZATIONS AND CONSENTS. Each Credit Party shall
have obtained all material Governmental Authorizations and all material consents
of other Persons, in each case that are necessary in connection with the
transactions contemplated by the Credit Documents and each of the foregoing
shall be in full force and effect. No action, request for stay, petition for
review or rehearing, reconsideration, or appeal with respect to any of the
foregoing shall be pending, and the time for any applicable agency to take
action to set aside its consent on its own motion shall have expired.
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(d) ACTIONS WITH RESPECT TO COLLATERAL. Each Agent shall have received
evidence satisfactory to it that each Credit Party shall have taken or caused to
be taken all such actions, executed and delivered or caused to be executed and
delivered all such agreements, documents and instruments, and made or caused to
be made all such filings and recordings that may be necessary or, in the
reasonable opinion of Agents, desirable in order to create in favor of
Administrative Agent, for the benefit of Lenders, a valid and perfected First
Priority Lien on the Collateral.
(e) MORTGAGES; CLOSING DATE MORTGAGE POLICIES. Without limiting the
generality of the foregoing SECTION 3.1(d), each Agent shall have received
(i) CLOSING DATE MORTGAGES. Fully executed and notarized
Mortgages in proper form for recording in all appropriate places in all
applicable jurisdictions, encumbering each Real Property Asset listed
on SCHEDULE 3.1(E) annexed hereto (each a "CLOSING DATE MORTGAGED
PROPERTY");
(ii) OPINIONS OF LOCAL COUNSEL. An opinion of counsel (which
counsel shall be reasonably satisfactory to Administrative Agent and
Syndication Agent) in Hawaii with respect to the enforceability of the
form of Mortgage to be recorded in such state, in form and substance
reasonably satisfactory to Administrative Agent and Syndication Agent;
(iii) LANDLORD CONSENTS AND ESTOPPELS. In the case of each
Closing Date Mortgaged Property consisting of a Leasehold Property, (A)
a Landlord Consent and Estoppel with respect thereto and (B) evidence
that such Leasehold Property is a Recorded Leasehold Interest;
(iv) TITLE INSURANCE. (a) ALTA mortgagee title insurance
policies or unconditional commitments therefor (each a "CLOSING DATE
MORTGAGE POLICY") issued by the Title Company with respect to each
Closing Date Mortgaged Property listed on SCHEDULE 3.1(e) annexed
hereto, in an amount reasonably satisfactory to Administrative Agent
and Syndication Agent, insuring fee simple title to, or a valid
leasehold interest in, each such Closing Date Mortgaged Property vested
in such Credit Party and assuring Administrative Agent that such
Mortgage creates a valid and enforceable First Priority mortgage Lien
on such Closing Date Mortgaged Property encumbered thereby, subject
only to a standard survey exception, which Closing Date Mortgage Policy
(A) shall include an endorsement for mechanics' liens, for future
advances under this Agreement and for any other matters reasonably
requested by Syndication Agent or Administrative Agent and (B) shall
provide for affirmative insurance and such reinsurance as
Administrative Agent or Syndication Agent may reasonably request, all
of the foregoing in form and substance reasonably satisfactory to
Administrative Agent and Syndication Agent; and (b) evidence
satisfactory to Administrative Agent and Syndication Agent that such
Credit Party has (i) delivered to the Title Company all certificates
and affidavits required by the Title Company in connection with the
issuance of the Closing Date Mortgage Policies and (ii) paid to the
Title Company or to the appropriate governmental authorities all
expenses and premiums of the Title Company in connection with the
issuance of the Closing Date Mortgage Policies and all recording and
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stamp taxes (including mortgage recording and intangible taxes) payable
in connection with recording the Mortgages in the appropriate real
estate records;
(v) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies
of all recorded documents listed as exceptions to title or otherwise
referred to in the Closing Date Mortgage Policies or title reports
delivered pursuant to clause (iv) above;
(vi) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (a)
Evidence, which may be in the form of a letter from an insurance broker
or a municipal engineer, as to (1) whether any Closing Date Mortgaged
Property is a Flood Hazard Property and (2) if so, whether the
community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, (b) if any
Closing Date Mortgaged Property is a Flood Hazard Property, such Credit
Party's written acknowledgment of receipt of written notification from
Administrative Agent (1) that such Closing Date Mortgaged Property is a
Flood Hazard Property and (2) as to whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, and (c) in the event any Closing Date Mortgaged
Property is a Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, evidence that
Company has obtained flood insurance in respect of such Flood Hazard
Property to the extent required under the applicable regulations of the
Board of Governors of the Federal Reserve System; and
(vii) COLLATERAL ACCESS AGREEMENTS. For each Leasehold
Property identified on SCHEDULE 3.1(e) which is not subject to a
Mortgage as provided in clause (i) above, a duly executed Collateral
Access Agreement.
(f) FINANCIAL STATEMENTS. Lenders shall have received from Company the
Historical Financial Statements, together with pro forma consolidated balance
sheet of Company and its Subsidiaries as at the end of the Fiscal Quarter most
recently ended and income statement of Company and its Subsidiaries for the
twelve-month period then ended, in each case prepared in accordance with GAAP
and reflecting the consummation of the Recapitalization, the related financings
and the other transactions contemplated by the Credit Documents and the Related
Agreements, which pro forma financial statements shall be in form and substance
reasonably satisfactory to Agents.
(g) EVIDENCE OF INSURANCE. Agents shall have received a certificate
from Company's insurance broker or other evidence reasonably satisfactory to
them that all insurance required to be maintained pursuant to SECTION 5.5 is in
full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under SECTION 5.5.
(h) OPINIONS OF COUNSEL TO CREDIT PARTIES. Lenders and their respective
counsel shall have received originally executed copies of the favorable written
opinion of Ropes & Gray, in the form of EXHIBIT D-1 and as to such other matters
as Agents may reasonably request, and otherwise
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in form and substance reasonably satisfactory to Agents and their counsel, dated
as of the Closing Date.
(i) OPINIONS OF SYNDICATION AGENT'S COUNSEL. Lenders shall have
received originally executed copies of one or more favorable written opinions of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Syndication Agent, dated as
of the Closing Date, in the form of EXHIBIT D-2 and otherwise in form and
substance reasonably satisfactory to Agents.
(j) FEES. Company shall have paid to Administrative Agent, for
distribution (as appropriate) to Agents and Lenders, the fees payable on the
Closing Date referred to in SECTION 2.10(c).
(k) COMPLETION OF PROCEEDINGS. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by
Administrative Agent, acting on behalf of Lenders, or Syndication Agent and its
counsel shall be reasonably satisfactory in form and substance to Administrative
Agent, Syndication Agent and such counsel, and Administrative Agent, Syndication
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent or Syndication Agent
may reasonably request.
(l) EXISTING INDEBTEDNESS, RELATED LIENS AND LETTERS OF CREDIT. (i) On
the Closing Date, Company and its Subsidiaries shall have (w) repaid (or
satisfied and discharged as described in clause (ii) below) in full all
Indebtedness of Holdings and its Subsidiaries other than the Indebtedness set
forth on SCHEDULE 6.1 annexed hereto, (x) terminated any commitments to lend or
make other extensions of credit thereunder, (y) delivered to Agents all
documents or instruments necessary to release all Liens securing such repaid
Indebtedness or other obligations of Holdings and its Subsidiaries thereunder,
and (z) made arrangements reasonably satisfactory to Agents with respect to the
cancellation of any letters of credit outstanding under such repaid Indebtedness
or the issuance of Letters of Credit to support the obligations of Holdings and
its Subsidiaries with respect thereto. Agents shall have received an Officers'
Certificate of Company stating that, after giving effect to the transactions
described in this SECTION 3.1(L), Credit Parties shall have no Indebtedness
outstanding other than Indebtedness under the Credit Documents, the Senior
Subordinated Bridge Loan Documents, the Holdings Notes Documents, the Junior
Subordinated Notes Documents and the Indebtedness described on SCHEDULE 6.1.
(ii) On or before the Closing Date: (w) Company shall have
mailed an irrevocable notice of redemption to each holder of Existing Notes and
the trustee under the Existing Indenture pursuant to Sections 3.07(c) and 3.01,
as applicable, of the Existing Indenture; (x) Company shall have irrevocably
deposited with the trustee under the Existing Indenture funds sufficient to pay
the principal of, all accrued and unpaid interest on and the Applicable Premium
(as defined in the Existing Indenture) on all outstanding Existing Notes and any
other sums payable by Company under the Existing Indenture; and (y) Company
shall have received a written notice of acknowledgment from the trustee under
the Existing Indenture of the satisfaction and discharge of the Existing
Indenture. The Agents shall have received a copy of all (1) notices including,
without limitation, the notices referred to in clauses (w) and (y) above, (2)
officers' certificate, (3) opinions of counsel and (4) other
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documents, in each case, delivered or issued in connection with the satisfaction
and discharge of the Existing Notes pursuant to Section 8.01(a) of the Existing
Indenture. Agents shall be satisfied based on the foregoing that all of the
outstanding Existing Notes shall have been satisfied and discharged.
(m) CORPORATE STRUCTURE, ETC. Set forth on SCHEDULE 4.1 is (i) the
corporate organizational structure of Holdings and its Subsidiaries, both before
and after giving effect to the Recapitalization, and (ii) the management
structure of Company after giving effect to the Recapitalization.
(n) ISSUANCE OF SENIOR SUBORDINATED BRIDGE NOTES, HOLDINGS NOTES AND
JUNIOR SUBORDINATED NOTES. On or before the Closing Date,
(i) (a) Company shall have received the Senior Subordinated
Bridge Loans in an aggregate amount in cash of not less than
$75,000,000 and shall have issued and sold the Junior Subordinated
Notes and received cash proceeds therefor in an aggregate amount of not
less than $30,000,000 and (B) Holdings shall have issued and sold the
Holdings Notes and received cash proceeds therefor in an aggregate
amount of not less than $10,000,000;
(ii) Company shall have delivered to Agents complete, correct
and conformed copies of the Senior Subordinated Bridge Loan Documents,
the Junior Subordinated Notes Documents and the Holdings Notes
Documents, each of which shall include terms reasonable and customary
for loans and securities of such type, as mutually agreed upon between
Fenway and the Agents substantially as set forth on EXHIBIT N attached
hereto; and
(iii) Company shall have provided evidence satisfactory to
Agents that the proceeds of Senior Subordinated Bridge Loans, the
Junior Subordinated Notes and the Holdings Notes have been irrevocably
committed, prior to the application of the proceeds of the Term Loans,
to the payment of a portion of the Recapitalization Financing
Requirements.
(o) EQUITY FINANCING. On or before the Closing Date, Company shall have
provided evidence satisfactory to Agents that the proceeds of the Equity
Financing have been irrevocably committed, prior to the application of the
proceeds of the Term Loans, to the payment of a portion of the Recapitalization
Financing Requirements.
(p) RELATED AGREEMENTS. Agents shall each have received a fully
executed or conformed copy of each Related Agreement and any documents executed
in connection therewith, and each Related Agreement shall be in full force and
effect and no provision thereof shall have been modified or waived in any
respect determined by Agents to be material, in each case without the consent of
Agents. Agents and counsel to Syndication Agent shall have received copies of
each of the opinions of counsel delivered to the parties under the Related
Agreements, together with a letter from each such counsel (to the extent not
inconsistent with such counsel's established internal policies) authorizing
Lenders to rely upon such opinion to the same extent as though it were addressed
to Lenders.
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(q) CONSUMMATION OF RECAPITALIZATION. With respect to the consummation
of the Recapitalization, (i) all conditions to the Recapitalization set forth in
Articles VII and VIII of the Recapitalization Agreement and related documents
shall have been satisfied or the fulfillment of any such conditions shall have
been waived with the consent of Agents, (ii) the Recapitalization shall have
become effective in accordance with the terms of the Recapitalization Agreement
and related documents, (iii) the Merger shall have become effective in
accordance with the terms of the Recapitalization Agreement and related
documents, the Certificate of Merger and the laws of the State of Delaware; (iv)
the aggregate cash consideration paid to existing stockholders of Holdings and
Company in connection with the Recapitalization shall not exceed $228,100,000,
and (v) the Transaction Costs shall not exceed $35,400,000, and Agents shall
have received evidence to their satisfaction to such effect.
(r) SOLVENCY ASSURANCES. On the Closing Date, Agents and Lenders shall
have received (i) a letter from Valuation Research, dated the Closing Date and
addressed to Agents and Lenders, in form and substance satisfactory to Agents
and with appropriate attachments, and (ii) a Solvency Certificate dated the
Closing Date, in each case demonstrating that, after giving effect to the
consummation of the Recapitalization, the related financings and the other
transactions contemplated by the Credit Documents and the Related Agreements,
each Credit Party will be Solvent.
(s) ENVIRONMENTAL REPORT. The Company shall have delivered to the
Agents and the Lenders true and correct copies of the August 24, 1998
Environmental Due Diligence Investigation from O'Brien & Gere Engineering, Inc.,
an independent environmental consultant, in form and substance reasonably
acceptable to the Administrative Agent and Agents.
(t) CLOSING DATE CERTIFICATE. Each Credit Party shall have delivered to
Agents a Closing Date Certificate.
(u) OWNERSHIP OF CERTAIN SECURITIES. On or before the Closing Date,
Company shall have provided evidence satisfactory to the Agents that Fenway and
its affiliates have agreed to own all of the Junior Subordinated Notes and the
Holdings Notes for a period and pursuant to terms reasonably satisfactory to
Agents.
(v) EMPLOYMENT AGREEMENTS. Company shall have (i) entered into
employment agreements with each Management Investor, each in form and substance
reasonably acceptable to the Administrative Agent (collectively, the "EMPLOYMENT
AGREEMENTS"), and (ii) made copies of such Employment Agreements, certified as
true and correct by an Authorized Officer of Company, available to the Agents
(which copies may be made available to the Lenders).
Each Lender, by delivering its signature page to this Agreement and
funding its Tranche A Term Loan Commitment, Tranche B Term Loan Commitment,
Tranche C Term Loan Commitment and/or a Revolving Loan on the Closing Date,
shall be deemed to have acknowledged receipt of, and consented to and approved
(as long as substantially in the form delivered to Lenders including any changed
pages thereto delivered to Lenders), each Credit Document and each other
document required to be approved by Requisite Lenders or Lenders, as applicable.
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3.2. CONDITIONS TO EACH CREDIT EXTENSION. The obligation of each Lender
to make any credit Extension on any Credit Extension Date, including the Closing
Date, is subject to the following further conditions precedent:
(a) Administrative Agent and Swing Line Lender, as the case may be,
shall have received a fully executed and delivered Funding Notice or Request for
Issuance, as the case may be;
(b) as of such Credit Extension Date, the representations and
warranties contained herein and in the other Credit Documents shall be true,
correct and complete in all respects on and as of that Credit Extension Date to
the same extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case such representations and warranties shall have been true, correct and
complete in all respects on and as of such earlier date;
(c) no injunction or other restraining order shall have been issued and
no hearing to cause an injunction or other restraining order to be issued shall
be pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated hereby or the making
of any Credit Extension;
(d) as of such Credit Extension Date, no event shall have occurred and
be continuing or would result from the consummation of the borrowing
contemplated by such Funding Notice that would constitute an Event of Default or
a Default; and
(e) on or before the date of issuance of any Letter of Credit,
Administrative Agent shall have received all other information required by the
applicable Request for Issuance, and such other documents or information as
Issuing Bank may reasonably require in connection with the issuance of such
Letter of Credit.
Any Notice shall be executed by the chief executive officer, the chief financial
officer or the treasurer of Company or by the executive officer thereof
designated by the chief executive officer, the chief financial officer or the
treasurer of Company in a writing delivered to Administrative Agent. In lieu of
delivering a Notice, Company may give Administrative Agent telephonic notice by
the required time of any proposed borrowing, conversion/continuation or issuance
of a Letter of Credit, as the case may be; PROVIDED each such notice shall be
promptly confirmed in writing by delivery of the applicable Notice to
Administrative Agent on or before the applicable date of borrowing,
continuation/conversion or issuance. Neither Administrative Agent nor any Lender
shall incur any liability to Company in acting upon any telephonic notice
referred to above that Administrative Agent believes in good faith to have been
given by a duly authorized officer or other person authorized on behalf of
Company or for otherwise acting in good faith in connection with any such
notice. Upon conversion or continuation of the applicable basis for determining
the interest rate with respect to any Loans in accordance with this Agreement or
upon funding of Loans by Lenders in accordance herewith, in either case pursuant
to any such telephonic notice, Company shall have effected a conversion or
continuation (as the case may be) or shall have effected Loans, respectively,
hereunder. Company shall notify Administrative Agent (or Issuing Bank, as the
case may be) prior to the funding
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of any Loans or the issuance of any Letter of Credit in the event that any of
the matters to which Company is required to certify in the applicable Notice is
no longer true and correct as of the applicable Credit Extension Date, and the
acceptance by Company of the proceeds of any Loans or the issuance of any Letter
of Credit shall constitute a re-certification by Company, as of the applicable
Credit Extension Date, as to the matters to which Company is required to certify
in the applicable Notice.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce Lenders and Issuing Bank to enter into this
Agreement and to make each Credit Extension to be made thereby, Company
represents and warrants to each Lender, on the Closing Date and on each Credit
Extension Date, that the following statements are true, correct and complete:
4.1. ORGANIZATION AND POWERS. Each Credit Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as specified in SCHEDULE 4.1. Each Credit Party
has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and as proposed to be
conducted, to enter into the Credit Documents to which it is a party and to
carry out the transactions contemplated thereby.
4.2. QUALIFICATION AND GOOD STANDING. Each Credit Party is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, except
in jurisdictions where the failure to be so qualified or in good standing has
not had and could not be reasonably be expected to have a Material Adverse
Effect.
4.3. SUBSIDIARIES. All of the Subsidiaries of Holdings are identified
in SCHEDULE 4.1. The capital stock of each of the Subsidiaries of Holdings
identified in SCHEDULE 4.1, as supplemented, is duly authorized, validly issued,
fully paid and nonassessable and none of such capital stock constitutes Margin
Stock. Each of the Subsidiaries of Holdings is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation set forth therein, has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, and is qualified to
do business and in good standing in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations, in each
case except where failure to be so qualified or in good standing or a lack of
such corporate power and authority has not had and could not be reasonably
expected to have a Material Adverse Effect. SCHEDULE 4.1 correctly sets forth
the ownership interest of Holdings and each of its Subsidiaries in each of the
Subsidiaries of Holdings identified therein.
4.4. AUTHORIZATION OF BORROWING; NO CONFLICT. The execution, delivery
and performance of the Credit Documents have been duly authorized by all
necessary corporate action on the part of each Credit Party that is a party
thereto. The execution, delivery and performance by Credit Parties of the Credit
Documents to which they are parties and the consummation of the transactions
contemplated by the Credit Documents do not and will not (a) violate any
provision of any law or
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any governmental rule or regulation applicable to Holdings or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Holdings
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Holdings or any of its Subsidiaries; (b)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of Holdings or any of
its Subsidiaries; (c) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Holdings or any of its Subsidiaries
(other than any Liens created under any of the Credit Documents in favor of
Administrative Agent on behalf of Lenders); or (d) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Holdings or any of its Subsidiaries, except for such approvals or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Lenders.
4.5. GOVERNMENTAL CONSENTS. The execution, delivery and performance by
Credit Parties of the Credit Documents to which they are parties and the
consummation of the transactions contemplated by the Credit Documents do not and
will not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any federal, state or other governmental authority
or regulatory body except for such registrations, consents, approvals or notices
which will be obtained on or before Closing Date and disclosed in writing to
Lenders.
4.6. BINDING OBLIGATION. Each of the Credit Documents has been duly
executed and delivered by each Credit Party that is a party thereto and is the
legally valid and binding obligation of such Credit Party, enforceable against
such Credit Party in accordance with its respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
4.7. VALID ISSUANCE OF HOLDINGS COMMON STOCK, THE SENIOR SUBORDINATED
BRIDGE NOTES, THE SENIOR SUBORDINATED NOTES, THE JUNIOR
SUBORDINATED NOTES AND THE HOLDINGS NOTES.
(i) The Holdings Common Stock issued on or before the Closing Date in
connection with the Equity Financing, when issued and delivered, will be duly
and validly issued, fully paid and nonassessable. The issuance and sale of such
Holdings Common Stock, upon such issuance and sale, will either (a) have been
registered or qualified under applicable federal and state securities laws or
(b) be exempt therefrom.
(ii) Company has the corporate power and authority to issue the Senior
Subordinated Bridge Notes, the Senior Subordinated Notes and the Junior
Subordinated Notes, and Holdings has the corporate power and authority to issue
the Holdings Notes. The Senior Subordinated Bridge Notes, the Senior
Subordinated Notes and the Junior Subordinated Notes, when issued and paid for,
will be the legally valid and binding obligations of Company, and the Holdings
Notes, when issued and paid for, will be the legally valid and binding
obligations of Holdings, enforceable against Company and Holdings, respectively,
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors' rights generally or by equitable principles relating to
enforceability. The subordination provisions of the Senior Subordinated Bridge
Loan Documents, the Senior Subordinated Note
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Documents, the Junior Subordinated Notes Documents and the Holding Notes
Documents, will be enforceable against the holders of the Senior Subordinated
Bridge Notes, the Senior Subordinated Notes, the Junior Subordinated Notes and
the Holdings Notes, as applicable, and the Loans and all other monetary
Obligations hereunder are and will be within the definition of "Senior Debt"
included in such Senior Subordinated Bridge Loan Documents, Senior Subordinated
Note Documents, Junior Subordinated Notes Documents and Holdings Notes
Documents. The Senior Subordinated Bridge Notes, the Senior Subordinated Notes,
the Junior Subordinated Notes and the Holdings Notes, when issued and sold, will
either (a) have been registered or qualified under applicable federal and state
securities laws or (b) be exempt therefrom.
4.8. FINANCIAL CONDITION. Company has heretofore delivered to Lenders
the Historical Financial Statements all of which were prepared in conformity
with GAAP and fairly present, in all material respects, the financial position,
on a consolidated basis, of the entities described in such financial statements
as at the respective dates thereof and the results of operations and cash flows,
on a consolidated basis, of the entities described therein for each of the
periods then ended, subject, in the case of any such unaudited financial
statements, to changes resulting from audit and normal year-end adjustments and,
in the case of interim financial statements, except for the absence of notes
thereto. As of the Closing Date, Company has no Contingent Obligation,
contingent liability or liability for taxes, long-term lease or unusual forward
or long-term commitment that is not reflected in the Historical Financial
Statements or the notes thereto and which in any such case is material in
relation to the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Company or any of its Subsidiaries.
4.9. NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS. Since
December 27, 1997, no event or change has occurred that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect. Neither
Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted
Junior Payment or agreed to do so except as permitted pursuant to SECTION 6.5.
4.10. LITIGATION; ADVERSE FACTS. Except as set forth on SCHEDULE 4.10
annexed hereto, there are no Adverse Proceedings, individually or in the
aggregate, that could reasonably be expected to result in a Material Adverse
Effect. The potential liability of Holdings and its Subsidiaries in connection
with the pending litigation with Serta disclosed on SCHEDULE 4.25 could not
reasonably be expected to exceed $1,500,000. Neither Holdings nor any of its
Subsidiaries (a) is in violation of any applicable laws (including Environmental
Laws) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, or (b) is subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
4.11. PAYMENT OF TAXES. Except in accordance with SECTION 5.3, all tax
returns and reports of Holdings and its Subsidiaries required to be filed by any
of them have been timely filed, and all taxes shown on such tax returns to be
due and payable and all assessments, fees and other governmental charges upon
Holdings and its Subsidiaries and upon their respective properties, assets,
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income, businesses and franchises which are due and payable have been paid when
due and payable. Company knows of no proposed tax assessment against Holdings or
any of its Subsidiaries which is not being contested by Holdings or such
Subsidiary in good faith and by appropriate proceedings; PROVIDED, such reserves
or other appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made or provided therefor.
4.12. TITLE TO PROPERTIES; REAL PROPERTY. Company and its Subsidiaries
have, subject to Permitted Liens, (a) good, sufficient and legal title to (in
the case of fee interests in real property); (b) valid leasehold interests in
(in the case of leasehold interests in real or personal property); and (c) good
title to (in the case of all other personal property), all of their respective
properties and assets reflected in the Historical Financial Statements or in the
most recent financial statements delivered pursuant to SECTION 5.1, except for
assets disposed of since the date of such financial statements in the ordinary
course of business or as otherwise permitted under SECTION 6.7. As of the
Closing Date, SCHEDULE 4.12 contains a true, accurate and complete list of all
(i) fee interests of any Credit Party in real property , and (ii) all leases,
subleases or assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting each Real Property
Asset of any Credit Party, regardless of whether such Credit Party is the
landlord or tenant (whether directly or as an assignee or successor in interest)
under such lease, sublease or assignment. Except as specified in SCHEDULE 4.12,
each agreement listed in clause (b) of the immediately preceding sentence is in
full force and effect and Company does not have knowledge of any default that
has occurred and is continuing thereunder, and each such agreement constitutes
the legally valid and binding obligation of each applicable Credit Party,
enforceable against such Credit Party in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or limiting creditors' rights generally or by
equitable principles.
4.13. COLLATERAL. (a) Except for the security interest created by the
Collateral Documents, each Credit Party owns the Collateral owned by such
Secured Party free and clear of any Lien other than Permitted Liens. (b) The
execution and delivery of the Collateral Documents by Credit Parties, together
with (i) the actions taken on or prior to the date hereof pursuant to SECTION 3
and SECTION 5 and (ii) the delivery to Administrative Agent of any Pledged
Collateral not delivered to Administrative Agent at the time of execution and
delivery of the applicable Collateral Document (all of which Pledged Collateral
has been so delivered) are effective to create in favor of Administrative Agent
for the benefit of Lenders, as security for the respective Secured Obligations
(as defined in the applicable Collateral Document in respect of any Collateral),
a valid and perfected First Priority Lien on all of the Collateral, and all
filings and other actions necessary or desirable to perfect and maintain the
perfection and First Priority status of such Liens have been duly made or taken
and remain in full force and effect, other than the filing of any UCC financing
statements and other filings contemplated to be made on the Closing Date which
have been delivered to Administrative Agent for filing (but not yet filed) and
the periodic filing of UCC continuation statements in respect of UCC financing
statements filed by or on behalf of Administrative Agent. (c) No authorization,
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for either (i) the pledge or grant by
any Credit Party of the Liens purported to be created in favor of Administrative
Agent pursuant to any of the Collateral Documents or (ii) the exercise by
Administrative Agent of any rights or remedies in respect of any Collateral
(whether specifically granted or created pursuant to any of the Collateral
Documents or created or provided for by
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applicable law), except for filings or recordings contemplated by this SECTION
4.13 and except for consents which have previously been obtained and disclosed
to Agents in writing prior to the Closing Date and except as may be required, in
connection with the disposition of any Pledged Collateral, by laws generally
affecting the offering and sale of securities. (d) Except such as may have been
filed in favor of Administrative Agent as contemplated by this SECTION 4.13 or
have been filed in connection with Permitted Liens, (i) no effective UCC
financing statement, fixture filing or other instrument similar in effect
covering all or any part of the Collateral is on file in any filing or recording
office and (ii) no effective filing covering all or any part of the Collateral
which is Intellectual Property is on file in the United States Patent and
Trademark Office or the United States Copyright Office or any similar foreign or
state office. (e) All information supplied to Administrative Agent by or on
behalf of any Credit Party with respect to any of the Collateral (in each case
taken as a whole with respect to any particular Collateral) is accurate and
complete in all material respects.
4.14. ENVIRONMENTAL. Neither Holdings nor any of its Subsidiaries nor
any of their respective Facilities or operations are subject to any outstanding
written order, consent decree or settlement agreement with any Person relating
to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous
Materials Activity that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Neither Holdings nor any of its
Subsidiaries has received any letter or request for information under Section
104 of the Comprehensive Environmental Response, Compensation, and Liability Act
(42 U.S.C. sec. 9604) or any comparable state law which could reasonably be
expected to have a Material Adverse Effect. There are and, to Company's
knowledge, have been no conditions, occurrences, or Hazardous Materials
Activities which could reasonably be expected to form the basis of an
Environmental Claim against Holdings or any of its Subsidiaries that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Neither Holdings nor any of its Subsidiaries nor, to
Company's knowledge, any predecessor of Holdings or any of its Subsidiaries has
treated, stored or disposed of any hazardous waste at any Facility, and none of
Holdings' or any of its Subsidiaries' operations involves the treatment, storage
or disposal of hazardous waste that, in each case, would require a permit under
RCRA. Compliance with all current or reasonably foreseeable future requirements
pursuant to or under Environmental Laws will not, individually or in the
aggregate, have a reasonable possibility of giving rise to a Material Adverse
Effect. Notwithstanding anything in this SECTION 4.14 to the contrary, no event
or condition has occurred or is occurring with respect to Holdings or any of its
Subsidiaries relating to any Environmental Law, any Release of Hazardous
Materials, or any Hazardous Materials Activity which individually or in the
aggregate has had or could reasonably be expected to have a Material Adverse
Effect.
4.15. NO DEFAULTS; MATERIAL CONTRACTS. Neither Holdings nor any of its
Subsidiaries is in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any of its Contractual
Obligations, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any, could not
be reasonably be expected to have a Material Adverse Effect. SCHEDULE 4.15
contains a true, correct and complete list of all the Material Contracts in
effect on the Closing Date, and except as described thereon, all such Material
Contracts are in full force and effect and no default currently exists
thereunder.
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4.16. GOVERNMENTAL REGULATION. Neither Holdings nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its
ability to incur Indebtedness or which may otherwise render all or any portion
of the Obligations unenforceable.
4.17. MARGIN STOCK. Neither Holdings nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. The
pledge of the Pledged Collateral pursuant hereto does not violate Regulation T,
U or X of the Board of Governors of the Federal Reserve System.
4.18. EMPLOYEE MATTERS. There is no strike or work stoppage in
existence or threatened involving Holdings or any of its Subsidiaries that could
reasonably be expected to have a Material Adverse Effect.
4.19. EMPLOYEE BENEFIT PLANS. The Company, each of its Subsidiaries and
each of their respective ERISA Affiliates are in material compliance with all
applicable provisions and requirements of ERISA and the regulations and
published interpretations thereunder with respect to each Employee Benefit Plan,
and have performed in all material respects all their obligations under each
Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify
under Section 401(a) of the Internal Revenue Code is so qualified or will be
qualified by admission of such Plan for an IRS determination in a timely
fashion, if not already submitted, and the timely making of such amendments as
may be required as a condition for issuance of a favorable determination. No
ERISA Event has occurred or as of the date hereof is reasonable expected to
occur where such Event individually or in the aggregate would have a Material
Adverse Effect. As of the most recent valuation date for any Pension Plan, any
amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of
ERISA "UNFUNDED BENEFIT LIABILITIES"), individually or in the aggregate for all
Pension Plans (except for purposes of such computation any Pension Plans with
respect to which assets exceed benefit liabilities), does not exceed $1,000,000.
Neither Company, its Subsidiaries nor their respective ERISA Affiliates has
completely or partially withdrawn from any Multiemployer Plan, or incurred
termination liability to the PBGC or withdrawal liability to any Multiemployer
Plan that is material in the aggregate. As of the most recent valuation date for
each Multiemployer Plan for which the actuarial report is available, the
potential liability of Company, its Subsidiaries and their respective ERISA
Affiliates for a complete withdrawal from such Multiemployer Plan (within the
meaning of Section 4203 of ERISA), when aggregated with such potential liability
for a complete withdrawal from all Multiemployer Plans, based on information
available pursuant to Section 4221(e) of ERISA, could not reasonably be expected
to have a Material Adverse Effect.
4.20. CERTAIN FEES. No broker's or finder's fee or commission will be
payable with respect hereto or any of the transactions contemplated hereby, and
Company hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
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4.21. SOLVENCY. Each Credit Party is and, upon the incurrence of any
Obligation by such Credit Party on any date on which this representation and
warranty is made, will be, Solvent.
4.22. RELATED AGREEMENTS. Company has delivered to Lenders complete and
correct copies of each Related Agreement and of all exhibits and schedules
thereto. Except to the extent otherwise set forth herein or in the schedules
hereto, each of the representations and warranties given by Holdings or Company
to Merger Corp. in the Recapitalization Agreement is true and correct in all
material respects as of the Closing Date (or as of any earlier date to which
such representation and warranty specifically relates). Subject to the
qualifications set forth therein, each of the representations and warranties
given by Merger Corp. to Holdings or Company in the Recapitalization Agreement
is true and correct in all material respects as of the date hereof and will be
true and correct in all material respects as of the Closing Date.
Notwithstanding anything in the Recapitalization Agreement to the contrary, the
representations and warranties of Company set forth in this SECTION 4.22 shall,
solely for purposes hereof, survive the Closing Date for the benefit of Lenders.
4.23. YEAR 2000 MATTERS. Company and its Subsidiaries have (a) engaged
in a process of assessment of the existence of the Year 2000 Problems reasonably
appropriate to the scope and complexity of their respective Systems; (b) adopted
and are implementing a Plan of Correction; (c) adopted and are implementing
validation procedures reasonably calculated to test on an ongoing basis the
sufficiency of the Plan of Correction, its implementation, and the correction of
Year 2000 Problems in any System; (d) adopted and are implementing policies and
procedures requiring regular reports to, and monitoring by, senior management of
Company concerning the foregoing matters; and (e) provided Administrative Agent
true and correct copies of the written Plan of Correction, and related
implementation budgets, reviewed and approved by Company's Board of Directors.
4.24. DISCLOSURE. No representation or warranty of Company or any of
its Subsidiaries contained in the Confidential Information Memorandum or in any
Credit Document or in any other document, certificate or written statement
furnished to Lenders by or on behalf of Company or any of its Subsidiaries for
use in connection with the transactions contemplated hereby when taken as a
whole contains any untrue statement of a material fact or omits to state a
material fact (known to Company, in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There are no facts known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
4.25. INTELLECTUAL PROPERTY. Each of the Credit Parties owns or has the
valid right to use all Intellectual Property, free and clear of any and all
Liens other than Permitted Liens. All registrations therefor are in full force
and effect and are valid and enforceable, except as could not
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be expected to have a Material Adverse Effect. The conduct of the business of
each Credit Party as currently conducted, including, but not limited to, all
products, processes, or services, made, offered or sold by each such Credit
Party, does not infringe upon, violate, misappropriate or dilute any
intellectual property of any third party which infringement is likely to have a
Material Adverse Effect. To the best of the Credit Parties' knowledge, no third
party is infringing upon the Intellectual Property in any material respect.
Except as set forth in Schedule 4.25, there is no pending or to the best of each
Credit Parties' knowledge, threatened claim or litigation contesting any Credit
Party's right to own or use any Intellectual Property or the validity or
enforceability thereof.
SECTION 5. AFFIRMATIVE COVENANTS
Each Credit Party indicated below covenants and agrees that so long as
any of the Commitments shall remain in effect and until payment in full of all
of the Obligations, such Credit Party shall perform, and shall cause each of its
Subsidiaries to perform, the covenants made by it in this SECTION 5.
5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. Company will deliver to
Administrative Agent and Lenders:
(a) as soon as available and in any event within twenty-five (25) days
after the end of each month ending after the Closing Date, the consolidated
balance sheet of Company and its Subsidiaries as at the end of such month and
the related consolidated statements of income, stockholders' equity and cash
flows of Company and its Subsidiaries for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month, setting
forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year, all in reasonable detail,
together with a CFO Certification and a Narrative Report with respect to each of
the foregoing;
(b) as soon as available and in any event within forty five (45) days
after the end of each Fiscal Quarter, the consolidated balance sheet of Company
and its Subsidiaries as at the end of such Fiscal Quarter and the related
consolidated statements of income, stockholders' equity and cash flows of
Company and its Subsidiaries for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the Financial Plan for the current Fiscal Year, all in reasonable detail,
together with (i) a quarterly accounts receivable "bad debts" report for such
Fiscal Quarter in the form prepared for management of Company on the Closing
Date and as previously delivered to the Agents and (ii) a CFO Certification and
a Narrative Report with respect thereto;
(c) as soon as available and in any event within ninety (90) days after
the end of each Fiscal Year, (i) the consolidated and consolidating balance
sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flows of Company and its Subsidiaries for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for the
previous Fiscal Year and the
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corresponding figures from the Financial Plan for the Fiscal Year covered by
such financial statements, in reasonable detail, together with a CFO
Certification and a Narrative Report with respect thereto; and (ii) in the case
of such consolidated financial statements, a report thereon of
PricewaterhouseCoopers LLP or other independent certified public accountants of
recognized national standing selected by Company and in form and substance
reasonably satisfactory to Administrative Agent;
(d) together with each delivery of financial statements of Company and
its Subsidiaries pursuant to SECTIONS 5.1(a), 5.1(b) and 5.1(c), a duly executed
and completed Compliance Certificate;
(e) (i) if, as a result of any change in accounting principles and
policies from those used in the preparation of the Historical Financial
Statements, the consolidated financial statements of Company and its
Subsidiaries delivered pursuant to SECTION 5.1(a), 5.1(b) or 5.1(c) will differ
in any material respect from the consolidated financial statements that would
have been delivered pursuant to such subdivisions had no such change in
accounting principles and policies been made, then together with the first
delivery of such financial statements after such change, one or more statements
of reconciliation for all such prior financial statements in form and substance
satisfactory to Administrative Agent; and (ii) promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all reports
submitted to Company by independent certified public accountants in connection
with each annual, interim or special audit of the financial statements of
Company and its Subsidiaries made by such accountants, including any comment
letter submitted by such accountants to management in connection with their
annual audit;
(f) together with each delivery of consolidated financial statements of
Company and its Subsidiaries pursuant to SECTION 5.1(c), a written statement by
the independent certified public accountants giving the report thereon stating
(i) that their audit examination has included a review of the terms of the
Credit Documents, (ii) whether, in connection therewith, any condition or event
that constitutes a Default or an Event of Default has come to their attention
and, if such a condition or event has come to their attention, specifying the
nature and period of existence thereof, it being understood that such audit
examination was directed primarily at accounting matters; and (iii) that nothing
has come to their attention that causes them to believe either or both that the
information contained in any Compliance Certificate is not correct or that the
matters set forth in such Compliance Certificate are not stated in accordance
with the terms hereof;
(g) promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by Company to its security holders or by any Subsidiary of Company to
its security holders other than Company or another Subsidiary of Company, (ii)
all regular and periodic reports and all registration statements (other than on
Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of
its Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory authority, and
(iii) all press releases and other statements made available generally by
Company or any of its Subsidiaries to the public concerning material
developments in the business of Company or any of its Subsidiaries;
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(h) promptly upon any Responsible Officer obtaining knowledge (i) of
any condition or event that constitutes a Default or an Event of Default or that
notice has been given to Company with respect thereto; (ii) that any Person has
given any notice to Company or any of its Subsidiaries or taken any other action
with respect to any event or condition set forth in SECTION 8.1(b); or (iii) of
the occurrence of any event or change that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect, a certificate of its
Authorized Officers specifying the nature and period of existence of such
condition, event or change, or specifying the notice given or action taken by
any such Person and the nature of such claimed Event of Default, Default,
default, event or condition, and what action Company has taken, is taking and
proposes to take with respect thereto;
(i) promptly upon any Responsible Officer obtaining knowledge of (i)
the institution of, or non-frivolous threat of, any Adverse Proceeding not
previously disclosed in writing by Company to Lenders, or (ii) any material
development in any Adverse Proceeding that, in the case of either (i) or (ii) if
adversely determined, is reasonably likely to give rise to a Material Adverse
Effect, or seeks to enjoin or otherwise prevent the consummation of, or to
recover any damages or obtain relief as a result of, the transactions
contemplated hereby, written notice thereof together with such other information
as may be reasonably available to Company to enable Lenders and their counsel to
evaluate such matters;
(j) (i) promptly but in any event within 20 days after Company, any of
its Subsidiaries or any of its ERISA Affiliates knows, or has reason to
know, that (1) any ERISA Event with respect to an Employee Benefit Plan
has occurred or will occur, or (2) Company, any of its Subsidiaries or
any of their respective ERISA Affiliates has applied for a waiver of
the minimum funding standard under Section 412 of the Code or Section
302 of ERISA, or (3) the aggregate present value of the Unfunded
Benefit Liabilities under all Pension Plans has in any year increased
by to an amount in excess of $1,000,000, or (4) any ERISA Event occurs
with respect to a Multiemployer Plan which presents a material risk of
a partial or complete withdrawal (as described in Section 4203 or 4205
of ERISA) by Company, any of its Subsidiaries or any of their
respective ERISA Affiliates from a Multiemployer Plan and such
withdrawal is reasonably expected to trigger withdrawal liability
payments in any year in excess of $3,000,000, or (5) Company, any of
its Subsidiaries or any of their respective ERISA Affiliates is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan, or (6) the potential withdrawal
liability (as determined in accordance with Title IV of ERISA) of
Company, any of its Subsidiaries and their respective ERISA Affiliates
with respect to all Multiemployer Plans has in any year increased to an
amount in excess of $3,000,000, or (7) there is an action brought
against Company, any of its Subsidiaries or any of their respective
ERISA Affiliates under Section 502 of ERISA with respect to its failure
to comply with Section 515 of ERISA, a certificate of the president or
chief financial officer of Company setting forth the details of each of
the events described in clauses (1) through (7) above as applicable and
the action which Company, any of its Subsidiaries or their respective
ERISA Affiliates proposes to take with respect thereto, together with a
copy of any notice or filing from the PBGC or which may be required by
the PBGC or other agency of the United States government with respect
to each of the events described in clauses (1) through (7) above, as
applicable;
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(ii) As soon as possible and in any event within ten Business
Days after the receipt by the Company (or to the knowledge of the
Company, after receipt by any of its Subsidiaries or any of their
respective ERISA Affiliates) of a demand letter from the PBGC notifying
the Company, its Subsidiaries or their respective ERISA Affiliates of
its decision finding liability, a copy of such letter, together with a
certificate of the president or chief financial officer of the Company
setting forth the action which the Company, its Subsidiaries or their
respective ERISA Affiliates proposes to take with respect thereto;
(k) as soon as practicable and in any event no later than 30 days after
the beginning of each Fiscal Year, a consolidated plan and financial forecast
for such Fiscal Year and the next two succeeding Fiscal Years (a "FINANCIAL
PLAN"), including (i) a forecasted consolidated balance sheet and forecasted
consolidated statements of income and cash flows of Holdings and its
Subsidiaries for each such Fiscal Year, together with PRO FORMA Compliance
Certificates for each such Fiscal Year and an explanation of the assumptions on
which such forecasts are based, (ii) forecasted consolidated statements of
income and cash flows of Holdings and its Subsidiaries for each month of each
such Fiscal Year, together with an explanation of the assumptions on which such
forecasts are based, and (III) such other information and projections as any
Lender may reasonably request;
(l) promptly, and in any event within ten Business Days after any
Material Contract of Company or any of its Subsidiaries is terminated or amended
other than in the ordinary course of business in a manner that is materially
adverse to Company or such Subsidiary, as the case may be, or any new Material
Contract is entered into, a written statement describing such event with copies
of such material amendments or new contracts, and an explanation of any actions
being taken with respect thereto; and
(m) with reasonable promptness, such other information and data with
respect to Company or any of its Subsidiaries as from time to time may be
reasonably requested by any Lender.
5.2. CORPORATE EXISTENCE, ETC. Except as permitted under SECTION 6.7,
each Credit Party will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect its corporate existence and all
rights and franchises material to its business; PROVIDED, neither any Credit
Party nor any of its Subsidiaries shall be required to preserve any such right
or franchise if the preservation thereof is no longer desirable in the conduct
of the business of such Credit Party or such Subsidiary, as the case may be, and
that the loss thereof is not disadvantageous in any material respect to such
Credit Party, such Subsidiary or Lenders.
5.3. PAYMENT OF TAXES AND CLAIMS. Each Credit Party will, and will
cause each of its Subsidiaries to, pay all taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its income, businesses or franchises before any penalty
accrues thereon, and all claims (including claims for labor, services, materials
and supplies) for sums that have become due and payable and that by law have or
may become a Lien upon any of its properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto; PROVIDED, no such
charge or claim need be paid if it is being contested in good faith by
appropriate proceedings so long as (a) such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor, and (b) in the case of a charge
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or claim which has or may become a Lien against any of the Collateral, such
contest proceedings conclusively operate to stay the sale of any portion of the
Collateral to satisfy such charge or claim. Company will not, nor will it permit
any of its Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than Holdings or any of Company's
Subsidiaries).
5.4. MAINTENANCE OF PROPERTIES. Each Credit Party will, and will cause
each of its Subsidiaries to, maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all material
properties (including maintenance of appropriate registrations with respect to
all Intellectual Property) used or useful in the business of Company and its
Subsidiaries and from time to time will make or cause to be made all appropriate
maintenance payments, repairs, renewals and replacements thereof.
5.5. INSURANCE. Each Credit Party will maintain or cause to be
maintained, with financially sound and reputable insurers, such public liability
insurance, third party property damage insurance, business interruption
insurance and casualty insurance with respect to liabilities, losses or damage
in respect of the assets, properties and businesses of Company and its
Subsidiaries as may customarily be carried or maintained under similar
circumstances by corporations of established reputation engaged in similar
businesses, in each case in such amounts (giving effect to self-insurance), with
such deductibles, covering such risks and otherwise on such terms and conditions
as shall be customary for corporations similarly situated in the industry. Each
such policy of insurance so insuring assets of Company and its Subsidiaries
shall (a) name Administrative Agent for the benefit of Lenders as an additional
insured thereunder as its interests may appear and (b) in the case of each
business interruption and casualty insurance policy, contain a loss payable
clause or endorsement, satisfactory in form and substance to Administrative
Agent, that names Administrative Agent for the benefit of Lenders as the loss
payee thereunder for any covered loss in excess of $500,000 and provides for at
least 30 days prior written notice to Administrative Agent of any modification
or cancellation of such policy.
5.6. INSPECTION RIGHTS; LENDER MEETING. Each Credit Party will, and
will cause each of its Subsidiaries to, permit any authorized representatives
designated by any Lender to visit and inspect any of the properties of Company
or of any of its Subsidiaries, to inspect, copy and take extracts from its and
their financial and accounting records, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants (PROVIDED, Company may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may reasonably be
requested. Company will, upon the request of Agents or Requisite Lenders,
participate in a meeting of Administrative Agent and Lenders once during each
Fiscal Year or, during the continuance of any Default or Event of Default, as
reasonably requested by the Agents or the Requisite Lenders, to be held at
Company's corporate offices (or at such other location as may be agreed to by
Company and Administrative Agent) at such time as may be agreed to by Company
and Administrative Agent.
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5.7. COMPLIANCE WITH LAWS, ETC. Each Credit Party will comply, and
shall cause each of its Subsidiaries and all other Persons, if any, on or
occupying any Facilities to comply, with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority (including all
Environmental Laws), noncompliance with which could reasonably be expected to
cause, individually or in the aggregate, a Material Adverse Effect.
5.8. ENVIRONMENTAL MATTERS.
(a) Company agrees that Administrative Agent may, from time to time and
in its reasonable discretion, (i) retain, at Company's expense, an independent
professional consultant to review any environmental audits, investigations,
analyses and reports relating to Hazardous Materials prepared by or for Company
which Administrative Agent has requested and which indicates conditions or
circumstances which Administrative Agent reasonably believes may have a
significant impact on the business and operations of Company or its Subsidiaries
and (ii) in the event (a) Administrative Agent reasonably believes that Company
has breached any representation, warranty or covenant contained in SECTION 4.10,
SECTION 5.7 (as each such section pertains to environmental matters) or SECTION
4.14 or that there has been a material violation of Environmental Laws at any
Facility or by Company or any of its Subsidiaries at any other location or (b)
an Event of Default has occurred and is continuing and the repayment of any
amount due hereunder has been accelerated, conduct its own investigation of any
Facility; PROVIDED that, in the case of any Facility no longer owned, leased,
operated or used by Company or any of its Subsidiaries, Company shall only be
obligated to use its reasonable efforts to obtain permission for Administrative
Agent's professional consultant to conduct an investigation of such Facility.
For purposes of conducting such a review and/or investigation, Company hereby
grants to Administrative Agent and its agents, employees, consultants and
contractors the right to enter into or onto any Facilities currently owned,
leased, operated or used by Company or any of its Subsidiaries and to perform
such tests on such property (including taking samples of soil, groundwater and
suspected asbestos-containing materials) as are reasonably necessary in
connection therewith. Any such investigation of any Facility shall be conducted,
unless otherwise agreed to by Company and Administrative Agent, during normal
business hours and, to the extent reasonably practicable, shall be conducted so
as not to interfere with the ongoing operations at such Facility or to cause any
damage or loss to any property at such Facility. Company and Administrative
Agent hereby acknowledge and agree that any report of any investigation
conducted at the request of Administrative Agent pursuant to this SECTION 5.8
will be obtained and shall be used by Administrative Agent and Lenders solely
for the purposes of Lenders' internal credit decisions, to monitor and police
the Loans and to protect Lenders' security interests, if any, created by the
Credit Documents. Administrative Agent agrees to deliver a copy of any such
report to Company with the understanding that Company acknowledges and agrees
that (x) it will indemnify and hold harmless Administrative Agent and each
Lender from any costs, losses or liabilities relating to Company's use of or
reliance on such report, (y) neither Administrative Agent nor any Lender makes
any representation or warranty with respect to such report, and (z) by
delivering such report to Company, neither Administrative Agent nor any Lender
is requiring or recommending the implementation of any suggestions or
recommendations contained in such report.
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(b) Company will deliver to Administrative Agent and Lenders: (i) as
soon as practicable following receipt thereof, copies of all environmental
audits, investigations, analyses and reports of any kind or character, whether
prepared by personnel of Company or any of its Subsidiaries or by independent
consultants, governmental authorities or any other Persons, with respect to
significant environmental matters at any Facility which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
or with respect to any Environmental Claims which, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;
(ii) promptly upon the occurrence thereof, written notice describing in
reasonable detail (1) any Release required to be reported to any federal, state
or local governmental or regulatory agency under any applicable Environmental
Laws which could reasonably be expected to have a Material Adverse Effect, (2)
any remedial action taken by Company or any other Person in response to (x) any
Hazardous Materials Activities the existence of which has a reasonable
possibility of resulting in one or more Environmental Claims having,
individually or in the aggregate, a Material Adverse Effect, or (y) any
Environmental Claims that, individually or in the aggregate, have a reasonable
possibility of resulting in a Material Adverse Effect, and (3) Company's
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of any Facility that is reasonably likely to cause such Facility or
any part thereof to be subject to any material restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws; (iii) as
soon as practicable following the sending or receipt thereof by Company or any
of its Subsidiaries, a copy of any and all written communications of a material
nature with respect to (1) any Environmental Claims that, individually or in the
aggregate, have a reasonable possibility of giving rise to a Material Adverse
Effect, (2) any Release required to be reported to any federal, state or local
governmental or regulatory agency which could reasonably be expected to have a
Material Adverse Effect, and (3) any request for information from any
governmental agency that suggests such agency is investigating whether Company
or any of its Subsidiaries may be potentially responsible for any Hazardous
Materials Activity which could reasonably be expected to have a Material Adverse
Effect; (iv) prompt written notice describing in reasonable detail (1) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to (x) expose Company or any of
its Subsidiaries to, or result in, Environmental Claims that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(y) affect the ability of Company or any of its Subsidiaries to maintain in full
force and effect all material Governmental Authorizations required under any
Environmental Laws for their respective operations and (2) any proposed action
to be taken by Company or any of its Subsidiaries to modify current operations
in a manner that could reasonably be expected to subject Company or any of its
Subsidiaries to any material additional obligations or requirements under any
Environmental Laws that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; and (v) with reasonable promptness,
such other documents and information as from time to time may be reasonably
requested by Administrative Agent in relation to any matters disclosed pursuant
to this SECTION 5.8.
5.9. SUBSIDIARIES. In the event that any Domestic Subsidiary which was
a Non-Guarantor Subsidiary ceases to be a Non-Guarantor Subsidiary or any Person
becomes a Subsidiary of Company after the date hereof, Company will promptly
notify Administrative Agent thereof and cause such Subsidiary to execute and
deliver to Administrative Agent a Counterpart Agreement and to take all such
further actions and execute all such further documents, instruments, agreements,
opinions and certificates (including those comparable to those described in
SECTIONS 3.1(b) and 3.1(d)) as may be
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necessary or, in the opinion of Administrative Agent, desirable to create in
favor of Administrative Agent, for the benefit of Lenders, a valid and perfected
First Priority Lien on all of the personal assets of such Subsidiary required
hereby and the other Credit Documents. With respect to each such Subsidiary,
Company shall send to Administrative Agent written notice setting forth with
respect to such Person (a) the date on which such Person became a Subsidiary of
Company, and (b) all of the data required to be set forth in SCHEDULE 4.1 with
respect to all Subsidiaries of Company (it being understood that such written
notice shall be deemed to supplement SCHEDULE 4.1 for all purposes hereof).
Notwithstanding the foregoing, Company shall not be required to deliver a
Counterpart Agreement or any of the other documents described in this Section
with respect to (x) any Domestic Subsidiary which is not a Material Subsidiary
or (y) any Foreign Subsidiary if the execution and delivery of such Counterpart
Agreement by such Foreign Subsidiary would have material adverse tax
consequences for Company and its Subsidiaries; PROVIDED, HOWEVER, that
notwithstanding the foregoing at no time shall (i) the aggregate amount of
consolidated revenues of the Non-Guarantor Subsidiaries for the most recent
Fiscal Quarter account for more than 5% of the consolidated revenues of Company
and its Subsidiaries for such Fiscal Quarter or (ii) the aggregate amount of
consolidated assets owned by the Non-Guarantor Subsidiaries at the end of the
most recent Fiscal Quarter account for more than 5% of the consolidated assets
of Company and its Subsidiaries at the end of such Fiscal Quarter, and if either
such case shall occur, Company shall immediately come into compliance with this
SECTION 5.9 by notifying Administrative Agent of the identity of a sufficient
number of Non-Guarantor Subsidiaries who are Domestic Subsidiaries (who shall
cease to be Non-Guarantor Subsidiaries) and causing such Domestic Subsidiaries
to execute and deliver to Administrative Agent a Counterpart Agreement and to
take all such further actions and execute all such further documents,
instruments, agreements, opinions and certificates (including those comparable
to those described in SECTIONS 3.1(b) and 3.1(d)) as may be necessary or, in the
opinion of Administrative Agent, desirable to create in favor of Administrative
Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on
all of the personal assets of such Subsidiary required hereby and the other
Credit Documents.
5.10. INTEREST RATE PROTECTION. At all times after the date which is 90
days after the Closing Date, Company shall maintain, or cause to be maintained,
in effect one or more Interest Rate Agreements with respect to the Loans, each
such Interest Rate Agreement to be for a term and in form and substance and for
a period reasonably satisfactory to Administrative Agent and Joint Lead
Arrangers, which Interest Rate Agreements shall effectively limit the Unadjusted
Eurodollar Rate Component (as hereinafter defined) of the interest costs to
Company with respect to an aggregate notional principal amount of not less than
50% (increasing to 75% in the event the Senior Subordinated Bridge Loans are not
refinanced in full with the proceeds of Senior Subordinated Notes within six
months of the Closing Date) of the aggregate principal amount of the Term Loans
outstanding from time to time (based on the assumption that such notional
principal amount was a Eurodollar Rate Loan with an Interest Period of three
months) to a rate equal to not more than 6.0% per annum. For purposes of this
SECTION 5.10, the term "UNADJUSTED EURODOLLAR RATE COMPONENT" means that
component of the interest costs to Company in respect of a Eurodollar Rate Loan
that is based upon the rate obtained pursuant to clause (i) or the last sentence
of the definition of Adjusted Eurodollar Rate.
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5.11. YEAR 2000 MATTERS. Company shall (a) promptly advise
Administrative Agent of any (i) material disruption or delay in the
implementation of the Plan of Correction, as the same may be updated from time
to time, including any determination by Company, any Responsible Officer of
Company or any Subsidiary, or any consultant to Company or any Subsidiary with
respect to Year 2000 Problems that there may be a failure to achieve any of the
objectives specifically identified in such Plan of Correction, or (ii) material
change in the written Plan of Correction or related implementation budget; and
(b) report to Administrative Agent and Lenders periodically upon request, in
such form as Administrative Agent and Lenders may reasonably request, on the
progress of Company and its Subsidiaries in implementing the Plan of Correction.
5.12. CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL
REAL PROPERTY COLLATERAL.
(a) If Company or any of its Subsidiaries acquires any Leasehold
Property, Company shall, or shall cause such Subsidiary to, use its reasonable
commercial efforts (without requiring Company or such Subsidiary to relinquish
any material rights or incur any material obligations or to expend more than a
nominal amount of money over and above the reimbursement, if required, of the
landlord's out-of-pocket costs, including attorneys fees) to cause such
Leasehold Property to be a Conforming Leasehold Interest.
(b) From and after the Closing Date, except with respect to any Real
Property Asset with a fair market value of less than $1,000,000 individually or
$5,000,000 in the aggregate from the Closing Date to the applicable date of
determination, in the event that (x) Company or any Subsidiary Guarantor
acquires any fee interest in real property or any Leasehold Property or (Y) at
the time any Person becomes a Subsidiary Guarantor, such Person owns or holds
any fee interest in real property or any Leasehold Property, in either case
excluding any such Real Property Asset the encumbrancing of which requires the
consent of any applicable lessor or (in the case of clause (y) above)
then-existing senior lienholder, where Company and its Subsidiaries are unable
after reasonably commercial efforts to obtain such lessor's or senior
lienholder's consent (any such non-excluded Real Property Asset described in the
foregoing clause (x) or (y) being an "ADDITIONAL MORTGAGED PROPERTY"), Company
or such Subsidiary Guarantor shall deliver to Administrative Agent, as soon as
practicable after such Person acquires such Additional Mortgaged Property or
becomes a Subsidiary Guarantor, as the case may be, the following: (i) a fully
executed and notarized Mortgage in proper form for recording in all appropriate
places in all applicable jurisdictions, encumbering the interest of such Credit
Party in such Mortgaged Property; (ii) (a) a favorable opinion of counsel to
such Credit Party, in form and substance satisfactory to Administrative Agent
and its counsel, as to the due authorization, execution and delivery by such
Credit Party of such Mortgage and such other matters as Administrative Agent may
reasonably request, and (b) if required by Administrative Agent, an opinion of
counsel (which counsel shall be reasonably satisfactory to Administrative Agent)
in the state in which such Additional Mortgaged Property is located with respect
to the enforceability of the form of Mortgage to be recorded in such state and
such other matters (including any matters governed by the laws of such state
regarding personal property security interests in respect of any Collateral) as
Administrative Agent may reasonably request, in each case in form and substance
reasonably satisfactory to Administrative Agent; (iii) in the case of an
Additional Mortgaged Property consisting of a Leasehold Property, (a) a Landlord
Consent and Estoppel and (b) evidence that such
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Leasehold Property is a Recorded Leasehold Interest; (iv) (a) if required by
Administrative Agent, an ALTA mortgagee title insurance policy or an
unconditional commitment therefor (an "ADDITIONAL MORTGAGE POLICY") issued by
the Title Company with respect to such Additional Mortgaged Property, in an
amount reasonably satisfactory to Administrative Agent, taking into
consideration the interest of the Credit Party in such Additional Mortgaged
Property, insuring fee simple title to, or a valid leasehold interest in, such
Additional Mortgaged Property vested in such Credit Party and assuring
Administrative Agent that such Mortgage creates a valid and enforceable First
Priority mortgage Lien on such Additional Mortgaged Property, subject only to a
standard survey exception, which Additional Mortgage Policy (1) shall include an
endorsement for mechanics' liens, for future advances under this Agreement and
for any other matters reasonably requested by Administrative Agent and (2) shall
provide for affirmative insurance and such reinsurance as Administrative Agent
may reasonably request, all of the foregoing in form and substance reasonably
satisfactory to Administrative Agent; and (b) evidence satisfactory to
Administrative Agent that such Credit Party has (i) delivered to the Title
Company all certificates and affidavits required by the Title Company in
connection with the issuance of the Mortgage Policy and (ii) paid to the Title
Company or to the appropriate governmental authorities all expenses and premiums
of the Title Company in connection with the issuance of the Additional Mortgage
Policy and all recording and stamp taxes (including mortgage recording and
intangible taxes) payable in connection with recording the Mortgage in the
appropriate real estate records; (v) if no Additional Mortgage Policy is
required with respect to such Additional Mortgaged Property, a title report
issued by the Title Company with respect thereto, dated not more than 30 days
prior to the date such Mortgage is to be recorded and satisfactory in form and
substance to Administrative Agent; (vi) copies of all recorded documents listed
as exceptions to title or otherwise referred to in the Additional Mortgage
Policy or title report delivered pursuant to clause (v) or (vi) above; (vii) (a)
evidence, which may be in the form of a letter from an insurance broker or a
municipal engineer, as to (1) whether such Additional Mortgaged Property is a
Flood Hazard Property and (2) if so, whether the community in which such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, (b) if such Additional Mortgaged Property is a Flood Hazard Property,
such Credit Party's written acknowledgment of receipt of written notification
from Administrative Agent (1) that such Additional Mortgaged Property is a Flood
Hazard Property and (2) as to whether the community in which such Flood Hazard
Property is located is participating in the National Flood Insurance Program,
and (c) in the event such Additional Mortgaged Property is a Flood Hazard
Property that is located in a community that participates in the National Flood
Insurance Program, evidence that Company has obtained flood insurance in respect
of such Flood Hazard Property to the extent required under the applicable
regulations of the Board of Governors of the Federal Reserve System; and (viii)
if required by Administrative Agent, reports and other information, in form,
scope and substance satisfactory to Administrative Agent and prepared by
environmental consultants satisfactory to Administrative Agent, concerning any
environmental hazards or liabilities to which Company or any of its Subsidiaries
may be subject with respect to such Additional Mortgaged Property.
(c) Company shall, and shall cause each of its Subsidiaries to, permit
an independent real estate appraiser satisfactory to Administrative Agent, upon
reasonable notice, to visit and inspect any Additional Mortgaged Property for
the purpose of preparing an appraisal of such Additional Mortgaged Property
satisfying the requirements of any applicable laws and regulations (in each case
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to the extent required under such laws and regulations as determined by
Administrative Agent in its discretion).
5.13. FURTHER ASSURANCES. Each of Holdings and Company shall take, and
cause each of its Subsidiaries to take, such actions as Administrative Agent may
reasonably request from time to time (including, without limitation, the
execution and delivery of guaranties, security agreements, pledge agreements,
Mortgages, stock powers, financing statements and other documents, the filing or
recording of any of the foregoing, title insurance with respect to any of the
foregoing that relates to an interest in real property, and the delivery of
stock certificates and other collateral with respect to which perfection is
obtained by possession) to ensure that the Obligations are guarantied by
Guarantors and are secured by substantially all of the assets of Company and its
Subsidiaries and all of the capital stock of Company and Guarantors. In the
event that Company or any of its Subsidiaries creates a new Subsidiary, all of
the capital stock or partnership interests of such new Subsidiary shall, to the
extent required by SECTION 5.9, be duly and validly pledged to Administrative
Agent for the benefit of Agents and Lenders pursuant to the Collateral
Documents, subject to no other Liens.
SECTION 6. NEGATIVE COVENANTS
Each Credit Party covenants and agrees that, so long as any of the
Commitments shall remain in effect and until payment in full of all of
Obligations, such Credit Party shall perform, and shall cause each of its
Subsidiaries to perform, all covenants made by it in this SECTION 6.
6.1. INDEBTEDNESS. Company shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) each of the Credit Parties may become and remain liable
with respect to its respective Obligations;
(ii) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in SCHEDULE 6.1 annexed
hereto;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by SECTION 6.4
and, upon any matured obligations actually arising pursuant thereto,
the Indebtedness corresponding to the Contingent Obligations so
extinguished;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness under Capital Leases capitalized on the
consolidated balance sheet of Company and its Subsidiaries and other
Indebtedness secured by Liens permitted under SECTION 6.2(iii);
PROVIDED, that the aggregate amount of all Indebtedness outstanding
under this clause (iv) at any time shall not exceed $5,000,000;
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(v) Company may become and remain liable with respect to
Indebtedness to any of its wholly owned Domestic Subsidiaries, and any
wholly owned Domestic Subsidiary may become and remain liable with
respect to Indebtedness to Company or any other wholly owned Domestic
Subsidiary of Company; PROVIDED that, in each case, (a) all such
intercompany Indebtedness shall be evidenced by promissory notes which
shall have been delivered as Collateral to the Administrative Agent
pursuant to the Pledge and Security Agreement, (b) all such
intercompany Indebtedness owed by Company to any of its respective
Domestic Subsidiaries shall be unsecured and subordinated in right of
payment to the payment in full of the Obligations pursuant to the terms
of the applicable promissory notes or an intercompany subordination
agreement, (c) any payment by Company or by any Domestic Subsidiary of
Company under any guaranty of the Obligations shall result in a PRO
TANTO reduction of the amount of any intercompany Indebtedness owed by
Company or by such Domestic Subsidiary to Company or to any of its
Domestic Subsidiaries for whose benefit such payment is made, and (d)
each such Domestic Subsidiary shall be a Subsidiary Guarantor and have
executed and delivered a counterpart of the Guaranty and the Pledge and
Security Agreement;
(vi) Company may become and remain liable with respect to
Indebtedness to any of its wholly owned Foreign Subsidiaries and wholly
owned Non-Guarantor Subsidiaries, and any wholly owned Foreign
Subsidiary and any wholly owned Non-Guarantor Subsidiary may become or
remain liable with respect to Indebtedness to Company or any other
wholly owned Subsidiary Guarantor of Company, in an aggregate principal
amount for all such Foreign Subsidiaries and Non-Guarantor Subsidiaries
at any time outstanding not in excess of the equivalent of $10,000,000
LESS the amount of any Investments made in Foreign Subsidiaries and in
Non-Guarantor Subsidiaries pursuant to SECTION 6.3(I); PROVIDED that,
in each case, (a) all such intercompany Indebtedness shall be evidenced
by promissory notes and (b) all such intercompany Indebtedness owed by
Company to any of its respective Foreign Subsidiaries and Non-Guarantor
Subsidiaries shall be unsecured and subordinated in right of payment to
the payment in full of the Obligations pursuant to the terms of the
applicable promissory notes or an intercompany subordination agreement;
(vii) Company may become and remain liable with respect to (a)
Indebtedness under the Senior Subordinated Bridge Loan Documents, the
Senior Subordinated Note Documents and the Junior Subordinated Notes
Documents, and (b) other Subordinated Indebtedness incurred to
refinance, in whole or in part, Indebtedness under the Senior
Subordinated Bridge Loan Documents and the Junior Subordinated Notes;
PROVIDED, that in each case contemplated by this clause (b) (1) the
principal amount (or accreted value, in the case of any such
refinancing Indebtedness issued with a discount) of such refinancing
Indebtedness does not exceed the amount of interest and principal (and
premium, if any) of the Indebtedness so refinanced, together with fees
and expenses related to such refinancing, (2) such refinancing
Indebtedness shall be subordinated in right of payment to the
Obligations pursuant to documentation containing interest payment
terms, maturities, amortization schedules, covenants, defaults,
remedies, subordination provisions, transfer restrictions and other
material terms which taken as a whole are no less favorable to the
Lenders than the corresponding terms of the Senior Subordinated Bridge
Loan Documents or the Junior
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Subordinated Notes Documents, as the case may be, and are otherwise
reasonably satisfactory to Administrative Agent and (3) immediately
prior to and immediately after the incurrence of such refinancing
Indebtedness, no Event of Default or Default shall have occurred and be
continuing.
(viii) (a) Indebtedness assumed in connection with
acquisitions permitted by SECTION 6.7(v) (so long as such Indebtedness
was not incurred in anticipation of any such acquisitions), (b)
Indebtedness of newly acquired Subsidiaries acquired in such
acquisitions (so long as such Indebtedness was not incurred in
anticipation of any such acquisition) and (c) Indebtedness owed to the
seller in any acquisition permitted by SECTION 6.7(v) constituting part
of the purchase price thereof; PROVIDED that such Indebtedness
permitted pursuant to this clause (c) (1) does not provide for any
prepayment or repayment of all or any portion of the principal thereof
prior to the date of the final scheduled installment of principal of
any of the Loans, (2) is subordinated in right of payment to the
Obligations, and (3) is pursuant to documentation containing
maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms reasonably
satisfactory to Administrative Agent; PROVIDED that the aggregate
amount of Indebtedness permitted under this clause (viii) constituting
industrial development or revenue bond financing shall not exceed
$5,000,000 and any additional Indebtedness permitted under this clause
(viii) shall not exceed $5,000,000 at any time outstanding;
(ix) Indebtedness incurred in connection with the repurchase
of shares of the capital stock of Holdings as permitted by SECTION
6.5(iv) and made in accordance with the terms of the ESOP, as more
fully described on SCHEDULE 6.1;
(x) Indebtedness in connection with workman's compensations
obligations and general liability exposure of Company and its
Subsidiaries; and
(xi) Indebtedness of Company and its Subsidiaries not
otherwise permitted by this SECTION 6.1 in an aggregate principal
amount at any time outstanding not exceeding $5,000,000; PROVIDED,
HOWEVER, that notwithstanding the foregoing, Indebtedness of Company
and/or its Subsidiaries to any Non-Guarantor Subsidiaries or Foreign
Subsidiaries shall not be permitted under this clause (xi).
6.2. LIENS. Company shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in SCHEDULE 6.2 annexed hereto;
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(iii) purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention or
deferred purchase devices) in real or tangible personal property of
Company or any of its Subsidiaries existing or created at the time of
acquisition thereof or within 30 days thereafter, and the renewal,
extension and refunding of any such security interest in an amount not
exceeding the amount thereof remaining unpaid immediately prior to such
renewal, extension or refunding; PROVIDED, HOWEVER, that such
Indebtedness is permitted by SECTION 6.1(iv) hereof;
(iv) Liens in favor of Administrative Agent granted pursuant
to the Collateral Documents;
(v) Liens on property of any of Company's Foreign Subsidiaries
created solely for the purpose of securing Indebtedness permitted by
SECTION 6.1(vi);
(vi) Liens on property of Company or any of its Subsidiaries
created solely for the purpose of securing Indebtedness permitted by
SECTION 6.1(viii)(a) or (b) (so long as such Lien was not incurred in
anticipation of the related acquisition), representing or incurred to
finance, refinance or refund the purchase price of property; PROVIDED
that no such Lien incurred in connection with such Indebtedness shall
extend to or cover other property of Company or such 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;
(vii) Liens on documents of title and the property covered
thereby securing Indebtedness in respect of commercial letters of
credit;
(viii) Liens in connection with workman's compensations
obligations and general liability exposure of Company and its
Subsidiaries; and
(ix) Liens on assets of Company and its Subsidiaries not
otherwise permitted under this SECTION 6.2, securing Indebtedness in an
aggregate principal amount at any time outstanding not in excess of
$5,000,000.
If any Credit Party or any of its Subsidiaries shall create or assume any Lien
upon any of its properties or assets, whether now owned or hereafter acquired,
other than Liens excepted by the first sentence of this SECTION 6.2, it shall
make or cause to be made effective provision whereby the Obligations will be
secured by such Lien equally and ratably with any and all other Indebtedness
secured thereby as long as any such Indebtedness shall be so secured; PROVIDED,
notwithstanding the foregoing, this covenant shall not be construed as a consent
by Requisite Lenders to the creation or assumption of any such Lien not
permitted by the provisions of this SECTION 6.2. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, no Credit Party
nor any of its Subsidiaries shall enter into any agreement prohibiting the
creation or assumption of any Lien upon any of its properties or assets, whether
now owned or hereafter acquired.
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6.3. INVESTMENTS. Company shall not, nor shall it permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may (a) continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company, and (b) make and own Investments in any Subsidiary which is a
Subsidiary Guarantor, PROVIDED that (x) the requirements of SECTION 5.9
are satisfied and (Y) in the case of Subsidiaries which are
Non-Guarantor Subsidiaries or Foreign Subsidiaries, the aggregate
amount of all Investments in Non-Guarantor Subsidiaries and Foreign
Subsidiaries does not exceed (1) $10,000,000 (net of any dividends or
distributions, or prepayments or payments of interest by such
Non-Guarantor Subsidiaries and such Foreign Subsidiaries to Company or
any of its Subsidiary Guarantors), MINUS (2) the amount of any
Indebtedness of any Non-Guarantor Subsidiary and any Foreign Subsidiary
at any such time outstanding in accordance with SECTION 6.1(vi);
(ii) Company and its Subsidiaries may make intercompany loans
to the extent permitted by SECTION 6.1;
(iii) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(iv) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by SECTION 6.8;
(v) Company and its Subsidiaries may make and own Investments
made in connection with a Permitted Acquisition under SECTION 6.7(v);
(vi) Company and its Subsidiaries may make loans and advances
to officers of Holdings and its Subsidiaries in an aggregate amount not
to exceed $5,000,000 at any time;
(vii) Company and its Subsidiaries may make and own
Investments consisting of notes received in connection with any Asset
Sale limited to 20% of the total sale price of the assets sold in such
Asset Sale, subject to SECTION 6.7(iv);
(viii) Company and its Subsidiaries may make and own other
Investments not otherwise permitted under this SECTION 6.3 in an
aggregate principal at any time outstanding not exceeding $2,500,000;
PROVIDED, HOWEVER, that notwithstanding the foregoing, Investments in
any Non-Guarantor Subsidiaries or Foreign Subsidiaries shall not be
permitted under this clause (viii); and
(ix) Company and its Subsidiaries may make and own Investments
received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the
ordinary course of business.
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6.4. CONTINGENT OBLIGATIONS. Company shall not, nor shall it permit any
of its Subsidiaries to, directly or indirectly, create or become or remain
liable with respect to any Contingent Obligation, except:
(i) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit, and the
Subsidiary Guarantors may become and remain liable with respect to
Contingent Obligations arising under the Guaranty;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under Hedge Agreements required
under SECTION 5.10;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase or sales price adjustment obligations
incurred in connection with Asset Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees in the ordinary
course of business of the obligations of suppliers, landlords,
customers, franchisees and licensees of Company and its Subsidiaries;
(v) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of unsecured guaranties of
any Indebtedness of Company permitted under SECTION 6.1(vii); PROVIDED,
that in each case the obligations of any such Subsidiary under any such
guaranty shall be subordinated in right of payment to the Obligations
pursuant to documentation containing subordination provisions and other
material terms reasonably satisfactory to Administrative Agent;
(vi) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in SCHEDULE 6.4
annexed hereto; and
(vii) Company and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; PROVIDED that the
maximum aggregate liability, contingent or otherwise, of Company and
its Subsidiaries in respect of all such Contingent Obligations,
together with the aggregate principal amount of Indebtedness of Company
and its Subsidiaries incurred pursuant to SECTION 6.1(vi), shall at no
time exceed $10,000,000.
6.5. RESTRICTED PAYMENTS. Company shall not, nor shall it permit any of
its Subsidiaries to, directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment, except:
(i) Company and its Subsidiaries may make (x) regularly
scheduled payments of interest in respect of Subordinated Indebtedness,
in each case in accordance with the terms of, and only to the extent
required by, and subject to the subordination provisions contained in,
the indenture or other agreement pursuant to which such Subordinated
Indebtedness was issued, as such indenture or other agreement may be
amended from time to time to the extent permitted under SECTION 6.11;
PROVIDED, to the extent the Senior Subordinated Bridge Loan
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Agreement, the Senior Subordinated Notes Indenture and the terms of the
Junior Subordinated Notes (as set forth in the Securities Purchase
Agreement) permit Company to pay interest thereon or liquidated damages
with respect thereto in like-kind instruments in a principal amount
equal to the amount of such interest or liquidated damages, Company and
Holdings shall pay such interest or liquidated damages in such
like-kind instruments; and (y) payments in respect of any repurchase,
redemption or repayment of the Junior Subordinated Notes and/or the
Senior Subordinated Bridge Loan with the proceeds of issuances of
equity by Holdings or in respect of any refinancing of the Junior
Subordinated Notes and/or the Senior Subordinated Bridge Loan under
SECTION 6.1(vii);
(ii) Company may make Restricted Junior Payments to Holdings
to permit the payment of Management Fees; PROVIDED, that at the time of
such Restricted Junior Payment and immediately after giving effect
thereto, no Event of Default shall have occurred and be continuing
under SECTION 8.1(a) or as a result of a breach of the provisions of
SECTION 6.6 and the lapse of 30 days without cure or waiver of such
breach;
(iii) Company may make Restricted Junior Payments to Holdings,
(a) in an aggregate amount not to exceed $850,000 in any Fiscal Year,
to the extent necessary to permit Holdings to pay general
administrative costs and expenses; (b) in respect of (a) federal income
taxes for the tax periods for which a federal consolidated return is
filed by Holdings for a consolidated group of which Holdings is the
parent and Company and its Subsidiaries are members, in an amount not
to exceed the hypothetical federal income taxes that Company would have
paid if Company and its Subsidiaries filed a separate consolidated
return with Company as the parent, taking into account carryovers and
carrybacks of tax attributes (including net operating losses) that
would have been allowed if such separate consolidated return had been
filed and (b) state income taxes for the tax periods for which a state
combined return is filed by Holdings for a combined group of which
Holdings is the parent and Company and its Subsidiaries are members, in
an amount not to exceed the hypothetical state income taxes that
Company would have paid if Company and its Subsidiaries filed a
separate combined return, taking into account carryovers and carrybacks
of tax attributes (including net operating losses) that would have been
allowed if such separate combined return had been filed; PROVIDED,
HOWEVER, that in no event shall any such tax payment pursuant to this
clause (b) exceed the amount of federal (or state, as the case may be)
income tax that is, at the time Company makes such tax payments,
actually due and payable by Holdings to the relevant taxing authorities
or to become due and payable within 30 days of such payment by Company;
and (c) distributions to Holdings to the extent necessary to fund the
Recapitalization;
(iv) Company may make Restricted Junior Payments to Holdings
to the extent required for Holdings to repurchase its capital stock
from deceased or retired employees in accordance with the terms of the
ESOP and from employees whose employment with Company or any of its
Subsidiaries has terminated for any other reason but only to the extent
mandatorily required by the ESOP, the Internal Revenue Code or ERISA;
and
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(v) Company may make Restricted Junior Payments to Holdings to
permit Holdings to repurchase its capital stock or options in respect
thereof, in each case from deceased, terminated or retired Management
Investors; PROVIDED, that (a) at the time of such Restricted Junior
Payment and immediately after giving effect thereto, no Event of
Default shall have occurred and be continuing under SECTION 8.1(a) or
as a result of a breach of the provisions of Section 6.6 and the lapse
of 30 days without cure or waiver of such breach and (B) the aggregate
amount of Restricted Junior Payments made pursuant to this clause (v)
in any Fiscal Year shall not exceed $2,000,000;
and PROVIDED FURTHER, that any Restricted Junior Payments by Company to Holdings
permitted under this Section shall be applied by Holdings for the purposes
specified in this Section.
Except as provided herein, Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any such Subsidiary to (w) pay dividends or make any other distributions on
any of such Subsidiary's capital stock owned by Company or any other Subsidiary
of Company, (x) repay or prepay any Indebtedness owed by such Subsidiary to
Company or any other Subsidiary of Company, (y) make loans or advances to
Company or any other Subsidiary of Company, or (Z) transfer any of its property
or assets to Company or any other Subsidiary of Company.
6.6. FINANCIAL COVENANTS.
(a) MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the
ratio of (I) Consolidated Adjusted EBITDAR to (ii) Consolidated Fixed Charges
for any four-Fiscal Quarter period ending during any of the periods set forth
below to be less than the correlative ratio indicated, PROVIDED that for
purposes of calculating Consolidated Fixed Charges for any period prior to the
first anniversary of the Closing Date, Consolidated Fixed Charges for such
period shall be equal to the actual amount of Consolidated Fixed Charges for the
period commencing on the Closing Date and ending on the date of determination
MULTIPLIED BY the quotient of (x) three hundred and sixty-five (365) DIVIDED BY
(y) the number of days that have passed since the Closing Date:
<TABLE>
<CAPTION>
PERIOD MINIMUM FIXED CHARGE
COVERAGE RATIO
========================================================== ==================================
<S> <C>
Closing Date - the day immediately preceding 1.45:1.00
the end of 2nd Fiscal Quarter 1999
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 1999 - the 1.50:1.00
day immediately preceding the end of Fiscal
Year 1999
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 1999 - the day 1.55:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2000
- ---------------------------------------------------------- ----------------------------------
</TABLE>
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<TABLE>
<CAPTION>
PERIOD MINIMUM FIXED CHARGE
COVERAGE RATIO
========================================================== ==================================
<S> <C>
The last day of 2nd Fiscal Quarter 2000 - the 1.65:1.00
day immediately preceding the end of Fiscal
Year 2000
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 2000 - the day 1.75:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2001
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2001 - there 1.95:1.00
after
========================================================== ==================================
</TABLE>
(b) MINIMUM CASH INTEREST COVERAGE RATIO. Company shall not permit the
ratio of (I) Consolidated Adjusted EBITDA to (II) Consolidated Cash Interest
Expense for any four-Fiscal Quarter period ending during any of the periods set
forth below to be less than the correlative ratio indicated, PROVIDED that for
purposes of calculating Consolidated Cash Interest Expense for any period prior
to the first anniversary of the Closing Date, Consolidated Cash Interest Expense
for such period shall be equal to the actual amount of Consolidated Cash
Interest Expense for the period commencing on the Closing Date and ending on the
date of determination MULTIPLIED BY the quotient of (X) three hundred and
sixty-five (365) DIVIDED BY (y) the number of days that have passed since the
Closing Date:
<TABLE>
<CAPTION>
PERIOD MINIMUM CASH INTEREST
COVERAGE RATIO
========================================================== ==================================
<S> <C>
Closing Date - the day immediately preceding 1.70:1.00
the end of 2nd Fiscal Quarter 1999
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 1999 - the 1.80:1.00
day immediately preceding the end of Fiscal
Year 1999
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 1999 - the day 1.90:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2000
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2000 - the 2.10:1.00
day immediately preceding the end of Fiscal
Year 2000
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 2000 - the day 2.30:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2001
- ---------------------------------------------------------- ----------------------------------
</TABLE>
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<PAGE> 101
<TABLE>
<CAPTION>
PERIOD MINIMUM CASH INTEREST
COVERAGE RATIO
========================================================== ==================================
<S> <C>
The last day of 2nd Fiscal Quarter 2001 - there 2.50:1.00
after
========================================================== ==================================
</TABLE>
(c) MAXIMUM LEVERAGE RATIO. Company shall not permit the Leverage Ratio
as of the last day of any Fiscal Quarter ending during any of the periods set
forth below to exceed the correlative ratio indicated:
<TABLE>
<CAPTION>
PERIOD MAXIMUM
LEVERAGE RATIO
========================================================== ==================================
<S> <C>
Closing Date - the day immediately preceding 5.75:1.00
the end of 2nd Fiscal Quarter 1999
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 1999 - the 5.75:1.00
day immediately preceding the end of Fiscal
Year 1999
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 1999 - the day 5.40:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2000
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2000 - the 5.40:1.00
day immediately preceding the end of Fiscal
Year 2000
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 2000 - the day 5.20:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2001
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2001 - the 5.00:1.00
last day immediately preceding the end of
Fiscal Year 2001
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 2001 and thereafter 4.75:100
========================================================== ==================================
</TABLE>
(d) MAXIMUM SENIOR DEBT LEVERAGE RATIO. Company shall not permit the
Senior Debt Leverage Ratio as of the last day of any Fiscal Quarter ending
during any of the periods set forth below to exceed the correlative ratio
indicated:
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<PAGE> 102
<TABLE>
<CAPTION>
PERIOD MAXIMUM SENIOR DEBT
LEVERAGE RATIO
========================================================== ==================================
<S> <C>
Closing Date - the day immediately preceding 3.95:1.00
the end of 2nd Fiscal Quarter 1999
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 1999 - the 3.95:1.00
day immediately preceding the end of Fiscal
Year 1999
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 1999 - the day 3.60:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2000
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2000 - the 3.50:1.00
day immediately preceding the end of Fiscal
Year 2000
- ---------------------------------------------------------- ----------------------------------
The last day of Fiscal Year 2000 - the day 3.25:1.00
immediately preceding the end of 2nd Fiscal
Quarter 2001
- ---------------------------------------------------------- ----------------------------------
The last day of 2nd Fiscal Quarter 2001 - there 3.00:1.00
after
========================================================== ==================================
</TABLE>
(e) CERTAIN CALCULATIONS. With respect to any period during which a
Permitted Acquisition occurs, for purposes of determining compliance with the
financial covenants set forth in this SECTION 6.6, Consolidated Adjusted EBITDA,
Consolidated Adjusted EBITDAR and Consolidated Fixed Charges shall be calculated
with respect to such periods and the business or Person acquired on a pro forma
basis (including pro forma adjustments arising out of events which are directly
attributable to a specific transaction, are factually supportable and are
expected to have a continuing impact, in each case determined on a basis
consistent with Article 11 of Regulation S-X promulgated under the Securities
Act and as interpreted by the staff of the Securities and Exchange Commission)
using the historical financial statements of the business or Person acquired, so
acquired or to be acquired and the consolidated financial statements of Company
and its Subsidiaries which shall be reformulated (i) as if such Permitted
Acquisition, and any Permitted Acquisitions which have been consummated during
such period, and any Indebtedness or other liabilities incurred in connection
with any such Permitted Acquisition, had been consummated or incurred at the
beginning of such period (and assuming that such Indebtedness bears interest
during any portion of the applicable measurement period prior to the relevant
acquisition at the weighted average of the interest rates applicable to
outstanding Loans during such period), and (ii) otherwise in conformity with
certain procedures to be agreed upon between Administrative Agent and Company,
all such calculations to be in form and substance reasonably satisfactory to
Administrative Agent.
6.7. FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS. Company and
Holdings shall not, nor shall it permit any of its Subsidiaries to (except to
the extent otherwise permitted under
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<PAGE> 103
this Agreement), alter the corporate, capital or legal structure (except in a
way that does not have a Material Adverse Effect) of Holdings, Company or any of
its Subsidiaries, create any new Subsidiaries or enter into any transaction of
merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, license,
sublicense, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property (including
Intellectual Property) or fixed assets, whether now owned or hereafter acquired,
or acquire by purchase or otherwise any part of the business, property
(including Intellectual Property) or fixed assets of, or stock or other evidence
of beneficial ownership of, any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly owned Subsidiary Guarantor, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly owned Subsidiary Guarantor; PROVIDED that, in the case of such a
merger involving Company, Company shall be the continuing or surviving
corporation, and in the case of any other such merger, such wholly
owned Subsidiary Guarantor shall be the continuing or surviving
corporation;
(ii) Company and its Subsidiaries may acquire inventory,
equipment and other assets (including Intellectual Property) in the
ordinary course of business;
(iii) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
PROVIDED that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof;
(iv) Company and its Subsidiaries may make Asset Sales in any
single Fiscal Year of assets that have, in the aggregate, a fair market
value (determined in good faith by the board of directors of Company)
not in excess of $3,000,000; PROVIDED that (x) the consideration
received for such assets shall be in an amount at least equal to the
fair market value thereof (determined in good faith by the board of
directors of Company); (y) not less than 80% of the consideration
received therefor shall be cash; and (Z) the proceeds of such Asset
Sales shall be applied as required by SECTION 2.13;
(v) Company and its Subsidiaries may acquire the stock or
other equity Securities of any Person that, as a result of such
acquisition, becomes a wholly owned Subsidiary of Company or, through a
newly created wholly owned Subsidiary, may acquire the business,
property or assets of any Person; PROVIDED, that (q) Company shall give
Administrative Agent at least 10 days' notice of the proposed
transaction, and copies of the definitive documentation relating
thereto, (r) any business acquired shall be made in compliance with
SECTION 6.12 and all applicable laws, (s) Company and its Subsidiaries
shall own all of the beneficial equity interests in the business
acquired and shall comply with the provisions of SECTION 5.9, (t) any
business or property acquired shall (1) be located in the United States
or (ii) if located outside the United States, be acquired by a Foreign
Subsidiary (provided that, for purposes of this clause (t), after
giving effect to such acquisition the Company and its Subsidiaries are
in
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<PAGE> 104
compliance with SECTION 6.3(i)), (u) any business or property acquired
shall have positive Consolidated Adjusted EBITDA (provided that for
purposes of this clause (u), the calculation of Consolidated Adjusted
EBITDA with respect to such acquired business and property shall be
made on a pro forma basis in accordance with SECTION 6.6(e)), (w)
Company shall deliver an Officers' Certificate to Administrative Agent
and Lenders in form and substance reasonably satisfactory to
Administrative Agent, together with the related financial statements,
demonstrating in reasonable detail that, after giving effect to the
acquisition of such business (including any Indebtedness incurred or
assumed therein), Company and its Subsidiaries are otherwise in
compliance on a pro forma basis in accordance with SECTION 6.6(e), with
the covenants set forth in SECTION 6.6 and (x) after consummation of
such acquisition, no Event of Default or Default shall exist or have
occurred; and
(vi) Company may create new wholly owned Subsidiaries (other
than with respect to shares required by applicable law to be owned by
another Person for the qualification of directors or to satisfy minimum
shareholder requirements); PROVIDED that, concurrently with or prior to
the formation of each such Subsidiary, Company or such Subsidiary, as
applicable, shall deliver each of the items and execute each of the
documents required pursuant to SECTION 5.9.
6.8. CONSOLIDATED CAPITAL EXPENDITURES. Company shall not, nor shall it
permit its Subsidiaries to, make or incur Consolidated Capital Expenditures
during any period indicated below in an aggregate amount in excess of (1) the
corresponding amount (as adjusted in accordance with the provisos hereto, the
"MAXIMUM CONSOLIDATED CAPITAL EXPENDITURES AMOUNT") set forth below opposite
such period, PLUS (2) the amount of any Consolidated Capital Expenditures made
or incurred during such period in connection with the construction of one new
Company production facility in the United States (PROVIDED that the amount of
all Consolidated Capital Expenditures permitted by this clause (2) during the
term of this Agreement shall not exceed $5,000,000 in the aggregate); PROVIDED
that the Maximum Consolidated Capital Expenditures Amount for any such period
shall be increased by an amount equal to the excess, if any, of the Maximum
Consolidated Capital Expenditures Amount for the previous period (prior to
adjustment in accordance with this proviso) over the actual amount of
Consolidated Capital Expenditures for such previous period:
98
<PAGE> 105
<TABLE>
<CAPTION>
PERIOD MAXIMUM
(TWELVE MONTHS CONSOLIDATED CAPITAL
ENDED) EXPENDITURES
================================ =================================
<S> <C>
12/31/98 $15,000,000
12/31/99 $9,000,000
12/31/00 $10,000,000
12/31/01 $11,000,000
12/31/02 $12,000,000
Thereafter $12,000,000
================================ =================================
</TABLE>
;PROVIDED, that the Maximum Consolidated Capital Expenditures Amount for each
period shall be increased upon the consummation of a Permitted Acquisition as
follows:
(a) for the period during which such acquisition is
consummated, the Maximum Consolidated Capital Expenditures Amount shall
be increased by an amount equal to the product of (i) a fraction
obtained by dividing the number of days remaining in such period
(following such acquisition) by 365, MULTIPLIED BY (ii) 1.75% of the
actual historical revenues of the assets or business constituting such
Permitted Acquisition for the most recently ended twelve-month period
(the "ACQUIRED LTM REVENUE") prior to such acquisition; and
(b) for each period thereafter, the Maximum Consolidated
Capital Expenditures Amount shall be increased by an amount equal to
1.75% of the Acquired LTM Revenue of such assets or business
constituting such Permitted Acquisition.
6.9. SALES AND LEASE-BACKS. Company shall not, nor shall it permit any
of its Subsidiaries to, directly or indirectly, become or remain liable as
lessee or as a guarantor or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any property (whether real, personal or
mixed), whether now owned or hereafter acquired, which Company or any of its
Subsidiaries (a) has sold or transferred or is to sell or to transfer to any
other Person (other than Company or any of its Subsidiaries), or (b) intends to
use for substantially the same purpose as any other property which has been or
is to be sold or transferred by Company or any of its Subsidiaries to any Person
(other than Company or any of its Subsidiaries) in connection with such lease;
PROVIDED, Company and its Subsidiaries may become and remain liable as lessee,
guarantor or other surety with respect to any such lease if and to the extent
that Company or any of its Subsidiaries would be otherwise permitted to enter
into, and remain liable under, such lease hereunder.
6.10. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. No Credit Party
shall, nor shall it permit any of its Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder of 5% or more of any class of equity Securities of Company or with any
Affiliate of
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<PAGE> 106
Company or of any such holder, on terms that are less favorable to Company or
that Subsidiary, as the case may be, than those that might be obtained at the
time from Persons who are not such a holder or Affiliate; PROVIDED, the
foregoing restriction shall not apply, subject to the other covenants contained
hereunder, to (a) any transaction between Company and any of its wholly-owned
Subsidiaries or between any of its wholly-owned Subsidiaries, (b) reasonable and
customary fees paid to members of the Boards of Directors of Company and its
Subsidiaries, (C) Management Fees and (D) Related Agreements and the transaction
fees in connection with the Recapitalization.
6.11. AMENDMENTS OR WAIVERS OF CERTAIN DOCUMENTS.
(a) AMENDMENTS OF CERTAIN RELATED AGREEMENTS. Neither Holdings nor any
of its Subsidiaries will agree to any material amendment to, or waive any of its
material rights under, any of the Recapitalization Agreement, the Stockholders
Agreements, the ESOP Stock Sale Agreement, the Certificate of Merger, the Fenway
Agreement or any Holding Notes Documents after the Closing Date if such
amendment or waiver would be adverse to Lenders without in each case obtaining
the prior written consent of Requisite Lenders to such amendment or waiver.
(b) AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS.
Holdings and Company shall not, and shall not permit any of its Subsidiaries to,
amend or otherwise change the terms of any Subordinated Indebtedness, or make
any payment consistent with an amendment thereof or change thereto, if the
effect of such amendment or change is to increase the interest rate on such
Subordinated Indebtedness, change (to earlier dates) any dates upon which
payments of principal or interest are due thereon, change any event of default
or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or trustee or other representative on their behalf)
which would be adverse to Company or Lenders.
(c) PREFERRED STOCK. Without the prior written approval of Requisite
Lenders, neither Holdings nor Company shall issue any preferred stock or permit
any of its Subsidiaries to issue any preferred stock; PROVIDED, HOWEVER, that
Holdings shall be permitted to issue preferred stock which (i) does not provide
for any payment or redemption with respect thereto prior to the date of the
final payment in full of all of the Obligations under this Agreement and any
refinancing, renewal, extension or restructuring of such Obligations, and (ii)
is upon terms reasonably satisfactory to Administrative Agent, PROVIDED that
immediately prior to and immediately after the issuance of such preferred stock
no Event of Default or Default under SECTION 8.1(k) shall have occurred and be
continuing.
6.12. CONDUCT OF COMPANY BUSINESS. From and after the Closing Date,
Company shall not, nor shall it permit any of its Subsidiaries to, engage in any
business other than (a) the businesses engaged in by Company and its
Subsidiaries on the Closing Date and similar or directly related businesses and
(b) such other lines of business as may be consented to by Requisite Lenders.
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<PAGE> 107
6.13. SPECIAL COVENANTS OF HOLDINGS. From and after the Closing Date,
Holdings shall:
(a) engage in no business or activities other than (i) activities for
which Holdings receives Restricted Junior Payments permitted under SECTION 6.5,
(ii) as permitted or required by the Stockholders Agreements and the Fenway
Agreement, (iii) owning 100% of the issued and outstanding capital stock of
Company, (iv) holding Cash and Cash Equivalents, (v) activities incidental
thereto, (vi) as otherwise required by mandatory provisions of law, (vii) the
consummation of the Recapitalization transactions, (viii) entering into the
Related Agreements to which it is a party, and, (ix) as otherwise permitted
hereunder;
(b) not own or acquire any assets other than (i) 100% of the issued and
outstanding capital stock of Company, (ii) as expressly permitted hereunder and
(iii) as permitted or required by the Stockholders Agreements and the Fenway
Agreement;
(c) not incur, assume or suffer to exist any Indebtedness (other than
the Holdings Notes) or Liens; PROVIDED, HOWEVER, that Holdings shall be
permitted to refinance its Indebtedness under the Holdings Notes, in whole or in
part, provided that (1) the principal amount of such refinancing Indebtedness
does not exceed the amount of interest and principal (and premium, if any) of
the Indebtedness so refinanced, together with fees and expenses related to such
refinancing, (2) such refinancing Indebtedness shall be subordinated in right of
payment to the Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination provisions,
transfer restrictions and other material terms which taken as a whole are no
less favorable to the Lenders than the terms of the Holdings Notes Documents and
are otherwise reasonably satisfactory to Administrative Agent, with interest
payable thereon not to exceed 17.5% per annum and payable in kind pursuant to
the same terms and conditions contained in the Holdings Notes Documents and (3)
immediately prior to and immediately after the incurrence of such refinancing
Indebtedness, no Event of Default or Default shall have occurred and be
continuing; and
(d) shall be permitted to issue common stock and, subject to SECTION
6.11(c), preferred stock; PROVIDED that immediately prior to and immediately
after the issuance of such stock, no Event of Default or Default under SECTION
8.1(k) shall have occurred and be continuing.
6.14. FISCAL YEAR. Company shall not change its Fiscal Year-end from
the final Saturday in the calendar year provided, however, that Company may
change its Fiscal Year-end to December 31 upon 90 days' prior written notice to
the Administrative Agent.
6.15. STAY, EXTENSION AND USURY LAWS. Company, Holdings and each of the
other Guarantors covenants (to the extent that they may lawfully do so) that
they shall not, and shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants in or the performance of this Agreement or any other Credit
Document; and each of Holdings and Company waives, and agrees to cause its
Subsidiaries to waive (to the extent they may lawfully do so), all benefit or
advantage of any such law, and covenant that they shall not, and shall not
permit its Subsidiaries to, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Lenders, but shall suffer and
permit, and shall cause its
101
<PAGE> 108
Subsidiaries to suffer and permit, the execution of every such power as though
no such law has been enacted.
SECTION 7. GUARANTY
7.1. GUARANTY OF THE OBLIGATIONS. Subject to the provisions of SECTION
7.2, Guarantors jointly and severally hereby irrevocably and unconditionally
guaranty the due and punctual payment in full of all Obligations when the same
shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. sec. 362(a)).
7.2. LIMITATION ON AMOUNT GUARANTIED. (a) Anything contained herein to
the contrary notwithstanding, if any Fraudulent Transfer Law (as hereinafter
defined) is determined by a court of competent jurisdiction to be applicable to
the obligations of any Guarantor hereunder, such obligations of such Guarantor
hereunder shall be limited to a maximum aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance as a
fraudulent transfer or conveyance under Section 548 of Title 11 of the United
States Code or any applicable provisions of comparable state law (collectively,
the "FRAUDULENT TRANSFER LAWS"), in each case after giving effect to all other
liabilities of such Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Guarantor (x) in respect of intercompany indebtedness to Company or
other affiliates of Company to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder and
(y) under any guaranty of Subordinated Indebtedness which guaranty contains a
limitation as to maximum amount similar to that set forth in this SECTION
7.2(A), pursuant to which the liability of such Guarantor hereunder is included
in the liabilities taken into account in determining such maximum amount) and
after giving effect as assets to the value (as determined under the applicable
provisions of the Fraudulent Transfer Laws) of any rights to subrogation,
reimbursement, indemnification or contribution of such Guarantor pursuant to
applicable law or pursuant to the terms of any agreement (including any such
right of contribution hereunder).
(b) Guarantors under this Guaranty, together desire to allocate among
themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and
equitable manner, their obligations arising under this Guaranty. Accordingly, in
the event any payment or distribution is made on any date by any Guarantor under
this Guaranty (a "FUNDING GUARANTOR") that exceeds its Fair Share (as defined
below) as of such date, that Funding Guarantor shall be entitled to a
contribution from each of the other Guarantors in the amount of such other
Guarantor's Fair Share Shortfall (as defined below) as of such date, with the
result that all such contributions will cause each Guarantor's Aggregate
Payments (as defined below) to equal its Fair Share as of such date. "FAIR
SHARE" means, with respect to a Guarantor as of any date of determination, an
amount equal to (i) the ratio of (x) the Adjusted Maximum Amount (as defined
below) with respect to such Guarantor to (y) the aggregate of the Adjusted
Maximum Amounts with respect to all Guarantors MULTIPLIED BY (ii) the aggregate
amount paid or distributed on or before such date by all Funding Guarantors
under this Guaranty in respect of the obligations guarantied. "FAIR SHARE
SHORTFALL" means, with respect to
102
<PAGE> 109
a Guarantor as of any date of determination, the excess, if any, of the Fair
Share of such Guarantor over the Aggregate Payments of such Guarantor. "ADJUSTED
MAXIMUM AMOUNT" means, with respect to a Guarantor as of any date of
determination, the maximum aggregate amount of the obligations of such Guarantor
under this Guaranty determined as of such date, in the case of any Guarantor, in
accordance with SECTION 7.2(a); PROVIDED that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Guarantor for
purposes of this SECTION 7.2(b), any assets or liabilities of such Guarantor
arising by virtue of any rights to subrogation, reimbursement or indemnification
or any rights to or obligations of contribution hereunder shall not be
considered as assets or liabilities of such Guarantor. "AGGREGATE PAYMENTS"
means, with respect to a Guarantor as of any date of determination, an amount
equal to (i) the aggregate amount of all payments and distributions made on or
before such date by such Guarantor in respect of this Guaranty (including in
respect of this SECTION 7.2(b)) MINUS (ii) the aggregate amount of all payments
received on or before such date by such Guarantor from the other Guarantors as
contributions under this SECTION 7.2(b). The amounts payable as contributions
hereunder shall be determined as of the date on which the related payment or
distribution is made by the applicable Funding Guarantor. The allocation among
Guarantors of their obligations as set forth in this SECTION 7.2(b) shall not be
construed in any way to limit the liability of any Guarantor hereunder.
7.3. PAYMENT BY GUARANTORS. Subject to SECTION 7.2(a), Guarantors
hereby jointly and severally agree, in furtherance of the foregoing and not in
limitation of any other right which any Beneficiary may have at law or in equity
against any Guarantor by virtue hereof, that upon the failure of Company to pay
any of the Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. sec. 362(a)),
Guarantors will upon demand pay, or cause to be paid, in cash, to Administrative
Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Obligations then due as aforesaid, accrued
and unpaid interest on such Obligations (including interest which, but for the
filing of a petition in bankruptcy with respect to Company, would have accrued
on such Obligations, whether or not a claim is allowed against Company for such
interest in the related bankruptcy proceeding) and all other Obligations then
owed to Beneficiaries as aforesaid.
7.4. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that, to
the maximum extent permitted by applicable law, its obligations hereunder are
irrevocable, absolute, independent and unconditional and shall not be affected
by any circumstance which constitutes a legal or equitable discharge of a
guarantor or surety other than payment in full of the Obligations. In
furtherance of the foregoing and without limiting the generality thereof, each
Guarantor agrees that, to the maximum extent permitted by applicable law,
(a) this Guaranty is a guaranty of payment when due and not of
collectibility;
(b) the obligations of each Guarantor hereunder are independent of the
obligations of Company and the obligations of any other guarantor (including any
other Guarantor) of the obligations of Company, and a separate action or actions
may be brought and prosecuted against such
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<PAGE> 110
Guarantor whether or not any action is brought against Company or any of such
other guarantors and whether or not Company is joined in any such action or
actions;
(c) payment by any Guarantor of a portion, but not all, of the
Obligations shall in no way limit, affect, modify or abridge any Guarantor's
liability for any portion of the Obligations which has not been paid. Without
limiting the generality of the foregoing, if Administrative Agent is awarded a
judgment in any suit brought to enforce any Guarantor's covenant to pay a
portion of the Obligations, such judgment shall not be deemed to release such
Guarantor from its covenant to pay the portion of the Obligations that is not
the subject of such suit, and such judgment shall not, except to the extent
satisfied by such Guarantor, limit, affect, modify or abridge any other
Guarantor's liability hereunder in respect of the Obligations;
(d) any Beneficiary, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability hereof or
giving rise to any reduction, limitation, impairment, discharge or termination
of any Guarantor's liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Obligations; (ii) settle, compromise,
release or discharge, or accept or refuse any offer of performance with respect
to, or substitutions for, the Obligations or any agreement relating thereto
and/or subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the Obligations and
take and hold security for the payment of this Guaranty or the Obligations; (iv)
release, surrender, exchange, substitute, compromise, settle, rescind, waive,
alter, subordinate or modify, with or without consideration, any security for
payment of the Obligations, any other guaranties of the Obligations, or any
other obligation of any Person (including any other Guarantor) with respect to
the Obligations; (v) enforce and apply any security now or hereafter held by or
for the benefit of such Beneficiary in respect of this Guaranty or the
Obligations and direct the order or manner of sale thereof, or exercise any
other right or remedy that such Beneficiary may have against any such security,
in each case as such Beneficiary in its discretion may determine consistent with
this Agreement or the applicable Hedge Agreement and any applicable security
agreement, including foreclosure on any such security pursuant to one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
any Guarantor against Company or any security for the Obligations; and (vi)
exercise any other rights available to it under the Credit Documents or the
Hedge Agreements;
(e) this Guaranty and the obligations of Guarantors hereunder shall be
valid and enforceable and shall not be subject to any reduction, limitation,
impairment, discharge or termination for any reason (other than payment in full
of the Obligations), including the occurrence of any of the following, whether
or not any Guarantor shall have had notice or knowledge of any of them: (i) any
failure or omission to assert or enforce or agreement or election not to assert
or enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy (whether arising under the Credit Documents or the Hedge
Agreements, at law, in equity or otherwise) with respect to the Obligations or
any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Obligations; (ii) any rescission, waiver,
amendment or modification of, or any consent to
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departure from, any of the terms or provisions (including provisions relating to
events of default) of this Agreement, any of the other Credit Documents, any of
the Hedge Agreements or any agreement or instrument executed pursuant thereto,
or of any other guaranty or security for the Obligations, in each case whether
or not in accordance with the terms of this Agreement or such Credit Document,
such Hedge Agreement or any agreement relating to such other guaranty or
security; (iii) the Obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the other Credit Documents or any of the Hedge Agreements or from
the proceeds of any security for the Obligations, except to the extent such
security also serves as collateral for indebtedness other than the Obligations)
to the payment of indebtedness other than the Obligations, even though any
Beneficiary might have elected to apply such payment to any part or all of the
Obligations; (v) any Beneficiary's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any of its
Subsidiaries and to any corresponding restructuring of the Obligations; (vi) any
failure to perfect or continue perfection of a security interest in any
collateral which secures any of the Obligations; (vii) any defenses, set-offs or
counterclaims which Company may allege or assert against any Beneficiary in
respect of the Obligations, including failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction and usury; and (viii) any other act or thing or omission, or delay
to do any other act or thing, which may or might in any manner or to any extent
vary the risk of any Guarantor as an obligor in respect of the Obligations;
7.5. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the
benefit of Beneficiaries, to the maximum extent permitted by applicable law: (a)
any right to require any Beneficiary, as a condition of payment or performance
by such Guarantor, to (i) proceed against Company, any other guarantor
(including any other Guarantor) of the Obligations or any other Person, (ii)
proceed against or exhaust any security held from Company, any such other
guarantor or any other Person, (iii) proceed against or have resort to any
balance of any deposit account or credit on the books of any Beneficiary in
favor of Company or any other Person, or (iv) pursue any other remedy in the
power of any Beneficiary whatsoever; (b) any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of Company
including any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto or by reason of the cessation of the liability of Company from any cause
other than payment in full of the Obligations; (c) any defense based upon any
statute or rule of law which provides that the obligation of a surety must be
neither larger in amount nor in other respects more burdensome than that of the
principal; (d) any defense based upon any Beneficiary's errors or omissions in
the administration of the Obligations, except behavior which amounts to bad
faith; (e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms hereof and any legal or
equitable discharge of such Guarantor's obligations hereunder, (ii) the benefit
of any statute of limitations affecting such Guarantor's liability hereunder or
the enforcement hereof, (iii) any rights to set-offs, recoupments and
counterclaims, and (iv) promptness, diligence and any requirement that any
Beneficiary protect, secure, perfect or insure any security interest or lien or
any property subject thereto; (f) notices, demands, presentments, protests,
notices of protest, notices of dishonor and notices of any action or inaction,
including acceptance hereof, notices of default under this Agreement, the Hedge
Agreements or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Obligations or
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any agreement related thereto, notices of any extension of credit to Company and
notices of any of the matters referred to in SECTION 7.4 and any right to
consent to any thereof; and (g) any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms hereof.
7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Each
Guarantor hereby waives, until all of the Obligations are indefeasibly paid in
full, any claim, right or remedy, direct or indirect, that such Guarantor now
has or may hereafter have against Company or any of its assets in connection
herewith or the performance by such Guarantor of its obligations hereunder, in
each case whether such claim, right or remedy arises in equity, under contract,
by statute under common law or otherwise and including (a) any right of
subrogation, reimbursement or indemnification that such Guarantor now has or may
hereafter have against Company, (b) any right to enforce, or to participate in,
any claim, right or remedy that any Beneficiary now has or may hereafter have
against Company, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Obligations shall have been indefeasibly paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor shall withhold exercise of any right of
contribution such Guarantor may have against any other guarantor (including any
other Guarantor) of the Obligations (including any such right of contribution
under SECTION 7.2(b)). Each Guarantor further agrees that, to the extent the
waiver or agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found by
a court of competent jurisdiction to be void or voidable for any reason, any
rights of subrogation, reimbursement or indemnification such Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights any Beneficiary may have against Company,
to all right, title and interest any Beneficiary may have in any such collateral
or security, and to any right any Beneficiary may have against such other
guarantor. If any amount shall be paid to any Guarantor on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Obligations shall not have been paid in full, such amount shall be held
in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith
be paid over to Administrative Agent for the benefit of Beneficiaries to be
credited and applied against the Obligations, whether matured or unmatured, in
accordance with the terms hereof.
7.7. SUBORDINATION OF OTHER OBLIGATIONS. Any Indebtedness of Company or
any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR")
is hereby subordinated in right of payment to the Obligations, and any such
indebtedness collected or received by the Obligee Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for Administrative
Agent on behalf of Beneficiaries and shall forthwith be paid over to
Administrative Agent for the benefit of Beneficiaries to be credited and applied
against the Obligations but without affecting, impairing or limiting in any
manner the liability of the Obligee Guarantor under any other provision hereof.
7.8. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and
shall remain in effect until all of the Obligations shall have been paid in full
and the Commitments shall have terminated and all Letters of Credit shall have
expired or been cancelled. Each Guarantor hereby
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irrevocably waives any right to revoke this Guaranty as to future transactions
giving rise to any Obligations.
7.9. AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any
Beneficiary to inquire into the capacity or powers of any Guarantor or Company
or the officers, directors or any agents acting or purporting to act on behalf
of any of them.
7.10. FINANCIAL CONDITION OF COMPANY. Any Credit Extension may be
granted to Company or continued from time to time, and any Hedge Agreements may
be entered into from time to time, in each case without notice to or
authorization from any Guarantor regardless of the financial or other condition
of Company at the time of any such grant or continuation or at the time such
Hedge Agreement is entered into, as the case may be. No Beneficiary shall have
any obligation to disclose or discuss with any Guarantor its assessment, or any
Guarantor's assessment, of the financial condition of Company. Each Guarantor
has adequate means to obtain information from Company on a continuing basis
concerning the financial condition of Company and its ability to perform its
obligations under the Credit Documents and the Hedge Agreements, and each
Guarantor assumes the responsibility for being and keeping informed of the
financial condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Obligations. Each Guarantor hereby waives and relinquishes any
duty on the part of any Beneficiary to disclose any matter, fact or thing
relating to the business, operations or conditions of Company now known or
hereafter known by any Beneficiary.
7.11. BANKRUPTCY, ETC. (a) So long as any Obligations remain
outstanding, no Guarantor shall, without the prior written consent of
Administrative Agent acting pursuant to the instructions of Requisite Lenders,
commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against Company. The obligations
of Guarantors hereunder shall not be reduced, limited, impaired, discharged,
deferred, suspended or terminated by any proceeding, voluntary or involuntary,
involving the bankruptcy, insolvency, receivership, reorganization, liquidation
or arrangement of Company or by any defense which Company may have by reason of
the order, decree or decision of any court or administrative body resulting from
any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Obligations if said proceedings had not been commenced) shall be
included in the Obligations because it is the intention of Guarantors and
Beneficiaries that the Obligations which are guarantied by Guarantors pursuant
hereto should be determined without regard to any rule of law or order which may
relieve Company of any portion of such Obligations. Guarantors will permit any
trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit
of creditors or similar person to pay Administrative Agent, or allow the claim
of Administrative Agent in respect of, any such interest accruing after the date
on which such proceeding is commenced.
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(c) In the event that all or any portion of the Obligations are paid by
Company, the obligations of Guarantors hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) are rescinded or recovered directly or
indirectly from any Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall
constitute Obligations for all purposes hereunder.
7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the stock
of any Guarantor or any of its successors in interest hereunder shall be sold or
otherwise disposed of (including by merger or consolidation) in an Asset Sale
not prohibited by this Agreement or otherwise consented to by Requisite Lenders,
the Guaranty of such Guarantor or such successor in interest, as the case may
be, hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
Asset Sale; PROVIDED, as a condition precedent to such discharge and release,
Administrative Agent shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Administrative
Agent of the applicable Net Asset Sale Proceeds.
SECTION 8. EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT. If any one or more of the following conditions
or events shall occur:
(a) failure by Company to pay (i) any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; (ii) when due any
amount payable to Issuing Bank in reimbursement of any drawing under a Letter of
Credit; or (iii) any interest on any Loan or any fee or any other amount due
hereunder within five days after the date due; or
(b) (i) failure of Holdings, Company or any of its Subsidiaries to pay
when due any principal of or interest on or any other amount payable in respect
of one or more items of Indebtedness (other than Indebtedness referred to in
SECTION 8.1(a)) or Contingent Obligation(s) with an aggregate principal amount
of $5,000,000 or more beyond the end of any grace period provided therefor; or
(ii) breach or default by Holdings, Company or any of its Subsidiaries with
respect to any other material term of (1) one or more items of Indebtedness or
Contingent Obligation(s) in the aggregate principal amount referred to in clause
(i) above or (2) any loan agreement, mortgage, indenture or other agreement
relating to such item(s) of Indebtedness or Contingent Obligation(s), if the
effect of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be (upon the giving or
receiving of notice, lapse of time, both, or otherwise); or
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(c) failure of Company to perform or comply with any term or condition
contained in SECTION 2.5, SECTION 5.2, SECTION 5.10 or SECTION 6 hereof; or
(d) any representation, warranty, certification or other statement made
or deemed made by Holdings, Company or any of its Subsidiaries in any Credit
Document or in any statement or certificate at any time given by Holdings,
Company or any of its Subsidiaries in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on the
date as of which made or deemed made; or
(e) any Credit Party shall default in the performance of or compliance
with any term contained herein or in any of the other Credit Documents, other
than any such term referred to in any other Section of this SECTION 8.1, and
such default shall not have been remedied or waived within 30 days after the
earlier of (i) a Responsible Officer of Company, Holdings or such Credit Party
becoming aware of such default or (ii) receipt by Company of notice from
Administrative Agent or any Lender of such default; or
(f) (i) a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Holdings, Company or any of its
Material Subsidiaries (or any group of Company's Subsidiaries that, taken as a
whole, would constitute a Material Subsidiary) in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against Holdings, Company or any
of its Material Subsidiaries (or any group of Company's Subsidiaries that, taken
as a whole, would constitute a Material Subsidiary) under the Bankruptcy Code or
under any other applicable bankruptcy, insolvency or similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Holdings, Company or any
of its Material Subsidiaries (or any group of Company's Subsidiaries that, taken
as a whole, would constitute a Material Subsidiary), or over all or a
substantial part of its property, shall have been entered; or there shall have
occurred the involuntary appointment of an interim receiver, trustee or other
custodian of Holdings, Company or any of its Material Subsidiaries (or any group
of Company's Subsidiaries that, taken as a whole, would constitute a Material
Subsidiary) for all or a substantial part of its property; or a warrant of
attachment, execution or similar process shall have been issued against any
substantial part of the property of Holdings, Company or any of its Material
Subsidiaries (or any group of Company's Subsidiaries that, taken as a whole,
would constitute a Material Subsidiary), and any such event described in this
clause (ii) shall continue for 60 days unless dismissed, bonded or discharged;
or
(g) (i) Holdings, Company or any of its Material Subsidiaries (or any
group of Company's Subsidiaries that, taken as a whole, would constitute a
Material Subsidiary) shall have an order for relief entered with respect to it
or commence a voluntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case, or to
the conversion of an involuntary case to a voluntary case, under any such law,
or shall consent to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or
Holdings,
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Company or any of its Material Subsidiaries (or any group of Company's
Subsidiaries that, taken as a whole, would constitute a Material Subsidiary)
shall make any assignment for the benefit of creditors; or (II) Holdings,
Company or any of its Material Subsidiaries (or any group of Company's
Subsidiaries that, taken as a whole, would constitute a Material Subsidiary)
shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of Holdings, Company or any of its Material Subsidiaries (or any group of
Company's Subsidiaries that, taken as a whole, would constitute a Material
Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise
authorize any action to approve any of the actions referred to in this SECTION
8.1(g); or
(h) any money judgment, writ or warrant of attachment or similar
process involving individually or in the aggregate at any time an amount in
excess of $5,000,000 (in either case not adequately covered by insurance as to
which a solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Holdings, Company or any of its Subsidiaries
or any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of 60 days (or in any event later than five
days prior to the date of any proposed sale thereunder); or
(i) any order, judgment or decree shall be entered against Holdings,
Company or any of its Subsidiaries decreeing the dissolution or split up of
Holdings, Company or that Subsidiary and such order shall remain undischarged or
unstayed for a period in excess of 30 days; or
(j) (i) the Company and any of its Subsidiaries or ERISA Affiliates are
required to contribute or pay during any year an aggregate amount to one or more
Multiemployer Plans which could reasonably be expected to have a Material
Adverse Effect; (ii) there shall occur one or more ERISA Events, other than any
ERISA Events with respect of Multiemployer Plans, which individually or in the
aggregate result in liability of Company, any of its Subsidiaries or any of
their respective ERISA Affiliates in excess of $1,000,000 (determined after the
application of insurance coverage) during the term hereof; or (iii) there shall
exist an amount of Unfunded Benefit Liabilities individually or in the aggregate
for all Pension Plans (excluding for purposes of such computation any Pension
Plans with respect to which assets exceed liabilities), which exceeds
$1,000,000; or
(k) (i) Holdings shall at any time cease to own directly 100% of the
outstanding capital stock of Company; or (ii) Fenway shall at any time not own
directly or indirectly, in the aggregate, at least 51% of all issued and
outstanding equity Securities of Holdings representing economic interests in
Holdings and at least 51% of the combined voting power of Holdings' voting
Securities; or (iii) any Person (other than Fenway), including a "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes
such Person, shall purchase or otherwise acquire, directly or indirectly,
beneficial ownership of Securities of Holdings and, as a result of such purchase
or acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 30% of the combined voting power of Holdings voting Securities; or
(iv) a "Change of Control" under any of the Junior Subordinated Note Documents,
Senior Subordinated Bridge Loan Documents, Senior Subordinated Notes Documents
or Holdings Notes Documents; or
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(l) at any time after the execution and delivery thereof, (i) the
Guaranty, for any reason other than the satisfaction in full of all Obligations,
ceases to be in full force and effect or is declared to be null and void or any
Credit Party denies in writing that it has any further liability, including with
respect to future advances by Lenders, under any Credit Document to which it is
a party, or (ii) any Collateral Document shall cease to be in full force and
effect (other than by reason of a release of Collateral thereunder in accordance
with the terms hereof or thereof, the satisfaction in full of the Obligations or
any other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void; or the validity or
enforceability thereof shall be contested in writing by any Credit Party; or
Administrative Agent shall not have or shall cease to have a valid security
interest in any Collateral purported to be covered thereby, perfected and with
the priority required by the relevant Collateral Document, for any reason other
than the failure of Administrative Agents or any Lender to take any action
within its control, subject only to Permitted Liens;
THEN (1) upon the occurrence of any Event of Default described in SECTION 8.1(f)
or 8.1(g), each of (A) the unpaid principal amount of and accrued interest on
the Loans, (B) an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (C) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by each Credit Party, and the obligation of each Lender to make
any Loan, the obligation of Administrative Agent to issue any Letter of Credit
and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate, and (2) upon the occurrence and during the continuation of
any other Event of Default, Administrative Agent shall, upon the written request
or with the written consent of Requisite Lenders, by written notice to Company,
declare all or any portion of the amounts described in clauses (A) through (C)
above to be, and the same shall forthwith become, immediately due and payable,
and the obligation of each Lender to make any Loan, the obligation of
Administrative Agent to issue any Letter of Credit and the right of any Lender
to issue any Letter of Credit hereunder shall thereupon terminate; PROVIDED, the
foregoing shall not affect in any way the obligations of Lenders under SECTION
2.3 or the obligations of Lenders to purchase participations in any unpaid Swing
Line Loans as provided in SECTION 2.2(c).
Company shall at such time deposit any amounts described in clause (B)
above in one or more cash collateral accounts opened by the Administrative
Agent. Company hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank and each Lender with a participation in such Letters of Credit, a
security interest in such cash collateral to secure all Obligations. Any amounts
held in such cash collateral account shall be applied by the Administrative
Agent to the payment of drafts drawn under such Letters of Credit issued for the
account of Company, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay the other Obligations. After all such Letters of Credit shall have expired
or been fully drawn upon and all Obligations shall have been satisfied and paid
in full, the balance, if any, in such cash collateral account shall be returned
to Company. Company shall execute and deliver to the Administrative Agent, for
the account of the relevant Issuing Bank and the Lenders with participations in
such Letters of Credit, such further documents and instruments as the
Administrative
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Agent may request to evidence the creation and perfection of the within security
interest in such cash collateral account.
8.2. CERTAIN OPTION OF LENDERS. Notwithstanding anything contained in
SECTION 8.1, if at any time within 60 days after an acceleration of the Loans
pursuant to such clause, Company shall pay all arrears of interest and all
payments on account of principal which shall have become due otherwise than as a
result of such acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified herein) and all
Events of Default and Defaults (other than non-payment of the principal of and
accrued interest on the Loans, in each case which is due and payable solely by
virtue of acceleration) shall be remedied or waived pursuant to SECTION 10.5,
then Requisite Lenders, by written notice to Company, may at their option
rescind and annul such acceleration and its consequences; but such action shall
not affect any subsequent Event of Default or Default or impair any right
consequent thereon. The provisions of this SECTION 8.2 are intended merely to
bind Lenders to a decision which may be made at the election of Requisite
Lenders and are not intended, directly or indirectly, to benefit Company, and
such provisions shall not at any time be construed so as to grant Company the
right to require Lenders to rescind or annul any acceleration hereunder or to
preclude Administrative Agent or Lenders from exercising any of the rights or
remedies available to them under any of the Credit Documents, even if the
conditions set forth in this SECTION 8.2 are met.
SECTION 9. AGENTS
9.1. APPOINTMENT OF AGENTS. GSCP is hereby appointed Syndication Agent
and a Joint Lead Arranger hereunder, and each Lender hereby authorizes
Syndication Agent and such Joint Lead Arranger to act as its agent in accordance
with the terms hereof and the other Credit Documents. Warburg is hereby
appointed a Joint Lead Arranger hereunder and each Lender hereby authorizes such
Joint Lead Arranger to act as its agent in accordance with the terms hereof and
the other Credit Documents. UBS is hereby appointed Administrative Agent
hereunder and under the other Credit Documents and each Lender hereby authorizes
Administrative Agent to act as its agent in accordance with the terms hereof and
the other Credit Documents. Each Agent hereby agrees to act upon the express
conditions contained herein and in the other Credit Documents, as applicable.
The provisions of this SECTION 9 are solely for the benefit of Agents and
Lenders and no Credit Party shall have any rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties
hereunder, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Holdings, Company or any of their
respective Subsidiaries. Syndication Agent, without consent of or notice to any
party hereto, may assign any and all of its rights or obligations hereunder to
any of its Affiliates. As of the date on which Syndication Agent notifies
Company that it has concluded its primary syndication of the Loans and
Commitments, all obligations of GSCP, in its capacity as Syndication Agent
hereunder, shall terminate.
9.2. POWERS AND DUTIES. Each Lender irrevocably authorizes each Agent
to take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Credit Documents as are specifically
delegated or granted to such Agent by the terms hereof
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and thereof, together with such powers, rights and remedies as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified herein and in the other Credit Documents. Each
Agent may exercise such powers, rights and remedies and perform such duties by
or through its agents or employees. No Agent shall have, by reason hereof or of
any of the other Credit Documents, a fiduciary relationship in respect of any
Lender; and nothing herein or in any of the other Credit Documents, expressed or
implied, is intended to or shall be so construed as to impose upon any Agent any
obligations in respect hereof or of any of the other Credit Documents except as
expressly set forth herein or therein.
9.3. GENERAL IMMUNITY. (a) No Agent shall be responsible to any Lender
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency hereof or of any other Credit Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
any of Agent to Lenders or by or on behalf of Company to any Agent or any Lender
in connection with the Credit Documents and the transactions contemplated
thereby or for the financial condition or business affairs of any Credit Party
or any other Person liable for the payment of any Obligations, nor shall any
Agent be required to ascertain or inquire as to the performance or observance of
any of the terms, conditions, provisions, covenants or agreements contained in
any of the Credit Documents or as to the use of the proceeds of the Loans or as
to the existence or possible existence of any Event of Default or Default.
Anything contained herein to the contrary notwithstanding, Administrative Agent
shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Letter of Credit Usage or the component amounts
thereof.
(b) None of Agents nor any of their respective officers, partners,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by any Agent under or in connection with any of the Credit Documents
except to the extent caused by such Agent's gross negligence or willful
misconduct. Each Agent shall be entitled to refrain from any act or the taking
of any action (including the failure to take an action) in connection herewith
or with any of the other Credit Documents or from the exercise of any power,
discretion or authority vested in it hereunder or thereunder unless and until
such Agent shall have received instructions in respect thereof from Requisite
Lenders (or such other Lenders as may be required to give such instructions
under SECTION 10.5) and, upon receipt of such instructions from Requisite
Lenders (or such other Lenders, as the case may be), such Agent shall be
entitled to act or (where so instructed) refrain from acting, or to exercise
such power, discretion or authority, in accordance with such instructions.
Without prejudice to the generality of the foregoing, (i) each Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against any Agent as a result of such Agent
acting or (where so instructed) refraining from acting hereunder or under any of
the other Credit Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under SECTION 10.5).
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9.4. AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall
in no way impair or affect any of the rights and powers of, or impose any duties
or obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include each Agent
in its individual capacity. Any Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Company or any of its Affiliates as if
it were not performing the duties specified herein, and may accept fees and
other consideration from Company for services in connection herewith and
otherwise without having to account for the same to Lenders.
9.5. LENDERS' REPRESENTATIONS AND WARRANTIES. Each Lender represents
and warrants that it has made its own independent investigation of the financial
condition and affairs of Company and its Subsidiaries in connection with the
Credit Extensions thereof hereunder and that it has made and shall continue to
make its own appraisal of the creditworthiness of Company and its Subsidiaries.
No Agent shall have any duty or responsibility, either initially or on a
continuing basis, to make any such investigation or any such appraisal on behalf
of Lenders or to provide any Lender with any credit or other information with
respect thereto, whether coming into its possession before the making of the
Loans or at any time or times thereafter, and no Agent shall have any
responsibility with respect to the accuracy of or the completeness of any
information provided to Lenders.
9.6. RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata
Share, severally agrees to indemnify each Agent, to the extent that such Agent
shall not have been reimbursed by Company, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Agent in exercising its powers, rights and remedies or performing
its duties hereunder or under the other Credit Documents or otherwise in its
capacity as such Agent in any way relating to or arising out hereof or of the
other Credit Documents; PROVIDED, no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. If any indemnity furnished to any Agent for
any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, such Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished; PROVIDED, in no event shall this sentence require any Lender to
indemnify any Agent against any liability, obligation, loss, damage, penalty,
action, judgment, suit, cost, expense or disbursement in excess of such Lender's
Pro Rata Share thereof; and PROVIDED FURTHER, this sentence shall not be deemed
to require any Lender to indemnify any Agent against any liability, obligation,
loss, damage, penalty, action, judgment, suit, cost, expense or disbursement
described in the proviso in the immediately preceding sentence.
9.7. SUCCESSOR ADMINISTRATIVE AGENT AND SWING LINE LENDER. (a)
Administrative Agent may resign at any time by giving 30 days' prior written
notice thereof to Lenders and Company, and Administrative Agent may be removed
at any time with or without cause by an instrument or concurrent instruments in
writing delivered to Company and Administrative Agent and signed by
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Requisite Lenders. Upon any such notice of resignation or any such removal,
Requisite Lenders shall have the right, upon five Business Days' notice to
Company, to appoint a successor Administrative Agent. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, that successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Administrative Agent and the retiring or removed Administrative Agent
shall be discharged from its duties and obligations hereunder. After any
retiring or removed Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this SECTION 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
hereunder.
(b) Swing Line Lender may resign at any time by giving 30 days' prior
written notice thereof to Lenders and Company. Upon any such notice of
resignation the Requisite Lenders shall have the right, upon five Business Days'
notice to Company, to appoint a successor Swing Line Lender. Upon the acceptance
of any appointment as Swing Line Lender hereunder by a successor Swing Line
Lender, that successor Swing Line Lender shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Swing
Line Lender and the retiring Swing Line Lender shall be discharged from its
duties and obligations hereunder. In such event (i) Company shall prepay any
outstanding Swing Line Loans made by the retiring Swing Line Lender, (ii) upon
such prepayment, the retiring Swing Line Lender shall surrender the Swing Line
Note held by it to Company for cancellation, and (iii) Company shall issue a new
Swing Line Note to the successor Swing Line Lender, in the principal amount of
the Swing Line Loan Commitment then in effect and with other appropriate
insertions.
9.8. COLLATERAL DOCUMENTS AND GUARANTIES. (a) Each Lender hereby
further authorizes Administrative Agent, on behalf of and for the benefit of
Lenders, to enter into each Collateral Document as secured party and to be the
agent for and representative of Lenders with respect to the Guaranty and the
Collateral, and each Lender agrees to be bound by the terms of each Collateral
Document. Subject to SECTION 10.5, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (i) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted hereby or
to which Requisite Lenders (or such other Lenders as may be required to give
such consent under SECTION 10.5) have otherwise consented or (ii) release any
Subsidiary Guarantor from the Guaranty if all of the capital stock of such
Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company)
pursuant to a sale or other disposition permitted hereunder or to which
Requisite Lenders (or such other Lenders as may be required to give such consent
under SECTION 10.5) have otherwise consented.
(b) Anything contained in any of the Credit Documents to the contrary
notwithstanding, Company, Administrative Agent and each Lender hereby agree that
(I) no Lender shall have any right individually to realize upon any of the
Collateral or to enforce the Guaranty, it being understood and agreed that all
powers, rights and remedies hereunder and under the Collateral Documents may be
exercised solely by Administrative Agent for the benefit of Lenders in
accordance with the terms hereof, and (ii) in the event of a foreclosure by
Administrative Agent on any of the Collateral pursuant to a public or private
sale, Administrative Agent or any Lender may be the purchaser of any or all of
such Collateral at any such sale and Administrative Agent, as agent for and
representative
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of Lenders (but not any Lender or Lenders in its or their respective individual
capacities unless Requisite Lenders shall otherwise agree in writing) shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Obligations as a credit on account of the
purchase price for any collateral payable by Administrative Agent at such sale.
(c) It is the purpose hereof and of the other Credit Documents that
there shall be no violation of any law of any jurisdiction denying or
restricting the right of banking corporations or associations to transact
business as agent or trustee in such jurisdiction. It is recognized that in case
of litigation hereunder or under any of the other Credit Documents, and in
particular in case of the enforcement of any of the Credit Documents, or in case
Administrative Agent deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the rights, powers or remedies granted
herein or in any of the other Credit Documents or take any other action which
may be desirable or necessary in connection therewith, it may be necessary that
Administrative Agent appoint an additional individual or institution as a
separate trustee, co-trustee, collateral agent or collateral co-agent (a
"SUPPLEMENTAL COLLATERAL AGENT"). In the event that Administrative Agent
appoints a Supplemental Collateral Agent with respect to any Collateral, (i)
each and every right, power, privilege or duty expressed or intended hereby or
by any of the other Credit Documents to be exercised by or vested in or conveyed
to Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Credit Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Agent or such Supplemental Collateral Agent, and (ii) the provisions of
this SECTION 9 and of SECTIONS 10.2 and 10.3 that refer to Administrative Agent
shall inure to the benefit of such Supplemental Collateral Agent and all
references therein to Administrative Agent shall be deemed to be references to
Administrative Agent and/or such Supplemental Collateral Agent, as the context
may require. Should any instrument in writing from Company or any other Credit
Party be required by any Supplemental Collateral Agent so appointed by
Administrative Agent for more fully and certainly vesting in and confirming to
him or it such rights, powers, privileges and duties, Company shall, or shall
cause such Credit Party to, execute, acknowledge and deliver any and all such
instruments promptly upon request by Administrative Agent. In case any
Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Administrative Agent until the
appointment of a new Supplemental Collateral Agent.
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SECTION 10. MISCELLANEOUS
10.1. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telexed or sent by telefacsimile (and
confirmed by telephone) or United States mail or courier service and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of telefacsimile (and confirmed by telephone) or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed; PROVIDED, notices to Syndication Agent or Administrative
Agent shall not be effective until received. For the purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or (i) as to Company and Administrative Agent, such
other address as shall be designated by such Person in a written notice
delivered to the other parties hereto and (ii) as to each other party, such
other address as shall be designated by such party in a written notice delivered
to Administrative Agent.
10.2. EXPENSES. Whether or not the transactions contemplated hereby
shall be consummated, Company agrees to pay promptly (a) all the actual and
reasonable costs and expenses of Agents and Swing Line Lender in connection with
the preparation of the Credit Documents and any consents, amendments, waivers or
other modifications thereto; (b) all the costs of furnishing all opinions by
counsel for Company (including any opinions requested by Lenders as to any legal
matters arising hereunder) and of Company's performance of and compliance with
all agreements and conditions on its part to be performed or complied with
hereunder and under the other Credit Documents including with respect to
confirming compliance with environmental, insurance and solvency requirements;
(c) the reasonable fees, expenses and disbursements of counsel to Syndication
Agent and counsel to Administrative Agent (in each case including allocated
costs of internal counsel) in connection with the negotiation, preparation,
execution and administration of the Credit Documents and any consents,
amendments, waivers or other modifications thereto and any other documents or
matters requested by Company; (d) all the actual costs and reasonable expenses
of Agents in connection with creating and perfecting Liens in favor of
Administrative Agent on behalf of Lenders pursuant to the Collateral Documents
and pursuant hereto, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums and reasonable
fees, expenses and disbursements of counsel to Syndication Agent and counsel to
Administrative Agent and of counsel providing any opinions that Syndication
Agent, Administrative Agent or Requisite Lenders may request in respect of the
Collateral Documents or the Liens created pursuant hereto and thereto; (e) all
the actual costs and reasonable expenses (including the reasonable fees,
expenses and disbursements) of any auditors, consultants, accountants, agents or
appraisers retained by any Agent; (f) all the actual costs and reasonable
expenses (including the reasonable fees, expenses and disbursements of any
consultants, advisors and agents employed or retained by Administrative Agent
and its counsel) of Agents in connection with the custody or preservation of any
of the Collateral; (g) all other actual and reasonable costs and expenses
incurred by Syndication Agent or Administrative Agent in connection with the
syndication of the Commitments and the negotiation, preparation and execution of
the Credit Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (h) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including allocated costs of internal counsel) and
costs of settlement, incurred by Syndication Agent,
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Administrative Agent and Lenders in enforcing any Obligations of or in
collecting any payments due from any Credit Party hereunder or under the other
Credit Documents by reason of such Event of Default (including in connection
with the sale of, collection from, or other realization upon any of the
Collateral or the enforcement of the Guaranty) or in connection with any
refinancing or restructuring of the credit arrangements provided hereunder in
the nature of a "work-out" or pursuant to any insolvency or bankruptcy
proceedings.
10.3. INDEMNITY. (a) In addition to the payment of expenses pursuant to
SECTION 10.2, whether or not the transactions contemplated hereby shall be
consummated, Company and each Guarantor agree to defend (subject to Indemnitees'
selection of counsel), indemnify, pay and hold harmless Agents and Lenders, and
the officers, partners, directors, trustees, employees, agents and affiliates of
any of Agents and Lenders (each, an "INDEMNITEE"), from and against any and all
Indemnified Liabilities; PROVIDED, neither the Company nor any Guarantor shall
have any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise from the gross
negligence or willful misconduct of that Indemnitee. To the extent that the
undertakings to defend, indemnify, pay and hold harmless set forth in this
SECTION 10.3 may be unenforceable in whole or in part because they are violative
of any law or public policy, Company and the Guarantors shall contribute the
maximum portion that it is permitted to pay and satisfy under applicable law to
the payment and satisfaction of all Indemnified Liabilities incurred by
Indemnitees or any of them.
(b) Company and each Guarantor agree that neither it nor any of its
Subsidiaries will settle, compromise or consent to the entry of any judgment in
any pending or threatened claim, action or proceeding in respect of which
indemnification or contribution could be sought under subsection (a) of this
section (whether or not any Indemnitee is an actual or potential party to such
claim, action or proceeding) without the prior written consent of the
Indemnitees, unless such settlement, compromise or consent includes an
unconditional release of each Indemnitee from all liability arising out of such
claim, action or proceeding, which consent shall not be unreasonably withheld or
delayed.
(c) If an Indemnitee is requested or required to appear as a witness in
any action brought by or on behalf of or against Company, any Guarantor or any
Affiliate thereof in which such Indemnitee is not named as a defendant, Company
agrees to reimburse such Indemnitee for all reasonable expenses incurred by it
in connection with such Indemnitee's appearing and preparing to appear as such a
witness, including, without limitation, the reasonable fees and disbursements of
its legal counsel.
10.4. SET-OFF. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default each Lender is hereby authorized by each
Credit Party at any time or from time to time subject to the consent of
Administrative Agent, without notice to any Credit Party or to any other Person
(other than Administrative Agent), any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits (general
or special, including Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by such Lender to or for the credit or
the account of such Credit Party against and on account of the obligations and
liabilities of such Credit Party to such
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Lender hereunder, the Letters of Credit and participations therein and the other
Credit Documents, including all claims of any nature or description arising out
of or connected herewith, the Letters of Credit and participations therein or
any other Credit Document, irrespective of whether or not (a) such Lender shall
have made any demand hereunder or (b) the principal of or the interest on the
Loans or any amounts in respect of the Letters of Credit or any other amounts
due hereunder shall have become due and payable pursuant to SECTION 2 and
although said obligations and liabilities, or any of them, may be contingent or
unmatured. Each Credit Party hereby further grants to Administrative Agent and
each Lender a security interest in all deposits and accounts maintained with
Administrative Agent or such Lender as security for the Obligations.
10.5. AMENDMENTS AND WAIVERS. (a) Subject to SECTION 10.5(b), SECTION
10.5(c) and SECTION 10.5(d), no amendment, modification, termination or waiver
of any provision of the Credit Documents, or consent to any departure by any
Credit Party therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders.
(b) No amendment, modification, termination or waiver of any provision
of the Credit Documents, or consent to any departure by any Credit Party
therefrom, shall extend the scheduled final maturity of any Loan or Note, or
waive, reduce or postpone any scheduled repayment set forth in SECTION 2.11, or
extend the stated expiration date of any Letter of Credit beyond the Revolving
Loan Commitment Termination Date, or reduce the rate of interest on any Loan
(other than any waiver of any increase in the interest rate applicable to any
Loan pursuant to SECTION 2.9) or any commitment fees or letter of credit fees
payable hereunder, or extend the time for payment of any such interest or fees,
or reduce the principal amount of any Loan or any reimbursement obligation in
respect of any Letter of Credit, in any such case without the written consent of
each Lender with Obligations affected thereby.
(c) No amendment, modification, termination or waiver of any provision
of the Credit Documents, or consent to any departure by any Credit Party
therefrom, shall (i) amend, modify, terminate or waive any provision of SECTION
10.5, (ii) reduce the percentage specified in the definition of "Requisite
Lenders" or the definition of "Pro Rata Share" (it being understood that, with
the consent of Requisite Lenders, additional extensions of credit pursuant to
this Agreement may be included in the determination of "Requisite Lenders" and
"Pro Rata Share" on substantially the same basis as the Term Loan amounts, the
Term Loans, the Revolving Loan Commitments and the Revolving Loans are included
on the Closing Date), (iii) release all or substantially all of the Collateral
or Holdings or all or substantially all of the other Guarantors from the
Guaranty except as expressly provided in the Credit Documents, or (iv) consent
to the assignment or transfer by Company of any of its rights and obligations
hereunder, in each case without the written consent of each Lender.
(d) No amendment, modification, termination or waiver of any provision
of the Credit Documents, or consent to any departure by any Credit Party
therefrom, shall: (i) increase the Commitments of any Lender over the amount
thereof then in effect without the consent of such Lender (it being understood
that no amendment, modification or waiver of any condition precedent, covenant,
Default or Event of Default, and no increase in the available portion of any
Commitment of any Lender, shall constitute an increase in the Commitment of any
Lender); (ii) amend, modify,
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terminate or waive any provision hereof relating to the Swing Line Loan
Commitment or the Swing Line Loans without the consent of Swing Line Lender;
(iii) reduce the percentage specified in the definition of "Requisite Class
Lenders" with respect to a particular Class without the consent of each Lender
of the affected Class, or otherwise amend the definition of "Requisite Class
Lenders" without the consent of Requisite Class Lenders of each Class (it being
understood that, with the consent of Requisite Lenders, additional extensions of
credit pursuant to this Agreement may be included in the determination of
"Requisite Class Lenders" on substantially the same basis as the Term Loan
amounts, the Term Loans, the Revolving Loan Commitments and the Revolving Loans
are included on the Closing Date); (iv) alter the required application of any
repayments or prepayments as between Classes pursuant to SECTION 2.14 without
the consent of Requisite Class Lenders of each Class which is being allocated a
lesser repayment or prepayment as a result thereof or, in the case of an
amendment of the provisions relating to Waivable Mandatory Prepayments in
SECTION 2.14(c), the Requisite Class Lenders of each Class with Tranche A Term
Loan Exposure, Tranche B Term Loan Exposure and Tranche C Term Loan Exposure
(although Requisite Lenders may waive, in whole or in part, any mandatory
prepayment so long as the application, as between Classes, of any portion of
such prepayment which is still required to be made is not altered); (v) amend,
modify, terminate or waive any obligation of Lenders relating to the purchase of
participations in Letters of Credit as provided in SECTION 2.3(e) without the
written consent of Administrative Agent and of Issuing Bank; or (vi) amend,
modify, terminate or waive any provision of SECTION 9 as the same applies to any
Agent, or any other provision hereof as the same applies to the rights or
obligations of any Agent, in each case without the consent of such Agent.
(e) Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of such Lender. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this SECTION 10.5 shall be binding upon each Lender
at the time outstanding, each future Lender and, if signed by a Credit Party, on
such Credit Party.
10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) This Agreement shall
be binding upon the parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and the successors and
assigns of Lenders. Neither any Credit Party's rights or obligations hereunder
nor any interest therein may be assigned or delegated by any Credit Party
without the prior written consent of all Lenders.
(b) No assignment or transfer of any Commitment or Loan shall be
effective, in each case unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Administrative Agent
and recorded in the Register. Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the Lender listed
in the Register as the owner thereof, and any request, authority or consent of
any Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and binding
on any subsequent holder, assignee or transferee of the corresponding
Commitments or Loans.
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(c) Each Lender shall have the right at any time to sell, assign or
transfer, in whole or in part, any Commitment, Loan, Letter of Credit or any
other Obligation: (i) upon the giving of notice to Company and Administrative
Agent, to another Lender, or to an Affiliate of the assigning Lender (or if such
assigning Lender is a fund that invests in commercial or bank loans, another
such investment fund managed or advised by the same investment advisor or an
Affiliate thereof) or another Lender; or (ii) in the case of Term Loans (unless
otherwise covered by clause (i) hereof), with the consent of Company and
Administrative Agent (which consent of Company and Administrative Agent shall
not be unreasonably withheld or delayed) to any other Eligible Assignee
(treating any two or more investment funds that invest in commercial loans and
that are managed or advised by the same investment advisor or by an Affiliate of
such investment advisor as a single Eligible Assignee), in an aggregate amount
of not less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Term Loans and other Obligations of the assigning
Lender); or (iii) in each other case, with the consent of Company and
Administrative Agent (which consent of Company and Administrative Agent shall
not be unreasonably withheld or delayed) to any other Eligible Assignee
(treating any two or more investment funds that invest in commercial loans and
that are managed or advised by the same investment advisor or by an Affiliate of
such investment advisor as a single Eligible Assignee), in an aggregate amount
of not less than $5,000,000 (or such lesser amount as shall constitute the
aggregate amount of the Commitments, Loans, Letters of Credit and participations
therein, and other Obligations of the assigning Lender); PROVIDED, HOWEVER, that
upon the occurrence and during the continuance of an Event of Default, the
consent of Company shall not be required under clauses (ii) and (iii) above.
Notwithstanding the foregoing, the Swing Line Loan Commitment and the Swing Line
Loans of Swing Line Lender may not be sold, assigned or transferred except to
the extent contemplated by SECTION 9.7(b).
(d) The assigning Lender and the assignee thereof shall execute and
deliver to Administrative Agent an Assignment Agreement, together with a
processing and recordation fee of $500, in the case of assignments pursuant to
SECTION 10.6(c)(i) and assignments by GSCP, or $3,500, in the case of all other
assignments (PROVIDED, no fee shall be due in respect of any assignment by GSCP
in connection with the syndication of the Loans and Commitments), and such
forms, certificates or other evidence, if any, with respect to United States
federal income tax withholding matters as the assignee under such Assignment
Agreement may be required to deliver to Administrative Agent pursuant to
SECTION 2.20(c). Subject to SECTION 10.6(b), upon its receipt of a duly executed
and completed Assignment Agreement, together with the processing and recordation
fee referred to herein and any forms, certificates or other evidence that such
assignee may be required hereunder to deliver to Administrative Agent,
Administrative Agent shall, if Administrative Agent and Company. have consented
to the assignment evidenced thereby (in each case to the extent such consent is
required hereunder), (i) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence any
required consent of Administrative Agent to such assignment), (ii) record the
information contained therein in the Register, and (iii) give prompt notice
thereof to Company. Administrative Agent shall maintain a copy of each
Assignment Agreement delivered to and accepted by it as provided in this SECTION
10.6(d).
(e) Each Lender listed on the signature pages hereof hereby represents
and warrants, and each Lender executing and delivering an Assignment Agreement
shall be deemed to represent and warrant as of the effective date of such
Assignment Agreement, that (i) it is an Eligible Assignee; (ii)
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it has experience and expertise in the making or purchasing of loans such as the
Loans; and (iii) it will make or purchase, as the case may be, its Loans for its
own account in the ordinary course of its business and without a view to
distribution of such Loans within the meaning of the Securities Act or the
Exchange Act or other federal securities laws (it being understood that, subject
to the provisions of this SECTION 10.6, the disposition of such Loans or any
interests therein shall at all times remain within its exclusive control).
(f) Subject to the terms and conditions of this SECTION 10.6, as of the
effective date specified in such Assignment Agreement: (i) the assignee
thereunder shall have the rights and obligations of a "Lender" hereunder to the
extent such rights and obligations hereunder have been assigned to it pursuant
to such Assignment Agreement and shall thereafter be a party hereto and a
"Lender" for all purposes hereof; (ii) the assigning Lender thereunder shall, to
the extent that rights and obligations hereunder have been assigned thereby
pursuant to such Assignment Agreement, relinquish its rights (other than any
rights which survive the termination hereof under SECTION 10.8) and be released
from its obligations hereunder (and, in the case of an Assignment Agreement
covering all or the remaining portion of an assigning Lender's rights and
obligations hereunder, such Lender shall cease to be a party hereto; PROVIDED,
anything contained in any of the Credit Documents to the contrary
notwithstanding, Issuing Bank shall continue to have all rights and obligations
as Issuing Bank with respect to Letters of Credit issued by it until the
cancellation or expiration of such Letters of Credit and the reimbursement of
any amounts drawn thereunder); (iii) the Commitments shall be modified to
reflect the Commitment of such assignee and any remaining Commitment of such
assigning Lender; and (iv) if any such assignment occurs after the issuance of
the Notes hereunder, the assigning Lender shall, upon the effectiveness of such
assignment or as promptly thereafter as practicable, surrender its applicable
Notes to Administrative Agent for cancellation, and thereupon new Notes shall be
issued to the assignee and/or to the assigning Lender, with appropriate
insertions, to reflect the new Commitments and/or outstanding Loans of the
assignee and/or the assigning Lender.
(g) In addition to the assignments and participations permitted under
the foregoing provisions of this SECTION 10.6, any Lender may assign and pledge
all or any portion of its Loans, the other Obligations owed to such Lender, and
its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
operating circular issued by such Federal Reserve Bank, and with the consent of
Company and Administrative Agent any Lender which is an investment fund may
pledge all or any portion of its Notes or Loans to its trustee in support of its
obligations to such trustee or to its indenture trustee in support of its
obligations to noteholders on whose behalf such indenture trustee is acting;
PROVIDED, (i) no Lender shall, as between Company and such Lender, be relieved
of any of its obligations hereunder as a result of any such assignment and
pledge and (ii) in no event shall such Federal Reserve Bank or trustee be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
(h) Each Lender shall have the right at any time to sell one or more
participations to any Person in, all or any part of its Commitments, Loans or
Letters of Credit or participations therein or any other interest herein or in
any other Obligation. The holder of any participation, other than an Affiliate
of the Lender granting such participation, shall not be entitled to require such
Lender to take
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<PAGE> 129
or omit to take any action hereunder except action directly affecting (I) the
extension of the regularly scheduled maturity of any portion of the principal
amount of or interest on any Loan allocated to such participation or (ii) a
reduction of the principal amount of or the rate of interest payable on any Loan
allocated to such participation, and all amounts payable by any Credit Party
hereunder (including amounts payable to such Lender pursuant to SECTION 2.18(c),
SECTION 2.19 or SECTION 2.20) shall be determined as if such Lender had not sold
such participation. Each Credit Party and each Lender hereby acknowledge and
agree that, solely for purposes of SECTIONS 2.17 and SECTION 10.4, (1) any
participation will give rise to a direct obligation of each Credit Party to the
participant and (2) the participant shall be considered to be a "Lender".
10.7. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or would otherwise be within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such action is taken
or condition exists.
10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements made herein shall survive the
execution and delivery of this Agreement and the making of any Credit Extension.
Notwithstanding anything herein or implied by law to the contrary, the
agreements of each Credit Party set forth in SECTIONS 2.18(c), 2.19, 2.20, 10.2,
10.3 and 10.4 and the agreements of Lenders set forth in SECTIONS 9.3, 9.6 and
2.17 shall survive the payment of the Loans, the cancellation or expiration of
the Letters of Credit and the reimbursement of any amounts drawn thereunder, and
the termination hereof.
10.9. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part
of Administrative Agent or any Lender in the exercise of any power, right or
privilege hereunder or under any other Credit Document shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. The rights, powers and remedies given to Beneficiaries
hereby are cumulative and shall be in addition to and independent of all rights,
powers and remedies existing by virtue of any statute or rule of law or in any
of the other Credit Documents or in any of the Hedge Agreements. Any forbearance
or failure to exercise, and any delay in exercising, any right, power or remedy
hereunder shall not impair any such right, power or remedy or be construed to be
a waiver thereof, nor shall it preclude the further exercise of any such right,
power or remedy.
10.10. MARSHALLING; PAYMENTS SET AIDE. Neither Administrative Agent nor
any Lender shall be under any obligation to marshal any assets in favor of any
Credit Party or any other Person or against or in payment of any or all of the
Obligations. To the extent that any Credit Party makes a payment or payments to
Administrative Agent or Lenders (or to Administrative Agent for the benefit of
Lenders), or Administrative Agent or Lenders enforce any security interests or
exercise their rights of setoff, and such payment or payments or the proceeds of
such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, any
other state or federal law, common law or any equitable cause, then, to the
extent of such recovery,
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<PAGE> 130
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
10.11. SEVERABILITY. In case any provision in or obligation hereunder
or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The
obligations of Lenders hereunder are several and no Lender shall be responsible
for the obligations or Commitments of any other Lender hereunder. Nothing
contained herein or in any other Credit Document, and no action taken by Lenders
pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out hereof and it shall not be necessary for any other Lender to
be joined as an additional party in any proceeding for such purpose.
10.13. HEADINGS. Section headings herein are included herein for
convenience of reference only and shall not constitute a part hereof for any
other purpose or be given any substantive effect.
10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
10.15. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS THEREUNDER,
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT,
EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON-CONVENIENS; (c) AGREES
THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE
CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (d) AGREES
THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL
JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(e) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS
OF ANY OTHER JURISDICTION; AND (f) AGREES THAT THE
124
<PAGE> 131
PROVISIONS OF THIS SECTION RELATING TO JURISDICTION AND VENUE SHALL BE BINDING
AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL
OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES
TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS
OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN
TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The
scope of this waiver is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including contract claims, tort claims, breach of duty claims and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already relied on this waiver in entering into this Agreement, and that
each will continue to rely on this waiver in their related future dealings. Each
party hereto further warrants and represents that it has reviewed this waiver
with its legal counsel and that it knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING
(OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION
10.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RESTATEMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
10.17. CONFIDENTIALITY. Each Lender shall hold all non-public
information obtained pursuant to the requirements hereof in accordance with such
Lender's customary procedures for handling confidential information of such
nature and in accordance with prudent lending or investing practices, it being
understood and agreed by Company that in any event a Lender may make disclosures
to Affiliates of such Lender or disclosures reasonably required by any bona fide
assignee, transferee or participant in connection with the contemplated
assignment or transfer by such Lender of any Loans or any participations therein
or by any direct or indirect contractual counterparties (or the professional
advisors thereto) in swap agreements (PROVIDED, such swap counterparties and
advisors are advised of and agree to be bound by the provisions of this SECTION
10.17) or disclosures required or requested by any governmental agency or
representative thereof or by the National Association of Insurance Commissioners
or pursuant to legal process; PROVIDED, unless specifically prohibited by
applicable law or court order, each Lender shall use reasonable efforts to
notify Company of any request by any governmental agency or representative
thereof (other than any such request in connection with any routine examination
of such Lender by such governmental agency) for disclosure of any such
non-public information prior to disclosure of such information; and PROVIDED
FURTHER, in no event shall any Lender be obligated or required to return any
materials furnished by Company or any of its Subsidiaries.
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<PAGE> 132
10.18. COUNTERPARTS; EFFECTIVENESS. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute but
one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and receipt by
Company and Administrative Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
10.19. MAXIMUM AMOUNT. It is the intention of Company and the Lenders
to conform strictly to the usury and similar laws relating to interest from time
to time in force, and all agreements between the Credit Parties and their
respective Subsidiaries and the Lenders, whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, whether by acceleration of maturity hereof or
otherwise, shall the amount paid or agreed to be paid in the aggregate to the
Lenders as interest (whether or not designated as interest, and including any
amount otherwise designated but deemed to constitute interest by a court of
competent jurisdiction) hereunder or under the other Credit Documents or in any
other agreement given to secure the indebtedness of Company to the Lenders, or
in any other document evidencing, securing or pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under applicable usury
or such other laws (the "MAXIMUM AMOUNT"). If under any circumstances whatsoever
fulfillment of any provision hereof, or any of the other Credit Documents, at
the time performance of such provision shall be due, shall involve exceeding the
Maximum Amount, then, ipso facto, the obligation to be fulfilled shall be
reduced to the Maximum Amount. For purposes of calculating the actual amount of
interest paid and/or payable hereunder in respect of laws pertaining to usury or
such other laws, all sums paid or agreed to be paid hereunder or under any other
Credit Document for the use, forbearance or detention of the indebtedness of
Company evidenced hereby or by any other Credit Document, outstanding from time
to time shall, to the extent permitted by applicable law, be amortized,
pro-rated, allocated and spread from the date of disbursement of the proceeds of
the Loans until payment in full of all of such indebtedness, so that the actual
rate of interest on account of such indebtedness is uniform through the term
hereof. The terms and provisions of this subsection shall control and supersede
every other provision of all agreements between Holdings, Company, or any of
their respective Subsidiaries or any endorser of the Notes and the Lenders.
[The remainder of this page is intentionally left blank.]
126
<PAGE> 133
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SIMMONS COMPANY,
as Borrower
By: /s/ J.C. Daiker
-----------------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President, Chief
Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Attn: Jonathan C. Daiker
Telecopy: 770-392-2608
S-1
<PAGE> 134
SIMMONS HOLDINGS, INC.,
as a Guarantor
By: /s/ J.C. Daiker
--------------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President, Chief
Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Attn: Jonathan C. Daiker
Telecopy: 770-392-2608
SIMMONS INTERNATIONAL HOLDINGS
COMPANY, INC., as a Guarantor
By:/s/ J.C. Daiker
--------------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President, Chief
Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Attn: Jonathan C. Daiker
Telecopy: 770-392-2608
S-2
<PAGE> 135
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually, as a Joint Lead Arranger and as
Syndication Agent
By: /s/ [ ]
--------------------------------------
Authorized Signatory
NOTICE ADDRESS:
Goldman Sachs Credit Partners L.P.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Steve King
Telecopy: 212-357-0923
S-3
<PAGE> 136
WARBURG DILLON READ LLC,
individually and as a Joint Lead Arranger
By: /s/ Michael R. Grayer
--------------------------------------
Name: Michael R. Grayer
Title: Managing Director, Leveraged Finance
By: /S/ [ ]
--------------------------------------
Authorized Signatory
NOTICE ADDRESS:
535 Madison Avenue, 6th Floor
New York, NY 10022
Attn: David Barth
Facsimile: 212-906-7116
S-4
<PAGE> 137
UBS A.G., STAMFORD BRANCH,
individually and as Administrative Agent
By: /s/ Michael R. Grayer
-------------------------------------------------
Name: Michael R. Grayer
Title: Managing Director, Leveraged Finance
By: /s/ Dorothy S. McKinley
-------------------------------------------------
Name: Dorothy S. McKinley
Title: Associate Director Loan Portfolio
Support
NOTICE ADDRESS:
677 Washington Blvd., 8th Floor
Stamford, CT 06912
Attn: Lara Kavanagh
Telecopy: 203-719-4176
S-5
<PAGE> 138
WACHOVIA BANK, NATIONAL ASSOCIATION,
individually and as Swing Line Lender
By: /s/ Ann B. Edwards
--------------------------------------
Name: Ann B. Edwards
Title: Assistant Vice President
NOTICE ADDRESS:
191 Peachtree Street NE
Atlanta, GA 30303
Attn: Ann Edwards
Telecopy: 404-332-6920
S-6
<PAGE> 139
FLEET NATIONAL BANK
By: /s/ John E. Duncan
--------------------------------------
Name: John E. Duncan
Title: Managing Director
NOTICE ADDRESS:
1185 Avenue of the Americas
New York, NY 10036
Attn: John E. Duncan
Telecopy: 212-819-6201
with a copy to:
1 Federal Street
Boston, MA 02110
Attn: George Ojanuca
Telecopy: 617-346-5093
S-7
<PAGE> 140
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Elliot J. Jaffee
--------------------------------------
Name: Elliot J. Jaffee
Title: Vice President
NOTICE ADDRESS:
601 2nd Avenue
Minneapolis, MN 55402
Attn: Eliott J. Jaffee
Telecopy: 612-973-0825
S-8
<PAGE> 141
BHF-BANK
AKTIENGESELLSCHAFT
NEW YORK BRANCH
By: /s/ Hans J. Scholz
--------------------------------------
Name: Hans J. Scholz
Title: Assistant Vice President
By: /s/ Anthony Heyman
--------------------------------------
Name: Anthony Heyman
Title: Assistant Vice President
NOTICE ADDRESS:
590 Madison Avenue, 30th Floor
New York, NY 10002
Attn: Hans Jurgen Scholz
Telecopy: 212-756-5536
S-9
<PAGE> 142
MARINE MIDLAND BANK
By: /s/ Gina Sidorsky
-------------------------------------
Name: Gina Sidorsky
Title: Authorized Signatory
NOTICE ADDRESS:
140 Broadway, 5th Floor
New York, NY 10005
Attn: Gina Sidorsky
Telecopy: 212-658-2586
S-10
<PAGE> 143
SUNTRUST BANK, ATLANTA
By: /s/ Richard C. Wilson
-------------------------------------
Name: Richard C. Wilson
Title: Vice President
By: /s/ Andrew McGhee
-------------------------------------
Name: Andrew McGhee
Title: Group Vice President
NOTICE ADDRESS:
25 Park Place, N.E., 26th Floor
Atlanta, GA 30303
Attn: Richard Wilson
Telecopy: 404-575-2693
S-11
<PAGE> 144
WELLS FARGO BANK, N.A.
By: /s/ Michael Real
-------------------------------------
Name: Michael Real
Title: Assistant Vice President
NOTICE ADDRESS:
555 Montgomery Street
17th Floor
San Francisco, CA 94111
Attn: Michael Real
Telecopy: 415-362-5081
S-12
<PAGE> 145
THE BANK OF NEW YORK
By: /s/ David C. Siegel
-------------------------------------
Name: David C. Siegel
Title: Vice President
NOTICE ADDRESS:
1 Wall Street - 22nd Floor
New York, NY 10286
Attn: David Siegel
Telecopy: 212-635-6434
S-13
<PAGE> 146
BAYERISCHE HYPO-UND VEREINSBANK, AG
NEW YORK BRANCH
By: /s/ Hans Dick
-------------------------------------
Name: Hans Dick
Title: Vice President
By: /s/ Steve Simons
-----------------------------
Name: Steve Simons
Title: Assistant Vice President
NOTICE ADDRESS:
150 East 42nd Street
New York, NY 10017
Attn: Hans Dick
Telecopy: 212-672-5591
S-14
<PAGE> 147
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Scott Kray
-------------------------------------
Name: Scott Kray
Title: Vice President
By: /s/ Gary Andresen
-------------------------------------
Name: Gary Andresen
Title: Associate
NOTICE ADDRESS:
Two Ravina Drive, Suite 1680
Atlanta, GA 30346
Attn: Scott Kray
Telecopy: 770-390-1851
S-15
<PAGE> 148
FREMONT INVESTMENT AND LOAN
By: /s/ Kannika Viravan
-------------------------------------
Name: Kannika Viravan
Title: Assistant Vice President
NOTICE ADDRESS:
2020 Santa Monica Blvd., Suite 600
Santa Monica, CA 90404
Attn: Kannika Viravan
Telecopy: 310-264-7401
S-16
<PAGE> 149
HELLER FINANCIAL, INC.
By: /s/ Linda W. Wolf
-------------------------------------
Name: Linda W. Wolf
Title: Senior Vice President
NOTICE ADDRESS:
500 W. Monroe Street
Chicago, IL 60661
Attn: Linda Wolf
Telecopy: 312-441-7357
S-17
<PAGE> 150
THE INDUSTRIAL BANK OF JAPAN, LTD
By: /s/ Takuya Honjo
-------------------------------------
Name: Tanuya Honjo
Title: Senior Vice President
NOTICE ADDRESS:
1251 Avenue of the Americas
New York, NY 10020
Attn: Chris Droussiotis
Telecopy: 212-282-4490
S-18
<PAGE> 151
THE PROVIDENT BANK
By: /s/ Thomas W. Doe
-------------------------------------
Name: Thomas W. Doe
Title: Vice President
NOTICE ADDRESS:
One East Fourth Street, 216A
Cincinnati, OH 45202
Attn: Thomas Doe
Telecopy: 513-579-2858
S-19
<PAGE> 152
SCOTIABANC INC.
By: /s/ Frank F. Sandler
-------------------------------------
Name: Frank F. Sandler
Title: Relationship Manager
NOTICE ADDRESS:
600 Peachtree Street NE
Suite 2700
Atlanta, GA 30308
Attn: William E. Zarrett
Telecopy: 404-888-8995
S-20
<PAGE> 153
Schedule 1.1(a)
Management Investors; Other Investors
- -------------------------------------
Management Investors
- --------------------
The Management Investors are shown on Annex 1.1(a)-1 attached hereto.
Other Investors
- ---------------
The Other Investors, who along with Fenway will acquire outstanding capital
stock of Holdings in the Merger, consist of FPC, LLC, a Delaware Limited
Liability Company, and RGIP, LLC, also a Delaware Limited Liability Company.
Fenway and the Other Investors are members of the newly formed Simmons
Holdings, LLC ("Holdings LLC"), a Delaware Limited Liability Company.
MergerCorp, which will merge with and into Holdings pursuant to the
Recapitalization transactions, is the wholly owned subsidiary of Holdings LLC.
It is through Holdings LLC that Fenway and the Other Investors will acquire
their interests in Holdings.
<PAGE> 154
[ATTACH ANNEX 1.1(A)-1]
<PAGE> 155
SIMMONS COMPANY
---------------
SUMMARY OF STOCK AND OPTIONS AND ROLLOVER SHARES
------------------------------------------------
ROLLOVER SHARES
---------------
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
--------- -------- ---------
<S> <C> <C> <C>
Ayers 154,716 70% 108,301
Barton 215,663 65% 140,181
Brennan 171,928 23% 39,543
Daiker 54,162 75% 40,622
Franklin 135,000 60% 81,000
Maher 123,516 60% 74,110
Murphy 39,344 60% 23,606
Nie 700,000 40% 280,000
Passaglia 285,763 60% 171,458
Pleasant 129,716 60% 77,830
Ulicny 126,146 60% 75,688
- ------- ------- ------
Senior Management 2,135,954 1,112,339
---------------------------------------------------------------------------------------------------------
Applegate 5,639 100% 5,639
Brinkman 15,535 100% 15,535
Brooks 15,535 60% 9,321
Cantrell 20,944 80% 16,755
Castricone 10,000 100% 10,000
Chambless 80% 0
Clayton 10,000 100% 10,000
Cowie 23,302 60% 13,981
</TABLE>
-1-
<PAGE> 156
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
--------- -------- ---------
<S> <C> <C> <C>
Cuppia 15,535 100% 15,535
Davis (retiring) 38,836 0% 0
Dohm 4,710 60% 2,826
Elliott 3,000 100% 3,000
Fettner (resigned) 0% 0
Giambalo 100% 0
Glover 5,000 100% 5,000
Grippando 5,000 100% 5,000
Hellyer 19,470 70% 13,629
Hoffmann 10,000 100% 10,000
Hutchinson 15,535 100% 15,535
Katz 11,279 60% 6,767
Kessler 5,000 60% 3,000
Lachenmeier 4,000 100% 4,000
Leber 38,836 100% 38,836
Messershmitt 39,083 60% 23,450
Messner 2,000 100% 2,000
Miller 5,000 75% 3,750
Murray 38,836 60% 23,302
Newman 10,000 100% 10,000
Orth (retiring) 4,710 0% 0
O'sorio 80% 0
Parsons 46,605 90% 41,944
Peterken 100% 0
Poliseo 25,802 75% 19,352
Saunders 30,002 100% 30,002
</TABLE>
-2-
<PAGE> 157
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Shares
--------- -------- ---------
<S> <C> <C>
Senese 5,000 100% 5,000
Silverstone 5,000 85% 4,250
Slattery 5,000 100% 5,000
Tobin 15,272 60% 9,163
Woodhead 80% 0
- -------- ------- ---------
Other Managment 509,465 381,572
--------------- ------- -------
Subtotal - Simmons 2,645,419 1,493,911
</TABLE>
-3-
<PAGE> 158
CONTINUING MANAGEMENT OPTIONS
-----------------------------
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
---------- ---------- --------------
<S> <C> <C> <C>
Ayers 45,284 70% 31,699
Barton 63,667 65% 41,384
Brennan 50,000 23% 11,500
Daiker 156,338 75% 117,254
Franklin 20,000 60% 12,000
Maher 45,284 60% 27,170
Murphy 120,656 60% 72,394
Nie 1,800,000 40% 720,000
Passaglia 64,237 60% 38,542
Pleasant 45,284 60% 27,170
Ulicny 30,000 60% 18,000
- ------- ------- ------
Senior Management 2,440,750 1,117,113
-----------------------------------------------------------------------------------------------
Applegate 100% 0
Brinkman 100% 0
Brooks 14,465 60% 8,679
Cantrell 21,056 80% 16,845
Castricone 100% 0
Chambless 30,000 80% 24,000
Clayton 100% 0
Cowie 6,698 60% 4,019
Cuppia 100% 0
Davis (retiring) 0% 0
Dohm 45,290 60% 27,174
</TABLE>
-4-
<PAGE> 159
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
---------- ---------- --------------
<S> <C> <C> <C>
Elliott 100% 0
Fettner (resigned) 10,000 0% 0
Giambalo 30,000 100% 30,000
Glover 100% 0
Grippando 100% 0
Hellyer 38,048 70% 26,634
Hoffmann 100% 0
Hutchinson 14,465 100% 14,465
Katz 23,721 60% 14,233
Kessler 25,000 60% 15,000
Lachenmeier 16,000 100% 16,000
Leber 41,164 100% 41,164
Messershmitt 11,234 60% 6,740
Messner 8,000 100% 8,000
Miller 25,000 75% 18,750
Murray 11,164 60% 6,698
Newman 100% 0
Orth (retiring) 25,290 0% 0
O'sorio 20,000 80% 16,000
Parsons 90% 0
Peterken 30,000 100% 30,000
Poliseo 6,698 75% 5,024
Saunders 100% 0
Senese 10,000 100% 10,000
Silverstone 25,000 85% 21,250
Slattery 100% 0
</TABLE>
-5-
<PAGE> 160
<TABLE>
<CAPTION>
Common Rollover Rollover
Stock % Option Shares
---------- --------- ---------------
<S> <C> <C>
Tobin 14,728 60% 8,837
Woodhead 20,000 80% 16,000
- -------- ------ ---------
Other Managment 523,021 385,512
--------------- ------- -------
Subtotal - Simmons 2,963,771 1,502,625
</TABLE>
-6-
<PAGE> 161
CONTINUING ANTI-DILUTION OPTIONS
--------------------------------
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
------------- -------- -------------
<S> <C> <C> <C>
Ayers 14,123 70% 9,886
Barton 19,436 65% 12,633
Brennan 9,552 23% 2,197
Daiker 5,580 75% 4,185
Franklin 15,417 60% 9,250
Maher 13,065 60% 7,839
Murphy 3,821 60% 2,293
Nie 81,519 40% 32,608
Passaglia 21,834 60% 13,100
Pleasant 13,275 60% 7,965
Ulicny 14,122 60% 8,473
- ------- ------- ------
Senior Management 211,744 110,429
-----------------------------------------------------------------------------------------------
Applegate 191 100% 191
Brinkman 527 100% 527
Brooks 1,018 60% 611
Cantrell 1,425 80% 1,140
Castricone 339 100% 339
Chambless 1,018 80% 814
Clayton 339 100% 339
Cowie 1,018 60% 611
Cuppia 527 100% 527
Davis (retiring) 1,317 0% 0
Dohm 1,696 60% 1,018
</TABLE>
-7-
<PAGE> 162
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
------------- --------- -------------
<S> <C> <C> <C>
Elliott 102 100% 102
Fettner (resigned) 339 0% 0
Giambalo 1,018 100% 1,018
Glover 170 100% 170
Grippando 170 100% 170
Hellyer 1,951 70% 1,366
Hoffmann 339 100% 339
Hutchinson 1,018 100% 1,018
Katz 1,187 60% 712
Kessler 1,018 60% 611
Lachenmeier 678 100% 678
Leber 2,714 100% 2,714
Messershmitt 1,707 60% 1,024
Messner 339 100% 339
Miller 1,018 75% 764
Murray 1,696 60% 1,018
Newman 339 100% 339
Orth (retiring) 1,018 0% 0
O'sorio 678 80% 542
Parsons 1,581 90% 1,423
Peterken 1,018 100% 1,018
Poliseo 1,102 75% 827
Saunders 1,018 100% 1,018
Senese 508 100% 508
Silverstone 1,018 85% 865
Slattery 170 100% 170
</TABLE>
-8-
<PAGE> 163
<TABLE>
<CAPTION>
Anti-Dilution Rollover Rollover
Stock Options % Option Shares
------------- -------- -------------
<S> <C> <C> <C>
Tobin 1,018 60% 611
Woodhead 678 80% 542
- -------- ------ -------
Other Managment 35,025 26,023
--------------- ------- -------
Subtotal - Simmons 246,769 136,452
</TABLE>
-9-
<PAGE> 164
SCHEDULE 1.1(b)
LENDERS' COMMITMENTS AND PRO RATA SHARES
<TABLE>
<CAPTION> Tranche Tranche
LENDER Tranche A Tranche A Tranche B Term B Tranche C C
Term Loan Pro Rata Loan Pro Rata Term Loan Pro Rata
Commitment Share Commitment Share Commitment Share
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Goldman Sachs Credit $4,783,333.34 6.83% $25,750,000.00 36.79% $50,000,000.00 100.00%
Partners, L.P.
c/o Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Att: Elizabeth Fischer
Tel: 212-902-1021
Fax: 212-357-0932
- ------------------------------------------------------------------------------------------------------------------------------
Warburg Dillon Read LLC 4,287,500.00 6.125% 6,812,500.00 9.73% 0 0.00%
535 Madison Avenue, 6th Floor
New York, NY 10022
Att: David Barth
Tel: 212-906-7865
Fax: 212-906-7116
- ------------------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A. 6,533,333.33 9.33% 0.00 0.00% 0 0.00%
191 Peachtree Street, NE
Atlanta, GA 30303
Att: Ann Edwards
Tel: 404-332-1244
Fax: 404-332-6920
- ------------------------------------------------------------------------------------------------------------------------------
Fleet Bank, N.A. $5,250,000.00 7.50% $3,750,000.00 5.36% 0 0.00%
1 Federal Street
Boston, MA 02110
Att: George Ojanuca
Tel: 617-346-0643
Fax:617-346-5093
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Bank, N.A. 5,250,000.00 7.50% 3,750,000.00 5.36% 0 0.00%
601 2nd Avenue
Minneapolis, MN 55402
Att: Elliot Jaffee
Tel: 612-973-0543
Fax: 612-973-0825
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LENDER Revolving Revolving
Loan Pro Rata
Commitment Share
- ----------------------------------------------------------
<S> <C> <C>
Goldman Sachs Credit $5,466,666.67 6.83%
Partners, L.P.
c/o Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Att: Elizabeth Fischer
Tel: 212-902-1021
Fax: 212-357-0932
- ------------------------------------------------------------
Warburg Dillon Read LLC 4,900,000.00 6.125%
535 Madison Avenue, 6th Floor
New York, NY 10022
Att: David Barth
Tel: 212-906-7865
Fax: 212-906-7116
- ------------------------------------------------------------
Wachovia Bank, N.A. 7,466,666.67 9.33%
191 Peachtree Street, NE
Atlanta, GA 30303
Att: Ann Edwards
Tel: 404-332-1244
Fax: 404-332-6920
- ------------------------------------------------------------
Fleet Bank, N.A. $6,000,000.00 7.50%
1 Federal Street
Boston, MA 02110
Att: George Ojanuca
Tel: 617-346-0643
Fax:617-346-5093
- ------------------------------------------------------------
U.S. Bank, N.A. 6,000,000.00 7.50%
601 2nd Avenue
Minneapolis, MN 55402
Att: Elliot Jaffee
Tel: 612-973-0543
Fax: 612-973-0825
- ------------------------------------------------------------
</TABLE>
-10-
<PAGE> 165
<TABLE>
<CAPTION> Tranche Tranche
LENDER Tranche A Tranche A Tranche B Term B Tranche C C
Term Loan Pro Rata Loan Pro Rata Term Loan Pro Rata
Commitment Share Commitment Share Com mitment Share
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BHF-Bank 4,900,000.00 7.00% 3,500,000.00 5.00% 0 0.00%
590 Madison Ave., 30th Floor
New York, NY 10022
Att: Hans Jurgen Scholz
Tel: 212-756-5533
Fax: 212-756-5536
- ---------------------------------------------------------------------------------------------------------------------------
HSBC Securities, Inc. $4,900,000.00 7.00% $3,500,000.00 5.00% 0 0.00%
c/o Marine Midland Bank
140 Broadway, 5th Floor
New York, NY 10005
Att: Gina Sidorsky
Tel: 212-658-2750
Fax: 212-658-2586
- ---------------------------------------------------------------------------------------------------------------------------
SunTrust Bank, Atlanta 4,900,000.00 7.00% 3,500,000.00 5.00% 0 0.00%
25 Park Place, N.E., 26th Floor
Atlanta, GA 30303
Att: Richard Wilson
Tel: 404-230-5426
Fax: 404-575-2693
- ---------------------------------------------------------------------------------------------------------------------------
Wells Fargo Bank, N.A. 4,900,000.00 7.00% 3,500,000.00 5.00% 0 0.00%
555 Montgomery St.
San Francisco, CA 94111
Att: Michael Real
Tel: 415-396-2299
Fax: 415-362-5081
- ---------------------------------------------------------------------------------------------------------------------------
The Bank of New York $2,975,000.00 4.25% $2,125,000.00 3.06% 0 0.00%
1 Wall Street - 22nd Floor
New York, NY 10286
Att: David Siegel
Tel: 212-635-6899
Fax: 212-635-6434
- ---------------------------------------------------------------------------------------------------------------------------
Bayerische Vereinsbank 2,975,000.00 4.25% 2,125,000.00 3.06% 0 0.00%
150 East 42nd Street
New York, NY 10017
Att: Erick Ebner
Tel: 212-672-5778
Fax: 212-672-5523
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Revolving Revolving
Loan Pro Rata
LENDER Commitment Share
- -------------------------------------------------------------
<S> <C> <C>
BHF-Bank 5,600,000.00 7.00%
590 Madison Ave., 30th Floor
New York, NY 10022
Att: Hans Jurgen Scholz
Tel: 212-756-5533
Fax: 212-756-5536
- -------------------------------------------------------------
HSBC Securities, Inc. $5,600,000.00 7.00%
c/o Marine Midland Bank
140 Broadway, 5th Floor
New York, NY 10005
Att: Gina Sidorsky
Tel: 212-658-2750
Fax: 212-658-2586
- -------------------------------------------------------------
SunTrust Bank, Atlanta 5,600,000.00 7.00%
25 Park Place, N.E., 26th Floor
Atlanta, GA 30303
Att: Richard Wilson
Tel: 404-230-5426
Fax: 404-575-2693
- -------------------------------------------------------------
Wells Fargo Bank, N.A. 5,600,000.00 7.00%
555 Montgomery St.
San Francisco, CA 94111
Att: Michael Real
Tel: 415-396-2299
Fax: 415-362-5081
- -------------------------------------------------------------
The Bank of New York $3,400,000.00 4.25%
1 Wall Street - 22nd Floor
New York, NY 10286
Att: David Siegel
Tel: 212-635-6899
Fax: 212-635-6434
- -------------------------------------------------------------
Bayerische Vereinsbank 3,400,000.00 4.25%
150 East 42nd Street
New York, NY 10017
Att: Erick Ebner
Tel: 212-672-5778
Fax: 212-672-5523
- -------------------------------------------------------------
</TABLE>
-11-
<PAGE> 166
<TABLE>
<CAPTION> Tranche Tranche
LENDER Tranche A Tranche A Tranche B Term B Tranche C C
Term Loan Pro Rata Loan Pro Rata Term Loan Pro Rata
Commitment Share Commitment Share Com mitment Share
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bank Austria Creditanstalt Cor 2,975,000.00 4.25% 2,125,000.00 3.06% 0 0.00%
porate Finance, Inc.
Two Ravina Drive, Ste. 1680
Atlanta, GA 30346
Att: Scott Kray
Tel: 770-390-1850
Fax: 770-390-1851
- -----------------------------------------------------------------------------------------------------------------------------
Fremont Investment and Loan $2,479,166.66 3.54% $3,187,500.00 4.55% 0 0.00%
2020 Santa Monica Blvd.,
Suite 600
Santa Monica, CA 90404
Att: Kannika Viravan
Tel: 310-315-3921
Fax: 310-264-7401
- -----------------------------------------------------------------------------------------------------------------------------
Heller Financial, Inc. 2,975,000.00 4.25% 2,125,000.00 3.06% 0 0.00%
500 W. Monroe Street
Chicago, IL 60661
Att: Linda Wolf
Tel: 312-441-7894
Fax: 312-441-7357
- -----------------------------------------------------------------------------------------------------------------------------
The Industrial Bank of Japan, 2,975,000.00 4.25% 2,125,000.00 3.06% 0 0.00%
Ltd.
1251 Avenue of the Americas
New York, NY 10020
Att: Chris Droussiotis
Tel: 212-282-3323
Fax: 212-282-4490
- -----------------------------------------------------------------------------------------------------------------------------
The Provident Bank $2,975,000.00 4.25% $2,125,000.00 3.06% 0 0.00%
One East Fourth St. 216A
Cincinnati, OH 45202
Att: Thomas Doe
Tel: 513-639-4376
Fax: 513-579-2858
- -----------------------------------------------------------------------------------------------------------------------------
Scotiabanc Inc. 3,966,666.67 5.67% 0 0.00% 0 0.00%
c/o The Bank of Nova Scotia
600 Peachtree St., NE
Atlanta, GA 30308
Att: William Zarrett
Tel: 404-877-1504
Fax: 404-888-8998
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Revolving Revolving
Loan Pro Rata
LENDER Commitment Share
- ----------------------------------------------------------------
<S> <C> <C>
Bank Austria Creditanstalt Cor 3,400,000.00 4.25%
porate Finance, Inc.
Two Ravina Drive, Ste. 1680
Atlanta, GA 30346
Att: Scott Kray
Tel: 770-390-1850
Fax: 770-390-1851
- ----------------------------------------------------------------
Fremont Investment and Loan $2,833,333.33 3.54%
2020 Santa Monica Blvd.,
Suite 600
Santa Monica, CA 90404
Att: Kannika Viravan
Tel: 310-315-3921
Fax: 310-264-7401
- ----------------------------------------------------------------
Heller Financial, Inc. 3,400,000.00 4.25%
500 W. Monroe Street
Chicago, IL 60661
Att: Linda Wolf
Tel: 312-441-7894
Fax: 312-441-7357
- ----------------------------------------------------------------
The Industrial Bank of Japan, 3,400,000.00 4.25%
Ltd.
1251 Avenue of the Americas
New York, NY 10020
Att: Chris Droussiotis
Tel: 212-282-3323
Fax: 212-282-4490
- ----------------------------------------------------------------
The Provident Bank $3,400,000.00 4.25%
One East Fourth St. 216A
Cincinnati, OH 45202
Att: Thomas Doe
Tel: 513-639-4376
Fax: 513-579-2858
- ----------------------------------------------------------------
Scotiabanc Inc. 4,533,333.33 5.67%
c/o The Bank of Nova Scotia
600 Peachtree St., NE
Atlanta, GA 30308
Att: William Zarrett
Tel: 404-877-1504
Fax: 404-888-8998
- ----------------------------------------------------------------
</TABLE>
-12-
<PAGE> 167
<TABLE>
<CAPTION> Tranche Tranche
Tranche A Tranche A Tranche B Term B Tranche C C
Term Loan Pro Rata Loan Pro Rata Term Loan Pro Rata
LENDER Commitment Share Commitment Share Com mitment Share
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTALS 70,000,000.00 100.00% 70,000,000.00 100.00% 50,000,000.00 100.00%
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LENDER Revolving Revolving
Loan Pro Rata
Commitment Share
- -----------------------------------------------------------
<S> <C> <C>
TOTALS 80,000,000.00 100.00%
- -----------------------------------------------------------
</TABLE>
-13-
<PAGE> 168
Schedule 3.1(e)
Closing Date Mortgaged Property
- -------------------------------
Closing Date Mortgaged Properties
- ---------------------------------
Charlotte Plant
5100 West W.T. Harris Blvd.
Charlotte, NC 28269
Honolulu Plant
91-489 Komohana Street
Kapolei, HI 96707-1715
Janesville, Wisconsin
1809 Adel Street
Janesville, WI 53546
San Leandro Plant
1700 Fairway Drive
San Leandro, CA 94577
Salt Lake City, Utah
Crossroads Corporate Center #1
1130 South 3800 West
Salt Lake City, UT 84104
Closing Date Collateral Access Agreement Properties
- ---------------------------------------------------
Los Angeles Plant
Compton/Harbor City
20100 South Alameda Street
Compton, CA 90220
Columbus Plant
3960 Brookham Drive
Grove City, OH 43123
Denver Plant (Old)
12601 East 33rd Avenue
Unit 100
Aurora, CO 80011
Arizona Plant
101 North 104th Avenue
Tolleson, AZ 85353
Warren Drive, Georgia
6424 Warren Drive
Norcross, GA 30093
-14-
<PAGE> 169
Schedule 4.1
Subsidiaries of Holdings
(1) Corporate Organizational Structure of Holdings and its
------------------------------------------------------
Subsidiaries
------------
(a) Before the Recapitalization:
Holdings owns 100% of the issued and
outstanding Common Stock of the Company.
Holdings has no other direct Subsidiaries. The
Simmons Company Stock Ownership Trust ("ESOT")
beneficially owns 100% of the Series A
Preferred Stock of the Company.
The Company directly owns 100% of the issued
and outstanding stock of each of the
Subsidiaries set forth below under
Subsidiaries.
(b) After the Recapitalization:
Holdings owns 100% of the Common Stock of
Company and has no other direct subsidiaries.
The ESOT owns Common Stock of Holdings, its
allocated shares of Series A Preferred Stock
of the Company having been purchased by
MergerCorp and ultimately canceled, and its
unallocated shares of Series A Preferred
having ultimately been converted and exchanged
for Common Stock of Holdings.
The organizational structure of the Company
and its Subsidiaries remains as disclosed in
(1)(a) above..
(2) Management Structure of the Company After the Recapitalization
--------------------------------------------------------------
Board of Directors
Zenon S. Nie - Chairman
Jonathan C. Daiker
Martin R. Passaglia
Peter Lamm
Richard C. Dresdale
Andrea Geisser
Gregory P. Meredith
Officers
-15-
<PAGE> 170
<TABLE>
<CAPTION>
<S> <C> <C>
Zenon S. Nie - Chairman, Chief Executive Officer, President
Martin R. Passaglia - Senior Executive Vice President, Secretary
Robert K. Barton - Senior Vice President - Human Resources and
Assistant Secretary
Jonathan C. Daiker - Executive Vice President-Finance and Administration,
Chief Financial Officer
Michael P. Rakauskas - Executive Vice President - Strategic Ventures
W.L. Ayers, IV - Executive Vice President - Marketing and Sales
Joseph Ulicny - Executive Vice President - Market Development
James P. Maher - Divisional President
Gary G. Pleasant - Divisional President
Cleve B. Murphy - Divisional President
Leo T. Brennan - Vice President - Materials Management
Roger W. Franklin - Vice President - Finance, Treasurer and Assistant
Secretary
Gary L. Senese - Vice President of Information Technology
John P. Peterken - Vice President - International and Assistant Secretary
</TABLE>
(3) Capital Stock of Holdings (After the Recapitalization)
------------------------------------------------------
1. Common Stock, $.01 per value per share (40,000,000 Authorized
Shares):
<TABLE>
<CAPTION>
Shareholder Shares of Stock Options
----------- --------- -------------
Common Stock
------------
<S> <C> <C>
Management 1,493,911.00 1,639,077.00
Investcorp 1,336,997.62
Simmons Holdings, LLC 19,030,131.175
ESOT 3,482,036.00
Total 25,343,075.80 1,639,077.00
</TABLE>
2. Class B Common Stock, $.01 par value per share (400,000
Authorized Shares)
<TABLE>
<CAPTION>
Shareholder Number Shares
----------- -------------
Class B Common Stock
--------------------
<S> <C>
Fenway Partners, Inc. 379,119.069
</TABLE>
(4) Capital Stock of the Company
----------------------------
-16-
<PAGE> 171
(a) Common Stock, $.0l par value per share (50,000,000 Authorized
Shares):
<TABLE>
<CAPTION>
Name Total Shares Certificate No.
--------------------------------------------------------------------
<S> <C> <C>
Simmons Holdings, Inc. 31,964,452 1
</TABLE>
Pursuant to that certain Parent Option Agreement between the Company
and Holdings, dated as of March 22, 1996, if Holdings grants an option
to any director, employee or consultant, the Company shall grant
Holdings a similar option on the same terms for an equal number of
shares of Common Stock of the Company. To date, no such options are
outstanding. The Parent Option Agreement terminates upon consummation
of the transactions contemplated by the Recapitalization Agreement.
(b) Series A Preferred Stock, $.01 par value per share (5,950,000
Authorized Shares):
<TABLE>
<CAPTION>
Name Total Shares Certificate No.
---------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company 1,095,025.793 1
solely as Trustee of the Simmons Company
Employee Stock Ownership Trust
1,155,023.2299 To be issued
(allocated)
State Street Bank and Trust Company 3,413,672 To be issued
solely as Trustee of the Simmons Company (unallocated)
Employee Stock Ownership Trust
-------------
Total 5,663,721.0229
</TABLE>
As a result of the transactions contemplated by the Recapitalization
Agreement, the ESOT will own Common Stock of Holdings, its allocated
shares of Series A Preferred Stock of the Company having been purchased
by MergerCorp and ultimately canceled, and its unallocated shares of
Series A Preferred having ultimately been converted and exchanged for
Common Stock of Holdings. Following the Recapitalization, no shares of
Series A Preferred Stock of the Company will be outstanding.
(c) Series C Cumulative Redeemable Exchangeable Preferred Stock,
$.01 par value per share (50,000 Authorized Shares):
None Issued or Outstanding
(5) Subsidiaries++
--------------
Simmons Company is a Subsidiary of Holdings, which has no other direct
subsidiaries. The following are direct Subsidiaries of the Company:
-17-
<PAGE> 172
<TABLE>
<CAPTION>
ENTITY COMPANY
(JURISDICTION OF IN- AUTHORIZED CAPITAL SHARES OUT- DIRECT OTHER OWN-
CORPORATION) (PAR VALUE) STANDING OWNERSHIP ERSHIP
- ------------ ----------- -------- --------- ------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Simmons International Hold- Common: 200 (none) 101 100% 0
ing Company, Inc. (New York) Preferred: 27 (none) 0 --- --
- ---------------------------------------------------------------------------------------------------------------------
Simmons Caribbean Bedding, Common 10,000 (none) 400 100% 0
Inc.
(Puerto Rico)+
- ---------------------------------------------------------------------------------------------------------------------
Info Establishment 10,000 S. Frs. 10,000 S. Frs. 100% 0
(Liechtenstein)+
- ---------------------------------------------------------------------------------------------------------------------
Simmons I.P. Inc. Common: Unlimited 2,121,100 100% 0
(Ontario)+ Class A: Unlimited 0 0
- ---------------------------------------------------------------------------------------------------------------------
688363 Ordinary: Unlimited First 10 100% 0
Ontario Limited Preference:
(Ontario) (formerly S i Unlimited 0 0 0
mmons Limited)**+ Second Preference:
Unlimited 0 0 0
Third Preference:
Unlimited 16,300 100% 0
- ---------------------------------------------------------------------------------------------------------------------
897701 Ontario Limited (On- Common: Unlimited 100 100% 0
tario)**+ Class A: Unlimited 0 0 0
- ---------------------------------------------------------------------------------------------------------------------
Simmons International Ltd. Common: 5,000 Not yet issued 100% 0
(Bahamas)+
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
** 688363 Ontario Limited (formerly Simmons Limited) and 897701 Ontario
Limited are being dissolved pursuant to resolutions adopted by their
respective shareholders on June 29, 1990. The assets and liabilities of
688363 Ontario Limited have been transferred to the Company pursuant to
a General Conveyance and separate Assignments of trademarks and patent
application, all dated June 29,1990 between the Company and Simmons
Limited and the assets and liabilities of 897701 Ontario Limited have
been transferred to the Company pursuant to a General Conveyance dated
June 29, 1990 between the Company and 897701 Ontario Limited. The
dissolution of such companies has been delayed to avoid prejudicing an
insurance claim of such companies which was resolved in early 1998; the
companies will be dissolved upon the final settlement of such claim.
+ Non-Guarantor Subsidiaries
++ As of the Closing Date, none of the Subsidiaries of the Company is a
"Material Subsdiary" for purposes of the Agreement.
-18-
<PAGE> 173
Schedule 4.10
Certain Litigation
------------------
None.
-19-
<PAGE> 174
Schedule 4.12
Real Property Assets
--------------------
Fee Interests
- -------------
11.Janesville, Wisconsin
1809 Adel Street
Janesville, Wisconsin 53546
Leases, Subleases or Assignments of Leases
- ------------------------------------------
12.Shawnee, Kansas
7910 Hedge Lane Terrace
Shawnee, Kansas 66216
(This property is subject to IRB financing. The Company has the option
to purchase the fee interest for $1 upon repayment of the bond.)
13.Lease agreement between Simmons Company and St. Paul Properties.
Norcross, Georgia
1900 Beaver Ruin Circle
Norcross, GA 30071
14.Lease agreement between Simmons Company and Concourse I Ltd. c/o The
Landmarks Group
Atlanta, Georgia
One Concourse Parkway
Suite 600
Atlanta, GA 30093
15.Lease agreement between Simmons Company and 1998 August Partners, L.P.,
successor in interest to John W. Rooker.
Atlanta Plant, Mabelton, Georgia
7131 Discovery Boulevard
Mabelton, GA 30093
16.Lease agreement between Simmons Company and Hill-Raaum Investment Company.
Seattle Plant, Auburn, Washington
425 C St. Northwest
Auburn, WA 98002
17.Lease agreement between Simmons Company and 1700 Fairway Drive Associates c/o
Orbit Property Management.
San Leandro Plant, California
1700 Fairway Drive
San Leandro, CA 94577
-20-
<PAGE> 175
18.Sublease agreement between Simmons Company and L&P Property Management
Company, for 30,000 sq. ft. of Bldg. #1.
San Leandro Plant, California
1700 Fairway Drive
San Leandro, CA 94577
19.Lease agreement between Simmons Company and Simmons Assoc., L.P.
c/o The Lingerfelt Company
Fredericksburg, Virginia
9601 Cosner Drive
Fredericksburg VA 22408
20.Lease agreement between Simmons Company and Glenborough Properties, L.P.,
successor in interest to Gateway Park II, LLC, assigned by Gateway Park II, LLC
to Building Ten, LLC.
Denver Plant, Aurora, Colorado
17850 East 32nd Place
Aurora, CO 80011
21.Lease agreement between Simmons Company and CP Reprop Phoenix III Corp.
c/o Cabot Partners
Phoenix Plant, Tolleson, Arizona
101 North 104th Avenue, Ste. A
Tolleson, AZ 85353
22.Lease agreement between Simmons Company and Simmons Jacksonville Associates
c/o Grubb & Ellis
Jacksonville, Florida
540 Beautyrest Avenue
Jacksonville, FL 32254
23.Lease agreement between Simmons Company and CK-Childress Klein #8 Limited
Partnership c/o Childress Klein Properties
Charlotte, North Carolina
5100 West W.T. Harris Blvd.
Charlotte, NC 28269-1898
24.Lease agreement between Simmons Company and ProLogis Development Services
Incorporated f/k/a SCI Development Services Incorporated
Salt Lake City, Utah
Crossroads Corporate Center #1
1130 South 3800 West
Salt Lake City, UT 84104
-21-
<PAGE> 176
25.Sublease agreement between Simmons Manufacturing, Inc. (now Simmons Company)
and Debu/Flair, Inc., under Lease agreement between Debu/Flair, Inc. and 20100
S. Alameda Property Co., assignee of Overton, Moore & Associates, Inc.
Los Angeles Plant, Compton/Harbor City, California
20100 South Alameda Street
Compton, CA 90220
26.Lease agreement between Simmons U.S.A. Corporation (now Simmons Company) and
Bluefin Associates c/o Kessinger/Hunter & Co.
Springfield Plant, Agawam, Massachusetts
320 Bowles Road
Agawam, MA 01001
27.Lease agreement between Simmons Company and Michael M.H. Moon, as Trustee of
the Michael M.H. Moon Trust II, as successor in interest to Moon & Hart.
Honolulu Plant, Kapolei, Hawaii
91-489 Komohana Street
Kapolei, HI 96707-1715
28.Lease agreement between Simmons Company and DFW Trade Center I L.P.
c/o Industrial Developments International, Inc.
Dallas Plant, Coppell, Texas
4255 Patriot Drive #100
Coppell, TX 75019
29.Lease agreement between Simmons Company and 287 Industrial Park c/o The
Sudler Companies.
Piscataway, New Jersey
365 South Randolphville Road
Piscataway, NJ 08854
30.Lease agreement between Simmons U.S.A. Corporation and Tri-Columbus
Associates (successor in interest to Leadership Group, Inc.) (now Northstar
Presidio Management Company LLC), as supplemented by Extension Agreement listing
Simmons Company as tenant.
Columbus, OH Plant, Grove City
3960 Brookham Drive
Grove City, OH 43123
31.Lease agreement between Simmons Company and St. Paul Properties, Inc.
Dallas Plant, Carolton, Texas (Old)
1625 Diplomat Drive
Carrolton, TX 75006
-22-
<PAGE> 177
32.Lease agreement between Simmons Company and Eagle-Warren Properties
(successors to B.F. Saul Real Estate Investment Trust) c/o IPG Management
Company, Inc.
Warren Drive, Norcross, Georgia
6424 Warren Drive
Norcross, GA 30093
33.Lease agreement between Simmons Company and Security Capital Industrial Trust
c/o Colliers Bennett & Kahnweiler.
Denver Plant, Aurora, Colorado (Old)
12601 East 33rd Avenue
Unit 100
Aurora, CO 80011
34.Lease agreement between Simmons Company and Wacker/Randolph Investment
Company.
Chicago, Il
150 North Wacker Drive
Suite 650
Chicago, IL 60606
35.Lease agreement between Simmons Company and International Home Furnishings
Center, Inc.
Highpoint, NC
International Home
Furnishings Center
2095 S. Main Street
Space No. M604
plus bays M601, M602, M603, M605, M606, M607 and M608
High Point, NC 27261
36.Lease agreement between Simmons Company and Security Capital Industrial
Trust, SCI Development Services, Inc.
Atlanta, GA
1335 Chattahoochee Ave.
Atlanta, GA 30318
37.Lease agreement between Simmons Company and A&E Partners L.P.
Baltimore, MD
Meadows Business Park
1717 Whitehead Rd.
Baltimore, MD 21207
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<PAGE> 178
38.Lease agreement between Simmons Company and Gateway Plaza Associates L.P.
Aurora, CO
Gateway Shopping Center
1060 S. Sable Boulevard
Aurora, CO 80012
39.Lease agreement between Simmons Company, Inc. and Thomas W. Morelli Trust.
Morgantown, PA
Home Furnishings & Fashions
Outlet Mall, Store 107
Route 10, Berks County
Morgantown, PA 19543
40.Lease agreement between Simmons Company, Inc. and Horrell Properties.
Nashville, TN
364 Elysian Fields Court
Nashville, TN 37211
41.Lease agreement between Simmons Company and Pine Island Investment Holdings,
Inc.
Davie, FL
Pine Island Ridge Plaza Shopping Center
8858 State Road, #84
Room # G-3
Davie, FL 33324
42.Lease agreement between Simmons Company and MGM Aurora Properties, L.P.
Seattle, WA
17000 Aurora Avenue North
Seattle, WA 98133
43.Lease agreement between Simmons Company and American National Insurance
Company.
Grandview, MO
Grandview Plaza Shopping Center
12905-L, South 71 Highway
Grandview, MO 64030
44.Lease agreement between Simmons Company and Weingarten Realty Investors.
Shawnee, KS (Kansas City)
Westbrooke Village Shopping Center
7357 Quivira Road
Shawnee, KS 66216
-24-
<PAGE> 179
45.Lease agreement between Simmons Company and Desert West Investors, L.L.C.
Kent, WA
Pacific Business Park
8623 South 212th Street
Kent, WA 98031
46.Lease agreement between Simmons Company and Security Capital Industrial
Trust.
Norcross, GA
Regency Business Center
6300 Jimmy Carter Boulevard
Suite 106
Norcross, GA 30071
47.Lease agreement between Simmons Company and G. Holdings Corp.
Rahway, NJ
Granite Plaza
947 Routes 1 & 9 North
Rahway, NJ 07065
48.Lease agreement between Simmons Company and Fowler Avenue Development
Company.
Tampa, FL
11612 North Nebraska Avenue
Tampa, FL 33612
40. Lease agreement between Simmons Company and Vantage Management Company.
Dallas, TX
1200 Conveyor Lane
Dallas, TX 75247
41. Lease agreement between Simmons Company and Fortune Five Limited
Partnership.
Howell, NJ
800 Route 9 South
Howell, NJ 07728
-25-
<PAGE> 180
Schedule 4.15
Material Contracts
------------------
1. Supplement to Supply Agreements dated January 30, 1987 between Simmons
Company (formerly Simmons U.S.A. Corporation) and Leggett & Platt,
Inc., as amended February 10, 1987, February 8, 1988, July 15, 1988,
January 29, 1995 and May 27, 1998.
-26-
<PAGE> 181
Schedule 4.25
Intellectual Property Litigation
--------------------------------
1. SERTA, INC. V. SIMMONS COMPANY, INC., Civil Action No. 98C 2067 (N.D.
Ill.).
This civil action was brought by Serta in federal court in
Chicago, Illinois. The Complaint alleges patent infringement, together
with alleged violations of the Lanham Act in connection with the
Company's use of the trademark "Crescendo." Serta seeks injunctive
relief, unspecified damages, attorneys fees and costs. On June 9, 1998
the Company filed an Answer and Counterclaim. In late June or early
July, 1998, Serta requested re-examination of its patent in the Patent
and Trademark Office. The District Court action has been stayed pending
the outcome of the re-examination. The potential liability of Holdings
and its Subsidiaries could not reasonably be expected to exceed
$1,500,000.
2. SERTA, INC. V. SIMMONS COMPANY, INC., Opp. No. 106,440 (TTAB).
This trademark opposition proceeding was brought by Serta in
the United States Patent and Trademark Office, before the Trademark
Trial and Appeal Board, to oppose the Company's application for
registration of the mark "Crescendo." Serta claims that it has superior
rights to the mark and has moved to stay the opposition pending the
result of Serta, Inc. v. Simmons Company, Inc., Civil Action No. 98C
2067 (N.D. Ill.) (SEE above). Simmons has not opposed the stay motion.
The stay motion has been granted.
3. SIMMONS COMPANY, INC. V. SLUMBERLAND U.S.A. CORP., Opp. No. 99,699
(TTAB);
SLUMBERLAND U.S.A. CORP. V. SIMMONS COMPANY, INC., Opp. No. 105,220
(TTAB).
These consolidated trademark opposition proceedings were
brought in the United States Patent and Trademark Office, before the
Trademark Trial and Appeal Board, to prevent the registration of
Slumberland's mark "Pocketed Posture Springing" and the Company's mark
"Pocketed Coil," respectively. These proceedings are pending and in the
discovery stage.
-27-
<PAGE> 182
Schedule 6.1
Certain Existing Indebtedness
-----------------------------
1. Loan Agreement between City of Janesville, Wisconsin and Simmons
Manufacturing Company dated November 12, 1982 relating to Industrial
Development Revenue Bond Anticipation Notes, Series A.
2. Loan Agreement between the City of Shawnee and the Company relating to
the Indenture of Trust between City of Shawnee, Kansas and State Street
Bank and Trust Company of Missouri, N.A., as Trustee, dated December 1,
1996 relating to $5,000,000 Private Activity Revenue Bonds Series 1996
(Simmons Company Project) and the Letter of Credit Agreement, dated as
of December 1, 1996 by and between Simmons Company and SunTrust Bank,
Atlanta, relating to the same bonds.
3. Loan Agreement (construction) dated December 12, 1997 between Simmons
Caribbean Bedding, Inc. and Banco Santander Puerto Rico.
4. Indenture dated April 18, 1996 between the Company and Suntrust Bank,
Atlanta relating to 10-3/4% Senior Subordinated Notes Due 2006, and the
following related agreements:
(i) Purchase Agreement dated April 15, 1996 between the Company
and Chase Securities, Inc. relating to 10 3/4% Senior
Subordinated Notes Due 2006.
(ii) Exchange and Registration Rights Agreement dated April 18,
1996 between the Company and Chase Securities, Inc. relating
to $100,000,000 10-3/4% Senior Subordinated Notes Due 2006.
(The Company intends to discharge the 10-3/4% Senior Subordinated Notes
at Closing pursuant to ss.8.01(a) of the Indenture. On or before the
Closing Date, the Company will have mailed an irrevocable notice of
redemption to each holder of the Existing Notes and the Trustee under
the Existing Indenture pursuant to Sections 3.07(c) and 3.01, as
applicable, of the Existing Indenture, and Company shall have
irrevocably deposited with the Trustee under the Existing Indenture
funds sufficient to pay the principal of, and all accrued and unpaid
interest and the Applicable Premium (as defined in the Existing
Indenture) on, all outstanding Existing Notes and any other sums
payable by Company under the Existing Indenture).
5. Capitalized Lease with respect to the Company's facility located at 540
Beautyrest Avenue, Jacksonville, FL 32254
Indebtedness Incurred in Connection with the Repurchase of ESOP Shares
----------------------------------------------------------------------
1. In accordance with the terms of the ESOP, if Company is required under
the ESOP to repurchase shares of capital stock of Company that are
distributed from and pursuant to the
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<PAGE> 183
terms of the ESOP as part of a Total Distribution, Company may elect to
make payment to the respective participant or beneficiary with respect
to such capital stock in substantially equal installments (made not
less frequently than annually) over a period of not longer than five
(5) years, the first installment of which shall be paid not later than
thirty (30) days after the date of the exercise by such participant or
beneficiary under the ESOP of the right to have Company repurchase such
capital stock. "Total Distribution" means a distribution to a
participant or a beneficiary under the ESOP, within a single taxable
year of such recipient, of the entire balance of the participant's or
beneficiary's account under the ESOP.
-29-
<PAGE> 184
Schedule 6.2
Certain Existing Liens
----------------------
Multiple Site Leases and Security Interests
1.Liens filed by AT&T Credit Corporation for AT&T Generic 3S systems, Lucent
Definity Generic 3 systems, Transtalk 9000 and related equipment leased under
Lease S501646 and Lease W409532, and all attachments, accessories, additions,
substitutions, products, replacements and rentals and a right to use license
for any software related to the foregoing, and proceeds therefore.
2.Liens filed by Varilease Corporation for miscellaneous equipment, including
IBM computing equipment, leased pursuant to Master Agreement dated 12/3/90 and
Master Agreement dated 12/31/91.
3.Liens filed by Crown Credit Company securing equipment (primarily forklifts,
batteries and chargers) leased from Crown Credit Company.
4.Liens filed by C.J. Hodder Lumber Company, Inc. on all cut to size box spring
lumber delivered to Simmons Company by C.J. Hodder Lumber Company, Inc. and not
yet billed to Simmons Company (the consigned inventory).
5.Liens on project equipment and the project site relating to the Indenture of
Trust between the City of Shawnee, Kansas and State Street Bank and Trust
Company of Missouri, N.A., as Trustee, dated as of December 1, 1996 relating to
$5,000,000 Private Activity Revenue Bonds Series 1996 (Simmons Company Project),
the Guarantee Agreement from Simmons Company to State Street Bank and Trust
Company of Missouri, N.A., as Trustee, dated as of December 1, 1996, the Loan
Agreement and Letter of Credit Agreement referenced in Item 2 of Schedule 6.1
and the Leasehold Mortgage and Security Agreement dated as of December 1, 1996
between Simmons Company and SunTrust Bank, Atlanta, including, among other
liens, Kansas liens 2312194 and 2312195.
6.Liens, if any, relating to the Loan Agreement between the City of Janesville,
Wisconsin and Simmons Manufacturing Company, dated November 12, 1992, relating
to the Industrial Development Revenue Bond Anticipation Notes, Series A.
7.Liens relating to the Loan Agreement executed by and between Simmons Caribbean
Bedding, Inc. and Banco Santander Puerto Rico, dated as of December 12, 1997.
8.Financing Statements securing Chase Manhattan Bank (formerly Chemical Bank)
liens are on file and will be released pending payment of the existing senior
secured debt.
9.Liens filed by Textron Financial Corp., Textron Capital Corp. and Lease Plan
U.S.A. on all tractors and trailers leased by the Company from such entities
pursuant to certain leases.
Equipment Lease Liens
-30-
<PAGE> 185
<TABLE>
<CAPTION>
Secured Party State Filing Number Collateral
- ------------- ----- ------------- ----------
<S> <C> <C> <C>
TMCC GA 441995005361 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
First United Leasing WI 1535182 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Residue West, Inc. HI 94-137876 Specific equipment listed.
AZ 862550 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Material Handling Services, Inc., Illi- IL 3748167 Specific equipment listed.
nois Material Handling IL 3816410 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Unisys Leasing Corporation GA 060-95-024822 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Residual Enterprises, Inc. GA 060199612494 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Mellon First United Leasing GA 0601998006229 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Caterpillar Financial Services Corpo- TX 95-00092333 Specific equipment listed.
ration; Peterson Tractor Co. TX 97-00035222 Specific equipment listed.
CA 93-236050 Specific equipment listed.
CA 97-18160595 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Advanced Acceptance Corporation KS 2388952 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Vanguard Financial Services Com- WI 1418573 Specific equipment listed.
pany WI 1541173 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
OCE Credit Corp. GA 060199521553 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
First Choice Business Machines; Busi- WA 94-070-0271 Specific equipment listed.
ness Credit Leasing WA 94-244-0307 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Burch Lowe, Inc. NC 042992 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
K&O Financial Corporation; CO 932053861 Specific equipment listed.
Leasetech Inc. GA 06719954220 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Xerox Corp CA 9613460519 Specific equipment listed.
CA 9818860147 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Citicorp Leasing, Inc. MA 1233397 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
The Space Maker Group Inc. VA 9309027104 Specific equipment listed.
Space Maker Systems of VA, Inc. VA 9805297017 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Whirlpool Financial Corporation, MA 819082 Specific equipment listed.
Whirlpool Leasing Services, Inc. MA 820924 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Liberty Equipment Leasing, Inc. OH 04687F06 Specific equipment listed.
OH AM67568 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Bankers Leasing Association, Inc. GA 000806158 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-31-
<PAGE> 186
<TABLE>
<CAPTION>
Secured Party State Filing Number Collateral
- ------------- ----- ------------- ----------
<S> <C> <C> <C>
Sanwa Business Credit Corp. WI 1705268 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Lucent Technologies FL 960000185607 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
IBM Credit Corporation GA 007-97-008529 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
Toyota Lift of Los Angeles, Inc., CA 94014376 Specific equipment listed.
Toyota Credit Corp. CA 94014881 Specific equipment listed.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
-32-
<PAGE> 187
Schedule 6.4
Certain Existing Contingent Obligations
- ---------------------------------------
EXISTING LETTERS OF CREDIT:
<TABLE>
<CAPTION>
EFFECTIVE DATE L/C NUMBER BENEFICIARY AMOUNT L/C EXPIRY DATE
TYPE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/15/90 SLCS052259 New Jersey EPA $55,000.00 Standby 6/15/99
- ----------------------------------------------------------------------------------------------------------------------------
9/14/94 SLCS325473 Employers' Insurance of Wausau $2,850,000.00 Standby 3/01/99
- ----------------------------------------------------------------------------------------------------------------------------
10/21/92 SLCS308227 KLN-Reliance Insurance Corp. $5,000.00 Standby 10/31/98
- ----------------------------------------------------------------------------------------------------------------------------
1/14/98 SLCPPDX00051 United States Fidelity and Guaranty $592,500.00 Standby 8/14/99
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
-33-
<PAGE> 188
EXHIBIT A-1 TO
CREDIT AND GUARANTY AGREEMENT
- --------------------------------------------------------------------------------
FUNDING NOTICE
Reference is made to the Credit and Guaranty Agreement, dated as of
October 29, 1998 (as it may be amended, supplemented or otherwise modified, the
"CREDIT AGREEMENT" the terms defined therein and not otherwise defined herein
being used herein as therein defined), by and among Simmons Company, a Delaware
corporation ("COMPANY"), Simmons Holdings, Inc. and certain Subsidiaries of
Company, as Guarantors, the Lenders (as such terms are defined therein), Goldman
Sachs Credit Partners L.P., as Joint Lead Arranger and Syndication Agent,
Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford Branch,
as Administrative Agent.
Pursuant to Section 2.2(c) of the Credit Agreement, Company desires
that Lenders make the following Loans to Company in accordance with SECTION
2.2(d) of the Credit Agreement on ________________ (the "FUNDING DATE")
1. TERM LOANS:
-----------
Tranche A Term Loans
--------------------
<TABLE>
<CAPTION>
<S> <C>
(1)Amount of Base Rate Loans:
$
-----------------------
(2)Amount of Eurodollar Rate Loans, with an
initial Interest Period of _______ month(s): $_______________________
Tranche B Term Loans
--------------------
(i) Amount of Base Rate Loans: $_______________________
(ii) Amount of Eurodollar Rate Loans, with an
initial Interest Period of _______ month(s): $_______________________
Tranche C Term Loans
--------------------
(i) Amount of Base Rate Loans: $_______________________
(ii) Amount of Eurodollar Rate Loans, with an
initial Interest Period of _______ month(s): $_______________________
</TABLE>
-34-
<PAGE> 189
2. REVOLVING LOANS:
----------------
<TABLE>
<S> <C> <C>
(i) Amount of Base Rate Loans: $_______________________
(ii) Amount of Eurodollar Rate Loans: with an
initial Interest Period of _______ month(s): $_______________________
3. SWING LINE LOANS: $_______________________
-----------------
</TABLE>
The undersigned officer of Company, to the best of his or her
knowledge, and Company certify that (i) as of the Funding Date, the
representations and warranties contained in each of the Credit Documents are
true, correct and complete in all material respects on and as of such Funding
Date to the same extent as though made on and as of such date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties are true, correct and
complete in all material respects on and as of such earlier date; (ii) as of the
Funding Date, no injunction or other restraining order shall have been issued
and no hearing to cause an injunction or other restraining order to be issued
shall be pending or noticed with respect to any action, suit or proceeding
seeking to enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, the borrowing contemplated hereby; and
(iii) as of the Funding Date, no event has occurred and is continuing or would
result from the consummation of the borrowing contemplated hereby that would
constitute an Event of Default or a Default.
Date: ____________________ SIMMONS COMPANY
By: __________________________
Name:
Title:
-35-
<PAGE> 190
EXHIBIT A-2 TO
CREDIT AND GUARANTY AGREEMENT
- --------------------------------------------------------------------------------
CONVERSION/CONTINUATION NOTICE
Reference is made to the Credit and Guaranty Agreement, dated as of
October 29, 1998 (as it may be amended, supplemented or otherwise modified, the
"CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein
being used herein as therein defined), by and among Simmons Company, a Delaware
corporation ("COMPANY"), Simmons Holdings, Inc. and certain Subsidiaries of
Company, as Guarantors, the Lenders (as such terms are defined therein), Goldman
Sachs Credit Partners L.P., as Joint Lead Arranger and Syndication Agent,
Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford Branch,
as Administrative Agent.
Pursuant to Section 2.8 of the Credit Agreement, Company desires to
convert or to continue the following Loans, each such conversion and/or
continuation to be effective as of
- -------------------:
1. TERM LOANS:
-----------
<TABLE>
<CAPTION>
Tranche A Term Loans
--------------------
<S> <C> <C>
(i) Amount of Eurodollar Rate Loans to be continued as
Eurodollar Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(ii) Amount of Base Rate Loans to be converted to Eurodollar
Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(iii) Amount of Eurodollar Rate Loans
to be converted to Base Rate Loans: $________________
Tranche B Term Loans
--------------------
(iv) Amount of Eurodollar Rate Loans to be continued as
Eurodollar Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(v) Amount of Base Rate Loans to be converted to Eurodollar
Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(vi) Amount of Eurodollar Rate Loans
</TABLE>
A-2-1
<PAGE> 191
<TABLE>
<S> <C> <C>
to be converted to Base Rate Loans: $________________
Tranche C Term Loans
--------------------
(vii) Amount of Eurodollar Rate Loans to be continued as
Eurodollar Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(viii) Amount of Base Rate Loans to be converted to Eurodollar
Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(ix) Amount of Eurodollar Rate Loans
to be converted to Base Rate Loans: $________________
2. REVOLVING LOANS:
(i) Amount of Eurodollar Rate Loans to be continued as
Eurodollar Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(ii) Amount of Base Rate Loans to be converted to Eurodollar
Rate Loans, with an initial
Interest Period of __________ month(s): $________________
(iii) Amount of Eurodollar Rate Loans
to be converted to Base Rate Loans: $________________
</TABLE>
In the case of a conversion to or continuation of a Eurodollar Rate
Loan, the undersigned officer, to the best of his or her knowledge, and Company
certify that (i) no Event of Default or Default has occurred and is continuing,
and (ii) the conversion or continuation date thereof is the expiration date of
such Loan's Interest Period.
Date: ____________________ SIMMONS COMPANY
By: __________________________
Title:
A-2-2
<PAGE> 192
EXHIBIT A-3 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
ISSUANCE NOTICE
Reference is made to the Credit and Guaranty Agreement, dated as of
October 29, 1998 (as it may be amended, supplemented or otherwise modified, the
"CREDIT AGREEMENT"; the terms defined therein and not otherwise defined herein
being used herein as therein defined), by and among Simmons Company, a Delaware
corporation ("COMPANY"), Simmons Holdings, Inc. and certain Subsidiaries of
Company, as Guarantors, the Lenders (as such terms are defined therein), Goldman
Sachs Credit Partners L.P., as Joint Lead Arranger and Syndication Agent,
Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford Branch,
as Administrative Agent.
Pursuant to SECTION 2.3 of the Credit Agreement, Company desires
Letters of Credit to be issued on _________________ (the "ISSUANCE DATE") as
follows:
<TABLE>
<CAPTION>
1. COMMERCIAL LETTERS OF CREDIT:
-----------------------------
<S> <C> <C>
Aggregate Face Amounts to be issued: $________________________
2. STANDBY LETTERS OF CREDIT:
--------------------------
Aggregate Face Amounts to be issued: $________________________
</TABLE>
Attached hereto for each such Letter of Credit is (i) the name and
address of the beneficiary, (ii) the expiration date, and (iii) either (a) the
verbatim text of such proposed Letter of Credit, or (b) a description of the
proposed terms and conditions of such Letter of Credit, including a precise
description of any documents to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of such Letter of
Credit, would require the Issuing Lender to make payment under such Letter of
Credit.
The undersigned officer of Company, to the best of his or her
knowledge, and Company certify that (i) as of the Issuance Date, the
representations and warranties contained in each of the Credit Documents are
true, correct and complete in all material respects on and as of such Issuance
Date to the same extent as though made on and as of such date, except to the
extent such representations and warranties specifically relate to an earlier
date, in which case such representations and warranties are true, correct and
complete in all material respects on and as of such earlier date; (ii) as of the
Issuance Date, no event has occurred and is continuing or would result from the
issuance contemplated hereby that would constitute an Event of Default or a
Default; and (iii) as of the Issuance Date, no injunction or other restraining
order has been issued and no hearing to cause an
A-3-1
<PAGE> 193
injunction or other restraining order to be issued is pending or noticed with
respect to any action, suit or proceeding seeking to enjoin or otherwise prevent
the consummation of, or to recover any damages or obtain relief as a result of,
the issuance contemplated hereby.
Date: ____________________ SIMMONS COMPANY
By: __________________________
Title:
A-3-1
<PAGE> 194
EXHIBIT B-1 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
TRANCHE A TERM LOAN NOTE
$________________________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, SIMMONS COMPANY, a Delaware corporation
("COMPANY"), promises to pay to the order of ________________ ("PAYEE") or its
registered assigns the principal amount of _______ DOLLARS ($_____________) in
the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement dated as of October 29, 1998 (as it may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), by and among Company, Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
Company shall make principal payments on this Note as set forth in
SECTION 2.11(a) of the Credit Agreement.
This Note is one of Company's "Tranche A Term Notes" in the aggregate
principal amount of $70,000,000.00 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Tranche A Term
Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, the failure to make a notation of any payment made on this Note
shall not limit or otherwise affect the obligations of Company hereunder with
respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
B-1-1
<PAGE> 195
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SIMMONS COMPANY
By: __________________________
Title: ________________________
B-1-2
<PAGE> 196
EXHIBIT B-2 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
TRANCHE B TERM LOAN NOTE
$________________________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, SIMMONS COMPANY, a Delaware corporation
("COMPANY"), promises to pay to the order of ________________ ("PAYEE") or its
registered assigns the principal amount of _______ DOLLARS ($_____________) in
the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement dated as of October 29, 1998 (as it may be
amended, supplemented or otherwise modified from time to time, the"CREDIT
AGREEMENT"), by and among Company, Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
Company shall make principal payments on this Note as set forth in
SECTION 2.11(b) of the Credit Agreement.
This Note is one of Company's "Tranche B Term Notes" in the aggregate
principal amount of $70,000,000.00 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Tranche B Term
Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, the failure to make a notation of any payment made on this Note
shall not limit or otherwise affect the obligations of Company hereunder with
respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
B-2-1
<PAGE> 197
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SIMMONS COMPANY
By: __________________________
Title: ________________________
B-2-2
<PAGE> 198
EXHIBIT B-3 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
TRANCHE C TERM LOAN NOTE
$________________________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, SIMMONS COMPANY, a Delaware corporation
("COMPANY"), promises to pay to the order of ________________ ("PAYEE") or its
registered assigns the principal amount of _______ DOLLARS ($_____________) in
the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement dated as of October 29, 1998 (as it may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), by and among Company, Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
Company shall make principal payments on this Note as set forth in
SECTION 2.11(c) of the Credit Agreement.
This Note is one of Company's "Tranche C Term Notes" in the aggregate
principal amount of $50,000,000.00 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Tranche C Term
Loan evidenced hereby was made and is to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, the failure to make a notation of any payment made on this Note
shall not limit or otherwise affect the obligations of Company hereunder with
respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
B-3-1
<PAGE> 199
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SIMMONS COMPANY
By: __________________________
Title: ________________________
B-3-2
<PAGE> 200
EXHIBIT B-4 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
REVOLVING LOAN NOTE
$________________________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, SIMMONS COMPANY, a Delaware corporation
("COMPANY"), promises to pay to the order of ________________ ("PAYEE") or its
registered assigns, on or before October __, 2004, the lesser of (i) __________
DOLLARS ($_______________) and (ii) the unpaid principal amount of all advances
made by Payee to Company as Revolving Loans under the Credit Agreement referred
to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement dated as of October 29, 1998 (as it may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), by and among Company, Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
This Note is one of Company's "Revolving Notes" in the aggregate
principal amount of $80,000,000 and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Revolving Loans
evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loans evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, the failure to make a notation of any payment made on this Note
shall not limit or otherwise affect the obligations of Company hereunder with
respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
B-4-1
<PAGE> 201
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SIMMONS COMPANY
By: __________________________
Title: ________________________
B-4-2
<PAGE> 202
TRANSACTIONS
ON
REVOLVING NOTE
--------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
---- ----------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
B-4-3
<PAGE> 203
EXHIBIT B-5 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
SWING LINE NOTE
$10,000,000.00 New York, New York
October 29, 1998
FOR VALUE RECEIVED, SIMMONS COMPANY, a Delaware corporation
("COMPANY"), promises to pay to _______________________ ("PAYEE"), on or before
October __, 2004, the lesser of (i) TEN MILLION DOLLARS ($10,000,000.00) and
(ii) the unpaid principal amount of all advances made by Payee to Company as
Swing Line Loans under the Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Credit and Guaranty Agreement dated as of October 29, 1998 (as it may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), by and among Company, Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Capitalized terms used herein
not otherwise defined herein shall have the meanings ascribed thereto in the
Credit Agreement.
This Note is Company's "SWING LINE NOTE" and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Swing Line Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment and to prepayment at the
option of Company, each as provided in the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
B-5-1
<PAGE> 204
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in the Credit Agreement, incurred in the
collection and enforcement of this Note. Company hereby consents to renewals and
extensions of time at or after the maturity hereof, without notice, and hereby
waives diligence, presentment, protest, demand and notice of every kind and, to
the full extent permitted by law, the right to plead any statute of limitations
as a defense to any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
SIMMONS COMPANY
By: __________________________
Title: ________________________
B-5-2
<PAGE> 205
TRANSACTIONS
ON
SWING LINE NOTE
---------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
---- --------- --------- --------- -------
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
B-5-3
<PAGE> 206
EXHIBIT C TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFY AS FOLLOWS:
1. We are the duly elected [Title] and [Title] of Simmons Company, a
Delaware Corporation ("Company").
2. We have reviewed the terms of that certain Credit and Guaranty
Agreement dated as of October 29, (as so amended, supplemented or otherwise
modified, the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined in this Certificate (including Attachment No. 1 annexed hereto and made
a part hereof (the "ATTACHMENT") being used in this Certificate as therein
defined), by and among Company, Simmons Holdings, Inc. and certain Subsidiaries
of Company, as Guarantors, the Lenders (as such terms are defined therein),
Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and Syndication
Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford
Branch, as Administrative Agent, and the terms of the other Credit Documents,
and we have made, or have caused to be made under our supervision, a review in
reasonable detail of the transactions and condition of Company and its
Subsidiaries during the accounting period covered by the attached financial
statements.
3. The examination described in paragraph 2 above did not disclose, and
we have no knowledge of, the existence of any condition or event which
constitutes an Event of Default or Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth in a separate attachment, if any, to
this Certificate, describing in detail, the nature of the condition or event,
the period during which it has existed and the action which Company has taken,
is taking, or proposes to take with respect to each such condition or event.
The foregoing certifications, together with the computations set forth
in Attachment No. 1 and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ______ day of ____________
pursuant to SECTION 5.1(d) of the Credit Agreement.
SIMMONS COMPANY
By: __________________________
Title: ________________________
By: __________________________
Title: _________________________
C-1
<PAGE> 207
ATTACHMENT NO. 1 TO
COMPLIANCE CERTIFICATE
----------------------
<TABLE>
<CAPTION>
1. INDEBTEDNESS
------------
<S> <C> <C>
(i) Indebtedness permitted under SECTION 6.1(iv): $_____________
(ii) Maximum permitted under SECTION 6.1(iv): $_____________
(iii) Indebtedness permitted under SECTION 6.1(vi): $_____________
(iv) Maximum permitted under SECTION 6.1(vi): $_____________
(v) Indebtedness permitted under SECTION 6.1(viii): $_____________
(vi) Maximum permitted under SECTIOn 6.1(viii): $_____________
(vii) Indebtedness permitted under SECTION 6.1(xi): $_____________
(viii) Maximum permitted under SECTION 6.1(xi): $_____________
2. LIENS
-----
(i) Indebtedness secured by Liens permitted under
SECTION 6.2(ix): $_____________
(ii) Maximum permitted under SECTION 6.2(ix): $_____________
3. INVESTMENTS
-----------
(i) Investments permitted under SECTION 6.3(i): $_____________
(ii) Maximum permitted under SECTION 6.3(i): $_____________
(iii) Investments permitted under SECTION 6.3(vi): $_____________
(iv) Maximum permitted under SECTION 6.3(vi): $_____________
(v) Investments permitted under SECTION 6.3(viii): $_____________
(vi) Maximum permitted under SECTION 6.3(viii): $_____________
4. CONTINGENT OBLIGATIONS
----------------------
(i) Contingent Obligations permitted under SECTION 6.4(vii):
$_____________
(ii) Maximum permitted under SECTION 6.4(vii): $_____________
</TABLE>
C-2
<PAGE> 208
<TABLE>
<CAPTION>
5. MINIMUM FIXED CHARGE COVERAGE RATIO
-----------------------------------
(for the four-Fiscal Quarter period
ending ______________)
<S> <C> <C>
(i) Consolidated Net Income: $_____________
(ii) Consolidated Interest Expense: $_____________
(iii) Provisions for taxes based on income: $_____________
(iv) Total depreciation expense: $_____________
(v) Total amortization expense: $_____________
(vi) Management Fees $_____________
(vii) ESOP Expenses $_____________
(viii) Recapitalization costs from SCHEDULE O $_____________
(ix) Other non-cash items reducing Consolidated
Net Income: $_____________
(x) Other non-cash items increasing Consolidated
Net Income: $(____________)
(xi) Consolidated Adjusted EBITDA ((i) through (x) inclusive): $_____________
(xii) Consolidated Rental Payments $_____________
(xiii) Consolidated Adjusted EBITDAR ((xi) + (xii)) $_____________
(xiv) Consolidated Cash Interest Expense $_____________
(xv) Consolidated Fixed Charges ((xii)+(xiv)): $_____________
(xvi) Fixed Charge Coverage Ratio (xiii):(xv): ____:1.00
(xvii) Minimum ratio required under SECTION 6.6(a): ____:1.00
6. MINIMUM CASH INTEREST COVERAGE RATIO
(for the four-Fiscal Quarter
period ending ______________)
(i) Consolidated Adjusted EBITDA (5(x)) $_____________
(ii) Consolidated Cash Interest Expense $_____________
(iii) Cash Interest Coverage Ratio (i):(ii) ___:1.00
(iv) Minimum ratio required under SECTION 6.6(b): ___:1.00
7. MAXIMUM LEVERAGE RATIO
(as of _____________)
(i) Consolidated Adjusted EBITDA (5(x)) $_____________
(ii) Consolidated Total Debt: $_____________
(iii) Leverage Ratio (i):(ii): ____:1.00
(iv) Maximum ratio permitted under SECTION 6.6(c): ____:1.00
</TABLE>
C-3
<PAGE> 209
<TABLE>
<S> <C> <C>
8. MAXIMUM SENIOR DEBT LEVERAGE RATIO
(as of _____________)
(i) Consolidated Adjusted EBITDA $_____________
(ii) Consolidated Total Senior Debt: $_____________
(iii) Senior Debt Leverage Ratio (i):(ii): ____:1.00
(iv) Maximum ratio permitted under SECTION 6.6(d): ____:1.00
9. FUNDAMENTAL CHANGES
(i) Aggregate fair market value of assets sold in any
one or more Asset Sales after Closing Date in one
or more transactions permitted under SECTION 6.7(iv): $_____________
(ii) Maximum permitted under SECTION 6.7(iv): $_____________
10. CONSOLIDATED CAPITAL EXPENDITURES
(i) Consolidated Capital Expenditures for Fiscal
Year-to-date: $_____________
(ii) Maximum amount of Consolidated Capital
Expenditures permitted under SECTION 6.8 for
Fiscal Year: $_____________
</TABLE>
C-4
<PAGE> 210
EXHIBIT D-1 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
OPINIONS OF COUNSEL TO CREDIT PARTIES
[TO BE PROVIDED BY ROPES & GRAY]
D-1-1
<PAGE> 211
EXHIBIT D-2 TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
[FORM OF OPINION OF
SKADDEN, ARPS, SLATE MEAGHER & FLOM LLP]
October 29, 1998
To the Persons listed on Schedule I
attached hereto
and
The Lenders Party to the Credit
Agreement Referenced Below
Re: Simmons Company
---------------
Ladies and Gentlemen:
We have acted as counsel to Goldman Sachs Credit Partners
L.P., as joint lead arranger and syndication agent (in such capacity, the
"SYNDICATION AGENT"), in connection with the preparation and delivery of that
certain Credit and Guaranty Agreement, dated as of October 29, 1998 (the "CREDIT
AGREEMENT"), among Simmons Company, a Delaware corporation (the "COMPANY"),
Simmons Holdings Inc., a Delaware corporation ("HOLDINGS") and certain other
subsidiaries of the Company as guarantors (collectively referred to herein as
the "GUARANTORS"), the financial institutions listed therein as Lenders, the
Syndication Agent, Warburg Dillon Read LLC, as joint lead arranger ("WARBURG"),
and UBS A.G., Stamford Branch, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT"; Warburg, the Syndication Agent and the Administrative
Agent are collectively referred to herein as the "AGENTS") and in connection
with the preparation and delivery of certain related documents.
We have participated in various conferences with
representatives of the Company and the Agents and conferences and telephone
calls with Ropes and Gray, counsel to the Company, Holdings and the other
Guarantors, during which the Credit Agreement and related matters have been
discussed, and we have also participated in the meeting held on the date hereof
(the "CLOSING") incident to the funding of the initial loans made under the
Credit Agreement. We have reviewed the forms of the Credit Agreement and the
exhibits thereto, including the forms of the promissory notes annexed thereto
(the "NOTES"), and the opinion of Ropes and Gray (the "OPINION") and the
officers' certificates and other documents delivered at the Closing. We have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals or copies and the due authority of all persons
executing the same, and we have relied as to factual matters on the documents
that we have reviewed.
D-2-1
<PAGE> 212
Although we have not independently considered all of the
matters covered by the Opinion to the extent necessary to enable us to express
the conclusions therein stated, we believe that the Opinion and the officers'
certificates and other documents delivered in connection with the execution and
delivery of, and as conditions to the making of the initial loans under, the
Credit Agreement and the Notes are substantially responsive to the requirements
of the Credit Agreement.
Very truly yours,
D-2-2
<PAGE> 213
SCHEDULE I
----------
Goldman Sachs Credit Partners L.P., as
Joint Lead Arranger and Syndication Agent
85 Broad Street
New York, New York 10004
Warburg Dillon Read,
as Joint Lead Arranger
535 Madison Avenue
New York, New York 10022
UBS A.G., Stamford Branch,
as Administrative Agent
677 Washington Blvd.
Stamford, Connecticut 06901
D-2-3
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EXHIBIT E TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of ______________ (this "AGREEMENT"), by and
between the parties signatory hereto and designated as Assignor ("ASSIGNOR") and
Assignee ("ASSIGNEE").
W I T N E S S E T H :
---------------------
WHEREAS, Assignor is party to the Credit and Guaranty Agreement, dated as
of October 29, 1998 (as it may be from time to time amended, supplemented or
otherwise modified, the "CREDIT AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Company, Simmons Holdings, Inc. and certain Subsidiaries of Company, as
Guarantors, the Lenders (as such terms are defined therein), Goldman Sachs
Credit Partners L.P., as Joint Lead Arranger and Syndication Agent, Warburg
Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford Branch, as
Administrative Agent; and
WHEREAS, Assignor desires to sell and assign to Assignee, and Assignee
desires to purchase and assume from Assignor, certain rights and obligations of
Assignor under the Credit Agreement.
NOW, THEREFORE, in consideration of the agreements and covenants herein
contained, the parties hereto agree as follows:
SECTION 1. ASSIGNMENT AND ASSUMPTION
Subject to the terms and conditions hereof, as of the Effective Date as set
forth on SCHEDULE I, Assignor sells and assigns to Assignee, without recourse,
representation or warranty (except as expressly set forth herein), and Assignee
purchases and assumes from Assignor, the percentage interest specified on
SCHEDULE I in all of the rights and obligations with respect to the Commitments
and outstanding Loans of Lenders arising under the Credit Agreement and the
other Credit Documents (the "ASSIGNED SHARE"). In consideration of such
assignment, Assignee hereby agrees to pay to Assignor on the date set forth on
Schedule I as the "Settlement Date", the principal amount of any outstanding
loans included within the Assigned Share (such principal amount referred to
herein as the "PURCHASE PRICE"), such payment to be made by wire transfer of
immediately available funds. Upon the occurrence of the Effective Date: (a) the
Assignee shall have the rights and obligations of a "Lender" to the extent of
the Assigned Share and shall thereafter be a party to the Credit Agreement and a
"Lender" for all purposes of the Credit Documents; (b) Assignor shall, to the
extent of the Assigned Share, relinquish its rights (other than any rights which
survive the termination of the Credit Agreement under SECTION 10.8 thereof) and
be released from its obligations under the Credit Agreement; and (c) the
Revolving Loan Commitments, if applicable, shall be modified to reflect the
Revolving Loan Commitment of Assignee and any remaining Revolving Loan
Commitment of Assignor. From and after the Effective Date, Administrative Agent
shall make all payments under
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the Credit Agreement in respect of the Assigned Share (i) in the case of any
interest and fees that shall have accrued prior to the Settlement Date, to
Assignor, and (ii) in all other cases, to Assignee; PROVIDED, Assignor and
Assignee shall make payments directly to each other to the extent necessary to
effect any appropriate adjustments in any amounts distributed to Assignor and/or
Assignee by Administrative Agent under the Credit Documents in respect of the
Assigned Share in the event that, for any reason whatsoever, the payment of
consideration contemplated by this SECTION 1 occurs on a date other than the
Settlement Date. Without limiting the generality of the foregoing, the parties
hereto hereby expressly acknowledge and agree that any assignment of all or any
portion of Assignor's rights and obligations relating to Assignor's Revolving
Loan Commitment shall include (i) in the event the Assignor is Issuing Bank,
with respect to outstanding Letters of Credit (any such Letters of Credit being
"ASSIGNOR LETTERS OF CREDIT"), the sale to Assignee of a participation in such
Assignor Letters of Credit and any drawings thereunder as contemplated by
SECTION 2.3(e) of the Credit Agreement and (ii) the sale to Assignee of a
ratable portion of any participations previously purchased by Assignor pursuant
to SECTION 2.3(f) of the Credit Agreement with respect to Letters of Credit
other than Assignor Letters of Credit.
SECTION 2. EFFECTIVE DATE
Notwithstanding anything herein to the contrary, the Effective Date shall
not be deemed to have occurred until each of the following conditions are
satisfied, as determined in the reasonable judgment of each of Assignor,
Assignee and Administrative Agent: (i) the execution of a counterpart hereof by
each of Assignor and Assignee; (ii) the payment of the Purchase Price on the
Settlement Date; (iii) the receipt by Administrative Agent of the processing and
recordation fee referred to in SECTION 10.6(d) of the Credit Agreement; (iv) the
receipt by the Assignor of any consent of Company and Administrative Agent as
required under SECTION 10.6(c) of the Credit Agreement; (v) in the event
Assignee is a Non-US Lender, the delivery by Assignee to Administrative Agent of
such forms, certificates or other evidence with respect to United States federal
income tax withholding matters as Assignee may be required to deliver to
Administrative Agent pursuant to SECTION 2.20(c); (vi) the receipt by
Administrative Agent of originals or telefacsimiles of executed counterparts
hereof; and (vii) the recordation by Administrative Agent in the Register of the
pertinent information regarding this Assignment pursuant to SECTION 10.6(d) of
the Credit Agreement.
SECTION 3. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) Assignor represents and warrants to Assignee that (i) Assignor is the
legal and beneficial owner of the Assigned Share, free and clear of any adverse
claim; and (ii) Schedule I sets forth the aggregate amount of the Commitments
and the aggregate amount of the Loans, in each case as of the Effective Date.
(b) Assignee represents and warrants to Assignor that (i) it is an Eligible
Assignee; that it has experience and expertise in the making of loans such as
the Loans; (ii) it has acquired the Assigned Share for its own account in the
ordinary course of its business and without a view to distribution of the Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of SECTION
10.6 of the Credit Agreement, the
E-2
<PAGE> 216
disposition of the Assigned Share or any interests therein shall at all times
remain within its exclusive control); (III) it has received, reviewed and
approved a copy of the Credit Agreement (including all Exhibits and Schedules
thereto); and (IV) it has received from Assignor such financial information
regarding Company and its Subsidiaries as is available to Assignor and as
Assignee has requested, that it has made its own independent investigation of
the financial condition and affairs of Company and its Subsidiaries in
connection with the assignment evidenced by this Agreement, and that it has made
and shall continue to make its own appraisal of the creditworthiness of Company
and its Subsidiaries. Assignor shall have no duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Assignee or to provide Assignee with any other credit or
other information with respect thereto, whether coming into its possession
before the making of the initial Loans or at any time or times thereafter, and
Assignor shall not have any responsibility with respect to the accuracy of or
the completeness of any information provided to Assignee.
(C) Each party to this Agreement represents and warrants to the other party
hereto that it has full power and authority to enter into this Agreement and to
perform its obligations hereunder in accordance with the provisions hereof, that
this Agreement has been duly authorized, executed and delivered by such party
and that this Agreement constitutes a legal, valid and binding obligation of
such party, enforceable against such party in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
(D) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Credit Documents or for any representations,
warranties, recitals or statements made therein or made in any written or oral
statements or in any financial or other statements, instruments, reports or
certificates or any other documents furnished or made by Assignor to Assignee or
by or on behalf of Company or any of its Subsidiaries to Assignor or Assignee in
connection with the Credit Documents and the transactions contemplated thereby
or for the financial condition or business affairs of Company or any other
Person liable for the payment of any Obligations, nor shall Assignor be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained in any of the Credit
Documents or as to the use of the proceeds of the Loans or the use of the
Letters of Credit or as to the existence or possible existence of any Event of
Default or Default.
SECTION 4. MISCELLANEOUS
Assignor and Assignee each agrees from time to time, upon request of such
other party, to take such additional actions and to execute and deliver such
additional documents and instruments as such other party may reasonably request
to effect the transactions contemplated by, and to carry out the intent of, this
Agreement. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought. Any notice or other communication herein
required or permitted to be given shall be given in pursuant to SECTION 10.1
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<PAGE> 217
of the Credit Agreement, and all for purposes thereof, the notice address of
Assignee shall be the address as set forth on SCHEDULE I. In case any provision
in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns. This Agreement may be
executed in one or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
E-4
<PAGE> 218
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the Effective Date by their respective
officers thereunto duly authorized.
[ASSIGNOR],
Assignor
By
--------------------------
Title:
---------------------
[ASSIGNEE],
Assignee
By
--------------------------
Title:
---------------------
[Consented to as of the Effective Date:]
[SIMMONS COMPANY] [UBS A.G., STAMFORD BRANCH,
as Administrative Agent]
By: ______________________ By: _________________________
Name: Name:
Title: Title:
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<PAGE> 219
SCHEDULE I TO
ASSIGNMENT AGREEMENT
1. Effective Date: ________________, _____
---------------
2. Settlement Date: ________________, _____
----------------
3. Assigned Share:
---------------
==================================================== =====================
Tranche A Term Loan Exposure ___%
- ---------------------------------------------------- ---------------------
Tranche B Term Loan Exposure ___%
- ---------------------------------------------------- ---------------------
Tranche C Term Loan Exposure ___%
- ---------------------------------------------------- ---------------------
Revolving Loan Exposure ___%
==================================================== =====================
4. Aggregate Commitments:
----------------------
- ---------------------------------------------------- ---------------------
Revolving Loan Commitments $__________
==================================================== =====================
5. Aggregate Outstanding Loans:
==================================================== =====================
Tranche A Term Loans $__________
- ---------------------------------------------------- ---------------------
Tranche B Term Loans $__________
- ---------------------------------------------------- ---------------------
Tranche B Term Loans $__________
- ---------------------------------------------------- ---------------------
Revolving Loans $__________
==================================================== =====================
6. Payment Instructions:
---------------------
ASSIGNOR: ASSIGNEE:
Attention: Attention:
- ---------- ----------
7. Notice Instructions:
--------------------
E-6
<PAGE> 220
ASSIGNOR: ASSIGNEE:
Attention: Attention:
- ---------- ----------
E-7
<PAGE> 221
EXHIBIT F TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Credit and Guaranty Agreement
dated as of October 29, 1998 (said Credit Agreement, as amended, supplemented or
otherwise modified to the date hereof, being the "CREDIT AGREEMENT") by and
among Simmons Company ("COMPANY"), Simmons Holdings, Inc. and certain
Subsidiaries of Company, as Guarantors, the Lenders (as such terms are defined
therein), Goldman Sachs Credit Partners L.P., as Joint Lead Arranger and
Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger, and UBS
A.G., Stamford Branch, as Administrative Agent. Pursuant to SECTION 2.20(c) of
the Credit Agreement, the undersigned hereby certifies that it is not a "bank"
or other Person described in Section 881(c)(3) of the Internal Revenue Code of
1986, as amended.
[NAME OF LENDER]
By: ____________________
Title: __________________
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<PAGE> 222
EXHIBIT G TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
SOLVENCY CERTIFICATE
I, the undersigned, the [Title/Chief Financial Officer] of Simmons
Company, a Delaware corporation ("COMPANY" or "BORROWER"), do hereby certify as
follows:
1. This Certificate is furnished to the Agents and the Lenders pursuant
to Section 3.1(r) of the Credit and Guaranty Agreement dated as of October 29,
1998 (as it may be amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT") by and among Simmons Company, Simmons Holdings,
Inc. and certain Subsidiaries of Company, as Guarantors, the Lenders (as such
terms are defined therein), Goldman Sachs Credit Partners L.P., as Joint Lead
Arranger and Syndication Agent, Warburg Dillon Read LLC, as Joint Lead Arranger,
and UBS A.G., Stamford Branch, as Administrative Agent. Capitalized terms used
herein not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement.
2. For purposes of this Certificate, the terms below shall have the
following definitions:
"UNREASONABLY SMALL CAPITAL" relates to the ability of the Borrower on
a consolidated basis after giving effect to the consummation of the
Transaction, to continue as a going concern and not lack sufficient capital
for their present needs and anticipated needs, including, without
limitation, Identified Contingent Liabilities, without substantial
unplanned disposition of assets outside the ordinary course of business,
restructuring of debt, externally forced revisions of its operations, or
similar actions.
"FAIR MARKET VALUE" means the amount at which the aggregate assets of
an entity would change hands between a willing buyer and a willing seller,
within a commercially reasonable period of time, each having reasonable
knowledge of the relevant facts, neither being under any compulsion to act,
with equity to both.
"IDENTIFIED CONTINGENT LIABILITIES" means the maximum reasonably
estimated liabilities of the Borrower on a consolidated basis that may
result from pending litigation, asserted claims and assessments,
guaranties, indemnities, environmental conditions, contract obligations,
uninsured risks, and other contingent liabilities as identified and
explained to me in terms of their nature and estimated dollar magnitude by
management of the Borrower ("MANAGEMENT"). Based on my reasonable
inquiries and analysis in connection with this certificate, I have no
reason to believe that such identified contingent liabilities are
materially understated and nothing has come to my attention suggesting that
material contingent liabilities have not been identified or disclosed. I do
not give any opinion as to
G-1
<PAGE> 223
whether such contingent liabilities meet the criteria for accrual under
Statement of Financial Accounting Standards No. 5.
"FINANCING" means the indebtedness being incurred, assumed or
guaranteed by the Borrower through the issuance of the Senior Subordinated
Bridge Loans, the Junior Subordinated Notes and the Loans from the Lenders
under the Credit Agreement.
"PRESENT FAIR SALABLE VALUE" means the aggregate amount that may be
realized from an independent willing buyer if an entity's assets are sold
as an entirety with reasonable promptness in an arm's-length transaction
under present conditions for the sale of assets as an entirety of the
business comprising such entity.
"STATED LIABILITIES" means the recorded liabilities of the Borrower on
a consolidated basis pursuant to the unaudited June 27, 1998 balance sheet
as prepared by the Borrower. Stated Liabilities excludes indebtedness under
the Financing. Based upon representations made within the Credit Agreement
by the Borrower and my investigations as described herein, I have no reason
to believe that there has been any such material adverse change since June
27, 1998.
3. For purposes of the Certificate, I, or officers of Company under my
direction and supervision, have performed the following procedures as of and for
the periods set forth below.
a. I have reviewed the financial statements (including the pro forma
financial statements) referred to in SECTION 5.1 of the Credit
Agreement.
b. I have made inquiries of certain officials of Company and its
Subsidiaries who have responsibility for financial and accounting
matters regarding (i) the existence and amount of Identified Contingent
Liabilities associated with the business of Company and its
Subsidiaries and (ii) whether the unaudited pro forma projected
consolidated financial statements referred to in paragraph (a) above
have been constructed based on information and assumptions that, in the
judgment of management, are reasonable.
c. I have knowledge of and have reviewed to my satisfaction the Credit
Documents and the respective Schedules and Exhibits thereto.
d. With respect to Identified Contingent Liabilities, I:
i. inquired of certain officials of Company and its Subsidiaries
who have responsibility for legal, financial and accounting
matters as to the existence and estimated liability with
respect to all contingent liabilities associated with the
business of Company and its Subsidiaries; and
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<PAGE> 224
ii. confirmed with officers of Company and its Subsidiaries that,
to the best of such officers' knowledge, (i) all appropriate
items were included in Stated Liabilities or Identified
Contingent Liabilities and that (ii) the amounts relating
thereto were the maximum estimated amount of liabilities
reasonably likely to result therefrom as of the date hereof.
e. I have made inquiries of certain officers of Company and its
Subsidiaries who have responsibility for financial reporting and
accounting matters regarding whether they were aware of any events or
conditions that, as of the date hereof, would cause Borrower (on a
consolidated basis), after giving effect to the consummation of the
Recapitalization, to (i) have assets with a Fair Market Value that is
less than the sum of Stated Liabilities, Identified Contingent
Liabilities and the Financing; (ii) have assets with a Present Fair
Saleable Value that is less than the sum of Stated Liabilities,
Identified Contingent Liabilities and the Financing; (iii) have
Unreasonably Small Capital; or (iv) not be able to pay the respective
Stated Liabilities, Identified Contingent Liabilities, and the
Financing as they mature or otherwise become payable.
4. Based on and subject to the foregoing, I hereby certify on behalf of
Company that, after giving effect to the consummation of the
Recapitalization, it is my opinion that:
a. The Fair Market Value of the assets of the Borrower (on a consolidated
basis) exceeds and will exceed its liabilities (including, without
limitation, the Financing, Stated Liabilities and Identified Contingent
Liabilities);
b. The Present Fair Saleable Value of the assets of the Borrower (on a
consolidated basis) exceeds and will exceed its probable liabilities on
its debts (including, without limitation, the Financing, Stated
Liabilities and Identified Contingent Liabilities) as such debts become
absolute and matured;
c. The Borrower (on a consolidated basis) is and will be able to pay its
debts (including, without limitation, the Financing, Stated Liabilities
and Identified Contingent Liabilities) as such debts mature;
d. The Borrower (on a consolidated basis) does not and will not have
Unreasonably Small Capital with which to conduct its present and
anticipated business.
I am not an appraiser or a valuation expert and have not obtained or
relied on the services of appraisers or valuation experts in making the above
statements. All such statements regarding Fair Market Value and Present Fair
Saleable Value are made to the best of my knowledge without having made any
investigation or inquiry, except as specifically provided in Paragraph 3 above.
This Certificate is given solely in my capacity as an officer of Company and not
in my individual capacity.
G-3
<PAGE> 225
IN WITNESS WHEREOF, I have set forth my name below as of the date
written.
Date: By:
----------- -----------------------------
Name:
Title:
G-4
<PAGE> 226
EXHIBIT H TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
CLOSING CERTIFICATE
-------------------
Pursuant to Section 3.1(t) of the Credit and Guaranty Agreement dated
as of October 29, 1998 (as it may be amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT"), by and among Simmons Company,
Simmons Holdings, Inc. and certain Subsidiaries of Simmons Company, as
Guarantors, the Lenders (as such terms are defined therein), Goldman Sachs
Credit Partners L.P., as Joint Lead Arranger and Syndication Agent, Warburg
Dillon Read LLC, as Joint Lead Arranger, and UBS A.G., Stamford Branch, as
Administrative Agent, the undersigned [INSERT TITLE OF OFFICER] of [INSERT NAME
OF COMPANY] ("COMPANY") hereby certifies as follows:
5. The representations and warranties of Company set forth in each of
the Credit Documents to which it is a party or which are contained in any
certificate furnished by or on behalf of Company pursuant to any of the Credit
Documents to which it is a party are true and correct in all material respects
on and as of the date hereof with the same effect as if made on the date hereof,
except for representations and warranties expressly 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.
6. ___________________ is the duly elected and qualified Corporate
Secretary of Company and the signature set forth for such officer below is such
officer's true and genuine signature.
7. [No Default or Event of Default has occurred and is continuing as of
the date hereof or after giving effect to the Loans to be made on the date
hereof.] [BORROWER ONLY]
8. [The conditions precedent set forth in SECTION 3.1 of the Credit
Agreement were satisfied as of the Closing Date.] [BORROWER ONLY]
The undersigned Corporate Secretary of Company certifies as follows:
9. There are no liquidation or dissolution proceedings pending or to my
knowledge threatened against Company, nor has any other event occurred adversely
affecting or threatening the continued corporate existence of Company.
10. Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its organization.
11. Attached hereto as EXHIBIT A is a true and complete copy of
resolutions duly adopted by the Board of Directors of Company on
_________________; such resolutions have not in any
H-1
<PAGE> 227
way been amended, modified, revoked or rescinded, have been in full force and
effect since their adoption to and including the date hereof and are now in full
force and effect and are the only corporate proceedings of Company now in force
relating to or affecting the matters referred to therein.
12. Attached hereto as EXHIBIT B is a true and complete copy of the
By-Laws of Company as in effect on the date hereof.
13. Attached hereto as EXHIBIT C is a true and complete copy of the
Certificate of Incorporation of Company as in effect on the date hereof, and
such certificate has not been amended, repealed, modified or restated.
14. The following persons are now duly elected and qualified officers
of Company holding the offices indicated next to their respective names below,
and such officers have held such offices with Company at all times since the
date indicated next to their respective titles to and including the date hereof,
and the signatures appearing opposite their respective names below are the true
and genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of Company each of the Credit
Documents to which it is a party and any certificate or other document to be
delivered by Company pursuant to the Credit Documents to which it is a party:
<TABLE>
<CAPTION>
Name Office Date Signature
---- ------ ---- ---------
<S> <C> <C> <C>
- ------------------- --------------- ------------ -
- --------------
- ------------------- --------------- ------------ -
- --------------
- ------------------- --------------- ------------
- ---------------
- ------------------- --------------- ------------
- ---------------
</TABLE>
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<PAGE> 228
IN WITNESS WHEREOF, the undersigned have hereunto set our
names as of the date set forth below.
- --------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: October __, 1998
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<PAGE> 229
EXHIBIT I TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
COUNTERPART AGREEMENT
COUNTERPART AGREEMENT, dated ______________ (this "COUNTERPART"), is
delivered pursuant to the Credit and Guaranty Agreement dated as of October 29,
1998 (as it may be amended, supplemented or otherwise modified from time to
time, the "CREDIT AGREEMENT"), by and among Simmons Company, Simmons Holdings,
Inc. and certain Subsidiaries of Simmons Company, as Guarantors, the Lenders (as
such terms are defined therein), Goldman Sachs Credit Partners L.P., as Joint
Lead Arranger and Syndication Agent, Warburg Dillon Read LLC, as Joint Lead
Arranger, and UBS A.G., Stamford Branch, as Administrative Agent. Capitalized
terms used herein not otherwise defined herein shall have the meanings ascribed
thereto in the Credit Agreement..
The undersigned ("ADDITIONAL GUARANTOR") hereby agrees that this
Counterpart may be attached to the Credit Agreement and by the execution and
delivery hereof, the undersigned (I) becomes a Guarantor under the Credit
Agreement, (II) agrees to be bound by all of the terms thereof, and (III)
guaranties all of the Obligations in accordance with the term and conditions of
the Credit Agreement.
IN WITNESS WHEREOF, Additional Guarantor has caused this Counterpart to
be duly executed and delivered by its duly authorized officer as of
______________.
----------------------------------
(Name of Additional Guarantor)
By:
--------------------------------
Name:
Title:
Address:
--------------------
--------------------
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<PAGE> 230
EXHIBIT J TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This PLEDGE AND SECURITY AGREEMENT, dated as of October 29,
1998, is made by SIMMONS COMPANY, a Delaware corporation, as Borrower (the
"BORROWER"), SIMMONS HOLDINGS, INC., a Delaware corporation and CERTAIN OTHER
SUBSIDIARIES OF THE BORROWER PARTY HERETO, as Guarantors (the "GUARANTORS" and,
together with the Borrower, the "GRANTORS"), in favor of UBS A.G., STAMFORD
BRANCH, as Administrative Agent (the "ADMINISTRATIVE AGENT") for the benefit of
the Secured Parties (as defined below).
RECITALS:
WHEREAS, the parties hereto have entered into a Credit and
Guaranty Agreement, dated as of October 29, 1998, among the Borrower, the
Guarantors, the Financial Institutions named therein as Lenders, Goldman Sachs
Credit Partners L.P., as Joint Lead Arranger and Syndication Agent, Warburg
Dillon Read LLC, as Joint Lead Arranger, UBS A.G., Stamford Branch, as
Administrative Agent (said Agreement, as it may hereafter be amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT");
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, each Guarantor has agreed to guaranty the obligations
of the Borrower incurred under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligations of the
Lenders to extend credit to the Borrower under the Credit Agreement that the
obligations of the Borrower and the other Guarantors thereunder and under the
Credit Documents referred to therein be secured as provided herein;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to enter into the Credit Agreement and to make their
respective extensions of credit to the Borrower thereunder, and in consideration
of other Secured Obligations hereinafter incurred, each Grantor hereby agrees
with the Administrative Agent, for the ratable benefit of the Secured Parties,
as follows:
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<PAGE> 231
ARTICLE I
DEFINITIONS
15.1 Definitions. Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement. The following terms shall have the following meanings:
"ACCOUNT DEBTOR" shall mean the person who is obligated on a
Receivable.
"ACCOUNTS" shall mean "accounts" as such term is defined in
Section 9-106 of the UCC.
"AGREEMENT" shall mean this Pledge and Security Agreement, as
the same may from time to time be amended, supplemented or otherwise
modified.
"CAPITAL STOCK" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.
"CHATTEL PAPER" shall mean "chattel paper" as such term is
defined in Section 9-105(b) of the UCC.
"COLLATERAL" shall have the meaning assigned to it in Section
2 hereof.
"COLLATERAL ACCOUNT" shall mean the account (which may be a
securities account) maintained pursuant to this Agreement by the
Administrative Agent for the benefit of the Secured Parties entitled
"[Simmons Company, Inc. Collateral Account, UBS A.G., Stamford Branch,
as Administrative Agent for the benefit of certain Secured Parties, as
Secured Party]," and all funds, investment property and instruments or
other items from time to time credited to such account and all interest
thereon.
"COLLATERAL RECORDS" shall mean books, records, computer
software, computer printouts, customer lists, blueprints, technical
specifications, manuals, and similar items which relate to any
Collateral other than such items obtained under license or franchise
agreements which prohibit assignment or disclosure of such items.
"CONTRACTS" shall mean all contracts to which any Grantor now
is, or hereafter will be, bound, or a party, beneficiary or assignee
(including without limitation Copyright Licenses, Patent Licenses,
Trademark Licenses and Trade Secret Licenses), and all other
instruments, agreements and documents executed and delivered with
respect to such contracts, and all revenues, rentals, Proceeds and
other sums of money due and to become due from any of the foregoing, as
the same may be amended, supplemented or otherwise modified from time
to time in accordance with their terms.
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"COPYRIGHT LICENSES" shall mean all of any Grantor's right,
title, and interest in and to any and all agreements providing for the
granting of any right in or to Copyrights (whether the Grantor is
licensee or licensor thereunder) including, without limitation, each
agreement referred to in ITEM B of SCHEDULE IV.
"COPYRIGHTS" shall mean all of any Grantor's right, title, and
interest in and to all United States and foreign copyrights, all mask
works fixed in semi-conductor chip products (as defined under 17 U.S.C.
901 of the U.S. Copyright Act), whether registered or unregistered, now
or hereafter in force throughout the world, all registrations and
applications therefor including, without limitation, the registrations
and applications referred to in ITEM A of SCHEDULE IV, all rights
corresponding thereto throughout the world, all extensions and renewals
of any thereof, the right to sue for past infringements of any of the
foregoing, and all proceeds of the foregoing, including, without
limitation, licenses, royalties, income, payments, claims, damages, and
proceeds of suit.
"DEPOSIT ACCOUNTS" shall mean the Collateral Account and any
deposit account, including without limitation, "deposit accounts" as
such term is defined in Section 9-105(e) of the UCC and any other
deposit or securities account, together with any funds, instruments or
other items credited to any such account from time to time, and all
interest thereon.
"DOCUMENTS" shall mean "documents" as such term is defined in
Section 9-105(f) of the UCC.
"EQUIPMENT" shall mean "equipment" as such term is defined in
Section 9-109(2) of the UCC, including, without limitation, machinery,
manufacturing equipment, data processing equipment, computers, office
equipment, furniture, appliances, tools, furnishings, fixtures,
vehicles, motor vehicles, and any manuals, instructions, blueprints,
computer software and similar items which relate to the above, and any
and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all improvements thereon and
all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto.
"EVENT OF DEFAULT" shall have the meaning assigned thereto in
the Credit Agreement.
"FIXTURES" shall mean "fixtures" as such term is defined in
Section 9-313 of the UCC.
"GENERAL INTANGIBLES" shall mean "general intangibles" as such
term is defined in Section 9-106 of the UCC, including, without
limitation, rights to the payment of money (other than Receivables),
Trademarks, Copyrights, Patents and Contracts, licenses including,
without limitation, Trademark Licenses, Copyright Licenses, Patent
Licenses and Trade Secret Licenses and franchises, partnership
interests, joint venture interests, federal income tax refunds,
computer software, databases, inventions, designs, Trade
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Secrets, goodwill, trade names, fictitious business names, business
names, company names, business identifiers, trade styles and service
marks (whether or not registered), proprietary rights, customer lists,
supplier and customer contracts, sale orders, correspondence,
advertising materials, payments due in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of any property,
reversionary interests in pension and profit-sharing plans and
reversionary, beneficial and residual interests in trusts, credits with
and other claims against any Person, together with any collateral for
any of the foregoing and the rights under any security agreement
granting a security interest in such collateral.
"INSTRUMENTS" shall mean "instruments" as such term is defined
in Section 9- 105(1)(i) of the UCC.
"INSURANCE POLICIES" shall mean insurance policies, including
without limitation the insurance policies identified on the
Certificates of Liability Insurance attached to Schedule VI.
"INTELLECTUAL PROPERTY" shall mean, collectively, the
Copyrights, the Copyright Licenses, the Patents, the Patent Licenses,
the Trademarks, the Trademark Licenses, the Trade Secrets and the Trade
Secret Licenses.
"INTEREST RATE AGREEMENTS" shall mean interest rate or
currency protection or hedging arrangements, including without
limitation, caps, collars, floors, forwards and any other similar or
dissimilar interest rate or currency exchange agreements or other
interest rate or currency hedging arrangements (including the Hedge
Agreements).
"INVENTORY" shall mean "inventory" as such term is defined in
Section 9-109(4) of the UCC, including without limitation, all goods
(whether such goods are in the possession of any Grantor or of a bailee
or other Person for sale, lease, storage, transit, processing, use or
otherwise and whether consisting of whole goods, spare parts,
components, supplies, materials or consigned or returned or repossessed
goods), including without limitation, all such goods whether raw, in
process or finished, all materials usable in processing the same and
all documents of title covering any inventory, including but not
limited to work in process, materials used or consumed in Grantor's
business, now owned or hereafter acquired or manufactured by any
Grantor and held for sale in the ordinary course of its business; all
present and future substitutions therefor, parts and accessories
thereof and all additions thereto; and all proceeds thereof and
products of such inventory in any form whatsoever.
"MONEY" shall mean "money" as such term is defined in Section
1-201(24) of the UCC.
"MOTOR VEHICLES" shall mean motor vehicles, tractors, trailers
and other like property, if title thereto is governed by a certificate
of title ownership.
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"PATENT LICENSES" means all of any Grantor's right, title, and
interest in and to any and all agreements providing for the granting of
any right in or to Patents (whether the Grantor is licensee or licensor
thereunder) including, without limitation, each agreement referred to
in ITEM D of SCHEDULE IV.
"PATENTS" means all of any Grantor's right, title, and
interest in and to all United States and foreign patents and
applications for letters patent throughout the world, including, but
not limited to each patent and patent application referred to in Item C
of SCHEDULE IV, all reissues, divisions, continuations,
continuations-in-part, and reexaminations of any of the foregoing, all
rights corresponding thereto throughout the world, and all proceeds of
the foregoing including, without limitation, licenses, royalties,
income, payments, claims, damages, and proceeds of suit and the right
to sue for past infringements of any of the foregoing.
"PERMITTED INVESTMENTS" shall mean Cash and Cash Equivalents.
"PERSON" shall mean and include any individual, partnership,
joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or agency,
department or instrumentality thereof.
"PLEDGED NOTES" shall mean all promissory notes listed on
SCHEDULE I hereto, all intercompany notes at any time issued to any
Grantor and all other promissory notes issued or held by any Grantor
(other than promissory notes to be issued in connection with extensions
of trade credit by any Grantor in the ordinary course of business).
"PLEDGED STOCK" shall mean the shares of Capital Stock listed
on SCHEDULE I hereto, together with any other shares, stock
certificates, options or rights of any nature whatsoever in respect of
the Capital Stock of any Person that may be issued or granted to, or
held by, any Grantor while this Agreement is in effect.
"PROCEEDS" shall mean "proceeds" as such term is defined in
Section 9-306(1) of the UCC.
"RECEIVABLES" shall mean all rights to payment for goods sold
or leased or services rendered, whether or not earned by performance
and all rights in respect of the Account Debtor, including without
limitation, all such rights in which the Grantor has any right, title
or interest by reason of the purchase thereof by the Grantor, and
including without limitation all such rights constituting or evidenced
by any Account, Chattel Paper, Instrument, General Intangible, note,
contract, invoice, purchase order, draft, acceptance, intercompany
account, security agreement, or other evidence of indebtedness or
security, together with (a) any collateral assigned, hypothecated or
held to secure any of the foregoing and the rights under any security
agreement granting a security interest in such collateral, (b) all
goods, the sale of which gave rise to any of the foregoing, including,
without limitation, all rights in any returned or repossessed goods and
unpaid seller's rights, (c) all guarantees, endorsements and
indemnifications on, or of, any of the
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foregoing, and (d) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection
therewith.
"RECEIVABLES RECORDS" shall mean (a) all original copies of
all documents, instruments or other writings evidencing the
Receivables, (b) all books, correspondence, credit or other files,
records, ledger sheets or cards, invoices, and other papers relating to
Receivables, including without limitation all tapes, cards, computer
tapes, computer discs, computer runs, record keeping systems and other
papers and documents relating to the Receivables, whether in the
possession or under the control of any Grantor or any computer bureau
or agent from time to time acting for any Grantor or otherwise, (c) all
evidences of the filing of financing statements and the registration of
other instruments in connection therewith and amendments, supplements
or other modifications thereto, notices to other creditors or secured
parties, and certificates, acknowledgments, or other writings,
including without limitation lien search reports, from filing or other
registration officers, (d) all credit information, reports and
memoranda relating thereto, and (e) all other written or non-written
forms of information related in any way to the foregoing or any
Receivable.
"SECURED OBLIGATIONS" shall mean (a) all obligations,
liabilities (including, without limitation, contingent obligations) and
indebtedness of every nature of the Grantors to the Administrative
Agent and the Secured Parties, now existing or hereafter incurred,
arising under or in connection with the Credit Agreement, any Note, any
other Credit Document or this Agreement; (b) all obligations,
liabilities (including, without limitation, contingent obligations) and
indebtedness of every nature of the Grantors to the Administrative
Agent and the Secured Parties, now existing or hereafter incurred,
arising under or in connection with Hedge Agreements entered into in
connection with Section 5.10 of the Credit Agreement and prior to the
termination thereof; and (c) all other obligations, liabilities of
every kind, nature or description, direct or indirect, primary or
secondary, joint or several, absolute or contingent of the Grantors to
the Administrative Agent and the Secured Parties whether due or to
become due and whether now existing or hereafter incurred and whether
similar or dissimilar to the obligations described in clauses (a) and
(b) hereof, and including without limitation all consumer or commercial
transactions, all purchase money and nonpurchase money transactions,
all overdrafts, all letters of credit, all lines of credit and all
other extensions of credit, regardless of how they may be evidenced,
and interest which, but for the filing of a petition in bankruptcy with
respect to any Grantor, would have accrued on any Secured Obligation,
whether or not a claim is allowed against such Grantor for such
interest in the related bankruptcy proceeding.
"SECURED PARTIES" shall mean the Agents, the Lenders and the
Lender Counterparties (as such terms are defined in the Credit
Agreement).
"SECURITY COLLATERAL" shall mean:
(I) the Pledged Stock and the certificates representing the
Pledged Stock, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Stock;
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(II) the Pledged Notes and the instruments evidencing the
Pledged Notes, and all interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Notes;
(iii) all additional shares of stock (of any issuer of the
Pledged Stock) from time to time acquired by any Grantor in any manner,
and the certificates representing such additional shares, and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares; and
(iv) all additional indebtedness from time to time owed to any
Grantor by any obligor of the Pledged Notes and the instruments
evidencing such indebtedness, and all interest, cash, instruments and
other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness.
"TRADEMARK LICENSES" shall mean all of each Grantor's right,
title, and interest in and to any and all agreements providing for the
granting of any right in or to Trademarks (whether such Grantor is
licensee or licensor thereunder) including, without limitation, each
agreement referred to in ITEM F of SCHEDULE IV.
"TRADEMARKS" shall mean all of each Grantor's right, title,
and interest in and to all United States and foreign trademarks, trade
names, corporate names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos, other
source or business identifiers, designs, internet domain names and
general intangibles of a like nature, all registrations and
applications for any of the foregoing including, but not limited to the
registrations and applications referred to in ITEM E of SCHEDULE IV,
all extensions or renewals of any of the foregoing; rights of publicity
and privacy relating to the use of names, likenesses, signatures and
biographical information of real persons; all of the goodwill of the
business connected with the use of and symbolized by the foregoing; the
right to sue for past infringement or dilution of any of the foregoing
or for any injury to goodwill, and all proceeds of the foregoing,
including, without limitation, license royalties, income, payments,
claims, damages, and proceeds of suit.
"TRADE SECRET LICENSES" shall mean all of each Grantor's
right, title and interest in and to any and all payments providing for
the granting of any right in or to Trade Secrets (whether the Grantor
is licensee or licensor thereunder) including, without limitation, each
agreement referred to in ITEM G of SCHEDULE IV.
"TRADE SECRETS" shall mean all of each Grantor's right, title,
and interest in and to trade secrets and all other confidential or
proprietary information and know-how now or hereafter owned or used in,
or contemplated at any time for use in, the business of the Grantor
(all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other
tangible form, including all documents and things embodying,
incorporating, or referring in any way to such Trade Secret, the right
to sue for past infringement of any Trade Secret, and all proceeds of
the
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foregoing, including, without limitation, licenses, royalties, income,
payments, claims, damages, and proceeds of suit.
"UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the State of New York.
ARTICLE II
GRANT OF SECURITY INTERESTS
2.1 As security for the prompt and complete payment and
performance in full of all the Secured Obligations when due (whether at stated
maturity, by acceleration or otherwise), each Grantor hereby grants to the
Administrative Agent for the benefit of the Secured Parties a security interest
in and lien on all of such Grantor's right, title and interest in, to and under
the following, in each case, whether now owned or existing or hereafter acquired
or arising, and wherever located (all of which being hereinafter collectively
called the "COLLATERAL"):
(1) all Accounts;
(2) all Chattel Paper;
(3) all Contracts;
(4) the Collateral Account;
(5) all Collateral Records;
(6) all Deposit Accounts;
(7) all Documents;
(8) all Equipment;
(9) all Fixtures;
(10) all General Intangibles;
(11) all Intellectual Property;
(12) all Interest Rate Agreements;
(13) all Instruments;
(14) all Insurance Policies;
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(15) all Inventory;
(16) all Money;
(17) all Motor Vehicles;
(18) all Receivables;
(19) all Receivables Records;
(20) all other tangible and intangible personal
property;
(21) all of the Security Collateral; and
(22) all accessions and additions to any or all of
the foregoing, all substitutions and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing.
Notwithstanding anything herein to the contrary, in no event
shall the Collateral include, and no Grantor shall be deemed to have granted a
security interest in, any of such Grantor's rights or interests in (a) any item
of Collateral or any of its rights or interests thereunder to the extent, but
only to the extent, that such a grant would, under the terms of the license,
contract or agreement underlying such item of Collateral, result in a breach of
the terms of, or constitute a default under such license, contract or agreement
to which such Grantor is a party (other than to the extent that any such term
would be rendered ineffective pursuant to Section 9-318(4) of the Uniform
Commercial Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code) or principles of equity); PROVIDED, that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect, or (b) more than 65% of the outstanding
stock of any issuer which is a Foreign Subsidiary if the pledge of more than
such amount would have material adverse tax consequences for Company and its
Subsidiaries.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the
Administrative Agent and each Lender, which representations and warranties shall
survive execution and delivery of this Agreement, as follows:
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3.1 CREDIT AGREEMENT REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties made by and/or in respect of such Grantor in
Section 4 of the Credit Agreement is true and correct as of the date hereof.
3.2 NO OTHER LIENS. (a) Except for the Lien granted to the
Administrative Agent for benefit of the Secured Parties hereunder, such Grantor
owns and, as to all Collateral whether now existing or hereafter acquired will
continue to own, each item of the Collateral pledged by it free and clear of any
and all Liens of all other Persons other than Permitted Liens, and such Grantor
shall defend the Collateral against all claims and demands of all Persons at any
time claiming the same or any interest therein adverse to the Administrative
Agent.
(b) No effective financing statement or other
evidence of Lien covering or purporting to cover any of the Collateral is on
file in any public office other than (i) financing statements filed or to be
filed in connection with the security interests granted to the Administrative
Agent for the benefit of the Secured Parties hereunder, (ii) financing
statements for which proper termination statements have been delivered to the
Administrative Agent for filing and (iii) financing statements filed in
connection with Permitted Liens. Such Grantor has not consented to any other
Person other than the Administrative Agent having "control" (within the meaning
of Section 8-106 of the UCC) over the Collateral Account.
3.3 PERFECTED LIENS; PRIORITY. (a) The security interests in
the Collateral granted to the Administrative Agent for the benefit of the
Secured Parties hereunder constitute valid security interests in the Collateral.
(b) (i) Upon filing financing statements naming such
Grantor, as "debtor" and the Administrative Agent for the benefit of the Secured
Parties as "secured party" and describing the Collateral in the filing offices
set forth on SCHEDULE V hereto and (ii) to the extent not subject to Article 9
of the UCC, (x) in the case of Intellectual Property, upon the recordation of
the security interests granted hereunder in Patents, Trademarks and Copyrights
in the applicable patent, trademark, and copyright registries, (y) in the case
of the Security Collateral, upon the delivery of the Security Collateral and
Investments to the Administrative Agent, and (z) in the case of Motor Vehicles,
upon the notation of the Lien created hereby upon the certificate of title for
such Motor Vehicle if required by applicable law, the security interests in the
Collateral granted to the Administrative Agent for the benefit of the Secured
Parties hereunder will constitute perfected security interests therein superior
and prior to all Liens (other than Permitted Liens).
3.4 SECURITY COLLATERAL. (a) All of the Pledged Stock issued
by Company or its Subsidiaries have been duly authorized and validly issued and
is fully paid and non-assessable. All of the Pledged Notes issued by Company or
its Subsidiaries have been duly authorized, authenticated or issued and
delivered, and each Pledged Note is the legal, valid and binding obligation of
the issuers thereof, and is not in default.
(b) The Pledged Stock constitutes the percentage of
the issued and outstanding shares of stock of the respective issuers thereof
indicated on SCHEDULE I. The Pledged Notes are outstanding in the principal
amount indicated on SCHEDULE I.
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3.5 CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive
office of such Grantor is located at the location specified on Schedule III.
3.6 LOCATION OF INVENTORY AND EQUIPMENT. All Inventory (other
than Inventory with a value not in excess of $4,000,000 in the aggregate for all
Grantors at any time held by Grantors' customers on consignment in the ordinary
course of business) and Equipment now or from time to time included in the
Collateral is kept only at the locations listed on SCHEDULE II. None of such
Inventory or Equipment is in the possession of an issuer of a negotiable
document (as defined in UCC Section 7-104) therefor or otherwise in the
possession of a bailee.
3.7 RECEIVABLES. (a) None of the Account Debtors in respect
of any material portion of the Receivables is the United States Government or an
instrumentality thereof.
(b) No Receivables are evidenced by any Instrument or
Chattel Paper which has not been delivered to the Administrative Agent (other
than in respect of Instruments and Chattel Paper in an amount less than $25,000
individually and $1,000,000 in the aggregate for all Grantors and Chattel Paper
consisting of consignment agreements with customers).
3.8 CONTRACTS. No payments due such Grantor under any
Contract are evidenced by any Instrument or Chattel Paper which has not been
delivered to the Administrative Agent (other than in respect of Instruments and
Chattel Paper in an amount less than $25,000 individually and $1,000,000 in the
aggregate for all Grantors and Chattel Paper consisting of consignment
agreements with customers).
3.9 FARM PRODUCTS. None of the Collateral constitutes, or is
the proceeds of, Farm Products (as defined in the UCC).
3.10 INTELLECTUAL PROPERTY COLLATERAL.
(a) SCHEDULE IV sets forth a true and accurate list
of (i) all United States, state and foreign registrations of and applications
for Patents, Trademarks, and Copyrights owned by such Grantor and (ii) all
Patent Licenses, Trademark Licenses and Copyright Licenses material to the
business of such Grantor.
(b) Such Grantor is the sole and exclusive owner of
the entire right, title, and interest in and to all Intellectual Property on
SCHEDULE IV, free and clear of all Liens and licenses, except for Permitted
Liens and the licenses set forth on SCHEDULE IV items B, D, F & G.
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ARTICLE IV
COVENANTS
Each Grantor covenants and agrees with the Administrative
Agent and the Secured Parties that from and after the date of this Agreement:
4.1 FURTHER ASSURANCES. At any time and from time to time,
upon the request of the Administrative Agent, and at the sole expense of such
Grantor, such Grantor will promptly and duly execute and deliver any and all
such further instruments, endorsements, powers of attorney and other documents,
make such filings, give such notices and take such further action as the
Administrative Agent may reasonably deem desirable in obtaining the full
benefits of this Agreement and of the rights, remedies and powers herein
granted, including, without limitation, the following:
(a) the filing of any financing statements, in form
acceptable to the Administrative Agent under the Uniform Commercial Code in
effect in any jurisdiction with respect to the liens and security interests
granted hereby. Such Grantor also hereby authorizes the Administrative Agent to
file any such financing statement without the signature of such Grantor to the
extent permitted by applicable law. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law. Such Grantor will pay
or reimburse the Administrative Agent for all filing fees and related expenses;
(b) the recordation of appropriate evidence of the
liens and security interest granted hereunder in the Intellectual Property with
any intellectual property registry in which said Intellectual Property is
registered or in which an application for registration is pending including,
without limitation, the United States Patent and Trademark Office, the United
States Copyright Office, the various Secretaries of State, and the foreign
counterparts on any of the foregoing;
(c) will make or reimburse the Administrative Agent
for making all searches deemed necessary by the Administrative Agent to
establish and determine the priority of the security interests of the
Administrative Agent for the benefit of the Secured Parties or to determine the
presence or priority of other secured parties;
(d) upon request of the Administrative Agent, cause
the Administrative Agent for the benefit of the Secured Parties to be listed as
the lienholder on the certificate of title or ownership covering any Collateral
covered by such a certificate of title or ownership and to deliver evidence
thereof to the Administrative Agent promptly;
(e) 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 and in form satisfactory
to the Administrative Agent; and
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(f) furnish to the Administrative Agent upon its
reasonable request, complete and correct copies of each Contract to which it is
a party.
4.2 DELIVERY OF SECURITY COLLATERAL. All certificates or
instruments representing or evidencing the Security Collateral shall be
delivered to and held by or on behalf of the Administrative Agent pursuant
hereto and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Administrative Agent. After an Event
of Default, the Administrative Agent shall have the right, at any time in its
discretion and without notice to such Grantor, to transfer to or to register in
the name of the Administrative Agent for the benefit of the Secured Parties any
or all of the Security Collateral, subject only to the revocable rights
specified in SECTION 6.1(b). For the better perfection of the Administrative
Agent's rights for the benefit of the Secured Parties in and to the Security
Collateral, if requested by the Administrative Agent after an Event of Default
such Grantor shall forthwith, upon the pledge of any Security Collateral
hereunder, cause such Security Collateral to be registered in the name of such
nominee or nominees as the Administrative Agent shall direct, subject only to
the revocable rights specified in SECTION 6.1(b). In addition, the
Administrative Agent shall have the right at any time to exchange certificates
or instruments representing or evidencing Security Collateral for certificates
or instruments of smaller or larger denominations.
4.3 CHANGE OF CHIEF EXECUTIVE OFFICE. Such Grantor shall not
establish a new location for its chief executive office from the location listed
in SCHEDULE III until (i) it shall have given to the Administrative Agent not
less than 15 days' prior written notice of its intention to do so, clearly
describing such new location and providing such other information in connection
therewith as the Administrative Agent may reasonably request, and (ii) with
respect to such new location, it shall have taken all action satisfactory to the
Administrative Agent as the Administrative Agent may reasonably request to
maintain the security interest of the Administrative Agent for the benefit of
the Secured Parties in the Collateral intended to be granted hereby at all times
fully perfected with the same or better priority and in full force and effect.
4.4 CHANGE OF LOCATION OF INVENTORY AND EQUIPMENT. Such
Grantor agrees that (i) all Inventory (other than Inventory with a value not in
excess of $4,000,000 in the aggregate for all Grantors at any time held by
Grantors' customers on consignment in the ordinary course of business) and
Equipment now held or subsequently acquired by it shall be kept at (or shall be
in transport to) any one of the locations shown on SCHEDULE II, or such new
location as such Grantor may establish in accordance with the last sentence of
this Section. Such Grantor may establish a new location for Inventory and
Equipment only if (i) it shall have given to the Administrative Agent not less
than 15 days' prior written notice of its intention to do so, clearly describing
such new location and providing such other information in connection therewith
as the Administrative Agent may reasonably request, and (ii) with respect to
such new location, it shall have taken all action satisfactory to the
Administrative Agent as the Administrative Agent may reasonably request to
maintain the security interest of the Administrative Agent in the Collateral
intended to be granted hereby at all times fully perfected with the same or
better priority and in full force and effect.
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4.5 CHANGE OF NAME; IDENTITY OR CORPORATE STRUCTURE. Such
Grantor shall not change its name (or conduct any significant portion of its
business under any new trade names), identity or corporate structure until (i)
it shall have given to the Administrative Agent not less than 15 days' prior
written notice of its intention to do so, clearly describing such new name,
identity or corporate structure or such new trade name and providing such other
information in connection therewith as the Administrative Agent may reasonably
request, and (ii) with respect to such new name, identify or corporate structure
or such new trade name, it shall have taken all action satisfactory to the
Administrative Agent as the Administrative Agent may reasonably request to
maintain the security interest of the Administrative Agent for the benefit of
the Secured Parties in the Collateral intended to be granted hereby at all times
fully perfected with the same or better priority and in full force and effect.
4.6 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper
(other than in respect of Instruments and Chattel Paper in an amount less than
$25,000 individually and $1,000,000 in the aggregate for all Grantors and
Chattel Paper consisting of consignment agreements with customers) shall be
immediately delivered to the Administrative Agent, duly indorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement. Upon request of Administrative Agent, such Grantor shall deliver
to Administrative Agent all Chattel Paper consisting of consignment agreements
with customers, duly indorsed in a manner satisfactory to the Administrative
Agent, to be held as Collateral pursuant to this Agreement.
4.7 MAINTAIN AND MARK RECORDS AND RECEIVABLES. Upon request
of the Administrative Agent, such Grantor shall legend, in form and manner
reasonably satisfactory to the Administrative Agent all Chattel Paper and other
evidence of Receivables, as well as the Receivables Records with an appropriate
reference to the fact that the Chattel Paper and all other Receivables have been
assigned to the Administrative Agent for the benefit of the Secured Parties and
that the Administrative Agent has a security interest therein.
4.8 INSURANCE. Such Grantor shall maintain insurance as
required by the Credit Agreement.
4.9 RECEIVABLES. (a) Such Grantor shall perform in all
material respects all of its obligations with respect to the Receivables.
(b) Other than (i) in the ordinary course of business
and (ii) while no Default or Event of Default shall have occurred and be
continuing, such Grantor shall not (v) amend, modify, terminate or waive any
provision of any Receivable in any manner which could reasonably be expected to
adversely affect the value of such Receivable as Collateral, (w) grant any
extension or renewal of the time of payment of any Receivable, (x) compromise or
settle any dispute, claim or legal proceeding with respect to any Receivable for
less than the total unpaid balance thereof, (y) release, wholly or partially,
any Person liable for the payment thereof, or (z) allow any credit or discount
thereon.
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(c) Except as may otherwise be indicated by prudent
business practices, such Grantor shall use its reasonable efforts (including,
without limitation, prompt and diligent exercise of each material right it may
have under any Receivable) to cause to be collected from each Account Debtor, as
and when due (including, without limitation, amounts which are delinquent, such
amounts to be collected in accordance with generally accepted lawful collection
procedures) any and all amounts owing under or on account of any Receivable.
4.10 CONTRACTS. (a) Except as may otherwise be indicated by
prudent business practices, such Grantor shall perform in all material respects
all of its obligations under each Contract.
(b) Such Grantor shall deliver promptly to the
Administrative Agent a copy of each material demand, notice or document received
by it relating in any way to any Material Contract.
(c) Without the prior written consent of the
Administrative Agent, such Grantor shall not (except in the ordinary course of
business) amend, modify, terminate or supplement any provision of any Material
Contract or compromise or settle any dispute, claim or legal proceeding with
respect to any Material Contract, in any such case in any manner which could
reasonably be expected to materially adversely affect the value of such Contract
as Collateral, and shall not terminate any Material Contract.
(d) Except as may otherwise be indicated by prudent
business practices, such Grantor shall promptly and diligently exercise each
material right it may have under any Contract (except the right of termination).
All costs and expenses in connection therewith, whether incurred by such Grantor
or the Administrative Agent shall be borne by such Grantor.
4.11 WAREHOUSE RECEIPTS NON-NEGOTIABLE. Such Grantor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt or
other Document is issued with respect to any of its Inventory, such warehouse
receipt or receipt in the nature thereof or other Document shall not be
"negotiable" (as such term is used in Section 7-104 of the UCC or under other
relevant law), unless such receipt (other than receipts with respect to goods
with a value less than $25,000 individually and $1,000,000 in the aggregate for
all Grantors) is immediately delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
4.12 LIMITATIONS ON DISPOSITIONS OF COLLATERAL. Such Grantor
will not sell, transfer, lease, license, or otherwise dispose of any of the
Collateral or any rights therein, or attempt, offer or contract to do so except
as permitted in the Credit Agreement.
4.13 INTELLECTUAL PROPERTY.
(a) Such Grantor shall not do any act or omit to do
any act whereby any of the Intellectual Property which is material to the
business of such Grantor may lapse, or become abandoned, dedicated to the
public, or unenforceable, or which would adversely affect the
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validity, grant, or enforceability of the security interest granted in such
material Intellectual Property.
(b) Such Grantor shall, within thirty (30) days of
the creation or acquisition of any Copyrightable work which is material to the
business of such Grantor, apply to register the Copyright in the United States
Copyright Office; and such Grantor shall, within thirty (30) days of the
acquisition of any registrations or applications for any Patents, Trademarks and
Copyrights from any third party, record its interest in the United States Patent
and Trademark Officer and the United States Copyright Office.
(c) Except as may otherwise be indicated by prudent
business practices, such Grantor shall take all reasonable steps in the United
States Patent and Trademark Office, the United States Copyright Office, any
state registry or any foreign counterpart of the foregoing, to pursue any
application and maintain any registration of each Trademark, Patent, and
Copyright owned by such Grantor and material to its business which is now or
shall become included in the Intellectual Property including, but not limited
to, those items on SCHEDULE IV ITEMS A, C, E.
(d) In the event that any material Intellectual
Property owned by such Grantor is infringed, misappropriated, or diluted by a
third party, except as may otherwise be indicated by prudent business practices,
such Grantor shall promptly take all reasonable actions to stop such
infringement, misappropriation, or dilution and protect its rights in such
Intellectual Property.
(e) Such Grantor shall promptly (but in no event more
than thirty (30) days after such Grantor obtains knowledge thereof) report to
the Administrative Agent (i) the filing of any application to register any
Intellectual Property with the United States Patent and Trademark Office, the
United States Copyright Office, or any state registry or international or
foreign counterpart of the foregoing (whether such application is filed by such
Grantor or through any agent, employee, licensee, or designee thereof) and (ii)
the registration of any Intellectual Property owned by the Grantor by any such
office. Such Grantor hereby authorizes the Administrative Agent to modify this
Agreement by amending SCHEDULE IV and will otherwise cooperate with the
Administrative Agent in effecting any such amendment to include any item
Intellectual Property which shall become part of the Intellectual Property after
the date hereof.
(f) Such Grantor shall, promptly upon the reasonable
request of the Administrative Agent, execute and deliver to the Administrative
Agent any document required to acknowledge, confirm, register, record, or
perfect the Administrative Agent's interest in any part of the Intellectual
Property, whether now owned or hereafter acquired.
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4.14 NOTICE. Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, in accordance with the provisions hereof
(a) of any Lien (other than Permitted Liens) on, or claim asserted against, any
of the Collateral and (b) 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.
4.15 PERFORMANCE BY ADMINISTRATIVE AGENT OF GRANTORS'
OBLIGATIONS; REIMBURSEMENT. If such Grantor fails to perform or comply with any
of its agreements contained herein the Administrative Agent may, without notice
to or consent by such Grantor, perform or comply or cause performance or
compliance therewith and the expenses of the Administrative Agent incurred in
connection with such performance or compliance, together with interest thereon
at a rate per annum 2% above the Base Rate shall be payable by such Grantors to
the Administrative Agent on demand and such reimbursement obligation shall be
secured hereby.
ARTICLE V
SPECIAL PROVISIONS REGARDING
RECEIVABLES AND CONTRACTS
5.1 GRANTORS REMAIN LIABLE UNDER RECEIVABLES AND CONTRACTS.
Anything herein to the contrary notwithstanding (including without limitation
the grant of any rights to the Administrative Agent for the benefit of the
Secured Parties, each Grantor shall remain liable under each of the Receivables
and Contracts to observe and perform all the 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 Receivable or Contract. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) or Contract by reason of
or arising out of this Agreement or the receipt by the Administrative Agent or
any Lender of any payment relating to such Receivable or Contract pursuant
hereto, nor shall the Administrative Agent be obligated in any manner to perform
any of the obligations of any Grantor under or pursuant to any Receivable (or
any agreement giving rise thereto) or under or pursuant to any 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 Receivable (or any agreement giving rise thereto) or under any
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.
5.2 NOTICE TO ACCOUNT DEBTORS AND CONTRACTING PARTIES. At any
time after an Event of Default has occurred and is continuing, the
Administrative Agent may, and upon request of the Administrative Agent, the
Grantors shall, notify Account Debtors and parties to the Contracts that the
Accounts and the Contracts have been assigned to the Administrative Agent for
the benefit of the Secured Parties and that payments in respect thereof shall be
made directly to the Administrative Agent. At any time after an Event of Default
has occurred and is continuing, the Administrative Agent may in its own name or
in the name of others communicate with
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Account Debtors and parties to the Contracts to verify with them to its
satisfaction the existence, amount and terms of any Receivables or Contracts.
5.3 COLLECTIONS ON RECEIVABLES AND CONTRACTS. The
Administrative Agent on behalf of the Secured Parties hereby authorizes each
Grantor to collect the Receivables and Contracts, and, at any time after an
Event of Default has occurred and is continuing, the Administrative Agent may
curtail or terminate said authority and itself, or by its agents, collect all
Receivables and amount owing under Contracts. After an Event of Default has
occurred and is continuing, if required by the Administrative Agent, any
payments of Receivables and Contracts, when collected by a Grantor, shall be
forthwith (and, in any event, within two Business Days) delivered by such
Grantor to the Administrative Agent in the exact form received, duly indorsed to
the Administrative Agent if required, for deposit into the Collateral Account,
and until so turned over, shall be held by such Grantor in trust for the
Administrative Agent for the benefit of the Secured Parties, segregated from
other funds of such Grantor. All Proceeds, while held by the Administrative
Agent for the benefit of the Secured Parties (or by such Grantor in trust for
the Administrative Agent for the benefit of the Secured Parties) shall continue
to be Collateral securing all of the Secured Obligations and shall not
constitute payment thereof until applied as hereinafter provided.
ARTICLE VI
SPECIAL PROVISIONS REGARDING
SECURITY COLLATERAL
6.1 VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Event of
Default or event which, with the giving of notice or the lapse of time, or both,
would become an Event of Default shall have occurred and be continuing:
(i) Each Grantor shall be entitled to
exercise or refrain from exercising any and all voting and other
consensual rights pertaining to the Security Collateral or any part
thereof for any purpose not inconsistent with the terms of this
Agreement or any other Credit Document.
(ii) The Grantors shall be entitled to
receive and retain any and all dividends and interest paid in respect
of the Security Collateral, PROVIDED, HOWEVER, that any and all
(A) dividends and interest paid or
payable other than in cash in respect of, and instruments and
other property received, receivable or otherwise distributed
in respect of, or in exchange for, any Security Collateral,
(B) dividends and other
distributions paid or payable in cash in respect of any
Security Collateral issued by Company in connection with a
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partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or
paid-in-surplus, and
(C) cash paid, payable or otherwise
distributed in respect of principal of, or in redemption of,
or in exchange for, any Security Collateral issued by Company,
shall be, and shall be forthwith delivered to the Administrative Agent
to hold as, Security Collateral and shall, if received by any Grantor,
be received in trust for the benefit of the Administrative Agent for
the benefit of the Secured Parties, be segregated from the other
property or funds of such Grantor, and be forthwith delivered to the
Administrative Agent as Security Collateral in the same form as so
received (with any necessary indorsement or assignment).
(iii) The Administrative Agent shall execute
and deliver (or cause to be executed and delivered) to a Grantor all
such proxies and other instruments as such Grantor may reasonably
request for the purpose of enabling such Grantor to exercise the voting
and other rights which it is entitled to exercise pursuant to paragraph
(i) above and to receive the dividends or interest payments which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of
an Event of Default or an event which, with the giving of notice or the lapse of
time, or both, would become an Event of Default:
(i) All rights of the Grantors (x) to
exercise or refrain from exercising the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to
SECTION 6(a)(i) shall, upon notice to such Grantor by the Administra-
tive Agent, cease and (y) to receive the dividends and interest
payments which such Grantors would otherwise be authorized to receive
and retain pursuant to SECTION 6(a)(ii) shall automatically cease, and
all such rights shall thereupon become vested in the Administrative
Agent who shall thereupon have the sole right to exercise or refrain
from exercising such voting and other consensual rights and to receive
and hold as Security Collateral such dividends and interest payments.
(ii) All dividends and interest payments
which are received by any Grantor contrary to the provisions of
paragraph (i) of this Section 6.1(b) shall be received in trust for the
benefit of the Administrative Agent for the benefit of the Secured
Parties, shall be segregated from other funds of such Grantor and shall
be forthwith paid over to the Administrative Agent as Security
Collateral in the same form as so received (with any necessary
indorsement).
6.2 ADDITIONAL SHARES. Each Grantor agrees that it will (i)
cause each issuer of the Pledged Shares that is a Subsidiary of Holdings not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to such Grantor
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and (ii) immediately upon its acquisition (directly or indirectly) thereof,
deliver to the Administrative Agent as additional security hereunder any and all
additional shares of stock or other securities of each issuer of the Pledged
Shares.
ARTICLE VII
COLLATERAL ACCOUNT
7.1 COLLATERAL ACCOUNT. There is hereby established with the
Administrative Agent the Collateral Account. The Collateral Account shall be
under the sole and exclusive dominion and control of the Administrative Agent
and no Grantor shall have any rights with respect to the Collateral Account
except as specifically set forth below with regard to determination of the
nature of investments to be made with amounts credited to the Collateral
Account. Without limiting the generality of the foregoing, no Grantor shall have
any right of withdrawal or transfer from the Collateral Account.
7.2 DEPOSIT OF PROCEEDS. There shall be deposited in the
Collateral Account from time to time the cash proceeds (as defined in Section
9-306(1) of the UCC) of any of the Collateral (including insurance proceeds
thereon) required to be delivered to the Administrative Agent pursuant hereto.
All amounts and investments and other items credited to the Collateral Account
from time to time shall constitute Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided. At any
time following the occurrence and during the continuance of an Event of Default,
the Administrative Agent may in its discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the credit
of the Collateral Account to the payment of the Secured Obligations in the
manner specified herein.
7.3 INVESTMENT OF BALANCE IN COLLATERAL ACCOUNT. Amounts
credited to the Collateral Account shall be invested from time to time in such
Permitted Investments as the Borrower (or, after the occurrence and during the
continuance of a Default or Event of Default, the Administrative Agent) shall
determine, which Permitted Investments shall be held in the name and be under
the control of the Administrative Agent for the benefit of the Secured Parties.
ARTICLE VIII
POWER OF ATTORNEY
8.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each Grantor 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 such Grantor and in the name of such Grantor or in its
own name, from time to time in the Administrative Agent discretion, for the
purpose of
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carrying out the terms of this 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 Agreement, and, without limiting
the generality of the foregoing, such Grantor hereby gives the Administrative
Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do the following:
(i) at any time when any Event of Default
shall have occurred and be continuing, in the name of such Grantor or
its own name, or otherwise, (A) to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under, or with respect to, any Collateral;
(B) 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; and (C) 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;
(ii) to prepare, sign and file any Uniform
Commercial Code financing statements in the name of such Grantor as
debtor;
(iii) to prepare, sign, and file for
recordation in any intellectual property registry, appropriate evidence
of the lien and security interest granted herein in the Intellectual
Property in the name of such Grantor as such Grantor;
(iv) to take or cause to be taken all
actions necessary to perform or comply or cause performance or
compliance with the terms of this Agreement, including, without
limitation, actions to pay or discharge taxes and Liens (other than
Permitted Liens) levied or placed on or threatened against the
Collateral, to effect any repairs or obtain any insurance called for by
the terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof;
(v) upon the occurrence and during the
continuance of any Event of Default (A) to sign and endorse 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;
(B) 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; (C) to defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (D) to settle,
compromise or adjust any suit, action or proceeding described in the
preceding clause and, in connection therewith, to give such discharges
or releases as the Administrative Agent may deem appropriate; and (E)
generally, to sell or transfer 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 such
Grantor's expense, at any time, or from time to time, all acts and
things which the Administrative Agent deems necessary to protect,
preserve or realize upon the
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Collateral and the Liens of the Administrative Agent and the Secured
Parties thereon and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do; and
(vi) at any time and from time to time, to
execute, in connection with any foreclosure, any indorsements,
assignments or other instruments of conveyance or transfer with respect
to the Collateral.
Each Grantor 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.
Each Grantor hereby acknowledges and agrees that in acting
pursuant to this power- of-attorney the Administrative Agent shall be
acting in the interest of the Secured Parties and such Grantor
acknowledges and agrees that the Administrative Agent shall have no
fiduciary duties to such Grantor and such Grantor hereby waives any
claims to the rights of a beneficiary of a fiduciary relationship
hereunder.
(b) NO DUTY ON THE PART OF ADMINISTRATIVE AGENT. The
powers conferred on the Administrative Agent hereunder are solely to protect the
interests of the Administrative Agent for the benefit of the Secured Parties in
the Collateral and shall not impose any duty upon the Administrative Agent to
exercise any such powers. The Administrative Agent shall be accountable only for
amounts that it actually receives 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 any Grantor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.
ARTICLE IX
REMEDIES; RIGHTS UPON DEFAULT
9.1 RIGHTS AND REMEDIES GENERALLY. If an Event of Default
shall occur and be continuing, then and in every such case, the Administrative
Agent shall have all the rights of a secured party under the UCC, shall have all
rights now or hereafter existing under all other applicable laws or in equity,
and, subject to any mandatory requirements of applicable law then in effect,
shall have all the rights set forth in this Agreements and all the rights set
forth with respect to the Collateral or this Agreement in any other agreement
between the parties. No enumeration of rights in this Article or elsewhere in
this Agreement or in any related document or other agreement shall be deemed to
in any way limit the rights of the Administrative Agent as described in this
Article.
9.2 COLLECTION OF RECEIVABLES AND OTHER PROCEEDS. If an Event
of Default shall occur and be continuing, in addition to the rights of the
Administrative Agent for the benefit of the Secured Parties specified in SECTION
5.3 with respect to the collection of Receivables and
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Contracts, all Proceeds received by any Grantor consisting of cash, checks and
other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Secured Parties, segregated from other funds of
such Grantor, and shall forthwith upon receipt by the Grantor, be turned over to
the Administrative Agent, in the same form received by such Grantor
(appropriately indorsed or assigned by such Grantor to the order of the
Administrative Agent or in such other manner as shall be satisfactory to the
Administrative Agent) for deposit into the Collateral Account.
9.3 COLLATERAL ACCOUNT. If an Event of Default shall occur
and be continuing, the Administrative Agent may liquidate any securities
credited to the Collateral Account (including any Permitted Investments) and
apply the proceeds thereof and any other amounts credited to the Collateral
Account to the Secured Obligations (whether matured or unmatured) in such order
as the Administrative Agent may elect. Any balance of such Proceeds remaining
after the Secured Obligations have been paid and performed in full, all Letters
of Credit have expired, been terminated or returned to the issuer thereof
undrawn upon and the Commitments shall have been terminated shall be paid over
to the Borrower on behalf of the Grantors or to whomsoever may lawfully be
entitled to receive the same or as a court of competent jurisdiction may direct.
9.4 POSSESSION OF COLLATERAL. If an Event of Default shall
occur and be continuing,
(a) the Administrative Agent may, personally or by
agents or attorneys, immediately retake possession of the Collateral (including
the originals of all or any Receivables, Receivables Records) or any part
thereof, from any of the Grantors or any other Person who then has possession of
any part thereof with or without notice or judicial process, and for that
purpose may enter upon any of the Grantors' premises where any of the Collateral
is located and remove the same and may use in connection with such removal any
and all services, supplies, aids and other facilities of such Grantors; and
(b) upon five (5) days' notice to a Grantor, such
Grantor shall, at its own expense, assemble the Collateral, including, without
limitation, the originals of all Receivables Records (or from time to time any
portion thereof) and make it available to the Administrative Agent at any place
or places designated by the Administrative Agent which is reasonably convenient
to both parties, whether at such Grantor's or the Administrative Agent's
premises or elsewhere. Such Grantor, shall at its sole expense, store and keep
any Collateral so assembled at such place or places pending further action by
the Administrative Agent and while the Collateral shall be so stored and kept,
shall provide such services as shall be necessary to protect the same and to
preserve and maintain the Collateral in good condition.
(c) When Collateral is in the Administrative Agent's
possession, (i) each Grantor shall pay (or reimburse the Administrative Agent on
demand for) all reasonable expenses (including the cost of any insurance and
payment of taxes or other charges) incurred in the custody, preservation, use or
operation of the Collateral, and the obligation to reimburse all such expenses
shall be secured hereby and (ii) the risk of accidental loss or damage shall be
on such Grantor to the extent of any deficiency in any effective insurance
coverage.
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9.5 DISPOSITION OF THE COLLATERAL. If an Event of Default
shall occur and be continuing, the Administrative Agent may sell, assign, lease,
license (on an exclusive or non-exclusive basis) give an option or options to
purchase or otherwise dispose of the Collateral (or contract to do any of the
foregoing) under one or more contracts or as an entirety, and without the
necessity of gathering at the place of sale the property to be sold, at public
or private sale or sales, conducted by any officer, nominee or agent of, or
auctioneer or attorney for the Administrative Agent at any location of any third
party conducting or otherwise involved in such sale or any office of the
Administrative Agent or elsewhere and in general in such manner, at such time or
times and upon such terms and conditions and at such price as it may consider
commercially reasonable, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent may in its sole
discretion restrict prospective bidders as to their number, nature of their
business and investment intention. Any of the Collateral may be sold, leased,
assigned or options or contracts entered to do so, or otherwise disposed of, in
the condition in which the same existed when taken by the Administrative Agent
or after any overhaul or repair which the Collateral Agent shall determine to be
commercially reasonable. To the extent permitted by applicable law, the
Administrative Agent may bid for and become the purchaser of the Collateral or
any item thereof, offered for sale in accordance with this Section without
accountability to any Grantor (except to the extent of surplus money received)
as provided below. In the payment of the purchase price of the Collateral, the
purchaser shall be entitled to have credit on account of the purchase price
thereof of amounts owing to such purchaser on account of any of the Obligations
and any such purchaser may deliver notes, claims for interest, or claims for
other payment with respect to such Obligations in lieu of cash up to the amount
which would, upon distribution of the net proceeds of such sale, be payable
thereon. Such notes, if the amount payable hereunder shall be less than the
amount due thereon, shall be returned to the holder thereof after being
appropriately stamped to show partial payment.
9.6 RECOURSE. Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to satisfy the Secured Obligations. Each Grantor shall also be
liable for all expenses of the Administrative Agent incurred in connection with
collecting such deficiency, including, without limitation, the fees and
disbursements of any attorneys employed by the Administrative Agent or the
Secured Parties to collect such deficiency.
9.7 INTELLECTUAL PROPERTY LICENSE. Solely for the purpose of
enabling the Administrative Agent to exercise rights and remedies under this
ARTICLE IX, each Grantor hereby grants to the Administrative Agent for the
benefit of the Secured Parties, to the extent it has the right to do so, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to any Grantor) to use, operate under, license, or sublicense
any Intellectual Property now owned or hereafter acquired by such Grantor, and
wherever the same may be located, subject, in the case of Trademarks, to
sufficient rights to quality control and inspection in favor of such Grantor to
avoid the risk of invalidation of said Trademarks.
9.8 EXPENSES; ATTORNEYS FEES. Each Grantor shall reimburse
the Administrative Agent for all its expenses in connection with the exercise of
its rights hereunder, including without
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limitation all reasonable attorneys' fees and legal expenses incurred by the
Administrative Agent or any Secured Party.
9.9 APPLICATION OF PROCEEDS. The proceeds of any disposition
of Collateral shall be applied as follows:
(a) to the payment of any and all expenses and fees
(including reasonable attorneys' fees and disbursements) incurred by the
Administrative Agent in connection with the exercise of its rights and remedies
hereunder, including without limitation, expenses and fees in connection with
obtaining, taking possession of, removing, holding, insuring, repairing,
preparing for sale or lease, storing and disposing of Collateral;
(b) to the satisfaction of the Secured Obligations in
accordance with Section 2.15 of the Credit Agreement;
(c) any other payment of any amount required to be
paid by the Administrative Agent by law;
(d) the satisfaction of indebtedness secured by any
subordinate security interest in the Collateral if written notification of
demand therefor is received before distribution of the proceeds is completed,
but only to the extent of the proceeds undistributed when such notification is
received; and
(e) upon termination of the Commitments and the
expiration, cancellation or return to the issuer thereof undrawn upon of any
letters of credit, to the Borrower on behalf of the Grantors or as a court of
competent jurisdiction may direct.
9.10 LIMITATION ON DUTIES REGARDING PRESERVATION OF
COLLATERAL. (a) 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 UCC or otherwise, shall be to deal with
it in the same manner as the Administrative Agent deals with similar property
for its own account.
(b) The Administrative Agent shall have no obligation
to take any steps to preserve rights against prior parties to any Collateral.
(c) Neither the Administrative Agent nor any of its
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 any Grantor or otherwise.
9.11 WAIVER OF CLAIMS. Except as otherwise provided in this
Agreement, EACH GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE ADMINISTRATIVE AGENT'S
TAKING POSSESSION OR THE ADMINISTRATIVE AGENT'S DISPOSITION
I-26
<PAGE> 255
OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR
NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT
WHICH SUCH GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF
THE STATES OR OF ANY STATE, and each Grantor hereby further waives, to the
extent permitted by law:
(a) all damages occasioned by such taking of
possession except any damages which are the direct result of the Administrative
Agent's gross negligence or willful misconduct;
(b) all other requirements as to the time, place and
terms of sale or other requirements with respect to the enforcement of the
Administrative Agent's rights hereunder;
(c) demand of performance or other demand, notice of
intent to demand or accelerate, notice of acceleration presentment, protest,
advertisement or notice of any kind to or upon any Grantor or any other Person;
and
(d) all rights of redemption, appraisement,
valuation, diligence, stay, extension or moratorium now or hereafter in force
under any applicable law in order to prevent or delay the enforcement of this
Agreement, the absolute sale of the Collateral or any portion thereof and such
Grantor, for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
9.12 DISCONTINUANCE OF PROCEEDINGS. In case the
Administrative Agent shall have instituted any proceeding to enforce any right,
power or remedy under this Agreement by foreclosure, sale, entry or otherwise,
and such proceeding shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Administrative Agent's, then and in
every such case each Grantor and the Administrative Agent shall be returned to
their former positions and rights hereunder with respect to the Collateral
subject to the security interest created under this Agreement, and all rights,
remedies and powers of the Administrative Agent shall continue as if no such
proceeding had been instituted except to the extent such rights, remedies or
powers were affected by the proceedings which were discontinued or abandoned.
ARTICLE X
INDEMNITY
10.1 INDEMNITY AND EXPENSES. (a) Each Grantor agrees to
indemnify, reimburse and hold the Administrative Agent and the Secured Parties,
and their respective officers, directors, employees, representatives and agents
(hereinafter in this Section referred to individually as "INDEMNITEE" and
collectively as "INDEMNITEES") harmless from any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements (including reasonable attorneys' fees and
expenses) (for the purposes of this Section the foregoing are collectively
called "expenses") for whatsoever kind or nature which may be imposed on,
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<PAGE> 256
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Agreement or the documents executed in connection herewith
or in any other way connected with the administration of the transactions
contemplated hereby or the enforcement of any of the terms of or the
preservation of any rights hereunder, or in any way relating to or arising out
of the manufacture, ownership, ordering, purchase, delivery, control,
acceptance, lease, financing, possession, operation, condition, sale, return or
other disposition or use of the Collateral (including, without limitation,
latent or other defects, whether or not discoverable), the violation of the laws
of any country, state or other governmental body or unit, any tort (including,
without limitation, claims arising or imposed under the doctrine of strict
liability, or for or on account of injury to or the death of any Person
(including any Indemnitee), or for property damage) or any contract claim;
provided that no Indemnitee shall be indemnified pursuant to this Section with
respect to any expenses hereunder to the extent such expenses arise from the
gross negligence or willful misconduct of that Indemnitee. Each Grantor agrees
that upon written notice by any Indemnitee of any assertion that could give rise
to an expense, such Grantor shall assume full responsibility for the defense
thereof. Each Indemnitee agrees to use its best efforts to promptly notify such
Grantor of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of clause (a) of
this Section, each Grantor agrees to pay, or reimburse the Administrative Agent
for any and all fees, costs and expenses of whatever kind or nature incurred in
connection with the creation, preservation or protection of the Administrative
Agent's Liens on, and security interest for the benefit of the Secured Parties
in, the Collateral, including, without limitation, all fees and taxes in
connection with the recording or filing of instruments and documents in public
offices, payment or discharge of any taxes or Liens upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral and all other
fees, costs and expenses in connection with protecting, maintaining or
preserving the Collateral and the Administrative Agent's interest therein,
whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Without limiting the application of clauses (a)
or (b) of this Section, each Grantor agrees to pay, indemnify and hold each
Indemnitee harmless from and against any expenses which such Indemnitee may
suffer, expend or incur in consequence of or growing out of any
misrepresentation by any Grantor in this Agreement or in any statement or
writing contemplated by or made or delivered pursuant to or in connection with
this Agreement.
(d) If and to the extent that the obligations of any
Grantor under this Section are unenforceable for any reason, each Grantor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
10.2 INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Secured Obligations secured by the Collateral.
The indemnity obligations of the Grantors contained in this Article shall
continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and notwithstanding the discharge
thereof.
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<PAGE> 257
ARTICLE XI
MISCELLANEOUS
11.1 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
11.2 SUBMISSION TO JURISDICTION. Any legal action or
proceeding with respect to this Agreement and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, each Grantor hereby accepts
for itself and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and appellate courts from any
thereof. Each Grantor irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such Grantor
at its address set forth under its signature below. Each Grantor hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceedings arising out of or
in connection with this Agreement brought in the courts referred to above and
hereby further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of the
Administrative Agent to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Grantor in any other
jurisdiction.
11.3 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE GRANTORS AND THE ADMINISTRATIVE AGENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER
ARISING HEREUNDER.
11.4 LIMITATION OF LIABILITY. No claim may be made by any
Grantor or any other Person against the Administrative Agent or the affiliates,
directors, officers, employees, attorneys or agent of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability (other than gross negligence
or willful misconduct) arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and each Grantor hereby waives, releases and agrees not to
sue upon any claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
11.5 NOTICES. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or
I-29
<PAGE> 258
made when delivered by hand, or five days after being deposited in the United
States mail, postage prepaid, or, in the case of telex notice, when sent,
answerback received, or, in the case of telecopy notice, when sent, or, in the
case of a nationally recognized overnight courier service, one Business Day
after delivery to such courier service, addressed, in the case of each party
hereto, at its address specified opposite its signature below, or to such other
address as may be designated by any party in a written notice to the other party
hereto, provided that notices and communications to the Administrative Agent
shall not be effective until received by the Administrative Agent.
11.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Grantors, the Administrative Agent, all
future holders of the Secured Obligations and their respective successors and
assigns, except that no Grantor may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent.
11.7 WAIVERS AND AMENDMENTS. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument which (i) is executed by the Grantors and the
Administrative Agent and (ii) is otherwise made in accordance with the Credit
Agreement, provided that any provision of this 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. Any such amendment, supplement, modification or waiver
shall be binding upon each Grantor and the Administrative Agent and all future
holders of the Secured Obligations. In the case of any waiver, each Grantor, the
Administrative Agent and the Secured Parties shall be restored to their former
position and rights hereunder and under the outstanding Secured Obligations, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing, but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
11.8 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Administrative Agent in exercising any right, power or privilege
hereunder and no course of dealing between any of the Grantors and the
Administrative Agent shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent 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 would otherwise have on any future occasion. The rights
and remedies herein expressly provided are cumulative may be exercised singly or
concurrently and as often and in such order as the Administrative Agent deems
expedient and are not exclusive of any rights or remedies which the
Administrative Agent would otherwise have whether by agreement or now or
hereafter existing under applicable law. No notice to or demand on any Grantor
in any case shall entitle any Grantor to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent to any other or further action in any circumstances without
notice or demand.
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<PAGE> 259
11.9 TERMINATION; RELEASE. When the Secured Obligations have
been indefeasibly paid and performed in full and after termination of the
Commitment and the expiration, cancellation or return to the issuer thereof of
all Letters of Credit, this Agreement shall terminate, and the Administrative
Agent, at the request and sole expense of the Grantors, will execute and deliver
to the Grantors the proper instruments (including Uniform Commercial Code
termination statements) acknowledging the termination of this Agreement, and
will duly assign, transfer and deliver to the Grantors, without recourse,
representation or warranty of any kind whatsoever, such of the Collateral as may
be in possession of the Administrative Agent and has not theretofore been
disposed of, applied or released.
11.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
11.11 EFFECTIVENESS. This Agreement shall become effective on
the date on which each Grantor shall have signed a counterpart hereof and shall
have delivered the same to the Administrative Agent.
11.12 HEADINGS DESCRIPTIVE. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
11.13 SEVERABILITY. In case any provision in or obligation
under this Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
11.14 SURVIVAL. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the making and repayment of the
Secured Obligations.
11.15 POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
11.16 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Agreement shall, as between the Administrative Agent and the
Secured Parties, 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 such Grantor, the Agent shall be
conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and such Grantor shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.
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<PAGE> 260
IN WITNESS WHEREOF, each Grantor and the Administrative Agent
have caused this Agreement to be duly executed and delivered as of the date
first above written.
SIMMONS COMPANY
By /s/ J.C. Daiker
---------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President
Chief Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Att: Jonathan C. Daiker
Telecopy: 770-392-2608
SIMMONS HOLDINGS, INC.
By /s/ J.C. Daiker
---------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President
Chief Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Att: Jonathan C. Daiker
Telecopy: 770-392-2608
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<PAGE> 261
SIMMONS INTERNATIONAL
HOLDING COMPANY, INC.
By /s/ J.C. Daiker
---------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President
Chief Financial Officer
NOTICE ADDRESS:
One Concourse Parkway, Suite 600
Atlanta, GA 30328
Att: Jonathan C. Daiker
Telecopy: 770-392-2608
UBS A.G., STAMFORD BRANCH,
as Administrative Agent
By /s/ Michael J. Cerminaro
---------------------------------
Name: Michael J. Carminaro
Title: Director
Leveraged Finance
NOTICE ADDRESS:
677 Washington Blvd., 8th Floor
Stamford, CT 06901
Att: Lara Kavanagh
Telecopy: 203-719-4176
By: /s/ M.R. Grayer
----------------------------------
Name: Michael R. Grayer
Title: Managing Director
Leveraged Finance
I-33
<PAGE> 262
<TABLE>
<CAPTION>
SCHEDULE I
Security Collateral
PART I
Pledged Stock
PERCENTAGE OF
CERTIFICATES OUTSTANDING
ISSUER HELD (PLEDGED) BY TOTAL SHARES NO. STOCK
- ------ ----------------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Simmons Company Simmons Holdings, 31,964,452 1 100%
Inc.
- ---------------------------------------------------------------------------------------------------------------
Simmons International Simmons Company 101 10 100%
Holding Company, Inc.
- ---------------------------------------------------------------------------------------------------------------
Simmons Caribbean Simmons Company 206 6 65%
Bedding, Inc.
- ---------------------------------------------------------------------------------------------------------------
Simmons I.P. Inc. Simmons Company 1,378,715 C-3 65%
- ---------------------------------------------------------------------------------------------------------------
Federated Department Simmons USA 84 3168 n/a
Stores (merged into Simmons
Company)
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
PART II
-------
Pledged Notes
ISSUER OTHER PRINCIPAL AMOUNT DATE
------ ---------------------- ----
<S> <C> <C>
Simmons International Holding An amount not to exceed October 29, 1998
Company, Inc. $10,000,000 in the aggregate
- ---------------------------------------------------------------------------------------------------------------
Simmons Caribbean Bedding, Inc. An amount not to exceed October 29, 1998
$10,000,000 in the aggregate
- ---------------------------------------------------------------------------------------------------------------
H&H Sleep Centers, Inc. and LPM $3,500,000 February 20, 1998
Corporation d/b/a La Jolla Patio
and California Beautyrest Mattress
Center
- ---------------------------------------------------------------------------------------------------------------
Orbit Development, Inc., Libitzky $2,500,000 September 29, 1992
and 1700 Fairway Associates L.P.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 263
SCHEDULE II
LOCATIONS OF EQUIPMENT AND INVENTORY
Locations of Equipment
1. Norcorss Georgia
1900 Beaver Ruin Circle
Norcross, GA 30071
2. Atlanta, Georgia
One Concourse Parkway
Suite 600
Atlanta, GA 30329
(hereinafter "Corporate HQ")
3. Atlanta Plant, Mabelton, Georgia
7131 Discovery Boulevard
Mabelton, GA 30093
4. Seattle Plant, Auburn, Washington
425 C St. Northwest
Auburn, WA 98002
5. San Leandro Plant, California
1700 Fairway Drive
San Leandro, CA 94577
6. Fredericksburg, Virginia
9601 Cosner Drive
Fredericksburg, VA 22408
7. Denver Plant, Aurora, Colorado
17850 East 32nd Place
Aurora, CO 80011
8. Phoenix Plant, Tolleson, Arizona
101 North 104th Avenue, Suite A
Tolleson, AZ 85353
9. Jacksonville, Florida
540 Beautyrest Avenue
Jacksonville, FL 32254
10. Charlotte, North Carolina
5100 West W.T. Harris Blvd.
Charlotte, NC 28269
11. Salt Lake City, Utah
Crossroads Corporate Center #1
1130 South 3800 West
Salt Lake City, UT 84104
12. Los Angeles Plant,
Compton/Harbor City, California
20100 South Alameda Street
Compton, CA 90220
13. Springfield Plant, Agawam,
Massachusetts
320 Bowles Road
Agawam, MA 01001
14. Honolulu Plant, Kapolei, Hawaii
91-489 Komohana Street
Kapolei, HI 96707-1715
15. Dallas Plant, Coppell, Texas
4255 Patriot Drive, #100
Coppell, TX 75019
16. Shawnee, Kansas
7910 Hedge Lane terrace
Shawnee, Kansas 66216
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<PAGE> 264
17. Janesville, Wisconsin
1809 Adel Street
Janesville, Wisconsin 53546
18. Piscataway, New Jersey
365 South Randolphville Road
Piscataway, NJ 08854
19. Columbus, OH Plant, Grove City
3960 Brookham Drive
Grove City, OH 43123
20. Warren Drive, Norcross, Georgia
6424 Warren Drive
Norcross, GA 30093
21. Chicago, IL
150 North Wacker Drive
Suite 650
Chicago, IL 60606
(hereinafter "Chicago Sales Office")
22. Highpoint, NC
International Home
Furnishings Center
2095 S. Main Street
Space No. M604
plus bays M601, M602, M603,
M605, 606, M607 and M608
High Point, NC 27261
(hereinafter "High Point
Showroom")
23. Atlanta, GA
1335 Chattahoochee Ave.
Atlanta, GA 30318
24. Baltimore, MD
Meadows Business Park
1717 Whitehead Rd.
Baltimore, MD 21207
25. Aurora, CO
Gateway Shopping Center
1060 S. Sable Boulevard
Aurora, CO 80012
26. Morgantown, PA
Home Furnishings & Fashions
Outlet Mall, Store 107
Route 10, Berks County
Morgantown, PA 19543
27. Nashville, TN
364 Elysian Fields Court
Nashville, TN 37211
28. Davie, FL
Pine Island Ridge Plaza Shopping
Center
8858 State Road, #84
Room #G-3
Davie, FL 33324
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<PAGE> 265
29. Seattle, WA
17000 Aurora Avenue North
Seattle, WA 98133
30. Grandview, MO
Grandview Plaza Shopping Center
12905-L, South 71 Highway
Grandview, MO 64030
31. Shawnee, KS (Kansas City)
Westbrooke Village Shopping Ctr.
7357 Quivira Road
Shawnee, KS 66216
32. Kent, WA
Pacific Business Park
8623 South 212th Street
Kent, WA 98031
32. Norcross, GA
Regency Business Center
6300 Jimmy Carter Boulevard
Suite 106
Norcross, GA 30071
33. Rahway, NJ
Granite Plaza
947 Routes 1 and 9 North
Rahway, NJ 07065
34. Tampa, FL
11612 North Nebraska Avenue
Tampa, FL 33612
35. Dallas, TX
1200 Conveyor Lane
Dallas, TX 75247
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<PAGE> 266
800 Route 9 South
Howell, NJ 07728
Locations of Inventory
All of the above locations except Corporate HQ, Chicago Sales Office and High
Point Showroom.
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<PAGE> 267
SCHEDULE III
LOCATIONS OF CHIEF EXECUTIVE OFFICES
Locations of Chief Executive Offices
1. Simmons Company
One Concourse Parkway
Suite 600
Atlanta, GA 30328
2. Simmons Holdings, Inc.
One Concourse Parkway
Suite 600
Atlanta, GA 30328
3. Simmons International Holding Company, Inc.
One Concorse Parkway
Suite 600
Atlanta, GA 30328
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<PAGE> 268
SCHEDULE IV
Intellectual Property
ITEM A: COPYRIGHTS
Copyrights of the Grantors are listed on Annex A attached hereto.
ITEM B: COPYRIGHT LICENSES
Copyright Licenses of the Grantors are listed on Annex B attached hereto.
ITEM C: PATENTS
Patents of the Grantors are listed on Annex C attached hereto.
ITEM D: PATENT LICENSES
Patent Licenses of the Grantors are listed on Annex B attached hereto.
ITEM E: TRADEMARKS
Trademarks of the Grantors are listed on Annex E attached hereto.
ITEM F: TRADEMARK LICENSES
Trademark Licenses of the Grantors are listed on Annex B attached hereto.
ITEM G: TRADE SECRET LICENSES
Trade Secret Licenses of the Grantors are listed on Annex B attached hereto.
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<PAGE> 269
For Intellectual Property Schedules
Please contact
Ken Horton
or
Dave Coombs
-8-
<PAGE> 270
SCHEDULE V
FILING OFFICES FOR UCC FINANCING STATEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
State Local Central
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Arizona Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
2. California Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
3. Colorado Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
4. Delaware Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
5. Florida Office of the Department of
State
- -------------------------------------------------------------------------------------------------------------
6. Georgia Clerk of the Superior
Court of Cobb County
- -------------------------------------------------------------------------------------------------------------
7. Hawaii Registrar of Conveyances
- -------------------------------------------------------------------------------------------------------------
8. Illinois Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
9. Kansas Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
10. Maryland Office of the Maryland
State Department of
Assessments and Taxation
- -------------------------------------------------------------------------------------------------------------
11. Massachusetts Office of the Clerk, Office of the Secretary of
Agawam Township State
- -------------------------------------------------------------------------------------------------------------
12. Missouri Office of the Recorder of Office of the Secretary of
Deeds, Jackson County State
- -------------------------------------------------------------------------------------------------------------
13. New Jersey Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 271
<TABLE>
<S> <C> <C>
14. North Carolina Office of the County Office of the Secretary of
Clerk, Mecklenberg State
County
Office of the County
Clerk, Davidson County
- -------------------------------------------------------------------------------------------------------------
15. Ohio Office of the County Office of the Secretary of
Recorded of Franklin State
County
- -------------------------------------------------------------------------------------------------------------
16. Pennsylvania Office of the Office of the Secretary of
Prothonotary of Berks the Commonwealth
County
- -------------------------------------------------------------------------------------------------------------
17. Tennessee Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
18. Texas Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
19. Utah Division of Corporations
and Commercial Code
- -------------------------------------------------------------------------------------------------------------
20. Virginia Office of the Clerk of the Office of the State
Circuit Court of Corporation Commission
Fredericksburg
- -------------------------------------------------------------------------------------------------------------
21. Washington Office of the Department of
Licensing
- -------------------------------------------------------------------------------------------------------------
22. Wisconsin Office of the Secretary of
State
- -------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the filing of UCC Financing Statements in the above filing
offices, UCC Financing Statement filings will be made against Simmons Company in
the central filing of each state not identified above.
-10-
<PAGE> 272
SCHEDULE VI
Insurance Certificates
-11-
<PAGE> 273
EXHIBIT K-1 TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING ([STATE])
BY AND FROM
SIMMONS COMPANY, "MORTGAGOR"
TO
UBS A.G., STAMFORD BRANCH, AS ADMINISTRATIVE AGENT, "MORTGAGEE"
DATED AS OF OCTOBER ____, 1998
LOCATION: [ADDRESS OF PROPERTY]
BLOCK:
LOT(S):
COUNTY:
THE SECURED PARTY (MORTGAGEE) DESIRES THIS FIXTURE FILING
TO BE INDEXED AGAINST THE RECORD OWNER OF THE REAL ESTATE
DESCRIBED HEREIN
PREPARED BY, RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
FORTY-FIFTH FLOOR
NEW YORK, NEW YORK 10022-3897
ATTENTION: JAY SOBEL, ESQ.
<PAGE> 274
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING ([STATE])
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND
LEASES AND FIXTURE FILING ([STATE]) (this "MORTGAGE") is dated as of October 29,
1998 by and from SIMMONS COMPANY, a Delaware corporation ("MORTGAGOR"), whose
address is One Concourse Parkway, Suite 600, Atlanta, Georgia 30328 to UBS A.G.,
STAMFORD BRANCH, as Administrative Agent (the "ADMINISTRATIVE AGENT") for the
Lenders listed in the Credit Agreement (defined below) and all successor
Administrative Agents and assigns (the Administrative Agent and all successor
Administrative Agents and assigns, "MORTGAGEE"), having an address at UBS A.G.,
Stamford Branch, 677 Washington Boulevard, 8th Floor, Stamford, Connecticut
06912.
ARTICLE 1
DEFINITIONS
-----------
SECTION 1.1. DEFINITIONS. All capitalized terms used herein without
definition shall have the respective meanings ascribed to them in that certain
Credit and Guaranty Agreement dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT") by
and among Mortgagor, as Borrower ("BORROWER"), Simmons Holdings, Inc. and
certain subsidiaries of Borrower, as Guarantors, Goldman Sachs Credit Partners
L.P., as a Joint Lead Arranger and as Syndication Agent, Warburg Dillon Read
LLC, as a Joint Lead Arranger, Mortgagee, as Administrative Agent, and the
financial institutions listed on the signature pages attached thereto (the
"LENDERS"). As used herein, the following terms shall have the following
meanings:
(a) "INDEBTEDNESS": All (i) principal indebtedness of Borrower
to Mortgagee and the Lenders, together with interest thereon, under the Tranche
A Term Loans, the Tranche B Term Loans, the Tranche C Term Loans, the Revolving
Loans and the Swing Line Loans, as evidenced by the Register or the Tranche A
Term Loan Notes, the Tranche B Term Loan Notes, the Tranche C Term Loan Notes,
the Revolving Notes and the Swing Line Notes of even date herewith (such
Register and Notes and any and all modifications, substitutions, extensions,
renewals and replacements thereof are collectively referred to herein as the
"MORTGAGE NOTES"), and (ii) other amounts evidenced or secured by the Credit
Documents, including, without limitation, reimbursement obligations in respect
of Letters of Credit, together with interest thereon and other amounts payable
with respect thereto, and (iii) principal, interest and other amounts which may
hereafter be loaned by Mortgagee or the Lenders or any of them under or in
connection with the Credit Agreement or any of the other Credit Documents,
whether evidenced by a promissory note or other instrument which, by its terms,
is secured hereby. Pursuant to the Credit Agreement, the Lenders have agreed to
provide Borrower with a revolving credit facility, which permits Borrower to
borrow certain principal amounts, repay all or a portion of such principal
amounts, and reborrow
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<PAGE> 275
the amounts previously paid to the Lenders, all upon satisfaction of certain
conditions stated in the Credit Agreement. The amount of such revolving credit
facility may increase and decrease from time to time as the Lenders advance,
Borrower repays, and the Lenders re-advance sums on account of the revolving
credit, all as more fully described in the Credit Agreement. Additionally,
pursuant to the Credit Agreement, Borrower will enter into Interest Rate
Agreements. The term "Indebtedness" includes without limitation all advances and
re-advances under the revolving credit feature of the Credit Agreement and all
amounts under Interest Rate Agreements entered into with one or more of the
Lenders or any Affiliates thereof.
(b) "MORTGAGED PROPERTY": All of Mortgagor's right, title
interest and estate in (1) the fee interest in the real property described in
EXHIBIT A attached hereto and incorporated herein by this reference, together
with any greater or additional estate therein as hereafter may be acquired by
Mortgagor (the "LAND"), (2) all improvements now owned or hereafter acquired by
Mortgagor, now or at any time situated, placed or constructed upon the Land (the
"IMPROVEMENTS"; the Land and Improvements are collectively referred to as the
"PREMISES"), (3) all materials, supplies, equipment, apparatus and other items
of personal property now owned or hereafter acquired by Mortgagor and now or
hereafter attached to or installed in any of the Improvements or the Land, and
water, gas, electrical, telephone, storm and sanitary sewer facilities and all
other utilities now owned or hereafter acquired by Mortgagor, whether or not
situated in easements (the "FIXTURES"), (4) all leases, licenses, concessions,
occupancy agreements or other agreements (written or oral, now or at any time in
effect) which grant to any Person a possessory interest in, or the right to use,
all or any part of the Mortgaged Property, together with all related security
and other deposits (the "LEASES"), (5) all of the rents, revenues, royalties,
income, proceeds, profits, security and other types of deposits, and other
benefits paid or payable by parties to the Leases for using, leasing, licensing
possessing, operating from, residing in, selling or otherwise enjoying the
Mortgaged Property (the "RENTS"), (6) all rights, privileges, tenements,
hereditaments, rights-of-way, easements, appendages and appurtenances
appertaining to the foregoing, (7) all property tax refunds (the "TAX REFUNDS"),
(8) all accessions, replacements and substitutions for any of the foregoing and
all proceeds thereof (the "PROCEEDS"), and (9) all of Mortgagor's right, title
and interest in and to any awards, damages, remunerations, reimbursements,
settlements or compensation heretofore made or hereafter to be made by any
governmental authority pertaining to the Land, Improvements or Fixtures (the
"CONDEMNATION AWARDS"). As used in this Mortgage, the term "MORTGAGED PROPERTY"
shall mean all or, where the context permits or requires, any portion of the
above or any interest therein.
(c) "OBLIGATIONS": All of the agreements, covenants,
conditions, warranties, representations and other Obligations of Mortgagor
(including, without limitation, the obligation to repay the Indebtedness) under
the Credit Agreement and the other Credit Documents.
(d) "UCC": The Uniform Commercial Code of [STATE] or, if the
creation, perfection and enforcement of any security interest herein granted is
governed by the laws of a state other than [STATE], then, as to the matter in
question, the Uniform Commercial Code in effect in that state.
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<PAGE> 276
ARTICLE 2
GRANT
-----
SECTION 2.1. GRANT. To secure the full and timely payment of the
Indebtedness and the full and timely performance of the Obligations, Mortgagor
MORTGAGES, GRANTS, BARGAINS, ASSIGNS, SELLS and CONVEYS, to Mortgagee the
Mortgaged Property, subject, however, to the Permitted Encumbrances, TO HAVE AND
TO HOLD the Mortgaged Property to Mortgagee, and Mortgagor does hereby bind
itself, its successors and assigns to WARRANT AND FOREVER DEFEND the title to
the Mortgaged Property unto Mortgagee.
ARTICLE 3
WARRANTIES, REPRESENTATIONS AND COVENANTS
-----------------------------------------
Mortgagor warrants, represents and covenants to Mortgagee as
follows:
SECTION 3.1. TITLE TO MORTGAGED PROPERTY AND LIEN OF THIS INSTRUMENT.
Mortgagor owns the Mortgaged Property free and clear of any liens, claims or
interests, except the Permitted Encumbrances. This Mortgage creates a valid,
enforceable first priority lien and security interest against the Mortgaged
Property.
SECTION 3.2. FIRST LIEN STATUS. Except as otherwise provided in the
Credit Agreement, Mortgagor shall preserve and protect the first lien and
security interest status of this Mortgage and the other Credit Documents. If any
lien or security interest other than the Permitted Encumbrances or this Mortgage
is asserted against the Mortgaged Property, Mortgagor shall promptly, and at its
expense, (a) give Mortgagee a detailed written notice of such lien or security
interest (including origin, amount and other terms), and (b) pay the underlying
claim in full or take such other action so as to cause it to be released or
contest the same in compliance with the requirements of the Credit Agreement
(including the requirement of providing a bond or other security satisfactory to
Mortgagee).
SECTION 3.3. PAYMENT AND PERFORMANCE. Mortgagor shall pay the
Indebtedness when due under the Credit Documents and shall perform the
Obligations in full when they are required to be performed.
SECTION 3.4. REPLACEMENT OF FIXTURES AND PERSONALTY. Except as
otherwise provided in the Credit Agreement, Mortgagor shall not, without the
prior written consent of Mortgagee, permit any of the Fixtures or Personalty
(excluding inventory sold in the ordinary course of business) to be removed at
any time from the Land or Improvements, unless the removed item is removed
temporarily for maintenance and repair or, if removed permanently, is obsolete
and is replaced by an article of equal or better suitability and value, owned by
Mortgagor subject to the liens and security interests of this Mortgage and the
other Credit Documents, and free and clear of any other lien or security
interest except such as may be permitted under the Credit Agreement or first
approved in writing by Mortgagee.
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<PAGE> 277
SECTION 3.5. INSPECTION. Mortgagor shall permit Mortgagee, the Lenders
and their respective agents, representatives and employees, upon reasonable
prior notice to Mortgagor, to inspect the Mortgaged Property and all books and
records of Mortgagor located thereon, and to conduct such engineering studies as
Mortgagee or the Lenders may reasonably require, provided that such inspections
and studies shall be at Lender's cost and expense and shall not materially
interfere with the use and operation of the Mortgaged Property. Mortgagor agrees
that Mortgagee and the Lenders may, from time to time and in their reasonable
discretion, (i) retain at Mortgagor's expense, an independent professional
consultant to review any environmental audits, investigations, analyses and
reports relating to Hazardous Material prepared by or for Mortgagor which
Mortgagee has requested and which indicates conditions or circumstances which
Mortgagee reasonably believes may have a significant impact on the business and
operations of Mortgagor and (ii) in the event (a) Mortgagee reasonably believes
that Mortgagor has breached any representation warranty or covenant contained in
SECTION 4.10 or SECTION 5.7 (as each such section pertains to environmental
matters) or SECTION 4.14 of the Credit Agreement or that there has been a
material violation of Environmental Laws at the Mortgaged Property or by
Mortgagor or (b) an Event of Default has occurred and is continuing and the
repayment of any amount due thereunder has been accelerated, conduct its own
investigation of the Mortgaged Property.
SECTION 3.6. OTHER COVENANTS. All of the covenants of Borrower in the
Credit Agreement are incorporated herein by reference.
(a) CONDEMNATION AWARDS AND INSURANCE PROCEEDS.
(b) CONDEMNATION AWARDS. Mortgagor assigns all awards and
compensation to which it is entitled for any condemnation or other taking, or
any purchase in lieu thereof, to Mortgagee and authorizes Mortgagee to collect
and receive such awards and compensation and to give proper receipts and
acquittances therefor, except to the extent otherwise provided by the terms of
the Credit Agreement.
(c) INSURANCE PROCEEDS. Except to the extent otherwise
provided by the Credit Agreement, Mortgagor assigns to Mortgagee all of
Mortgagor's right, title and interest in all proceeds of any insurance policies
insuring against loss or damage to the Mortgaged Property. Mortgagor authorizes
Mortgagee to collect and receive such proceeds and authorizes and directs the
issuer of each of such insurance policies to make payment for all such losses
directly to Mortgagee, instead of to Mortgagor and Mortgagee jointly, except to
the extent provided otherwise in the Credit Agreement.
ARTICLE 4
[INTENTIONALLY OMITTED]
ARTICLE 5
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<PAGE> 278
DEFAULT AND FORECLOSURE
-----------------------
SECTION 5.1. REMEDIES. Upon the occurrence and during the continuance of
an Event of Default, Mortgagee may, at Mortgagee's election, exercise any or all
of the following rights, remedies and recourses:
(a) ACCELERATION. The Indebtedness shall automatically become
immediately due and payable, if required by the Credit Agreement and in
accordance with the Credit Agreement, or if the Credit Agreement does not
require automatic acceleration, Mortgagee may declare the Indebtedness to be
immediately due and payable, pursuant to and in accordance with the Credit
Agreement, without further notice, presentment, protest, notice of intent to
accelerate, notice of acceleration, demand or action of any nature whatsoever
(each of which hereby is expressly waived by Mortgagor), whereupon the same
shall become immediately due and payable.
(b) ENTRY ON MORTGAGED PROPERTY. To the extent permitted by
applicable law, enter the Mortgaged Property and take exclusive possession
thereof and of all books, records and accounts relating thereto or located
thereon. If Mortgagor remains in possession of the Mortgaged Property after an
Event of Default and without Mortgagee's prior written consent, Mortgagee may
invoke any legal remedies to dispossess Mortgagor.
(c) OPERATION OF MORTGAGED PROPERTY. To the extent permitted
by applicable law, hold, lease, develop, manage, operate or otherwise use the
Mortgaged Property upon such terms and conditions as Mortgagee may deem
reasonable under the circumstances (making such repairs, alterations, additions
and improvements and taking other actions, from time to time, as Mortgagee deems
necessary or desirable), and apply all Rents and other amounts collected by
Mortgagee in connection therewith in accordance with the provisions of SECTION
5.7.
(d) FORECLOSURE AND SALE. Institute proceedings for the
complete foreclosure of this Mortgage, either by judicial action or by power of
sale, in which case the Mortgaged Property may be sold for cash or credit in one
or more parcels. With respect to any notices required or permitted under the
UCC, Mortgagor agrees that five (5) days' prior written notice shall be deemed
commercially reasonable. At any such sale by virtue of any judicial proceedings,
power of sale, or any other legal right, remedy or recourse, the title to and
right of possession of any such property shall pass to the purchaser thereof,
and to the fullest extent permitted by law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim, equity, equity
of redemption, and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar both at law and in equity
against Mortgagor, and against all other Persons claiming or to claim the
property sold or any part thereof, by, through or under Mortgagor. Mortgagee or
any of the Lenders may be a purchaser at such sale and if Mortgagee is the
highest bidder, Mortgagee may credit the portion of the purchase price that
would be distributed to Mortgagee against the Indebtedness in lieu of paying
cash. In the event this Mortgage is foreclosed by judicial action, appraisement
of the Mortgaged Property is waived to the extent permitted by applicable law.
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<PAGE> 279
(e) RECEIVER. To the extent permitted by applicable law, make
application to a court of competent jurisdiction for, and obtain from such court
as a matter of strict right and without notice to Mortgagor or regard to the
adequacy of the Mortgaged Property for the repayment of the Indebtedness, the
appointment of a receiver of the Mortgaged Property, and Mortgagor irrevocably
consents to such appointment. Any such receiver shall have all the usual powers
and duties of receivers in similar cases, including the full power to rent,
maintain and otherwise operate the Mortgaged Property upon such terms as may be
approved by the court, and shall apply such Rents in accordance with the
provisions of SECTION 5.7.
(f) OTHER. Exercise all other rights, remedies and recourses
granted under the Credit Documents or otherwise available at law or in equity.
SECTION 5.2. SEPARATE SALES. The Mortgaged Property may be sold in one
or more parcels and in such manner and order as Mortgagee in its sole discretion
may elect; the right of sale arising out of any Event of Default shall not be
exhausted by any one or more sales.
SECTION 5.3. REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE.
Mortgagee and the Lenders shall have all rights, remedies and recourses granted
in the Credit Documents and available at law or equity (including the UCC),
which rights (a) shall be cumulated and concurrent, (b) may be pursued
separately, successively or concurrently against Mortgagor or others obligated
under the Credit Documents, or against the Mortgaged Property, or against any
one or more of them, at the sole discretion of Mortgagee or the Lenders, (c) may
be exercised as often as occasion therefor shall arise, and the exercise or
failure to exercise any of them shall not be construed as a waiver or release
thereof or of any other right, remedy or recourse, and (d) are intended to be,
and shall be, nonexclusive. No action by Mortgagee or the Lenders in the
enforcement of any rights, remedies or recourses under the Credit Documents or
otherwise at law or equity shall be deemed to cure any Event of Default.
SECTION 5.4. RELEASE OF AND RESORT TO COLLATERAL. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the Mortgaged Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security interest
created in or evidenced by the Credit Documents or their status as a first and
prior lien and security interest in and to the Mortgaged Property. For payment
of the Indebtedness, Mortgagee may resort to any other security in such order
and manner as Mortgagee may elect.
SECTION 5.5 WAIVER OF REDEMPTION, NOTICE AND MARSHALLING OF ASSETS. To
the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefit that might accrue to
Mortgagor by virtue of any present or future statute of limitations or law or
judicial decision exempting the Mortgaged Property from attachment, levy or sale
on execution or providing for any stay of execution, exemption from civil
process, redemption or extension of time for payment, (b) except as provided in
the Credit Agreement, all notices of any Event of Default or of Mortgagee's
election to exercise or the actual exercise of any right, remedy
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<PAGE> 280
or recourse provided for under the Credit Documents, and (c) any right to a
marshalling of assets or a sale in inverse order of alienation.
SECTION 5.6. DISCONTINUANCE OF PROCEEDINGS. If Mortgagee or the Lenders
shall have proceeded to invoke any right, remedy or recourse permitted under the
Credit Documents and shall thereafter elect to discontinue or abandon it for any
reason, Mortgagee or the Lenders shall have the unqualified right to do so, to
the extent permitted by applicable law, and, in such an event, to the extent
permitted by applicable law, Mortgagor and Mortgagee or the Lenders shall be
restored to their former positions with respect to the Indebtedness, the
Obligations, the Credit Documents, the Mortgaged Property and otherwise, and the
rights, remedies, recourses and powers of Mortgagee or the Lenders shall
continue as if the right, remedy or recourse had never been invoked, but no such
discontinuance or abandonment shall waive any Event of Default which may then
exist or the right of Mortgagee or the Lenders thereafter to exercise any right,
remedy or recourse under the Credit Documents for such Event of Default.
SECTION 5.7. APPLICATION OF PROCEEDS. After the occurrence and during
the continuance of any Event of Default, subject to the terms of the Credit
Agreement, the proceeds of any sale of, and the Rents and other amounts
generated by the holding, leasing, management, operation or other use of the
Mortgaged Property, shall be applied by Mortgagee (or the receiver, if one is
appointed) in the following order unless otherwise required by applicable law;
(a) to the payment of the costs and expenses of taking
possession of the Mortgaged Property and the actual costs and reasonable
expenses of holding, using, leasing, repairing, improving and selling the same,
including, without limitation (1) receiver's fees and expenses, including the
repayment of the amounts evidenced by any receiver's certificates, (2) court
costs, (3) reasonable attorneys' and accountants' fees and expenses, and (4)
costs of advertisement;
(b) to the payment of the Indebtedness and performance of the
Obligations in such manner and order of preference as Mortgagee in its sole
discretion may determine; and
(c) the balance, if any, to the payment of the Persons legally
entitled thereto.
SECTION 5.8. OCCUPANCY AFTER FORECLOSURE. Any sale of the Mortgaged
Property or any part thereof in accordance with SECTION 5.1(D) will divest all
right, title and interest of Mortgagor in and to the property sold. Subject to
applicable law, any purchaser at a foreclosure sale will receive immediate
possession of the property purchased. If Mortgagor retains possession of such
property or any part thereof subsequent to such sale, Mortgagor will be
considered a tenant at sufferance of the purchaser, and will, if Mortgagor
remains in possession after demand to remove, be subject to eviction and
removal, forcible or otherwise, with or without process of law.
SECTION 5.9. ADDITIONAL ADVANCES AND DISBURSEMENTS; COSTS OF
ENFORCEMENT.
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<PAGE> 281
(a) Upon the occurrence and during the continuance of any
Event of Default, Mortgagee and each of the Lenders shall have the right, but
not the obligation, to cure such Event of Default in the name and on behalf of
Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee or
any Lender under this SECTION 5.9, or otherwise under this Mortgage or any of
the other Credit Documents or applicable law, shall bear interest from the date
that such sum is advanced or expense incurred, to and including the date of
reimbursement, computed at the rate or rates at which interest is then computed
on the Indebtedness, and all such sums, together with interest thereon, shall be
secured by this Mortgage.
(b) Mortgagor shall pay all expenses (including reasonable
attorneys' fees and expenses) of or incidental to the perfection and enforcement
of this Mortgage and the other Credit Documents, or the enforcement, compromise
or settlement of the Indebtedness or any claim under this Mortgage and the other
Credit Documents, and for the curing thereof, or for defending or asserting the
rights and claims of Mortgagee or the Lenders in respect thereof, by litigation
or otherwise.
SECTION 5.10. NO MORTGAGEE IN POSSESSION. To the extent permitted by
applicable law, neither the enforcement of any of the remedies under this
ARTICLE 5, the assignment of the Rents and Leases under ARTICLE 6, the security
interests under ARTICLE 7, nor any other remedies afforded to Mortgagee or the
Lenders under the Credit Documents, at law or in equity shall cause Mortgagee or
any Lender to be deemed or construed to be a mortgagee in possession of the
Mortgaged Property, to obligate Mortgagee or any Lender to lease the Mortgaged
Property or attempt to do so, or to take any action, incur any expense, or
perform or discharge any obligation, duty or liability whatsoever under any of
the Leases or otherwise.
ARTICLE 6
ASSIGNMENT OF RENTS AND LEASES
------------------------------
SECTION 6.1. ASSIGNMENT. In furtherance of and in addition to the
assignment made by Mortgagor in SECTION 2.1 of this Mortgage, Mortgagor hereby
absolutely and unconditionally assigns, sells, transfers and conveys to
Mortgagee all of its right, title and interest in and to all Leases, whether now
existing or hereafter entered into, and all of its right, title and interest in
and to all Rents. This assignment is an absolute assignment and not an
assignment for additional security only. So long as no Event of Default shall
have occurred and be continuing, Mortgagor shall have a revocable license from
Mortgagee to exercise all rights extended to the landlord under the Leases,
including the right to receive and collect all Rents and to hold the Rents in
trust for use in the payment and performance of the Obligations and to otherwise
use the same. The foregoing license is granted subject to the conditional
limitation that no Event of Default shall have occurred and be continuing. Upon
the occurrence and during the continuance of an Event of Default, whether or not
legal proceedings have commenced, and without regard to waste, adequacy of
security for the Obligations or solvency of Mortgagor, the license herein
granted shall automatically expire and terminate, without notice by Mortgagee
(any such notice being hereby expressly waived by Mortgagor).
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<PAGE> 282
SECTION 6.2. PERFECTION UPON RECORDATION. Mortgagor acknowledges that
Mortgagee has taken all actions necessary to obtain, and that upon recordation
of this Mortgage Mortgagee shall have, to the extent permitted under applicable
law, a valid and fully perfected, first priority, present assignment of the
Rents arising out of the Leases and all security for such Leases. Mortgagor
acknowledges and agrees that upon recordation of this Mortgage, Mortgagee's
interest in the Rents shall be deemed to be fully perfected, "choate" and
enforced as to Mortgagor and all third parties, including, without limitation,
any subsequently appointed trustee in any case under Title 11 of the United
States Code (the "BANKRUPTCY CODE"), without the necessity of commencing a
foreclosure action with respect to this Mortgage, making formal demand for the
Rents, obtaining the appointment of a receiver or taking any other affirmative
action.
SECTION 6.3. BANKRUPTCY PROVISIONS. Without limitation of the absolute
nature of the assignment of the Rents hereunder, Mortgagor and Mortgagee agree
that (a) this Mortgage shall constitute a "security agreement" for purposes of
Section 552(b) of the Bankruptcy Code, (b) the security interest created by this
Mortgage extends to property of Mortgagor acquired before the commencement of a
case in bankruptcy and to all amounts paid as Rents and (c) such security
interest shall extend to all Rents acquired by the estate after the commencement
of any case in bankruptcy.
SECTION 6.4. NO MERGER OF ESTATES. So long as part of the Indebtedness
and the Obligations secured hereby remain unpaid and undischarged, the fee and
leasehold estates to the Mortgaged Property shall not merge, but shall remain
separate and distinct, notwithstanding the union of such estates either in
Mortgagor, Mortgagee, any tenant or any third party by purchase or otherwise.
ARTICLE 7
SECURITY AGREEMENT
------------------
SECTION 7.1. SECURITY INTEREST. This Mortgage constitutes a "security
agreement" on personal property within the meaning of the UCC and other
applicable law and with respect to the Fixtures, Leases, Rents, Tax Refunds,
Proceeds, and Condemnation Awards. To this end, Mortgagor grants to Mortgagee a
first and prior security interest in the Fixtures, Leases, Rents, Tax Refunds,
Proceeds, Condemnation Awards and all other Mortgaged Property which is personal
property to secure the payment of the Indebtedness and performance of the
Obligations, and agrees that Mortgagee shall have all the rights and remedies of
a secured party under the UCC with respect to all such personal property. Any
notice of sale, disposition or other intended action by Mortgagee with respect
to the Fixtures, Leases, Rents, Tax Refunds, Proceeds, and Condemnation Awards
sent to Mortgagor at least five (5) days prior to any action under the UCC shall
constitute reasonable notice to Mortgagor.
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SECTION 7.2. FINANCING STATEMENTS; CHIEF EXECUTIVE OFFICE. Mortgagor
shall execute and deliver to Mortgagee, in form and substance satisfactory to
Mortgagee, such financing statements and such further assurances as Mortgagee
may, from time to time, reasonably consider necessary to create, perfect and
preserve Mortgagee's security interest hereunder and Mortgagee may cause such
statements and assurances to be recorded and filed, at such times and places as
may be required or permitted by law to so create, perfect and preserve such
security interest. Mortgagor's chief executive office is in the State of [STATE]
at the address set forth in the first paragraph of this Mortgage.
SECTION 7.3. FIXTURE FILING. This Mortgage shall also constitute a
"fixture filing" for the purposes of the UCC against all of the Mortgaged
Property which is or is to become fixtures. The address of Mortgagor (the
debtor) and the address of Mortgagee (the secured party) appear in EXHIBIT B
attached to this Mortgage.
ARTICLE 8
[INTENTIONALLY OMITTED]
ARTICLE 9
MISCELLANEOUS
-------------
SECTION 9.1. NOTICES. Any notice required or permitted to be given
under this Mortgage shall be given in accordance with Section 10.1 of the Credit
Agreement.
SECTION 9.2. COVENANTS RUNNING WITH THE LAND. All Obligations contained
in this Mortgage are intended by Mortgagor and Mortgagee to be, and shall be
construed as, covenants running with the Mortgaged Property. As used herein,
"Mortgagor" shall refer to the party named in the first paragraph of this
Mortgage and to any subsequent owner of all or any portion of the Mortgaged
Property. All Persons who may have or acquire an interest in the Mortgaged
Property shall be deemed to have notice of, and be bound by, the terms of the
Credit Agreement and the other Credit Documents; however, no such party shall be
entitled to any rights thereunder without the prior written consent of
Mortgagee.
SECTION 9.3. CHANGE IN TAX LAW. Upon the enactment of or change in
(including, without limitation, a change in interpretation of) any applicable
law (i) deducting or allowing Mortgagor to deduct from the value of the
Mortgaged Property for the purpose of taxation any lien or security interest
thereon or (ii) subjecting Mortgagee or any of the Lenders to any tax or
changing the basis of taxation of mortgages, deeds of trust, or other liens or
debts secured thereby, or the manner of collection of such taxes, in each such
case, so as to affect this Mortgage, the Indebtedness or Mortgagee, and the
result is to increase the taxes imposed upon or the cost to Mortgagee of
maintaining the Indebtedness, or to reduce the amount of any payments receivable
hereunder, then, and in any such event, Mortgagor shall, on demand, pay to
Mortgagee and the Lenders additional
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<PAGE> 284
amounts to compensate for such increased costs or reduced amounts, provided that
if any such payment or reimbursement shall be unlawful, or taxable to Mortgagee,
or would constitute usury or render the Indebtedness wholly or partially
usurious under applicable law, then Mortgagor shall pay or reimburse Mortgagee
or the Lenders for payment of the lawful and non-usurious portion thereof.
SECTION 9.4. MORTGAGE TAX. Mortgagor shall (i) pay when due any tax
imposed upon it or upon Mortgagee or any Lender pursuant to the tax law of the
state in which the Mortgaged Property is located in connection with the
execution, delivery and recordation of this Mortgage and any of the other Credit
Documents, and (ii) prepare, execute and file any form required to be prepared,
executed and filed in connection therewith.
SECTION 9.5. ATTORNEY-IN-FACT. Mortgagor hereby irrevocably appoints
Mortgagee and its successors and assigns, as its attorney-in-fact with full
power of substitution, which agency is coupled with an interest, (a) to execute
and/or record any notices of completion, cessation of labor or any other notices
that Mortgagee deems appropriate to protect Mortgagee's interest, if Mortgagor
shall fail to do so within ten (10) days after written request by Mortgagee, (b)
upon the issuance of a deed pursuant to the foreclosure of this Mortgage or the
delivery of a deed in lieu of foreclosure, to execute all instruments of
assignment, conveyance or further assurance with respect to the Fixtures,
Personalty, Deposit Accounts, Leases, Rents, Property Agreements, Tax Refunds,
Proceeds, Insurance and Condemnation Awards in favor of the grantee of any such
deed and as may be necessary or desirable for such purpose, (c) to prepare,
execute and file or record financing statements, continuation statements,
applications for registration and like papers necessary to create, perfect or
preserve Mortgagee's security interests and rights in or to any of the Mortgaged
Property, and (d) upon the occurrence and during the continuance of any Event of
Default, to perform any obligation of Mortgagor hereunder, however: (1)
Mortgagee shall not under any circumstances be obligated to perform any
obligation of Mortgagor; (2) any sums advanced by Mortgagee in such performance
shall be added to and included in the Indebtedness and shall bear interest at
the rate or rates at which interest is then computed on the Indebtedness; (3)
Mortgagee as such attorney-in-fact shall only be accountable for such funds as
are actually received by Mortgagee; and (4) Mortgagee shall not be liable to
Mortgagor or any other person or entity for any failure to take any action which
it is empowered to take under this SECTION 9.5.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Mortgage shall be binding
upon and inure to the benefit of Mortgagee and Mortgagor and their respective
successors and assigns. Except as otherwise permitted by the Credit Agreement,
Mortgagor shall not, without the prior written consent of Mortgagee, assign any
rights, duties or obligations hereunder.
SECTION 9.7. NO WAIVER. Any failure by Mortgagee or the Lenders to
insist upon strict performance of any of the terms, provisions or conditions of
the Credit Documents shall not be deemed to be a waiver of same, and Mortgagee
and the Lenders shall have the right at any time to insist upon strict
performance of all of such terms, provisions and conditions.
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<PAGE> 285
SECTION 9.8. CREDIT AGREEMENT. If any conflict or inconsistency exists
between this Mortgage and the Credit Agreement, the Credit Agreement shall
govern.
SECTION 9.9. RELEASE OR RECONVEYANCE. Upon payment in full of the
Indebtedness and performance in full of the Obligations, Mortgagee, at
Mortgagor's expense, shall release the liens and security interests created by
this Mortgage or reconvey the Mortgaged Property to Mortgagor.
SECTION 9.10. WAIVER OF STAY, MORATORIUM AND SIMILAR RIGHTS. Mortgagor
agrees, to the full extent that it may lawfully do so, that it will not at any
time insist upon or plead or in any way take advantage of any stay, marshalling
of assets, extension, redemption or moratorium law now or hereafter in force and
effect so as to prevent or hinder the enforcement of the provisions of this
Mortgage or the Indebtedness secured hereby, or any agreement between Mortgagor
and Mortgagee or any rights or remedies of Mortgagee.
SECTION 9.11. APPLICABLE LAW. The provisions of this Mortgage regarding
the creation, perfection and enforcement of the liens and security interests
herein granted shall be governed by and construed under the laws of the state in
which the Mortgaged Property is located. All other provisions of this Mortgage
shall be governed by the laws of the State of New York (including, without
limitation, Section 5-1401 of the General Obligations Law of the State of New
York), without regard to conflicts of laws principles.
SECTION 9.12. HEADINGS. The Article, Section and Subsection titles
hereof are inserted for convenience of reference only and shall in no way alter,
modify or define, or be used in construing, the text of such Articles, Sections
or Subsections.
SECTION 9.13. ENTIRE AGREEMENT. This Mortgage and the other Credit
Documents embody the entire agreement and understanding between Mortgagee and
Mortgagor and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof. Accordingly, the
Credit Documents may not be contradicted by evidence of prior, contemporaneous
or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
SECTION 9.14. REDUCTION OF SECURED AMOUNT. In the event that the amount
secured by the Mortgage is less than the aggregate Indebtedness evidenced by the
Mortgage Notes, then the amount secured shall be reduced only by the last and
final sums that Mortgagor or Borrower repays with respect to the Indebtedness
and shall not be reduced by any intervening repayments of the Indebtedness. So
long as the balance of the Indebtedness exceeds the amount secured, any payments
of the Indebtedness shall not be deemed to be applied against, or to reduce, the
portion of the Indebtedness secured by this Mortgage. Such payments shall
instead be deemed to reduce only such portions of the Indebtedness as are
secured by other collateral located outside of the state in which the Mortgaged
Property is located or as are unsecured.
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ARTICLE 10
LOCAL LAW PROVISIONS
[To Come]
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Mortgagor has on the date set forth in the
acknowledgment hereto, effective as of the date first above written, caused this
instrument to be duly EXECUTED AND DELIVERED by authority duly given.
MORTGAGOR: SIMMONS COMPANY,
a Delaware corporation
By:
-----------------------------
Name:
Title:
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<PAGE> 288
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
ON THE ____ DAY OF OCTOBER IN THE YEAR 1998 BEFORE ME, THE UNDERSIGNED, A NOTARY
PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED _______________
___________________________________________, PERSONALLY KNOWN TO ME OR PROVED TO
ME ON THE BASIS OF SATISFACTORY EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S)
IS (ARE) SUBSCRIBED TO THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT
HE/SHE/THEY EXECUTED THE SAME IN HIS/HER/THEIR CAPACITY(IES), AND THAT BY
HIS/HER/THEIR SIGNATURE(S) ON THE INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON
UPON BEHALF OF WHICH THE INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
-----------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING
ACKNOWLEDGMENT)
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EXHIBIT A
Legal Description of premises located at [INSERT ADDRESS OF PROPERTY]:
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<PAGE> 290
EXHIBIT B
---------
UCC INFORMATION
DEBTOR:
- -------
Name: Simmons Company
Corporate Structure: a Delaware corporation
Notice Address: c/o Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attn: Roger Franklin
State in which Mortgagor's
Chief Executive Office is
located: Georgia
SECURED PARTY:
- --------------
UBS, A.G., Stamford Branch,
as Administrative Agent
677 Washington Boulevard
8th Floor
Stamford, Connecticut 06912
Attn: Lara Kavanagh
Secured Party acts as Administrative Agent for the Lenders party from time to
time to the Credit Agreement. Information regarding the security interest held
by the Lenders, for which Secured Party acts as Administrative Agent, may be
obtained by contacting Secured Party at the address set forth above.
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<PAGE> 291
EXHIBIT K-2 TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
FORM OF LEASEHOLD MORTGAGE
[TO BE PROVIDED]
K-2-1
<PAGE> 292
EXHIBIT K-2 TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING ([STATE])
BY AND FROM
SIMMONS COMPANY, "MORTGAGOR"
TO
UBS A.G., STAMFORD BRANCH, AS ADMINISTRATIVE AGENT, "MORTGAGEE"
DATED AS OF OCTOBER ____, 1998
LOCATION: [ADDRESS OF PROPERTY]
BLOCK:
LOT(S):
COUNTY:
THE SECURED PARTY (MORTGAGEE) DESIRES THIS FIXTURE FILING
TO BE INDEXED AGAINST THE RECORD OWNER OF THE REAL ESTATE
DESCRIBED HEREIN
PREPARED BY, RECORDING REQUESTED BY,
AND WHEN RECORDED MAIL TO:
O'MELVENY & MYERS LLP
153 EAST 53RD STREET
FIFTY-FOURTH FLOOR
NEW YORK, NEW YORK 10022-4611
ATTENTION: JENNIFER G. GRENERT, ESQ.
FILE #317,790-138
<PAGE> 293
LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING ([STATE])
THIS LEASEHOLD MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
RENTS AND LEASES AND FIXTURE FILING ([STATE]) (this "MORTGAGE") is dated as of
October ___, 1998 by and from SIMMONS COMPANY, a Delaware corporation
("MORTGAGOR"), whose address is One Concourse Parkway, Suite 600, Atlanta,
Georgia 30328 to UBS A.G., STAMFORD BRANCH, as Administrative Agent (the
"ADMINISTRATIVE AGENT") for the Lenders listed in the Credit Agreement (defined
below) and all successor Administrative Agents and assigns (the Administrative
Agent and all successor Administrative Agents and assigns, "MORTGAGEE"), having
an address at UBS A.G., Stamford Branch, 677 Washington Boulevard, 8th Floor,
Stamford, Connecticut 06912.
ARTICLE 1
DEFINITIONS
-----------
SECTION 1.1. DEFINITIONS. All capitalized terms used herein
without definition shall have the respective meanings ascribed to them in that
certain Credit and Guaranty Agreement dated as of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT") by and among Mortgagor, as Borrower ("BORROWER"), Simmons Holdings,
Inc. and certain subsidiaries of Borrower, as Guarantors, Goldman Sachs Credit
Partners L.P., as a Joint Lead Arranger and as Syndication Agent, Warburg Dillon
Read LLC, as a Joint Lead Arranger, Mortgagee, as Administrative Agent and the
financial institutions listed on the signature pages attached thereto (the
"LENDERS"). As used herein, the following terms shall have the following
meanings:
(a) "INDEBTEDNESS": (1) All (a) principal indebtedness of
Borrower to Mortgagee and the Lenders, together with interest thereon, under the
Tranche A Term Loans, the Tranche B Term Loans, the Tranche C Term Loans, the
Revolving Loans and the Swing Line Loans, as evidenced by the Register or the
Tranche A Term Loan Notes, the Tranche B Term Loan Notes, the Tranche C Term
Loan Notes, the Revolving Notes and the Swing Line Notes of even date herewith
(such Register and Notes and any and all modifications, substitutions,
extensions, renewals and replacements thereof are collectively referred to
herein as the "MORTGAGE NOTES"), and (b) other amounts evidenced or secured by
the Credit Documents, including, without limitation, reimbursement obligations
in respect of Letters of Credit, together with interest thereon and other
amounts payable with respect thereto, and (c) principal, interest and other
amounts which may hereafter be loaned by Mortgagee or the Lenders or any of them
under or in connection with the Credit Agreement or any of the other Credit
Documents, whether evidenced by a promissory note or other instrument which, by
its terms, is secured hereby, and (2) all other indebtedness, obligations and
liabilities now or hereafter existing of any kind of Mortgagor to Mortgagee or
the Lenders under documents which recite that they are intended to be secured by
this Mortgage. Pursuant to the Credit Agreement, the Lenders have agreed to
provide Borrower with a revolving credit facility, which permits Borrower to
borrow certain principal amounts, repay all or a portion of such principal
amounts, and reborrow the amounts previously paid to the Lenders, all upon
satisfaction of certain conditions stated in the Credit Agreement. The amount of
such revolving credit facility may increase and decrease from time to time as
the Lenders advance, Borrower repays, and the Lenders re-advance sums on account
of the revolving credit, all as more fully described in the Credit Agreement.
Additionally, pursuant to the Credit Agreement, Borrower will enter into
Interest Rate Agreements. The term "Indebtedness" includes without
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<PAGE> 294
limitation all advances and re-advances under the revolving credit feature of
the Credit Agreement and all amounts under Interest Rate Agreements entered into
with one or more of the Lenders or any Affiliates thereof.
(b) "MORTGAGED PROPERTY": All of Mortgagor's right, title,
interest and estate in (1) the leasehold interest in the real property described
in EXHIBIT A attached hereto and incorporated herein by this reference and
created by the Subject Lease (defined below), together with any greater or
additional estate therein as hereafter may be acquired by Mortgagor (the
"LAND"), (2) all assignments, modifications, extensions and renewals of the
Subject Lease and all credits, deposits, options, privileges and rights of
Mortgagor as tenant under the Subject Lease, including, but not limited to,
rights of first refusal, if any, and the right, if any, to renew or extend the
Subject Lease for a succeeding term or terms, (3) all improvements now owned or
hereafter acquired by Mortgagor, now or at any time situated, placed or
constructed upon the Land (the "IMPROVEMENTS"; the Land and Improvements are
collectively referred to as the "PREMISES"), (4) all materials, supplies,
equipment, apparatus and other items of personal property now owned or hereafter
acquired by Mortgagor and now or hereafter attached to, installed in or used in
connection with any of the Improvements or the Land, and water, gas, electrical,
telephone, storm and sanitary sewer facilities and all other utilities, whether
or not situated in easements (the "FIXTURES"), (5) all right, title and interest
of Mortgagor in and to all goods, accounts, general intangibles, instruments,
documents, chattel paper and all other personal property of any kind or
character, including such items of personal property as defined in the UCC
(defined below), now owned or hereafter acquired by Mortgagor and now or
hereafter affixed to, placed upon, used in connection with, arising from or
otherwise related to the Premises (the "PERSONALTY"), (6) all reserves, escrows
or impounds required under the Credit Agreement and all deposit accounts
maintained by Mortgagor with respect to the Mortgaged Property (the "DEPOSIT
ACCOUNTS"), (7) all leases, licenses, concessions, occupancy agreements or other
agreements (written or oral, now or at any time in effect) which grant to any
Person other than Mortgagor a possessory interest in, or the right to use, all
or any part of the Mortgaged Property, together with all related security and
other deposits (the "LEASES"), (8) all of the rents, revenues, royalties,
income, proceeds, profits, security and other types of deposits, and other
benefits paid or payable by parties to the Leases for using, leasing, licensing,
possessing, operating from, residing in, selling or otherwise enjoying the
Mortgaged Property (the "RENTS"), (9) all other agreements, such as construction
contracts, architects' agreements, engineers' contracts, utility contracts,
maintenance agreements, management agreements, service contracts, listing
agreements, guaranties, warranties, permits, licenses, certificates and
entitlements in any way relating to the construction, use, occupancy, operation,
maintenance, enjoyment or ownership of the Mortgaged Property to the extent
transferable without consent and without violating the terms thereof (the
"PROPERTY AGREEMENTS"), (10) all rights, privileges, tenements, hereditaments,
rights-of-way, easements, appendages and appurtenances appertaining to the
foregoing, (11) all property tax refunds (the "TAX REFUNDS"), (12) all
accessions, replacements and substitutions for any of the foregoing and all
proceeds thereof (the "PROCEEDS"), (13) all insurance policies, unearned
premiums therefor and proceeds from such policies covering any of the above
property now or hereafter acquired by Mortgagor (the "INSURANCE"), and (14) all
of Mortgagor's right, title and interest in and to any awards, damages,
remunerations, reimbursements, settlements or compensation heretofore made or
hereafter to be made by any governmental authority pertaining to the Land,
Improvements, Fixtures or Personalty (the "CONDEMNATION AWARDS"). As used in
this Mortgage, the term "MORTGAGED PROPERTY" shall mean all or, where the
context permits or requires, any portion of the above or any interest therein.
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<PAGE> 295
(c) "OBLIGATIONS": All of the agreements, covenants,
conditions, warranties, representations and other obligations of Mortgagor
(including, without limitation, the obligation to repay the Indebtedness) under
the Credit Agreement and the other Credit Documents.
(d) "SUBJECT LEASE": (1) That certain [Lease] dated [Date],
pursuant to which Mortgagor leases all or a portion of the Land from [Full Name
of Lessor], a memorandum of which was recorded with the County Clerk of
[County], in [Book/Liber/Reel], Page ___.
(e) "UCC": The Uniform Commercial Code of [STATE] or, if the
creation, perfection and enforcement of any security interest herein granted is
governed by the laws of a state other than [STATE], then, as to the matter in
question, the Uniform Commercial Code in effect in that state.
ARTICLE 2
GRANT
-----
SECTION 2.1. GRANT. To secure the full and timely payment of
the Indebtedness and the full and timely performance of the Obligations,
Mortgagor MORTGAGES, GRANTS, BARGAINS, ASSIGNS, SELLS and CONVEYS, to Mortgagee
the Mortgaged Property, subject, however, to the Permitted Encumbrances and the
terms and provisions of the Subject Lease, TO HAVE AND TO HOLD the Mortgaged
Property to Mortgagee, and Mortgagor does hereby bind itself, its successors and
assigns to WARRANT AND FOREVER DEFEND the title to the Mortgaged Property unto
Mortgagee.
ARTICLE 3
WARRANTIES, REPRESENTATIONS AND COVENANTS
-----------------------------------------
Mortgagor warrants, represents and covenants to Mortgagee as
follows:
SECTION 3.1. TITLE TO MORTGAGED PROPERTY AND LIEN OF THIS
INSTRUMENT. Mortgagor owns the Mortgaged Property, subject to the terms and
provisions of the Subject Lease free, and clear of any liens, claims or
interests, except the Permitted Encumbrances. This Mortgage creates a valid,
enforceable [first] priority lien and security interest against the Mortgaged
Property.
SECTION 3.2. FIRST LIEN STATUS. Except as otherwise provided
in the Credit Agreement, Mortgagor shall preserve and protect the [first] lien
and security interest status of this Mortgage and the other Credit Documents. If
any lien or security interest other than the Permitted Encumbrances or this
Mortgage is asserted against the Mortgaged Property, Mortgagor shall promptly,
and at its expense, (a) give Mortgagee a detailed written notice of such lien or
security interest (including origin, amount and other terms), and (b) pay the
underlying claim in full or take such other action so as to cause it to be
released or contest the same in compliance with the requirements of the Credit
Agreement (including the requirement of providing a bond or other security
satisfactory to Mortgagee).
SECTION 3.3. PAYMENT AND PERFORMANCE. Mortgagor shall pay the
Indebtedness when due under the Credit Documents and shall perform the
Obligations in full when they are required to be performed.
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<PAGE> 296
SECTION 3.4. REPLACEMENT OF FIXTURES AND PERSONALTY. Except as
otherwise provided in the Credit Agreement, Mortgagor shall not, without the
prior written consent of Mortgagee, permit any of the Fixtures or Personalty
(excluding inventory sold in the ordinary course of business) to be removed at
any time from the Land or Improvements, unless the removed item is removed
temporarily for maintenance and repair or, if removed permanently, is obsolete
and is replaced by an article of equal or better suitability and value, owned by
Mortgagor subject to the liens and security interests of this Mortgage and the
other Credit Documents, and free and clear of any other lien or security
interest except such as may be permitted under the Credit Agreement or first
approved in writing by Mortgagee.
SECTION 3.5. INSPECTION. Mortgagor shall permit Mortgagee, the
Lenders and their respective agents, representatives and employees, upon
reasonable prior notice to Mortgagor, and in compliance with the Subject Lease,
to inspect the Mortgaged Property and all books and records of Mortgagor located
thereon and to conduct such engineering studies as Mortgagee or the Lenders may
reasonably require, provided that such inspections and studies shall be at
Lender's cost and expense and shall not materially interfere with the use and
operation of the Mortgaged Property. Mortgagor agrees that Mortgagee and the
Lenders may, from time to time and in their reasonable discretion, (i) retain at
Mortgagor's expense, an independent professional consultant to review any
environmental audits, investigations, analyses and reports relating to Hazardous
Material prepared by or for Mortgagor and (ii) in the event (a) Mortgagee or
Lenders reasonably believe that Mortgagor has breached any representation
warranty or covenant contained in SECTION 4.10, SECTION 4.14, SECTION 5.7 or
SECTION 5.8 of the Credit Agreement or that there has been a material violation
of Environmental Laws at the Mortgaged Property or by Mortgagor or (b) an Event
of Default has occurred and is continuing, conduct its own investigation of the
Mortgaged Property.
SECTION 3.6. OTHER COVENANTS. All of the covenants of Borrower
in the Credit Agreement are incorporated herein by reference.
SECTION 3.7. CONDEMNATION AWARDS AND INSURANCE PROCEEDS.
(a) CONDEMNATION AWARDS. Subject to the terms and provisions
of the Subject Lease, Mortgagor assigns all awards and compensation to which it
is entitled for any condemnation or other taking, or any purchase in lieu
thereof, to Mortgagee and authorizes Mortgagee to collect and receive such
awards and compensation and to give proper receipts and acquittances therefor,
except to the extent otherwise provided by the terms of the Credit Agreement.
(b) INSURANCE PROCEEDS. Subject to the terms and provisions of
the Subject Lease, and except to the extent otherwise provided by the Credit
Agreement, Mortgagor assigns to Mortgagee all of Mortgagor's right, title and
interest in all proceeds of any insurance policies insuring against loss or
damage to the Mortgaged Property. Subject to the terms and provisions of the
Subject Lease, Mortgagor authorizes Mortgagee to collect and receive such
proceeds and authorizes and directs the issuer of each of such insurance
policies to make payment for all such losses directly to Mortgagee, instead of
to Mortgagor and Mortgagee jointly, except to the extent provided otherwise in
the Credit Agreement.
ARTICLE 4
LEASEHOLD MORTGAGE PROVISIONS
-----------------------------
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SECTION 4.1. REPRESENTATIONS; WARRANTIES; COVENANTS. Mortgagor
hereby represents, warrants and covenants, with respect to the Subject Lease,
that:
(a) (1) Such Subject Lease is unmodified and in full force and
effect, (2) all rent and other charges thereunder are not past due beyond any
applicable grace periods, (3) Mortgagor enjoys the quiet and peaceful possession
of the property demised thereby, (4) to the best of its knowledge, Mortgagor is
not in default under any of the terms thereof and there are no circumstances
which, with the passage of time or the giving of notice or both, would
constitute an event of default thereunder, any which defaults if existing,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect, (5) to Mortgagor's knowledge, the lessor thereunder is
not in default under any of the terms or provisions thereof on the part of the
lessor to be observed or performed, any which defaults if existing, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect;
(b) Mortgagor shall promptly pay, when due and payable, the
rent and other charges payable pursuant to such Subject Lease, and will timely
perform and observe all of the other terms, covenants and conditions required to
be performed and observed by Mortgagor as lessee under such Subject Lease,
subject to the Mortgagor's right, if any, to contest such payment or performance
in accordance with and subject to the terms of the Subject Lease;
(c) Mortgagor shall notify Mortgagee in writing of any default
by Mortgagor in the performance or observance of any terms, covenants or
conditions on the part of Mortgagor to be performed or observed under such
Subject Lease within three (3) days after Mortgagor knows of such default;
(d) Mortgagor shall, immediately upon receipt thereof, deliver
a copy of each material notice given to Mortgagor by the lessor pursuant to such
Subject Lease and promptly notify Mortgagee in writing of any default by the
lessor in the performance or observance of any of the material terms, covenants
or conditions on the part of the lessor to be performed or observed thereunder;
(e) Unless required under the terms of such Subject Lease, and
except as may be permitted under the Credit Agreement, Mortgagor shall not,
without the prior written consent of Mortgagee (which may be granted or withheld
in Mortgagee's sole and absolute discretion) terminate, modify or surrender such
Subject Lease, and any such attempted termination, modification or surrender
without Mortgagee's written consent shall be void; and
(f) Mortgagor shall, within twenty (20) days after written
request from Mortgagee, use its best efforts to obtain from the lessor and
deliver to Mortgagee a certificate setting forth the name of the tenant
thereunder and stating that such Subject Lease is in full force and effect, is
unmodified or, if the Subject Lease has been modified, the date of each
modification (together with copies of each such modification), that no notice of
termination thereon has been served on Mortgagor, stating that no default or
event which with notice or lapse of time (or both) would become a default is
existing under the Subject Lease, stating the date to which rent has been paid,
and specifying the nature of any defaults, if any, and containing such other
statements and representations as may be reasonably requested by Mortgagee.
SECTION 4.2. NO MERGER. So long as any of the Indebtedness or
the Obligations remain unpaid or unperformed, the fee title to and the leasehold
estate in the premises subject to each Subject Lease shall not merge but shall
always be kept separate and distinct notwithstanding the union of such estates
in the lessor or Mortgagor, or in a third party, by purchase or otherwise. If
Mortgagor acquires
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the fee title or any other estate, title or interest in the property demised by
the Subject Lease, or any part thereof, the lien of this Mortgage shall attach
to, cover and be a lien upon such acquired estate, title or interest and the
same shall thereupon be and become a part of the Mortgaged Property with the
same force and effect as if specifically encumbered herein. Mortgagor agrees to
execute all instruments and documents that Mortgagee may reasonably require to
ratify, confirm and further evidence the lien of this Mortgage on the acquired
estate, title or interest. Furthermore, Mortgagor hereby appoints Mortgagee as
its true and lawful attorney-in-fact to execute and deliver, following the
occurrence and during the continuance of an Event of Default, all such
instruments and documents in the name and on behalf of Mortgagor. This power,
being coupled with an interest, shall be irrevocable as long as any portion of
the Indebtedness remains unpaid.
SECTION 4.3. MORTGAGEE AS LESSEE. If the Subject Lease shall
be terminated prior to the natural expiration of its term due to default by
Mortgagor or any tenant thereunder, and if, pursuant to the provisions of such
Subject Lease, Mortgagee or its designee shall acquire from the lessor a new
lease of the premises subject to the Subject Lease, Mortgagor shall have no
right, title or interest in or to such new lease or the leasehold estate created
thereby, or renewal privileges therein contained.
SECTION 4.4. NO ASSIGNMENT. Notwithstanding anything to the
contrary contained herein, this Mortgage shall not constitute an assignment of
any Subject Lease within the meaning of any provision thereof prohibiting its
assignment and Mortgagee shall have no liability or obligation thereunder by
reason of its acceptance of this Mortgage. Mortgagee shall be liable for the
obligations of the tenant arising out of any Subject Lease for only that period
of time for which Mortgagee is in possession of the premises demised thereunder
or has acquired, by foreclosure or otherwise, and is holding all of Mortgagor's
right, title and interest therein.
ARTICLE 5
DEFAULT AND FORECLOSURE
-----------------------
SECTION 5.1. REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Mortgagee may, at Mortgagee's election,
exercise any or all of the following rights, remedies and recourses:
(a) ACCELERATION. The Indebtedness shall automatically become
immediately due and payable, if required by the Credit Agreement and in
accordance with the Credit Agreement, or if the Credit Agreement does not
require automatic acceleration, Mortgagee may declare the Indebtedness to be
immediately due and payable, pursuant to and in accordance with the Credit
Agreement, without further notice, presentment, protest, notice of intent to
accelerate, notice of acceleration, demand or action of any nature whatsoever
(each of which hereby is expressly waived by Mortgagor), whereupon the same
shall become immediately due and payable.
(b) ENTRY ON MORTGAGED PROPERTY. To the extent permitted by
(i) applicable law, and (ii) the terms and provisions of the Subject Lease or
any Landlord Consent and Estoppel, enter the Mortgaged Property and take
exclusive possession thereof and of all books, records and accounts relating
thereto or located thereon. If Mortgagor remains in possession of the Mortgaged
Property after an Event of Default and without Mortgagee's prior written
consent, Mortgagee may invoke any legal remedies to dispossess Mortgagor.
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(c) OPERATION OF MORTGAGED PROPERTY. To the extent permitted
by (i) applicable law, and (ii) the terms and provisions of the Subject Lease or
any Landlord Consent and Estoppel, hold, lease, develop, manage, operate or
otherwise use the Mortgaged Property upon such terms and conditions as Mortgagee
may deem reasonable under the circumstances (making such repairs, alterations,
additions and improvements and taking other actions, from time to time, as
Mortgagee deems necessary or desirable), and apply all Rents and other amounts
collected by Mortgagee in connection therewith in accordance with the provisions
of SECTION 5.7.
(d) FORECLOSURE AND SALE. Institute proceedings for the
complete foreclosure of this Mortgage, either by judicial action or by power of
sale, in which case the Mortgaged Property may be sold for cash or credit in one
or more parcels. With respect to any notices required or permitted under the
UCC, Mortgagor agrees that five (5) days' prior written notice shall be deemed
commercially reasonable. At any such sale by virtue of any judicial proceedings,
power of sale, or any other legal right, remedy or recourse, the title to and
right of possession of any such property shall pass to the purchaser thereof,
and to the fullest extent permitted by law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim, equity, equity
of redemption, and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar both at law and in equity
against Mortgagor, and against all other Persons claiming or to claim the
property sold or any part thereof, by, through or under Mortgagor. Mortgagee or
any of the Lenders may be a purchaser at such sale and if Mortgagee is the
highest bidder, Mortgagee may credit the portion of the purchase price that
would be distributed to Mortgagee against the Indebtedness in lieu of paying
cash. In the event this Mortgage is foreclosed by judicial action, appraisement
of the Mortgaged Property is waived to the extent permitted by applicable law.
(e) RECEIVER. To the extent permitted by applicable law, make
application to a court of competent jurisdiction for, and obtain from such court
as a matter of strict right and without notice to Mortgagor or regard to the
adequacy of the Mortgaged Property for the repayment of the Indebtedness, the
appointment of a receiver of the Mortgaged Property, and Mortgagor irrevocably
consents to such appointment. Any such receiver shall have all the usual powers
and duties of receivers in similar cases, including the full power to rent,
maintain and otherwise operate the Mortgaged Property upon such terms as may be
approved by the court, and shall apply such Rents in accordance with the
provisions of SECTION 5.7.
(f) OTHER. Exercise all other rights, remedies and recourses
granted under the Credit Documents or otherwise available at law or in equity.
SECTION 5.2. SEPARATE SALES. The Mortgaged Property may be
sold in one or more parcels and in such manner and order as Mortgagee in its
sole discretion may elect; the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.
SECTION 5.3. REMEDIES CUMULATIVE, CONCURRENT AND NONEXCLUSIVE.
Mortgagee and the Lenders shall have all rights, remedies and recourses granted
in the Credit Documents and available at law or equity (including the UCC),
which rights (a) shall be cumulated and concurrent, (b) may be pursued
separately, successively or concurrently against Mortgagor or others obligated
under the Credit Documents, or against the Mortgaged Property, or against any
one or more of them, at the sole discretion of Mortgagee or the Lenders, (c) may
be exercised as often as occasion therefor shall arise, and the exercise or
failure to exercise any of them shall not be construed as a waiver or release
thereof or of any
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other right, remedy or recourse, and (d) are intended to be, and shall be,
nonexclusive. No action by Mortgagee or the Lenders in the enforcement of any
rights, remedies or recourses under the Credit Documents or otherwise at law or
equity shall be deemed to cure any Event of Default.
SECTION 5.4. RELEASE OF AND RESORT TO COLLATERAL. Mortgagee
may release, regardless of consideration and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Mortgaged
Property, any part of the Mortgaged Property without, as to the remainder, in
any way impairing, affecting, subordinating or releasing the lien or security
interest created in or evidenced by the Credit Documents or their status as a
first and prior lien and security interest in and to the Mortgaged Property. For
payment of the Indebtedness, Mortgagee may resort to any other security in such
order and manner as Mortgagee may elect.
SECTION 5.5. WAIVER OF REDEMPTION, NOTICE AND MARSHALLING OF
ASSETS. To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefit that might accrue to
Mortgagor by virtue of any present or future statute of limitations or law or
judicial decision exempting the Mortgaged Property from attachment, levy or sale
on execution or providing for any stay of execution, exemption from civil
process, redemption or extension of time for payment, (b) except as provided in
the Credit Agreement, all notices of any Event of Default or of Mortgagee's
election to exercise or the actual exercise of any right, remedy or recourse
provided for under the Credit Documents, and (c) any right to a marshalling of
assets or a sale in inverse order of alienation.
SECTION 5.6. DISCONTINUANCE OF PROCEEDINGS. If Mortgagee or
the Lenders shall have proceeded to invoke any right, remedy or recourse
permitted under the Credit Documents and shall thereafter elect to discontinue
or abandon it for any reason Mortgagee or the Lenders shall have the unqualified
right to do so, to the extent permitted by applicable law, and, in such an
event, to the extent permitted by applicable law, Mortgagor and Mortgagee or the
Lenders shall be restored to their former positions with respect to the
Indebtedness, the Obligations, the Credit Documents, the Mortgaged Property and
otherwise, and the rights, remedies, recourses and powers of Mortgagee or the
Lenders shall continue as if the right, remedy or recourse had never been
invoked, but no such discontinuance or abandonment shall waive any Event of
Default which may then exist or the right of Mortgagee or the Lenders thereafter
to exercise any right, remedy or recourse under the Credit Documents for such
Event of Default.
SECTION 5.7. APPLICATION OF PROCEEDS. After the occurrence and
during the continuance of any Event of Default, subject to the terms of the
Credit Agreement, the proceeds of any sale of, and the Rents and other amounts
generated by the holding, leasing, management, operation or other use of the
Mortgaged Property, shall be applied by Mortgagee (or the receiver, if one is
appointed) in the following order unless otherwise required by applicable law:
(a) to the payment of the costs and expenses of taking
possession of the Mortgaged Property and the actual costs and reasonable
expenses of holding, using, leasing, repairing, improving and selling the same,
including, without limitation (1) receiver's fees and expenses, including the
repayment of the amounts evidenced by any receiver's certificates, (2) court
costs, (3) reasonable attorneys' and accountants' fees and expenses, (4) costs
of advertisement, and (5) the payment of all rent and other charges under the
Subject Lease;
(b) to the payment of the Indebtedness and performance of the
Obligations in such manner and order of preference as Mortgagee in its sole
discretion may determine; and
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<PAGE> 301
(c) the balance, if any, to the payment of the Persons legally
entitled thereto.
SECTION 5.8. OCCUPANCY AFTER FORECLOSURE. Any sale of the
Mortgaged Property or any part thereof in accordance with SECTION 5.1(D) will
divest all right, title and interest of Mortgagor in and to the property sold.
Subject to applicable law, any purchaser at a foreclosure sale will receive
immediate possession of the property purchased. If Mortgagor retains possession
of such property or any part thereof subsequent to such sale, Mortgagor will be
considered a tenant at sufferance of the purchaser, and will, if Mortgagor
remains in possession after demand to remove, be subject to eviction and
removal, forcible or otherwise, with or without process of law.
SECTION 5.9. ADDITIONAL ADVANCES AND DISBURSEMENTS; COSTS OF
ENFORCEMENT.
(a) Upon the occurrence and during the continuance of any
Event of Default, Mortgagee and each of the Lenders shall have the right, but
not the obligation, to cure such Event of Default in the name and on behalf of
Mortgagor. All sums advanced and expenses incurred at any time by Mortgagee or
any Lender under this SECTION 5.9, or otherwise under this Mortgage or any of
the other Credit Documents or applicable law, shall bear interest from the date
that such sum is advanced or expense incurred, to and including the date of
reimbursement, computed at the rate or rates at which interest is then computed
on the Indebtedness, and all such sums, together with interest thereon, shall be
secured by this Mortgage.
(b) Mortgagor shall pay all expenses (including reasonable
attorneys' fees and expenses) of or incidental to the perfection and enforcement
of this Mortgage and the other Credit Documents, or the enforcement, compromise
or settlement of the Indebtedness or any claim under this Mortgage and the other
Credit Documents, and for the curing thereof, or for defending or asserting the
rights and claims of Mortgagee or the Lenders in respect thereof, by litigation
or otherwise.
SECTION 5.10. NO MORTGAGEE IN POSSESSION. To the extent
permitted by applicable law, neither the enforcement of any of the remedies
under this ARTICLE 5, the assignment of the Rents and Leases under ARTICLE 6,
the security interests under ARTICLE 7, nor any other remedies afforded to
Mortgagee or the Lenders under the Credit Documents, at law or in equity shall
cause Mortgagee or any Lender to be deemed or construed to be a mortgagee in
possession of the Mortgaged Property, to obligate Mortgagee or any Lender to
lease the Mortgaged Property or attempt to do so, or to take any action, incur
any expense, or perform or discharge any obligation, duty or liability
whatsoever under any of the Leases or otherwise.
ARTICLE 6
ASSIGNMENT OF RENTS AND LEASES
------------------------------
SECTION 6.1. ASSIGNMENT. In furtherance of and in addition to
the assignment made by Mortgagor in SECTION 2.1 of this Mortgage, Mortgagor
hereby absolutely and unconditionally assigns, sells, transfers and conveys to
Mortgagee all of its right, title and interest in and to all Leases, whether now
existing or hereafter entered into, and all of its right, title and interest in
and to all Rents. This assignment is an absolute assignment and not an
assignment for additional security only. So long as no Event of Default shall
have occurred and be continuing, Mortgagor shall have a revocable license from
Mortgagee to exercise all rights extended to the landlord under the Leases,
including the right to receive and collect
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all Rents and to hold the Rents in trust for use in the payment and performance
of the Obligations and to otherwise use the same. The foregoing license is
granted subject to the conditional limitation that no Event of Default shall
have occurred and be continuing. Upon the occurrence and during the continuance
of an Event of Default, whether or not legal proceedings have commenced, and
without regard to waste, adequacy of security for the Obligations or solvency of
Mortgagor, the license herein granted shall automatically expire and terminate,
without notice by Mortgagee (any such notice being hereby expressly waived by
Mortgagor).
SECTION 6.2. PERFECTION UPON RECORDATION. Mortgagor
acknowledges that Mortgagee has taken all actions necessary to obtain, and that
upon recordation of this Mortgage Mortgagee shall have, to the extent permitted
under applicable law, a valid and fully perfected, first priority, present
assignment of the Rents arising out of the Leases and all security for such
Leases. Mortgagor acknowledges and agrees that upon recordation of this
Mortgage, Mortgagee's interest in the Rents shall be deemed to be fully
perfected, "choate" and enforced as to Mortgagor and all third parties,
including, without limitation, any subsequently appointed trustee in any case
under Title 11 of the United States Code (the "BANKRUPTCY CODE"), without the
necessity of commencing a foreclosure action with respect to this Mortgage,
making formal demand for the Rents, obtaining the appointment of a receiver or
taking any other affirmative action.
SECTION 6.3. BANKRUPTCY PROVISIONS. Without limitation of the
absolute nature of the assignment of the Rents hereunder, Mortgagor and
Mortgagee agree that (a) this Mortgage shall constitute a "security agreement"
for purposes of Section 552(b) of the Bankruptcy Code, (b) the security interest
created by this Mortgage extends to property of Mortgagor acquired before the
commencement of a case in bankruptcy and to all amounts paid as Rents and (c)
such security interest shall extend to all Rents acquired by the estate after
the commencement of any case in bankruptcy.
SECTION 6.4. NO MERGER OF ESTATES. So long as part of the
Indebtedness and the Obligations secured hereby remain unpaid and undischarged,
the fee and leasehold estates to the Mortgaged Property shall not merge, but
shall remain separate and distinct, notwithstanding the union of such estates
either in Mortgagor, Mortgagee, any tenant or any third party by purchase or
otherwise.
ARTICLE 7
SECURITY AGREEMENT
------------------
SECTION 7.1. SECURITY INTEREST. This Mortgage constitutes a
"security agreement" on personal property within the meaning of the UCC and
other applicable law and with respect to the Fixtures, Personalty, Deposit
Accounts, Leases, Rents, Property Agreements, Tax Refunds, Proceeds, Insurance
and Condemnation Awards. To this end, Mortgagor grants to Mortgagee a first and
prior security interest in the Fixtures, Personalty, Deposit Accounts, Leases,
Rents, Property Agreements, Tax Refunds, Proceeds, Insurance, Condemnation
Awards and all other Mortgaged Property which is personal property to secure the
payment of the Indebtedness and performance of the Obligations, and agrees that
Mortgagee shall have all the rights and remedies of a secured party under the
UCC with respect to all such personal property. Any notice of sale, disposition
or other intended action by Mortgagee with respect to the Fixtures, Personalty,
Deposit Accounts, Leases, Rents, Property Agreements, Tax Refunds, Proceeds,
Insurance and Condemnation Awards sent to Mortgagor at least five (5) days prior
to any action under the UCC shall constitute reasonable notice to Mortgagor.
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SECTION 7.2. FINANCING STATEMENTS; CHIEF EXECUTIVE OFFICE.
Mortgagor shall execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further assurances
as Mortgagee may, from time to time, reasonably consider necessary to create,
perfect and preserve Mortgagee's security interest hereunder and Mortgagee may
cause such statements and assurances to be recorded and filed, at such times and
places as may be required or permitted by law to so create, perfect and preserve
such security interest. Mortgagor's chief executive office is in the State of
[STATE] at the address set forth in the first paragraph of this Mortgage.
SECTION 7.3. FIXTURE FILING. This Mortgage shall also
constitute a "fixture filing" for the purposes of the UCC against all of the
Mortgaged Property which is or is to become fixtures. The address of Mortgagor
(the debtor) and the address of Mortgagee (the secured party) appear in EXHIBIT
B attached to this Mortgage.
ARTICLE 8
[INTENTIONALLY OMITTED]
ARTICLE 9
MISCELLANEOUS
-------------
SECTION 9.1. NOTICES. Any notice required or permitted to be
given under this Mortgage shall be given in accordance with Section 10.1 of the
Credit Agreement.
SECTION 9.2. COVENANTS RUNNING WITH THE LAND. All Obligations
contained in this Mortgage are intended by Mortgagor and Mortgagee to be, and
shall be construed as, covenants running with the Mortgaged Property. As used
herein, "Mortgagor" shall refer to the party named in the first paragraph of
this Mortgage and to any subsequent owner of all or any portion of the Mortgaged
Property. All Persons who may have or acquire an interest in the Mortgaged
Property shall be deemed to have notice of, and be bound by, the terms of the
Credit Agreement and the other Credit Documents; however, no such party shall be
entitled to any rights thereunder without the prior written consent of
Mortgagee.
SECTION 9.3. CHANGE IN TAX LAW. Upon the enactment of or
change in (including, without limitation, a change in interpretation of) any
applicable law (i) deducting or allowing Mortgagor to deduct from the value of
the Mortgaged Property for the purpose of taxation any lien or security interest
thereon or (ii) subjecting Mortgagee or any of the Lenders to any tax or
changing the basis of taxation of mortgages, deeds of trust, or other liens or
debts secured thereby, or the manner of collection of such taxes, in each such
case, so as to affect this Mortgage, the Indebtedness or Mortgagee, and the
result is to increase the taxes imposed upon or the cost to Mortgagee of
maintaining the Indebtedness, or to reduce the amount of any payments receivable
hereunder, then, and in any such event, Mortgagor shall, on demand, pay to
Mortgagee and the Lenders additional amounts to compensate for such increased
costs or reduced amounts, provided that if any such payment or reimbursement
shall be unlawful, or taxable to Mortgagee, or would constitute usury or render
the Indebtedness wholly or partially usurious under applicable law, then
Mortgagee or the Requisite Lenders may, at their option, declare the
Indebtedness immediately due and payable or require Mortgagor to pay or
reimburse Mortgagee or the Lenders for payment of the lawful and non-usurious
portion thereof.
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<PAGE> 304
SECTION 9.4. MORTGAGE TAX. Mortgagor shall (i) pay when due
any tax imposed upon it or upon Mortgagee or any Lender pursuant to the tax law
of the state in which the Mortgaged Property is located in connection with the
execution, delivery and recordation of this Mortgage and any of the other Credit
Documents, and (ii) prepare, execute and file any form required to be prepared,
executed and filed in connection therewith.
SECTION 9.5. ATTORNEY-IN-FACT. Mortgagor hereby irrevocably
appoints Mortgagee and its successors and assigns, as its attorney-in-fact with
full power of substitution, which agency is coupled with an interest, (a) to
execute and/or record any notices of completion, cessation of labor or any other
notices that Mortgagee deems appropriate to protect Mortgagee's interest, if
Mortgagor shall fail to do so within ten (10) days after written request by
Mortgagee, (b) upon the issuance of a deed pursuant to the foreclosure of this
Mortgage or the delivery of a deed in lieu of foreclosure, to execute all
instruments of assignment, conveyance or further assurance with respect to the
Fixtures, Personalty, Deposit Accounts, Leases, Rents, Property Agreements, Tax
Refunds, Proceeds, Insurance and Condemnation Awards in favor of the grantee of
any such deed and as may be necessary or desirable for such purpose, (c) to
prepare, execute and file or record financing statements, continuation
statements, applications for registration and like papers necessary to create,
perfect or preserve Mortgagee's security interests and rights in or to any of
the Mortgaged Property, and (d) upon the occurrence and during the continuance
of any Event of Default, to perform any obligation of Mortgagor hereunder,
however: (1) Mortgagee shall not under any circumstances be obligated to perform
any obligation of Mortgagor; (2) any sums advanced by Mortgagee in such
performance shall be added to and included in the Indebtedness and shall bear
interest at the rate or rates at which interest is then computed on the
Indebtedness; (3) Mortgagee as such attorney-in-fact shall only be accountable
for such funds as are actually received by Mortgagee; and (4) Mortgagee shall
not be liable to Mortgagor or any other person or entity for any failure to take
any action which it is empowered to take under this SECTION 9.5.
SECTION 9.6. SUCCESSORS AND ASSIGNS. This Mortgage shall be
binding upon and inure to the benefit of Mortgagee and Mortgagor and their
respective successors and assigns. Except as otherwise permitted by the Credit
Agreement, Mortgagor shall not, without the prior written consent of Mortgagee,
assign any rights, duties or obligations hereunder.
SECTION 9.7. NO WAIVER. Any failure by Mortgagee or the
Lenders to insist upon strict performance of any of the terms, provisions or
conditions of the Credit Documents shall not be deemed to be a waiver of same,
and Mortgagee and the Lenders shall have the right at any time to insist upon
strict performance of all of such terms, provisions and conditions.
SECTION 9.8. CREDIT AGREEMENT. If any conflict or
inconsistency exists between this Mortgage and the Credit Agreement, the Credit
Agreement shall govern.
SECTION 9.9. RELEASE OR RECONVEYANCE. Upon payment in full of
the Indebtedness and performance in full of the Obligations, Mortgagee, at
Mortgagor's expense, shall release the liens and security interests created by
this Mortgage or reconvey the Mortgaged Property to Mortgagor.
SECTION 9.10. WAIVER OF STAY, MORATORIUM AND SIMILAR RIGHTS.
Mortgagor agrees, to the full extent that it may lawfully do so, that it will
not at any time insist upon or plead or in any way take advantage of any stay,
marshalling of assets, extension, redemption or moratorium law now or hereafter
in force and effect so as to prevent or hinder the enforcement of the provisions
of this Mortgage
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<PAGE> 305
or the Indebtedness secured hereby, or any agreement between Mortgagor and
Mortgagee or any rights or remedies of Mortgagee.
SECTION 9.11. APPLICABLE LAW. The provisions of this Mortgage
regarding the creation, perfection and enforcement of the liens and security
interests herein granted shall be governed by and construed under the laws of
the state in which the Mortgaged Property is located. All other provisions of
this Mortgage shall be governed by the laws of the State of New York (including,
without limitation, Section 5-1401 of the General Obligations Law of the State
of New York), without regard to conflicts of laws principles.
SECTION 9.12. HEADINGS. The Article, Section and Subsection
titles hereof are inserted for convenience of reference only and shall in no way
alter, modify or define, or be used in construing, the text of such Articles,
Sections or Subsections.
SECTION 9.13. ENTIRE AGREEMENT. This Mortgage and the other
Credit Documents embody the entire agreement and understanding between Mortgagee
and Mortgagor and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof. Accordingly, the
Credit Documents may not be contradicted by evidence of prior, contemporaneous
or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
SECTION 9.14. REDUCTION OF SECURED AMOUNT. In the event that
the amount secured by the Mortgage is less than the aggregate Indebtedness
evidenced by the Mortgage Notes, then the amount secured shall be reduced only
by the last and final sums that Mortgagor or Borrower repays with respect to the
Indebtedness and shall not be reduced by any intervening repayments of the
Indebtedness. So long as the balance of the Indebtedness exceeds the amount
secured, any payments of the Indebtedness shall not be deemed to be applied
against, or to reduce, the portion of the Indebtedness secured by this Mortgage.
Such payments shall instead be deemed to reduce only such portions of the
Indebtedness as are secured by other collateral located outside of the state in
which the Mortgaged Property is located or as are unsecured.
ARTICLE 10
LOCAL LAW PROVISIONS
--------------------
[To Come]
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Mortgagor has on the date set forth in the
acknowledgment hereto, effective as of the date first above written, caused this
instrument to be duly EXECUTED AND DELIVERED by authority duly given.
MORTGAGOR: SIMMONS COMPANY,
a Delaware corporation
By:
----------------------------
Name:
Title:
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<PAGE> 307
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
ON THE ____ DAY OF OCTOBER IN THE YEAR 1998 BEFORE ME, THE UNDERSIGNED, A NOTARY
PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED _______________
___________________________________________, PERSONALLY KNOWN TO ME OR PROVED TO
ME ON THE BASIS OF SATISFACTORY EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S)
IS (ARE) SUBSCRIBED TO THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT
HE/SHE/THEY EXECUTED THE SAME IN HIS/HER/THEIR CAPACITY(IES), AND THAT BY
HIS/HER/THEIR SIGNATURE(S) ON THE INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON
UPON BEHALF OF WHICH THE INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
--------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGMENT)
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<PAGE> 308
EXHIBIT A
Legal Description of premises located at [INSERT ADDRESS OF PROPERTY]:
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<PAGE> 309
EXHIBIT B
---------
UCC INFORMATION
DEBTOR:
- -------
Name: Simmons Company
Corporate Structure: a Delaware corporation
Notice Address: c/o Simmons Company
One Concourse Parkway
Suite 600
Atlanta, Georgia 30328
Attn: Roger Franklin
State in which Mortgagor's
Chief Executive Office is
located: Georgia
SECURED PARTY:
- --------------
UBS, A.G., Stamford Branch,
as Administrative Agent
677 Washington Boulevard
8th Floor
Stamford, Connecticut 06912
Attn: Lara Kavanagh
Secured Party acts as Administrative Agent for the Lenders party from time to
time to the Credit Agreement. Information regarding the security interest held
by the Lenders, for which Secured Party acts as Administrative Agent, may be
obtained by contacting Secured Party at the address set forth above.
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<PAGE> 310
EXHIBIT L TO
CREDIT AND GUARANTY AGREEMENT
-----------------------------
LANDLORD'S WAIVER AND CONSENT AGREEMENT
This LANDLORD'S WAIVER AND CONSENT AGREEMENT (this"Agreement")
is dated as of September __, 1998 and entered into by ____________, a
________________ (and its successors and assigns, "Landlord"), to and for the
benefit of UBS A.G., STAMFORD BRANCH ("UBS"), as collateral agent (and its
successors and assigns, "Agent ") for the financial institutions ("Lenders")
which are or may hereafter become parties to the Credit Agreement (as
hereinafter defined).
R E C I T A L S
---------------
A. [* Simmons Company *], a Delaware corporation ("Company"),
has possession of and occupies all or a portion of the property described on
Exhibit A annexed hereto (the "Premises") pursuant to the lease (the "Lease")
between Landlord as landlord and Company as tenant described in EXHIBIT B
annexed hereto.
B. UBS, as administrative agent, and a group of lenders for
which UBS is acting as Agent, will be entering into that certain Credit and
Guaranty Agreement (the "Credit Agreement") with Company, as borrower, and
certain Company affiliates, and the obligations under such Credit Agreement will
be secured by, among other things, certain security agreements and other
collateral documents granting to Agent security interests in Company's
equipment, inventory, machinery and other personal property and fixtures now or
hereafter located on the Premises (other than any tenant improvements to the
Premises owned by the Landlord) (the "Collateral").
C. Lenders have requested that Landlord execute this Agreement
as a condition to the extension of credit to Company under the Credit Agreement,
and Landlord understands that Lenders will be extending credit to Company in
reliance upon the statements set forth herein.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord hereby certifies and agrees as follows:
1. Landlord hereby (a) waives and releases unto Agent any and
all rights granted by or under any present or future laws to levy or distraint
for rent or any other charges which may be due to Landlord against the
Collateral, and any and all other claims, liens and demands of every kind which
it now has or may hereafter have against the Collateral, and (b) agrees that any
rights it may have in or to the Collateral, no matter how arising (to the
extent not
<PAGE> 311
effectively waived pursuant to clause (a) of this paragraph 1), shall be second
and subordinate to the rights of Agent in respect thereof.
2. (a) Landlord is the landlord under the Lease, (b) the Lease is valid
and in full force and effect and has not been modified except as set forth on
EXHIBIT B annexed hereto, (c) to the knowledge of Landlord, there is no defense,
offset, claim or counterclaim by or in favor of Landlord against Company under
the Lease or against the obligations of Landlord under the Lease, and (d)
Landlord has no knowledge of the occurrence of any default under or in
connection with the Lease. Landlord shall send to Agent a copy of any notice of
default under the Lease sent by Landlord to Company.
3. During the term of the Lease and until thirty (30) days after
Landlord's Notice (as defined below), Landlord grants to Agent a license to
enter upon and into the Premises to do any or all of the following with respect
to the Collateral: assemble, have appraised, display, remove, maintain, prepare
for sale or lease, repair, transfer, or sell (at public or private sale). In
entering upon or into the Premises, Agent hereby agrees to indemnify, defend and
hold Landlord harmless from and against any and all claims, judgments,
liabilities, costs and expenses incurred by Landlord caused solely by Agent's
entering upon or into the Premises and taking any of the foregoing actions with
respect to the Collateral, including repairing any damage to the Premises made
by Agent arising from the removal of any of the Collateral. Landlord agrees that
it will not prevent Agent or its designee from entering upon the Premises at all
reasonable times to inspect or remove the Collateral.
4. In the event that Landlord has the right to obtain possession of the
Premises (either through expiration of the Lease or termination thereof in
accordance with the terms of the Lease), Landlord will deliver notice (the
"Landlord's Notice") to Agent to that effect.
5. All notices to Agent under this Agreement shall be in writing and
sent to Agent at the following address by telefacsimile, by United States Mail,
or by overnight delivery service:
UBS A.G., STAMFORD BRANCH
Att: Lara Kavanagh
677 Washington Boulevard, 8th Floor
Stamford, CT 06912
203-719-4181 (tel)
203-719-4176 (fax)
6. This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of the State of New York, without regard to
conflicts of laws principles.
L-2
<PAGE> 312
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered as of the day and year first set forth above.
[NAME OF LANDLORD]
By:___________________________
Name:
Title:
Landlord's Address For Notices:
_______________________________
_______________________________
_______________________________
_______________________________
Fax: (___) __________
L-3
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EXHIBIT A
---------
DESCRIPTION OF PREMISES
L-4
<PAGE> 314
EXHIBIT B
---------
DESCRIPTION OF LEASE
Landlord:
Tenant:
Date: ___________________, 19__
L-5
<PAGE> 315
EXHIBIT M TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
Simmons Company
Historical Quarterly Adjusted EBITDA
($ thousands)
<TABLE>
<CAPTION>
4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr FY '99
1997 1998 1998 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA 20,448 7,084 10,201 21,271 Actual Actual
Interest Income 54 45 47 47 Actual Actual
EBITDA 20,502 7,129 10,248 21,318 Actual Actual
---------------- ---------------
Non-Recurring SWIFT/UNITE 793 641 619 416 667 1,050
Management Strategic Initiatives
Strategic Initiative #1 411 -- -- --
Strategic Initiative #2 181 -- -- --
Strategic Initiative #3 -- -- 333 373 333 500
Other
EBITDA, as Adjusted 21,887 7,770 11,200 22,107
---------------- ---------------
</TABLE>
The numbers set forth above under "EBITDA, as Adjusted" for periods prior
to the 4th Quarter, 1998 shall be used as "Consolidated Adjusted EBITDA" in
computing the covenants set forth in Section 6.6 of the Credit Agreement in lieu
of the actual numbers for the period indicated. EBITDA for the 4th Quarter, 1998
and for each Fiscal Quarter in 1999 shall use the actual numbers for such
quarter adjusted as provided under the heading "4th Qtr 1998" and under the
heading "FY '99," as the case may be, the magnitude of such adjustments for such
quarter to be the actual amount incurred in such quarter, and the cumulative
aggregate amount of such adjustments not to exceed the sum of the amounts
provided under the headings "4th Qtr 1998" and "FY '99." It is estimated that
the adjustments provided under the heading "FY '99" will be made in equal
amounts in each of the first two fiscal quarters of 1999.
EXHIBIT N TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
TERMS OF CERTAIN OTHER INDEBTEDNESS
[SEE ATTACHED SUMMARIES OF TERMS]
N-1
<PAGE> 316
EXHIBIT O TO THE
CREDIT AND GUARANTY AGREEMENT
-----------------------------
RECAPITALIZATION EXPENSES
-------------------------
(Figures in Dollars)
<TABLE>
<S> <C>
Seller Fees Paid by the Buyer 10,600,000.00
Buyer Fees 13,300,000.00
Miscellaneous Fees 437,100.00
TOTAL 24,337,100.00
</TABLE>
O-1
<PAGE> 317
SIMMONS COMPANY
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
October 29, 1998
UBS A.G., Stamford Branch
c/o Warburg Dillon Read, L.L.C.
535 Madison Avenue, 6th Floor
New York, NY 10022
Re: Simmons Company
---------------
Ladies and Gentlemen:
This letter agreement is delivered by Simmons Company (the
"Company") to UBS A.G., Stamford Branch (the "Agent"), as Agent for itself and
certain other financial institutions (collectively, the "Lenders") party to that
certain Credit and Guaranty Agreement (the "Credit Agreement"), dated as of
October 29, 1998 by and among the Company, as borrower, Simmons Holdings, Inc.
and certain subsidiaries of Company, as guarantors, the Lenders listed on the
signature pages thereto, Goldman Sachs Credit Partners L.P., as a joint lead
arranger and as syndication agent for the Lenders, Warburg Dillon Read, LLC, as
a joint lead arranger, and the Agent. Terms not defined herein are used herein
as defined in the Credit Agreement.
In connection herewith, the Company has previously delivered
to you, among other things, a leasehold deed of trust, leasehold mortgage or
leasehold deed to secure debt with respect to the property locations listed on
Exhibit A attached hereto (individually, a "Mortgage" and collectively, the
"Mortgages").
The Company hereby agrees with the Agent as follows:
<PAGE> 318
1. To use all commercially reasonable efforts, to obtain and deliver to
First American Title Insurance Company (the "Title Company") and Jay Sobel at
Skadden, Arps within 60 days of the date hereof the documents listed below for
each of the property locations leased by the Company listed below:
A. COPPELL, TEXAS.
(i) An original Landlord Consent to Leasehold Mortgage
executed by the Company's landlord for such property
location, to the extent there is only one original it
shall be delivered to Jay Sobel.
(ii) An original Notice/Memorandum of Lease executed by the
Company and the Company's landlord for such property
location, to the extent there is only one original it
shall be delivered to the Title Company.
B. MABELTON, GEORGIA.
(i) An amendment changing said lease from an "usufruct" to
"an estate for a term of years" under Georgia law
sufficient in form to allow the Title Company to insure
the tide to a leasehold mortgage with respect to such
property.
(ii) An original Notice/Memorandum of Lease executed by the
Company and the Company's landlord for such property
location, to the extent there is only one original it
shall be delivered to the Title Company.
C. SHAWNEE, KANSAS. An original Landlord Consent to Leasehold
Mortgage executed by the City of Shawnee, Kansas for such
property location, to the extent there is only one original it
shall be delivered to Jay Sobel.
2. To use all commercially reasonable efforts to obtain and deliver to
the Title Company within 60 days of the date hereof the documents listed below
(most of which have been delivered to the Agent in facsimile form or are
expected to be so delivered today) for each of the property locations leased by
the Company listed below;
A. AURORA, COLORADO:
(i) An original Landlord Consent to Leasehold Deed of Trust
executed by the Company's landlord for such property
location.
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<PAGE> 319
(ii) An original Memorandum/Notice of Lease executed by the
Company and the Company's landlord for such property
location.
B. JACKSONVILLE, FLORIDA:
(i) An original Landlord Consent to Leasehold Mortgage
executed by the Company's landlord for such property
location.
(ii) An original Memorandum/Notice of Lease executed by the
Company and the Company's landlord for such property
location.
C. AGAWAM, MASSACHUSETTS: An original Notice of Lease executed
by the Company and the Company's landlord for such property
location.
D. SEATTLE, WASHINGTON: An original Memorandum/Notice of Lease
executed by the Company and the Company's landlord for such
property location.
3. If despite using commercially reasonable efforts, the Company is
unable to obtain the Amendment to Lease with respect to the Mabelton, Georgia
property location as described in Paragraph 1B above, then the Company shall
use all commercially reasonable efforts to provide the Agent with a mortgage,
security interest or similar lien on real property owned or leased by the
Company valued at approximately $4,358,586 which is the Agent's estimate of the
fair market value of the Company's leasehold interest in the Mabelton, Georgia
property location.
4. The Mortgage for each property location listed in Paragraph 1 above
is to be held by the Agent until all of the above listed documents for such
location have been obtained by the Company and delivered to the Title Company as
aforesaid. Whereupon the Title Company is authorized to record the Mortgage(s)
for the applicable property location(s) for which the above-listed documents
were obtained and delivered as aforesaid. The Company further agrees to pay all
title insurance premiums, endorsement fees, recording costs and mortgage tax
amounts and the reasonable costs, expenses, and fees of the Title Company in
connection with the recording of such Mortgage(s) and any necessary related
documents.
5. To use all commercially reasonable efforts to locate and deliver in
pledge to the Agent within sixty (60) days of the date hereof the Info
Establishment (Liechtenstein) stock (65%).
6. To deliver in pledge to the Agent within sixty (60) days of the
capitalization of the Company the Simmons International Ltd. (Bahamas) stock
(65%) if the Company elects to capitalize this subsidiary. The Company
represents and warrants to the Agent and the Lenders
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<PAGE> 320
that Simmons International Ltd. (Bahamas) has no assets and is not
engaged in any business or operations.
7. To use all commercially reasonable efforts to effect a dissolution
of 688363 Ontario Limited and 897701 Ontario Limited within a reasonable period
of time after date hereof. The Company represents and warrants to the Agent and
the Lenders that each of 688363 Ontario United and 897701 Ontario Limited has no
assets and is not engaged in any business or operations.
This letter agreement shall be deemed to be a part of the Credit
Agreement and shall be a part of the Credit Agreement and shall have the same
effect as if set forth in full in Section 5.13 of the Credit Agreement.
The Company hereby states for the benefit of the Agent and the Lenders
that it expects to receive the original documents in Paragraph 2 above later
today or over the next several days.
[Intentionally Left Blank]
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<PAGE> 321
If the foregoing reflects to your understanding of the agreement
between the Company, the Agent and the Lenders with respect to the subject
matter hereof, please countersign the acceptance and acknowledgment in the
appropriate place below and return an original copy to the Company whereupon
this letter shall become a binding agreement between the Company, the Agent and
the Lenders.
Very Truly Yours,
SIMMONS COMPANY
By:/s/ J. C. Daiker
------------------------------------
Name: Jonathan C. Daiker
Title: Executive Vice President and
Chief Financial Officer
The foregoing is hereby acknowledged,
agreed to and accepted:
UBS A.G., Stamford Branch, for itself
and as Agent for the Lenders
By: /s/ M. R. Grayer
- ------------------------------------------
Name: Michael R. Grayer
Title: Managing Director Leveraged Finance
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<PAGE> 322
EXHIBIT A
---------
Property Locations
1. Shawnee, Kansas
2. Coppell, Texas
3. Mabelton, Georgia
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<PAGE> 1
Exhibit 10.7
SIMMONS COMPANY
FIRST AMENDMENT TO
CREDIT AND GUARANTY AGREEMENT
THIS FIRST AMENDMENT (this "AMENDMENT") dated as of March 1, 1999 to
the CREDIT AND GUARANTY AGREEMENT (the "CREDIT AGREEMENT") dated as of October
29, 1998 is entered into by and among SIMMONS COMPANY, a Delaware corporation
(the "COMPANY"), SIMMONS HOLDINGS, INC., a Delaware corporation ("HOLDINGS"),
the CREDIT SUPPORT PARTY listed on the signature papers hereto, CERTAIN
FINANCIAL INSTITUTIONS listed on the signature pages hereto, GOLDMAN SACHS
CREDIT PARTNERS L.P. and UBS A.G., ("UBS"). Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement and in the amendments contained in Section 1 hereof.
RECITALS
WHEREAS, Company proposes to issue Subordinated Indebtedness in an
aggregate principal amount of up to $150,000,000 and has requested, in
connection therewith, that Requisite Lenders agree to modify certain provisions
of the Credit Agreement in connection thereto.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 DEFINITIONS. SECTION 1.1 of the Credit Agreement is hereby amended by adding
the following definitions of "Excess Amount" and "1999 Subordinated
Indebtedness" in appropriate alphabetic sequence.
"EXCESS AMOUNT" has the meaning specified in SECTION 2.13(c).
"1999 SUBORDINATED INDEBTEDNESS" has the meaning specified in
SECTION 6.1(vii)."
1.2 AMENDMENTS TO SECTION 2
A. SECTION 2.13(c) of the Credit Agreement is hereby amended to read in
its entirety as follows:
<PAGE> 2
"(c) On the date of receipt by Holdings or Company of the Cash
proceeds from the issuance of any debt Securities (other than the proceeds of
Indebtedness permitted under SECTION 6.1 or Section 6.13(c)) of Holdings,
Company or its Subsidiaries, Company shall prepay the Loans and/or the
Commitments shall be permanently reduced in an aggregate amount equal to equal
to 100% of such proceeds, net, in the case of any such issuance, of underwriting
discounts and commissions and other reasonable costs and expenses associated
therewith, including reasonable legal fees and expenses; PROVIDED that, with
respect to any net Cash proceeds of 1999 Subordinated Indebtedness only that the
portion of such net Cash proceeds in excess of $125,000,000 (such amount being
referred to herein as the "EXCESS AMOUNT") shall be subject to the mandatory
prepayment provisions of this SECTION 2.13(c)."
B. SECTION 2.14(a) of the Credit Agreement is hereby amended to read in
its entirety as follows:
"2.14. APPLICATION OF PREPAYMENTS AND REDUCTIONS OF COMMITMENTS. (a)
Any voluntary prepayments made pursuant to SECTION 2.12 shall be applied as
specified by Company in the applicable notice of prepayment; PROVIDED, in the
event Company fails to specify the Loans to which any such prepayment shall be
applied, such prepayment shall be applied FIRST, to repay outstanding Swing Line
Loans to the full extent thereof, SECOND to repay outstanding Revolving Loans to
the full extent thereof, and THIRD to prepay the Tranche A Term Loans, the
Tranche B Term Loans and the Tranche C Term Loans on a pro rata basis (in
accordance with the respective outstanding principal amounts thereof) and shall
be applied on a pro rata basis (in accordance with the respective outstanding
principal amounts thereof) to each scheduled installment of principal of the
Tranche A Term Loans or Tranche B Term Loans or the Tranche C Term Loans, as the
case may be, that is unpaid at the time of such prepayment. Notwithstanding the
foregoing, any voluntary prepayments of Tranche A Term Loans, Tranche B Term
Loans or Tranche C Term Loans made with net Cash proceeds of 1999 Subordinated
Indebtedness shall be applied to each scheduled installment of principal thereon
that is unpaid at the time of such prepayment in forward order of maturity."
C. SECTION 2.14(b) of the Credit Agreement is hereby amended to read in
its entirety as follows:
"(b) Any amount (the "APPLIED AMOUNT") required to be paid
pursuant to SECTION 2.13 shall be applied FIRST, to prepay the Tranche A Term
Loans, the Tranche B Term Loans and the Tranche C Term Loans on a pro rata basis
(in accordance with the respective outstanding principal amounts thereof) and
shall be further applied on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) to each scheduled installment of
principal of the Tranche A Term Loans or Tranche B Term Loans or the Tranche C
Term Loans, as the case may be, that is unpaid at the time of such prepayment,
except that, with respect to any portion of the Excess Amount included in the
Applied Amount, notwithstanding the foregoing or the last sentence of Section
2.14(c), the further application of such amount to scheduled installments of
principal shall be made in forward order of maturity, whether such application
results from the provisions of Section 2.14(b) or 2.14(c), SECOND, to the extent
of any remaining portion of the Applied Amount, to prepay the
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<PAGE> 3
Swing Line Loans to the full extent thereof and to permanently reduce the
Revolving Loan Commitments by the amount of such prepayment, THIRD, to the
extent of any remaining portion of the Applied Amount, to prepay the Revolving
Loans to the full extent thereof and to further permanently reduce the Revolving
Loan Commitments by the amount of such prepayment, and FOURTH, to the extent of
any remaining portion of the Applied Amount, to further permanently reduce the
Revolving Loan Commitments to the full extent thereof."
1.3 AMENDMENTS TO SECTION 6: NEGATIVE COVENANTS
A. SECTION 6.1(vii) of the Credit Agreement is hereby amended to read
in its entirety as follows:
"(vii) Company may become and remain liable with respect to
(a) Indebtedness under the Senior Subordinated Bridge Loan Documents, the Senior
Subordinated Note Documents and the Junior Subordinated Notes Documents, and (b)
other Subordinated Indebted-ness ("1999 SUBORDINATED INDEBTEDNESS") incurred to
refinance, in whole or in part, Indebtedness under the Senior Subordinated
Bridge Loan Documents and the Junior Subordinated Notes and to make prepayments
of Loans; PROVIDED that, in each case contemplated by this clause (b) (1) the
principal amount (or accreted value, in the case of any such Indebtedness issued
with a discount) of such Indebtedness does not exceed$150,000,000 and any
portion of such proceeds in excess of the amount of principal, accrued interest,
fees and expenses payable with respect to Indebtedness outstanding under the
Senior Subordinated Bridge Loans and the Junior Subordinated Notes shall be
applied to prepay Loans in accordance with the terms of this Agreement; (2) such
refinancing Indebtedness shall be subordinated in right of payment to the
Obligations pursuant to documentation containing interest payment terms,
maturities, amortization schedules, covenants, defaults, remedies, subordination
provisions, transfer restrictions and other material terms which taken as a
whole are no less favorable to the Lenders than the corresponding terms of the
Senior Subordinated Bridge Loan Documents or the Junior Subordinated Notes
Documents, as the case may be, and are otherwise reasonably satisfactory to
Administrative Agent and (3) immediately prior to and immediately after the
incurrence of such refinancing Indebted-ness, no Event of Default or Default
shall have occurred and be continuing."
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT
EFFECTIVE DATE"):
A. EXECUTION. Credit Parties and Requisite Lenders shall have executed
this Amendment.
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<PAGE> 4
B. RELATED AGREEMENTS. Company have delivered to Administrative Agent
complete and correct copies of the documents evidencing the 1999 Subordinated
Indebtedness and of all exhibits and schedules thereto.
C. REPAYMENT OF CERTAIN DEBT. Company shall repay, simultaneous with
the issuance of the 1999 Subordinated Indebtedness and the receipt of the
proceeds thereof, the Senior Subordinated Bridge Loans and the Junior
Subordinated Notes and, to the extent required by this Amendment, Loans.
D. OPINIONS OF LOAN PARTIES' COUNSEL. Administrative Agent (for
Lenders) shall have received an executed copy of one or more favorable written
opinions of Ropes & Gray in respect of the 1999 Subordinated Indebtedness.
E. FEES. The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the First Amendment Effective Date,
including, to the extent invoiced, reimbursement or other payment of all
out-of-pocket expenses required to be reimbursed or paid by the Company
hereunder or under any other Credit Document.
F. NECESSARY CONSENTS. Each Credit Party shall have obtained all
material consents necessary or advisable in connection with the borrowing by
Company of the 1999 Subordinated Indebtedness and the transactions contemplated
by this Amendment.
G. OTHER DOCUMENTS. Administrative Agent and Lenders shall have
received such other documents and information regarding Credit Parties and the
1999 Subordinated Indebtedness as Administrative Agent may reasonably request.
SECTION 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each of the Company
represents and warrants to each Lender that the following statements are true,
correct and complete in all material respects:
A. CORPORATE POWER AND AUTHORITY. Each Credit Party which is party
hereto has all requisite corporate power and authority to enter into this
Amendment and to carry out the transactions contemplated by, and perform its
obligations under, the Credit Agreement as amended by this Amendment (the
"AMENDED AGREEMENT") and the other Credit Documents.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Credit
Documents have been duly authorized by all necessary corporate action on the
part of each Credit Party.
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<PAGE> 5
C. NO CONFLICT. The execution and delivery by each Credit Party of this
Amendment and the performance by each Credit Party of the Amended Agreement and
the other Credit Documents do not and will not (i) violate (A) any provision of
any law, statute, rule or regulation, or of the certificate or articles of
incorporation or partnership agreement, other constitutive documents or by-laws
of Holdings, the Company or any Subsidiary, (B) any applicable order of any
court or any rule, regulation or order of any Governmental Authority or (C) any
provision of any indenture, certificate of designation for preferred stock,
agreement or other instrument to which Holdings, the Company or any Subsidiary
is a party or by which any of them or any of their property is or may be bound,
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any such indenture, certificate
of designation for preferred stock, agreement or other instrument, where any
such conflict, violation, breach or default referred to in clause (i) or (ii) of
this Section 3.C., individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of each Credit Party
(other than any Liens created under any of the Credit Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
contractual obligation of each Credit Party, except for such approvals or
consents which will be obtained on or before the First Amendment Effective Date.
D. GOVERNMENTAL CONSENTS. No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the execution and delivery by each Credit
Party of this Amendment and the performance by Company and Holdings of the
Amended Agreement and the other Credit Documents, except for such actions,
consents and approvals the failure to obtain or make which could not reasonably
be expected to result in a Material Adverse Effect or which have been obtained
and are in full force and effect.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by each of the Credit Parties party thereto and
each constitutes a legal, valid and binding obligation of such Credit Party to
the extent a party thereto enforce-able against such Credit Party in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally and except as enforceability may be limited by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Amended Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
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<PAGE> 6
G. ABSENCE OF DEFAULT. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Default.
SECTION 4. ACKNOWLEDGMENT AND CONSENT
Simmons International Holdings Company, Inc. referred to herein as the
"CREDIT SUPPORT PARTY", and the Credit Documents to which they are a party are
collectively referred to herein as the "CREDIT SUPPORT DOCUMENTS".
Credit Support Party hereby acknowledges that it has reviewed the terms
and provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Credit
Support Party hereby confirms that each Credit Support Document to which it is a
party or otherwise bound and all Collateral encumbered thereby will continue to
guarantee or secure, as the case may be, to the fullest extent possible in
accordance with the Credit Support Documents the payment and performance of all
"Obligations" under each of the Credit Support Documents to which is a party (in
each case as such terms are defined in the applicable Credit Support Document).
Credit Support Party acknowledges and agrees that any of the Credit
Support Documents to which it is a party or otherwise bound shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Credit Support Party represents and warrants
that all representations and warranties contained in the Amended Agreement and
the Credit Support Documents to which it is a party or otherwise bound are true,
correct and complete in all material respects on and as of the First Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
Credit Support Party acknowledges and agrees that (i) notwithstanding
the conditions to effectiveness set forth in this Amendment, Credit Support
Party is not required by the terms of the Credit Agreement or any other Credit
Support Document to consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Credit Support Document shall be deemed to require the
consent of Credit Support Party to any future amendments to the Credit
Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
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<PAGE> 7
(i) On and after the First Amendment Effective Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Credit Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Credit Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of any Agent or Lender
under, the Credit Agreement or any of the other Credit Documents.
B. HEADINGS. Section and Subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first written above.
BORROWER: SIMMONS COMPANY
By: /s/ Roger W. Franklin
-----------------------------
Name: Roger W. Franklin
Title: Vice President - Finance,
Treasurer
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<PAGE> 9
HOLDINGS: SIMMONS HOLDING, INC.
By: /s/ Roger W. Franklin
-----------------------------
Name: Roger W. Franklin
Title: Vice President - Finance,
Treasurer
CREDIT SUPPORT
PARTIES: SIMMONS INTERNATIONAL HOLDINGS COMPANY, INC.
(for the purposes of Section 4 only) as a Credit Support Party
By: /s/ Roger W. Franklin
-----------------------------
Name: Roger W. Franklin
Title: Vice President - Finance,
Treasurer
LENDERS GOLDMAN SACHS CREDIT PARTNERS L.P.,
AND AGENTS:
By: /s/ [ ]
-----------------------------
Name: Authorized Signatory
UBS AG, STAMFORD BRANCH
By: /s/ Denise M. Clerkin
-----------------------------
Name: Associate Director
Title: Loan Portfolio Support, US
By: /s/ Thomas R. Salzano
-----------------------------
Name: Associate Director
Title: Loan Portfolio Support, US
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<PAGE> 10
WACHOVIA BANK, N.A.,
By: /s/ Ann B. Edwards
-----------------------------
Name: Ann B. Edwards
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Pauline So
-----------------------------
Name: Pauline So
Title: Assistant Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/ Elliot Jaffee
-----------------------------
Name: Elliot Jaffee
Title: Vice President
BHF-BANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By: /s/ Steven Alexander
-----------------------------
Name: Steven Alexander
Title: Assistant Treasurer
By: /s/ Perry Forman
-----------------------------
Name: Perry Forman
Title: Vice President
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<PAGE> 11
MARINE MIDLAND BANK
By: /s/ Gina Sidorsky
-----------------------------
Name: Gina Sidorsky
Title: Authorized Signatory
SUNTRUST BANK, ATLANTA
By: /s/ Daniel Bromstad
-----------------------------
Name: Daniel Bromstad
Title: Vice President
By: /s/ Richard C. Wilson
-----------------------------
Name: Richard C. Wilson
Title: Vice President
WELLS FARGO BANK, N.A.
By: /s/ [ ]
-----------------------------
Name:
Title:
-11-
<PAGE> 12
BAYERISCHE HYPO-UND VEREINSBANK, AG
NEW YORK BRANCH
By: /s/ Hans Dick
-----------------------------
Name: Hans Dick
Title: Director
By: /s/ Sylvia K. Cheng
-----------------------------
Name: Sylvia K. Cheng
Title: Director
THE BANK OF NEW YORK
By: /s/ David C. Siegel
-----------------------------
Name: David C. Siegel
Title: Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Thomas G. Pierce
-----------------------------
Name: Thomas G. Pierce
Title: Senior Associate
By: /s/ Robert M. Biringer
-----------------------------
Name: Robert M. Biringer
Title: Executive Vice President
-12-
<PAGE> 13
HELLER FINANCIAL, INC.
By: /s/ Robert M. Reeg
-----------------------------
Name: Robert M. Reeg
Title: Assistant Vice President
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ Toshihiro Hayashi
-----------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
THE PROVIDENT BANK
By: /s/ [ ]
-----------------------------
Name:
Title:
SCOTIABANC INC.
By: /s/ [ ]
-----------------------------
Name:
Title:
-13-
<PAGE> 14
AERIES FINANCE LTD.
By: /s/ Ian David Moore
-----------------------------
Name: Ian David Moore
Title: Director
AMARA-3 FINANCE LTD.
By: /s/ Ian David Moore
-----------------------------
Name: Ian David Moore
Title: Director
CARAVELLE INVESTMENT FUND, LLC,
By: /s/ Dean Criares
-----------------------------
Name: Dean Criares
Title: Managing Director
Caravelle Advisors L.L.C.
CYPRESSTREE INSTITUTIONAL FUND, L.L.C.
By: CypressTree Investment Management
Company, Inc. its Managing Member
By: /s/ Jeffrey W. Heuer
-----------------------------
Name: Jeffrey W. Heuer
Title: Principal
-14-
<PAGE> 15
EATON VANCE SENIOR INCOME TRUST
By: Eaton Vance Management
as Investment Advisor
By: /s/ Scott H. Page
-----------------------------
Name: Scott H. Page
Title: Vice President
FLOATING RATE PORTFOLIO
By: INVESCO Senior Secured Management, Inc.,
as Attorney-in-Fact
By: /s/ Anne M. Mccarthy
-----------------------------
Name: Anne M. McCarthy
Title: Authorized Signatory
FREMONT INVESTMENT AND LOAN
By: /s/ Kannika Viravan
-----------------------------
Name: Kannika Viravan
Title: Assistant Vice President
KZH CYPRESSTREE-1 LLC
By: /s/ Virginia Conway
-----------------------------
Name: Virginia Conway
Title: Authorized Agent
-15-
<PAGE> 16
KZH ING-2 LLC
By: /s/ Virginia Conway
-----------------------------
Name: Virginia Conway
Title: Authorized Agent
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ Andrew C. Liggio
-----------------------------
Name: Andrew C. Liggio
Title: Authorized Signatory
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
(formerly Prime Income Trust)
By: /s/ Peter Geuntz
-----------------------------
Name: Peter Geuntz
Title: Authorized Signatory
NORTH AMERICAN SENIOR FLOATING
RATE FUND
By: CypressTree Investment Management
Company, Inc.
as Portfolio Manager
By: /s/ Jeffrey W. Heuer
-----------------------------
Name: Jeffrey W. Heuer
Title: Principal
-16-
<PAGE> 17
OXFORD STRATEGIC INCOME FUND
By: Eaton Vance Management
as Investment Advisor
By: /s/ Scott H. Page
-----------------------------
Name: Scott H. Page
Title: Vice President
SCOTIABANC INC.
By: /s/ F.C.H. Ashby
-----------------------------
Name: F.C.H. Ashby
Title: Senior Manager
Loan Operations
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ Scott H. Page
-----------------------------
Name: Scott H. Page
Title: Vice President
-17-
<PAGE> 1
Exhibit 10.8
ADVISORY AGREEMENT
This Advisory Agreement (this "Agreement") is entered into as of the
29th day of October, 1998 by and between Simmons Holdings, Inc., a Delaware
corporation (the "Holdings"), Simmons Company, a Delaware corporation (the
"Company") and Fenway Partners, Inc., a Delaware corporation ("Fenway").
WHEREAS, Fenway has provided advisory and other services to
Holdings and the Company in connection with the acquisition by funds
affiliated with Fenway (the "Fenway Funds") of Simmons Holdings, Inc.
(the "Acquisition") and the senior secured financing (the "Senior
Financing") being provided for the Acquisition pursuant to a credit
agreement dated on or about the date hereof by Goldman Sachs Credit
Partners L.P. as joint lead arranger and syndication agent, Warburg
Dillon Read LLC, as joint lead arranger, and UBS A.G., Stamford Branch
as administrative agent and the lending institutions from time to time
party thereto;
WHEREAS, subject to the terms and conditions of this
Agreement, Holdings and the Company desire to retain Fenway to provide
certain management and advisory services to Holdings and the Company,
and Fenway desires to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. SERVICES. Fenway hereby agrees that, during the term of this Agreement
(the "Term"), it will:
a. provide Holdings and the Company with advice in connection
with the negotiation and consummation of agreements,
contracts, documents and instruments necessary to provide the
Company with senior secured financing from banks or other
financial institutions or other entities on terms and
conditions satisfactory to Holdings and the Company; and
b. provide Holdings and the Company with financial, managerial
and operational advice in connection with its day-to-day
operations, including, without limitation:
(i) advice with respect to the investment of funds; and
-1-
<PAGE> 2
(ii) advice with respect to the development and
implementation of strategies for improving the
operating, marketing and financial performance of
Holdings and the Company.
2. PAYMENT OF FEES. The Company hereby agrees to:
a. pay to Fenway (or its designee) a fee in the amount of five
million, one hundred thousand dollars ($5,100,000) and
379,119.069 shares of Class B Common Stock of Holdings in
connection with the structuring of the Acquisition and the
Senior Financing, together with reimbursement of Fenway's
reasonable out-of-pocket expenses incurred on behalf of the
Company through the closing date in connection with the
Acquisition, such fees and expenses being payable by the
Company at the closing of the Acquisition;
b. during the Term, pay to Fenway (or its designee) management
fees as follows (subject to adjustment as provided below): for
the Term of this Agreement, for each fiscal year, an amount
equal to 1/4 of 1% of net sales for the immediately preceding
fiscal year or such other amount (or formula) as may be
mutually agreed among Holdings, the Company and Fenway, in
each case in exchange for the services provided to Holdings
and the Company by Fenway, as more fully described in Section
1 of this Agreement, such fees being payable by Holdings and
the Company quarterly in advance, the first such payment to be
made at or promptly after the closing of the Acquisition;
c. during the Term, allow Fenway to participate in the
negotiation and consummation of any acquisition transactions
by Holdings or the Company or any of its direct or indirect
subsidiaries, and pay to Fenway (or an affiliate of Fenway
designated by it) such customary fee as may be charged
therefor by Fenway in connection therewith; provided, however,
that in each case such fee shall not exceed the greater of (i)
$1,000,000 or (ii) one and one-half percent (1 1/2%) of the
aggregate transaction value (including liabilities assumed);
and provided further that such fee shall be due and payable
for the foregoing services at the closing of such transaction;
and
d. in the event of an acquisition or series of acquisitions of
another business or businesses (whether by stock or asset
purchase, merger or otherwise) wherein the acquired entities
or businesses have an aggregate enterprise value in excess of
$25,000,000, thereafter, if appropriate under the
circumstances, pay to Fenway an increase to the management
fees payable pursuant to Section 2(b) above as is mutually
agreed by the Company and Fenway (it being agreed that the
amount of any such increase will be negotiated in good faith
between the Company and Fenway).
-2-
<PAGE> 3
e. in the event of an initial public offering of Common Stock of
Holdings or the Company, the parties agree to negotiate in
good faith any adjustments to the fee as may be customary and
appropriate based upon market conditions and the participation
of Fenway in the business, financings and acquisition of
Holdings and the Company (including, if applicable the
termination of the Agreement); provided, however, that,
nothing contained herein shall require Holdings or the Company
to pay Fenway the present value of future payments under this
Agreement through the term of this Agreement or any other fee
in respect of such termination or adjustment.
Each payment made pursuant to this Section 2 shall be paid by wire
transfer of immediately available federal funds to such account(s) as
Fenway may specify to the Company in writing prior to such payment.
3. TERM. This Agreement shall continue in full force and effect, unless
and until terminated by mutual consent of the parties, for a minimum of
ten years; and thereafter for so long as Fenway (or any successor or
permitted assign, as the case may be) continues to carry on the
business of providing services of the type described in Section 1
above; provided, however, that:
a. either party may terminate this Agreement following a material
breach of the terms of this Agreement by the other party
hereto and a failure to cure such breach within 30 days
following written notice thereof;
b. this Agreement shall terminate automatically upon the earliest
date upon which the Fenway Funds and their respective
affiliates shall cease to retain the power to elect or cause
the election of a majority of the board of directors of
Holdings; and
c. each of (i) the obligations of Holdings and the Company under
Section 4 below, (ii) any and all accrued and unpaid
obligations of Holdings and the Company owed under Section 2
above and (iii) the provisions of Sections 4(b) and 7 shall
survive any termination of this Agreement to the maximum
extent permitted under applicable law.
4. EXPENSES; INDEMNIFICATION.
a. Expenses. Whether or not the Acquisition or any of the other
transactions contemplated by this Agreement or any other
agreement executed in connection herewith shall be
consummated, Holdings and the Company agree to pay on demand
reasonable expenses incurred by Fenway and the Fenway Funds in
connection with this Agreement, the Acquisition and such other
transactions and
-3-
<PAGE> 4
all operations hereunder or otherwise incurred in connection
with the Acquisition or the Company, including but not limited
to:
(i) the reasonable fees and disbursements of: (A) Ropes &
Gray, special counsel to Fenway and the Fenway Funds,
(B) Ernst & Young, accountant to Fenway and the
Fenway Funds, and (C) any other consultants or
advisors retained by Fenway, the Fenway Funds or
either of the parties identified in clauses (A) and
(B) arising in connection therewith (including but
not limited to the preparation, negotiation and
execution of this Agreement and any other agreement
executed in connection herewith or in connection with
the Acquisition, the Senior Financing or the
consummation of the other transactions contemplated
hereby (and any and all amendments, modifications,
restructurings and waivers, and exercises and
preservations of rights and remedies hereunder or
thereunder) and the operations of Holdings and the
Company and any of its subsidiaries), and
(ii) any out-of-pocket expenses incurred by Fenway in
connection with the provision of services hereunder
or the attendance at any meeting of the board of
directors (or any committee thereof) of Holdings and
the Company or any of its affiliates.
b. Indemnity and Liability. Holdings and the Company hereby agree
to indemnify, exonerate and hold each of Fenway, and the
Fenway Funds, and each of their respective partners,
shareholders, affiliates, directors, officers, fiduciaries,
employees and agents and each of the partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and
agents of each of the foregoing (collectively, the
"Indemnitees") free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including
without limitation reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Liabilities"),
incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to the Acquisition, the execution,
delivery, performance, enforcement or existence of this
Agreement or the transactions contemplated hereby except for
any such Indemnified Liabilities arising on account of such
Indemnitee's gross negligence or willful misconduct, and if
and to the extent that the foregoing undertaking may be
unenforceable for any reason, Holdings and the Company hereby
agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. None of the Indemnitees
shall be liable to Holdings and the Company or any of its
affiliates for any act or omission suffered or taken by such
Indemnitee that does not constitute gross negligence or
willful misconduct.
-4-
<PAGE> 5
5. ASSIGNMENT, ETC. Neither party shall have the right to assign this
Agreement; provided, however, that notwithstanding the foregoing
prohibition, (a) Fenway may assign all or part of its rights and
obligations hereunder to any affiliate of Fenway which provides
services similar to those called for by this Agreement, in which event
Fenway shall be released of all of its rights and obligations
hereunder, and (b) the provisions hereof for the benefit of the Fenway
Fund shall inure to the benefit of their successors and assigns.
6. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision
or condition of this Agreement shall be effective, unless in writing
and executed by each of Fenway and the Company. No waiver on any one
occasion shall extend to or effect or be construed as a waiver of any
right or remedy on any future occasion. No course of dealing of any
person nor any delay or omission in exercising any right or remedy
shall constitute an amendment of this Agreement or a waiver of any
right or remedy of any party hereto.
7. MISCELLANEOUS.
a. Choice of Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of
the State of New York without giving effect to any choice or
conflict of law provision or rule that would cause the
application of the domestic substantive laws of any other
jurisdiction.
b. Consent to Jurisdiction. Each of the parties agrees that all
actions, suits or proceedings arising out of or based upon
this Agreement or the subject matter hereof shall be brought
and maintained exclusively in the federal and state courts of
the State of New York. Each of the parties hereto by execution
hereof (i) hereby irrevocably submits to the jurisdiction of
the federal and state courts in the State of New York for the
purpose of any action, suit or proceeding arising out of or
based upon this Agreement or the subject matter hereof and
(ii) hereby waives to the extent not prohibited by applicable
law, and agrees not to assert, by way of motion, as a defense
or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of
the above-named courts, that it is immune from
extraterritorial injunctive relief or other injunctive relief,
that its property is exempt or immune from attachment or
execution, that any such action, suit or proceeding may not be
brought or maintained in one of the above-named courts, that
any such action, suit or proceeding brought or maintained in
one of the above-named courts should be dismissed on grounds
of FORUM NON CONVENIENS, should be transferred to any court
other than one of the above-named courts, should be stayed by
virtue of the pendency of any other action, suit or proceeding
in any court other than one of the above-named courts, or that
this Agreement or the subject matter hereof may not be
enforced in or by any of the above-named courts. Each of the
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<PAGE> 6
parties hereto hereby consents to service of process in any
such suit, action or proceeding in any manner permitted by the
laws of the State of New York, agrees that service of process
by registered or certified mail, return receipt requested, at
the address specified in or pursuant to Section 9 is
reasonably calculated to give actual notice and waives and
agrees not to assert by way of motion, as a defense or
otherwise, in any such action, suit or proceeding any claim
that service of process made in accordance with Section 9 does
not constitute good and sufficient service of process. The
provisions of this Section 7(b) shall not restrict the ability
of any party to enforce in any court any judgment obtained in
a federal or state court of the State of New York.
c. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES
HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM,
DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING
OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the
parties hereto acknowledges that it has been informed by each
other party that the provisions of this Section 7(c)
constitute a material inducement upon which such party is
relying and will rely in entering into this Agreement and the
transactions contemplated hereby. Any of the parties hereto
may file an original counterpart or a copy of this Agreement
with any court as written evidence of the consent of each of
the parties hereto to the waiver of its right to trial by
jury.
8. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof
and supersedes any prior communication or agreement with respect
thereto.
9. NOTICE. All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this
Agreement shall be in writing and shall be served upon such other party
and such other party's copied persons as specified below by personal
delivery to the address set forth for it below or to such other address
as such party shall have specified by notice to each other party or by
mailing a copy thereof by certified or registered mail, or by Federal
Express or any other reputable overnight courier service, postage
prepaid, with return receipt requested, addressed to such party and
copied persons at such addresses. In the case of service by personal
delivery, it shall be deemed complete on the first business day after
the date of actual delivery to such address. In case of service by mail
or by overnight courier, it shall be deemed complete, whether or not
received, on the third day after the date of mailing as shown by the
registered or certified mail receipt or courier service
-6-
<PAGE> 7
receipt. Notwithstanding the foregoing, notice to any party or copied
person of change of address shall be deemed complete only upon actual
receipt by an officer or agent of such party or copied person.
If to Holdings or the Company, to it at:
Simmons Holdings, Inc.
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Attention: Zenon S. Nie
With a Copy to:
Jones, Day, Reavis & Pogue
Suite 3500
One SunTrust Plaza
Atlanta, Georgia 30308
Attention: Lizanne Thomas
If to Fenway, to it at:
Fenway Partners, Inc.
152 West 57th Street
New York, NY 10019
Attention: Richard C. Dresdale
With a Copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
10. SEVERABILITY. If in any judicial or arbitral proceedings a court or
arbitrator shall refuse to enforce any provision of this Agreement,
then such unenforceable provision shall be deemed eliminated from this
Agreement for the purpose of such proceedings to the extent necessary
to permit the remaining provisions to be enforced. To the full extent,
however, that the provisions of any applicable law may be waived, they
are hereby waived to the end that this Agreement be deemed to be valid
and binding agreement enforceable in accordance with its terms, and in
the event that any provision hereof shall be found to be invalid or
unenforceable, such provision shall be construed by
-7-
<PAGE> 8
limiting it so as to be valid and enforceable to the maximum extent
consistent with and possible under applicable law.
11. DISCLAIMER AND LIMITATION OF LIABILITY.
a. Disclaimer. Fenway makes no representations or warranties,
express or implied, in respect of the services to be provided
by it hereunder.
b. Standard of Care. In no event shall Fenway be liable to
Holdings or the Company or any of its affiliates for any act,
alleged act, omission or alleged omission on the part of
Fenway that does not constitute gross negligence or willful
misconduct.
c. Freedom to Pursue Opportunities, Etc. In anticipation that
Holdings, the Company and Fenway (or one or more affiliates,
associated investment funds or portfolio companies, or clients
of Fenway) may engage in the same or similar activities or
lines of business and have an interest in the same areas of
corporate opportunities and in recognition of the difficulties
which may confront any advisor who desires and endeavors fully
to satisfy such advisor's duties in determining the full scope
of such duties in any particular situation, the provisions of
this clause (c) are set forth to regulate, define and guide
the conduct of certain affairs of Holdings and the Company as
they may involve Fenway. Except as Fenway may otherwise agree
in writing after the date hereof:
(i) Fenway shall have the right to, and shall have no
duty (contractual or otherwise) not to, directly or
indirectly: (A) engage in the same or similar
business activities or lines of business as Holdings
or the Company, including those competing with
Holdings or the Company, and (B) do business with any
client or customer of Holdings or the Company;
(ii) Neither Fenway nor any officer, director, employee,
partner, affiliate or associated entity thereof shall
be liable to Holdings or the Company or its
affiliates for breach of any duty (contractual or
otherwise) by reason of any such activities of or of
such person's participation therein; and
(iii) In the event that Fenway acquires knowledge of a
potential transaction or matter that may be a
corporate opportunity for Holdings or the Company and
Fenway or any other person, Fenway shall have no duty
(contractual or otherwise) to communicate or present
such corporate opportunity to Holdings or the Company
and, notwithstanding any provision of this Agreement
to the contrary, shall not be liable to Holdings or
the
-8-
<PAGE> 9
Company or any of its affiliates for breach of any
duty (contractual or otherwise) by reason of the fact
that Fenway directly or indirectly pursues or
acquires such opportunity for itself, directs such
opportunity to another person, or does not present
such opportunity to Holdings or the Company.
d. Limitation of Liability. In no event will any party hereto be
liable to the other for any indirect, special, incidental or
consequential damages, including lost profits or savings,
whether or not such damages are foreseeable, or for any third
party claims (whether based in contract, tort or otherwise),
relating to the services to be provided by Fenway hereunder.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by each of the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same
agreement.
-9-
<PAGE> 10
[Advisory Agreement]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as an instrument under seal as of the date first above
written by its officer or representative thereunto duly authorized.
HOLDINGS: SIMMONS HOLDINGS, INC.
By /s/ Zenon S. Nie
------------------------------
Title: Chief Executive Officer
The Company: SIMMONS COMPANY
By /s/ Zenon S. Nie
------------------------------
Title: Chief Executive Officer
FENWAY: FENWAY PARTNERS, INC.
By /s/ Gregory P. Meredith
------------------------------
Title: Managing Director
<PAGE> 1
EXHIBIT 10.9
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 Right is exercised, any Option or portion thereof that is
surrendered in connection with such exercise shall terminate and the 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.
<PAGE> 2
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 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.
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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 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 pay the exercise price.
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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 (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
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<PAGE> 5
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.
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
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<PAGE> 6
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.
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.
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Exhibit 10.10
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made
effective as of October 29, 1998 (the "Effective Date"), between Simmons
Holdings, Inc., a Delaware corporation ("Issuer"), and ______________________
("Optionee").
RECITALS
A. Issuer has adopted the Simmons 1996 Management Stock
Incentive Plan (the "Plan"), a copy of which is attached hereto as EXHIBIT 1.
B. In accordance with Section 14 of the Plan, Issuer has taken
all appropriate actions to make appropriate adjustments to the number and kind
of shares or other securities subject to the options issued pursuant to the
Prior Option Agreements (as defined herein).
C. Optionee hereby agrees that upon the Effective Date of this
Agreement, the Prior Option Agreements (as defined herein) shall automatically
be terminated and of no further force and effect and the parties to such Prior
Option Agreements shall have no further rights or obligations thereunder.
D. Issuer desires to grant Optionee the opportunity to acquire
a proprietary interest in Issuer to encourage Optionee's contribution to the
success and progress of Issuer and Simmons Company, a Delaware corporation
("Employer").
E. In accordance with the Plan, the Committee (as defined in
the Plan) has as of the Effective Date granted to Optionee certain non-qualified
stock options to purchase shares of Common Stock, $.01 par value, of Issuer (the
"Common Stock") subject to the terms and conditions of the Plan and this
Agreement.
AGREEMENTS
1. DEFINITIONS. Capitalized terms used herein shall have the
following meanings:
"Act" is defined in Section 10.
"Affiliate" means, with respect to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person. For purposes of this definition,
"control" of a Person shall mean the power, directly or indirectly, (i) to vote
fifty percent (50%) or more of the securities having ordinary voting power for
the election of directors of such Person whether by ownership of securities,
contract, proxy or otherwise; or (ii) to direct or cause the direction of
management and policies of such person whether by ownership of securities,
contract, proxy or otherwise.
"Agreement" means this Stock Option Agreement.
"Anti Dilution Option Exercise Price" is defined in Section 2.
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"Anti Dilution Option Shares" is defined in Section 2.
"Approved Retirement" means the retirement of Optionee on or
after his sixty-fifth (65th) birthday or, if earlier, either for Good Reason or
approved by the Board of Directors of Issuer.
"Approved Sale" means a transaction or a series of related
transactions which results in a bona fide, unaffiliated change of beneficial
ownership of Employer or its business of greater than 50% (disregarding for this
purpose any disparate voting rights attributable to the outstanding stock of
Issuer), whether pursuant to the sale of the stock of Employer or Issuer, the
sale of the assets of Employer, or a merger or consolidation involving Employer
or Issuer; provided, however, that for purposes of this Agreement, an Approved
Sale shall not mean the transaction whereby REM Acquisition, Inc. ("MergerCo")
will merge with and into Holdings pursuant to the terms and conditions of the
Agreement and Plan of Merger dated as of July 16, 1998, as amended from time to
time, among the Company, the Holdings and MergerCo.
"Cause," when used in connection with the termination of
employment of Optionee, means (i) the conviction for the commission of, or a
plea of guilty or nolo contendere made by Optionee in response to a charge
involving, a felony or a crime involving moral turpitude, (ii) the embezzlement
or misappropriation of funds or property of Issuer, Employer or any Subsidiary,
(iii) the continued use of alcohol or drugs to an extent which, consistent with
the Substance Abuse Policy of Employer adopted October 14, 1994, would result in
Optionee's Termination, (iv) the intentional, unauthorized disclosure of
proprietary information or confidential records of Issuer, Employer or any
Subsidiary or (v) the willful failure or refusal to perform (unless for Good
Reason) those duties reasonably assigned or delegated to Optionee by the Board
of Directors of Employer which failure or refusal continues following (A) the
Board of Directors giving Optionee written notice setting forth the facts or
events constituting such failure or refusal and (B) a reasonable opportunity to
correct the deficiencies or other problems specified in such notice to the
reasonable satisfaction of such Board.
"Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of Issuer setting forth, inter alia, the rights,
preferences and privileges of and restrictions on the Common Stock and Class B
Common Stock of Issuer.
"Common Stock" is defined in recital E.
"Disability" means that Optionee becomes physically or
mentally incapacitated or disabled so that he or she is unable to perform for
Employer or a Subsidiary substantially the same services as he or she performed
prior to incurring such incapacity or disability or to devote his or her full
working time or use his or her best efforts to advance the business and welfare
of Employer or a Subsidiary for an aggregate period of six months during any
12-month period.
"Effective Date" is defined in the preamble.
"Employer" is defined in recital D.
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"Endorsed Certificate" means a stock certificate evidencing
the shares properly endorsed for transfer, or, in the alternative, an
appropriate certification as to the lost, stolen, or missing status of such
stock certificate.
"Fair Market Value" means the value of a Share, as of the
Termination Date, calculated pursuant to Section 9(c).
"Fiscal Year" means the fiscal year of Issuer.
"Good Reason" means (i) the assignment to Optionee of any
duties inconsistent with Optionee's position (including status, offices, titles
and reporting requirements), (ii) a demotion in the job title of Optionee, (iii)
a reduction in the compensation paid to Optionee, unless such reduction is
comparable to an across-the-board reduction applicable to all senior management
employees of Employer due to adverse business circumstances, (iv) a request of
Optionee to relocate his office to a distance of greater than seventy-five (75)
miles from the present site of his office, or (v) any other action by Employer
which results in a material diminution in the position, authority, duties or
responsibilities of Optionee.
"Initial Public Offering" means the effectiveness of a
registration statement under the Act covering any of the capital stock of Issuer
or Employer (other than preferred stock that is not convertible into common
stock) and the completion of a sale of such stock thereunder, if as a result of
such sale (i) the issuer becomes a reporting company under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, and (ii) such stock is
traded on the New York Stock Exchange or the American Stock Exchange, or is
quoted on the Nasdaq Stock Market or is traded or quoted on any other national
stock exchange or securities system.
"Issuer" is defined in the preamble.
"Issuer Note" is defined in Section 9(b).
"Lock-Up Period" means, in the case of an Initial Public
Offering, the 180-day period commencing on the effective date of the
registration statement covering capital stock of Issuer or Employer sold in such
Initial Public Offering, and, in the case of any subsequent registered offering,
the 90-day period commencing on the effective date of the registration statement
relating to such offering, or, in either case, such lesser period as may be
agreed upon with the underwriters of such offering.
"Option" and "Options" are defined in Section 2.
"Optionee" is defined in the preamble.
"Option Shares" is defined in Section 2.
"Performance Option Exercise Price" is defined in Section 2.
"Performance Option Shares" is defined in Section 2.
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"Permitted Transferee" is defined in Section 5.
"Person" means any natural person, partnership, corporation,
trust or incorporated organization.
"Plan" is defined in recital A.
"Purchase Date" is defined in Section 9(a).
"Put Date" is defined in Section 9(b).
"Repurchase Disability" is defined in Section 9(b)
"Repurchase Period" is defined in Section 9(a).
"Repurchase Price" is defined in Section 9(a).
"Second Repurchase Period" is defined in Section 9(a).
"Shareholder" means Simmons Holdings, LLC, and its successors
and assigns.
"Stock Purchase Agreement" is defined in Section 9(a).
"Subsidiary" means any joint venture, corporation, partnership
or other entity as to which Issuer or Employer, whether directly or indirectly,
has more than 50% of the (i) voting rights or (ii) rights to capital or profits.
"Termination Date" means the date on which Optionee ceases to
be employed by Employer or any Affiliate of Employer for any reason; provided,
however, that Optionee shall not be considered to have ceased to be employed by
Employer or any Affiliate of Employer if he or she continues to be employed by
Employer or any Subsidiary.
2. GRANT OF OPTIONS. Issuer grants to Optionee the rights and
options (the each an "Option," collectively, the "Options") to purchase, on the
terms and conditions hereinafter set forth,
(i) all or any part of an aggregate of ____________ shares of
Common Stock (the "Performance Option Shares"), at the purchase price of
$__________ per share (as such amount may be adjusted as herein provided, the
"Performance Option Exercise Price"), on the terms and conditions set forth
herein.
(ii) all or any part of an aggregate of ____________ shares of
Common Stock (as such number may be adjusted as herein provided) (the "Anti
Dilution Option Shares," and, together with the Performance Option Shares, the
"Option Shares"), at the purchase price of $______ per share (as such among may
be adjusted as herein provided, the "Anti Dilution Option Exercise Price"), on
the terms and conditions set forth herein.
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3. EXERCISABILITY. Optionee's right to exercise the Options
shall be immediately fully vested.
4. EXPIRATION. The Options shall expire upon the thirtieth
(30th) day following the tenth (10th) anniversary of the date of the Prior
Option Agreement unless (i) Optionee is terminated without Cause or ceases to be
employed by Employer or a Subsidiary due to death, Disability or Approved
Retirement, in which case the Option to purchase Performance Option Shares shall
expire 180 days following the Termination Date and the Option to purchase Anti
Dilution Option Shares shall expire 180 days following the end of the Fiscal
Year during which the Termination Date occurs, (ii) Optionee resigns or is
terminated for Cause from employment by Employer, in which case the vested
portion of the Options shall expire on the Termination Date, or (iii) Issuer,
Shareholder or Optionee exercises the purchase or put right pursuant to Section
9 hereof, in which case the Options shall expire on the business day immediately
preceding the Purchase Date or the Put Date, as the case may be.
5. NONTRANSFERABILITY. Subject to Section 9 hereof, the
Options shall not be transferable by Optionee otherwise than to his or her
spouse, child, estate, personal representative, heir or successor or to a trust
for the benefit of Optionee or his or her spouse, child or heir (a "Permitted
Transferee"), and the Options shall be exercisable, during Optionee's lifetime,
only by him or her or by any of the foregoing Permitted Transferees, or in the
event of Optionee's Disability, his or her guardian or legal representative.
More particularly (but without limiting the generality of the foregoing), the
Options may not be assigned, transferred (except as aforesaid), pledged or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment or similar process. Any assignment,
transfer, pledge, hypothecation or other disposition of the Options contrary to
the provisions, hereof, and the levy of any attachment or similar process upon
the Options that would otherwise effect a change in the ownership of the
Options, shall terminate the Options; provided, however, that in the case of the
involuntary levy of any attachment or similar involuntary process upon the
Options, Optionee shall have thirty (30) days after notice thereof to cure such
levy or process before the Options terminate. This Agreement shall be binding on
and enforceable against any person who is a Permitted Transferee of the Options
pursuant to the first sentence of this Section.
6. EFFECT OF MERGER; ADJUSTMENTS.
(a) In the event of an Approved Sale that is a merger or other
form of corporate reorganization and notwithstanding any other provisions of
this Agreement, the unexercised portion of the Options shall be subject to the
terms of the agreement or plan of merger or reorganization effecting such merger
or reorganization and shall be converted, redeemed, exchanged, canceled or
otherwise treated as provided in such agreement or plan of merger or
reorganization, provided that Optionee shall be given at least 20 days' prior
notice of the proposed merger or reorganization and shall (notwithstanding
anything else herein to the contrary) be entitled to exercise the vested portion
of the Options at any time during such 20-day period up to and until the close
of business on the day immediately preceding the date of consummation of such
merger or reorganization (which exercise may be expressly contingent upon
completion of the Approved Sale if the unexercised portion of the Options were
to vest as a result of such sale being a Qualifying Approved Sale) and upon
exercise of the Options the
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Option Shares shall be treated in the same manner as the shares of any other
stockholder of Issuer.
(b) Subject to Section 6(a), in the event of any one or more
reorganizations, recapitalizations, mergers, acquisitions, stock splits, reverse
stock splits, stock dividends or similar events, an appropriate adjustment shall
be made in the number and kind of shares or other securities subject to the
Options, and the Performance Exercise Price or Anti Dilution Exercise Price, as
applicable, for each Option Share or other unit of any securities subject to
this Agreement, in accordance with Section 14 of the Plan. No fractional
interests shall be issued on account of any such adjustment unless the Committee
(as defined in the Plan) specifically determines to the contrary; provided,
however, that in lieu of fractional interests, Optionee, upon the exercise of
the Options in whole or in part, shall receive cash in an amount equal to the
amount by which the Fair Market Value of such fractional interests exceeds the
Performance Exercise Price or Anti Dilution Exercise Price, as applicable,
attributable to such fractional interests.
7. EXERCISE OF THE OPTIONS. Prior to the expiration thereof,
Optionee may exercise the vested portion of the Options from time to time in
whole or in part. Upon electing to exercise the Options, Optionee shall deliver
to the Secretary of Issuer a written and signed notice of such election setting
forth the number of Performance Option Shares or Anti Dilution Option Shares, as
applicable, that Optionee has elected to purchase and shall at the time of
delivery of such notice tender cash or a cashier's or certified bank check to
the order of Issuer for the full Performance Exercise Price or Anti Dilution
Exercise Price, as applicable, of such Performance Option Shares or Anti
Dilution Option Shares, as applicable, and any amount required pursuant to
Section 18 hereof. The Committee may, in its discretion, also permit payment of
the Performance Exercise Price or Anti Dilution Exercise Price, as applicable,
in such form or in such manner as may be permissible under the Plan and under
any applicable law.
8. RESTRICTIONS ON TRANSFERS OF OPTION SHARES. Subject to
Section 9 hereof, prior to the earlier of (a) the termination of the Lock-Up
Period following an Initial Public Offering or (b) an Approved Sale, the Option
Shares shall not be transferable or transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) except that
optionee may transfer the Option Shares to a Permitted Transferee. This
Agreement shall be binding on and enforceable against any person who is a
Permitted Transferee of the Option Shares. The stock certificates issued to
evidence Option Shares upon exercise of the Options hereunder shall bear legends
referring to this Agreement and the restrictions contained herein.
9. PURCHASE OF OPTION SHARES.
(a) In the event that the Termination Date occurs for any
reason prior to an Initial Public Offering or an Approved Sale, subject to
Section 9(b) below, the Option Shares shall be subject to repurchase as follows:
(i) Issuer, during the sixty (60) days
following the Termination Date (the "Repurchase Period"),
shall have a one-time right to purchase all, but not less than
all, of the Option Shares.
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(ii) If Issuer does not elect to purchase
the Option Shares during the Repurchase Period, then
Shareholder, during the thirty (30) days following the
expiration of the Repurchase Period (the "Second Repurchase
Period"), shall have a one-time right to purchase all, but not
less than all, of the Option Shares.
(iii) In the event that Optionee does not
own any Option Shares on the Termination Date, Issuer or
Shareholder (as applicable) may notify Optionee that Issuer or
Shareholder (as applicable) will purchase any Option Shares
that Optionee may thereafter become entitled to acquire upon
the exercise of the Options and shall set the Purchase Date
and shall purchase such Option Shares, if any, pursuant to the
terms of this Agreement.
(iv) The purchase price (the "Repurchase
Price") for each Option Share shall be the Fair Market Value.
If Issuer or Shareholder elects to purchase the Option Shares,
it shall notify Optionee at or before the end of the
Repurchase Period or, in the case of Shareholder, the Second
Repurchase Period, and the Repurchase Price shall be paid in
cash at a time set by Issuer or Shareholder, as the case may
be, which time shall be within thirty (30) days after the end
of the Repurchase Period or Second Repurchase Period, as the
case may be, provided that Optionee has presented to Issuer or
Shareholder an Endorsed Certificate.
(v) The Option Shares shall be transferred
to Issuer or Shareholder, as applicable, free and clear of all
liens, encumbrances, mortgages, pledges, security interests,
restrictions, prior assignments and claims of any kind or
nature whatsoever except those created by the Certificate of
Incorporation or this Agreement. If Issuer or Shareholder does
not purchase the Option Shares, the restrictions on transfer
thereof contained in Sections 5 and 8 of this Agreement shall
terminate and be of no further force and effect.
Notwithstanding Optionee's failure to deliver the Endorsed
Certificate, the Option Shares represented thereby shall be
deemed to be owned by Issuer or Shareholder, as applicable,
upon (A) the payment by Issuer or Shareholder, as applicable,
of the purchase price to Optionee or his or her Permitted
Transferee or (B) notice to Optionee or such Permitted
Transferee that Issuer or Shareholder, as applicable, is
holding the purchase price in the United States for the
account of Optionee or such Permitted Transferee, and upon
such payment or notice (x) Optionee and such Permitted
Transferee will have no further rights in or to such Option
Shares, (y) Issuer or Shareholder, as applicable, shall be
entitled to specific performance of Optionee's or such
Permitted Transferee's obligation to deliver such Endorsed
Certificates, and (z) Optionee and his or her Permitted
Transferee shall be jointly and severally liable for all
reasonable attorneys' fees and other costs and expenses
incurred by Issuer or Shareholder, as applicable, in enforcing
its right to repurchase the Option Shares hereunder and shall
pay to Issuer or Shareholder, as applicable, promptly upon
demand the amount of all such fees and expenses.
(vi) Optionee shall not be obligated to
transfer any Option Shares to Issuer or Shareholder, as
applicable, unless, concurrently with the repurchase of Option
Shares
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hereunder, Issuer or Shareholder, as the case may be,
repurchases all of the Option Shares.
(b) If Optionee's Termination Date occurs prior to an Initial
Public Offering or an Approved Sale due to Optionee's death, Disability or
Approved Retirement, or in the event of an Approved Sale (substituting 75% for
50% in such definition) in which substantially all of the proceeds of such
Approved Sale are not reinvested in a similar or like business to the
manufacturing of bedding products within one (1) year of such Approved Sale,
Optionee or his or her representative shall have a one-time right to require
Issuer to purchase all, but not less than all, of the Option Shares at Fair
Market Value, provided, that such right must be exercised within
one-hundred-eighty (180) days after the Termination Date, or, in the case of an
Approved Sale, the first anniversary of such Approved Sale. The Repurchase Price
shall be paid on the Put Date, which date shall be the later of (i) the
thirtieth (30th) day after Issuer has received notice of Optionee's election to
exercise his or her put right, or (ii) the day that Optionee presents to Issuer
the endorsed Certificate, and shall be paid in the form of cash or, at the
option of Issuer in the event the purchase is following Optionee's death,
disability or Approved Retirement, a combination of an amount of cash equal to
the Cost of the repurchased Shares and the issuance of an Issuer Note ("Issuer
Note") the principal amount of which is equal to the difference between the
Repurchase Price for the Shares and the cost of the Shares, bearing interest at
a rate equal to the rate at which interest is calculated at such time pursuant
to the then-current senior credit facility of the Employer or Issuer, as
appropriate, provided that such rate shall in no event exceed ten percent (10%)
per annum, provided further that up to fifty percent (50%) of any interest
payment shall, at the option of the Issuer, be payable in additional Issuer
Notes of like tenor. All Issuer Notes shall mature on the earliest to occur of
(x) the third anniversary of the date on which the Issuer Note is issued, (y)
the sale of stock of the Issuer pursuant to an Initial Public Offering, or (z)
an Approved Sale. The Option Shares shall be transferred to Issuer free and
clear of all liens, encumbrances, mortgages, pledges, security interests,
restrictions, prior assignments and claims of any kind or nature whatsoever
except those created by the Certificate of Incorporation or this Agreement.
Notwithstanding anything to the contrary in the foregoing, the Issuer's
obligation to repurchase any of the Option Shares shall be suspended if (i) such
repurchase would render the Issuer unable to meet its obligations in the
ordinary course of business; (ii) the Issuer is prohibited from doing so by
applicable law restricting the purchase by a corporation of its own shares; or
(iii) such repurchase would constitute a breach of or default or event of
default under, or is otherwise prohibited by, the terms of any loan agreement or
other agreement or instrument to which the Issuer or any of its Subsidiaries is
a party, any of such events constituting a "Repurchase Disability." In the event
of a Repurchase Disability, the Issuer shall repurchase the Option Shares as
soon as reasonably practicable after all Repurchase Disabilities cease to exist
(and the Issuer may also elect, but shall have no obligation, to cause its
nominee to repurchase such shares while any Repurchase Disabilities continue to
exist). In the event that the Issuer suspends its obligation to repurchase
Option Shares pursuant to a Repurchase Disability, then, upon repurchase of the
shares, the Issuer shall pay to Optionee or his or her representative (as
applicable) an additional amount equal to interest on the original repurchase
price calculated at the Applicable Federal Rate (as set forth in Section 1274 of
the Code or the Treasury Regulations promulgated thereunder) from the date the
repurchase would have occurred but for such Repurchase Disability to (but not
including) the date such repurchase actually occurs.
8
<PAGE> 9
(c) The Fair Market Value shall be determined in good faith by
Issuer's Board of Directors. If the Board determination is challenged by
Optionee, a mutually acceptable investment banker or appraiser shall establish
the Fair Market Value. If Optionee and Issuer cannot agree upon an investment
banker or appraiser each shall choose an investment banker or appraiser and the
two investment bankers or appraisers shall choose a third investment banker or
appraiser who alone shall establish the Fair Market Value. The Fair Market Value
shall be based on an assumed sale of 100% of the outstanding capital stock of
Issuer (without reduction for minority discount or lack of liquidity of the
Option Shares) and shall be determined using customary criteria generally
employed within the investment banking community at the time such determination
is made for valuing an entity similar to Issuer. The investment banker's or
appraiser's determination shall be conclusive and binding on Shareholder, Issuer
and Optionee. Issuer shall bear all costs incurred in connection with the
services of such investment banker or appraiser unless the Fair Market Value
established by the investment banker or appraiser is (i) less than or equal to
110% of the Board of Directors' determination, in which case Optionee shall
promptly pay or reimburse Issuer for such costs or (ii) greater than 110% but
less than 125% of the Board of Directors' determination, in which case Optionee
shall promptly pay or reimburse Issuer for 50% of such costs.
(d) For so long as Optionee or his or her Permitted Transferee
owns the Option Shares, Issuer agrees that it shall, upon the written request of
Optionee, provide Optionee with annual financial statements of Issuer promptly
upon the completion of the preparation of such statements. The annual financial
statements shall be accompanied by an audit report by Issuer's independent
accountants.
10. COMPLIANCE WITH LEGAL REQUIREMENTS.
(a) No Option Shares shall be issued or transferred pursuant
to this Agreement unless and until all legal requirements applicable to such
issuance or transfer have, in the opinion of counsel to Issuer, been satisfied.
Such requirements may include, but are not limited to, registering or qualifying
such Shares under any state or federal law, satisfying any applicable law
relating to the transfer of unregistered securities or demonstrating the
availability of an exemption from applicable laws, placing a legend on the
Option Shares to the effect that they were issued in reliance upon an exemption
from registration under the Securities Act of 1933, as amended (the "Act"), and
may not be transferred other than in reliance upon Rule 144 or Rule 701
promulgated under the Act, if available, or upon another exemption from the Act,
or obtaining the consent or approval of any governmental regulatory body. Issuer
shall use its best efforts to comply with all legal requirements applicable to
the issuance or transfer of Option Shares.
(b) Optionee understands that Issuer intends for the offering
and sale of Option Shares to be effected in reliance upon Rule 701 or another
available exemption from registration under the Act, and that Issuer is under no
obligation to register for resale the Option Shares issued upon exercise of the
Options. In connection with any such issuance or transfer, the person acquiring
the Option Shares shall, if requested by Issuer, provide information and
assurances satisfactory to counsel to Issuer with respect to such matters as
Issuer reasonably may deem
9
<PAGE> 10
desirable to assure compliance with all applicable legal requirements. Issuer
hereby covenants and agrees to register all of the Option Shares on a Form S-8
(or any successor form thereto) following the Initial Public Offering.
11. CAPITALIZATION, EXCHANGES ETC. AFFECTING SHARES; DILUTION.
(a) The provisions of this Agreement shall apply to any and
all shares of capital stock of Issuer or any successor or assign of Issuer that
may be issued in respect of, in exchange for, or in substitution of, the Option
Shares by reason of any stock dividend, stock split, stock issuance, reverse
stock split, combination, recapitalization, reclassification, merger,
consolidation or otherwise, other than an Approved Sale.
(b) Except as may be specifically provided herein or in the
Certificate of Incorporation, nothing herein shall prohibit or restrict Issuer
from taking any corporate action or engaging in any corporate transaction of any
kind, including, without limitation, the issuance and sale of additional shares
of capital stock of Issuer, any merger, consolidation, liquidation or sale of
assets, or create in Optionee or his or her Permitted Transferee any rights to
acquire or receive additional shares of capital stock of Issuer or otherwise to
be protected against dilution.
12. SUBJECT TO CERTIFICATE OF INCORPORATION. Optionee
acknowledges that the Option Shares are subject to the terms of the Certificate
of Incorporation.
13. NO INTEREST IN SHARES SUBJECT TO OPTIONS. Neither Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through Optionee shall have any right, title, interest, or
privilege in or to any shares allocated or reserved for the purpose of the Plan
or subject to this Agreement except as to such Option Shares, if any, as shall
have been issued to such person upon exercise of these Options or any part of
it.
14. PLAN CONTROLS. The Options hereby granted are subject to,
and Issuer and Optionee agree to be bound by, all of the terms and conditions of
the Plan as the same may be amended from time to time in accordance with the
terms thereof, but no such amendment shall be effective as to the Options
without Optionee's consent insofar as it may adversely affect Optionee's rights
under this Agreement.
15. TERMINATION OF PRIOR OPTION AGREEMENT. Upon the
effectiveness of this Agreement, any option agreement between the Issuer and the
Optionee granted pursuant to the Plan and entered into prior to the Effective
Date (collectively, (the "Prior Option Agreement") shall automatically be
terminated and of no further force and effect and the parties to such Prior
Option Agreement shall have no further rights or obligations thereunder.
16. NOT AN EMPLOYMENT CONTRACT. Nothing in the Plan, in this
Agreement or any other instrument executed pursuant thereto shall confer upon
Optionee any right to continue in the employ of Employer or any Subsidiary or
shall affect the right of Employer or any Subsidiary to terminate the employment
of Optionee with or without Cause.
10
<PAGE> 11
17. GOVERNING LAW. All terms of and rights under this
Agreement shall be governed by and construed in accordance with the internal law
of the State of New York, without giving effect to principles of conflicts of
law.
18. TAXES. The Committee may, in its discretion, make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required by law to be
withheld with respect to the issuance or exercise of the Options including, but
not limited to, deducting the amount of any such withholding taxes from any
other amount then or thereafter payable to Optionee, requiring Optionee to pay
to Issuer the amount required to be withheld or to execute such documents as the
Committee deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other means provided in the Plan. Optionee shall have the
right to satisfy the withholding obligation in whole or in part by the delivery
of shares of the Issuer previously issued to Optionee or by the withholding of
the delivery of Option Shares otherwise to be received upon the exercise of the
Options.
19. NOTICES. All notices, requests, demands and other
communications pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered, telexed or telecopied
to, or, if mailed, when received by, the other party, if to Issuer at its
principal executive offices addressed to the attention of Issuer's Secretary,
and if to Optionee at his or her address as it appears on the books of his or
her employer (or at such other address as shall be given in writing by Optionee
or his or her Permitted Transferee to Issuer).
20. AMENDMENTS AND WAIVERS. This Agreement may be amended and
any provision hereof may be waived, only by a writing signed by the party to be
charged.
21. ENTIRE AGREEMENT. This Agreement, together with the Plan,
sets forth the entire agreement and understanding between the parties as to the
subject matter hereof and supersedes all prior oral and written and all
contemporaneous oral discussions, agreements and understandings of any kind or
nature.
22. HEADINGS. The headings preceding the text of the sections
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
23. FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement.
24. ARBITRATION. The parties shall endeavor to settle all
disputes by amicable negotiations. Except as otherwise provided in Section 9(c)
hereof, any claim, dispute, disagreement or controversy that arises among the
parties relating to this Agreement that is not amicably settled shall be
resolved by arbitration, as follows:
(a) Any such arbitration shall be heard in The City of New
York, New York, before a panel consisting of one (1) to three (3) arbitrators,
each of whom shall be impartial. Upon the written Request for Arbitration by
either party hereto to commerce arbitration hereunder, the
11
<PAGE> 12
parties shall attempt to mutually agree as to the number and identity of the
arbitrators within thirty (30) days of such Request. Except as the parties may
otherwise agree, all arbitrators (if not selected by the parties hereto within
thirty (30) days of a written Request for Arbitration) shall be appointed
pursuant to the commercial arbitration rules of the American Arbitration
Association. In determining the number and appropriate background of the
arbitrators, the appointing authority shall give due consideration to the issues
to be resolved, but his or her decision as to the number of arbitrators and
their identity shall be final.
(b) An arbitration may be commenced by any party to this
Agreement by the service of a written request for arbitration upon the other
affected parties. Such request for arbitration shall summarize the controversy
or claim to be arbitrated.
(c) All attorneys' fees and costs of the arbitration shall in
the first instance be borne by the respective party incurring such costs and
fees, but the arbitrators shall award costs and attorneys' fees to the
prevailing party. The parties hereby expressly waive punitive damages, and under
no circumstances shall an award contain any amount that in any way reflects
punitive damages.
(d) Judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
(e) It is intended that controversies or claims submitted to
arbitration under this Section 24 shall remain confidential, and to that end it
is agreed by the parties that neither the facts disclosed in the arbitration,
the issues arbitrated, nor the views or opinions of any persons concerning them,
shall be disclosed to third persons at any time, except to the extent necessary
to enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.
(f) Any arbitration under this Section 24 shall be conducted
pursuant to the commercial arbitration rules of the American Arbitration
Association.
25. BINDING EFFECT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the Effective Date.
SIMMONS HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
------------------------------------
Name of Optionee:
13
<PAGE> 1
Exhibit 10.11
SIMMONS COMPANY
ONE CONCOURSE PARKWAY, SUITE 600
ATLANTA, GEORGIA 30328
October 28, 1998
- ---------------------
- ---------------------
- ---------------------
Dear _______________:
As you know, Simmons Company (the "COMPANY") and Simmons Holdings, Inc.
("HOLDINGS") intend to consummate the transactions contemplated by the Agreement
and Plan of Merger dated as of July 16, 1998, as amended (the "MERGER
AGREEMENT"), by and among the Company, Holdings and REM Acquisition, Inc.
("BUYER"). This letter (the "AGREEMENT") is being furnished to you to provide
you with reasonable compensation for prior services rendered to the Company and
its subsidiaries in excess of previous salary and compensation paid to you,
subject to the terms and conditions specified herein. Accordingly, you (the
"MANAGEMENT EMPLOYEE") hereby agree with the Company and Holdings as follows:
1. BONUS. Subject to Section 5, upon the consummation of the Merger pursuant to
the terms of the Merger Agreement (the "SALE TRANSACTION") the Management
Employee shall be entitled to a bonus (the "BONUS") of $_______. The Bonus shall
be paid on the closing of the Sale Transaction (the "CLOSING DATE") or, if
later, the date the Company has received this letter executed by the Management
Employee.
2. COOPERATION. The Management Employee agrees that he or she shall, in his or
her capacity as a seller, officer, manager and otherwise, take or cause to be
taken all such actions as may be reasonably requested by the Company or Holdings
in order to promptly consummate the Sale Transaction, including without
limitation the tendering of stock, stock options or stock rights to the Buyer in
the Sale Transaction.
3. PROPRIETARY INFORMATION. The Management Employee agrees that he shall not,
while employed by the Company and/or Holdings and thereafter, except as
expressly authorized by the Board of Directors of the Company or a person duly
authorized thereby, disclose to any person, other than an employee or adviser of
the Company or Holdings, any trade secrets, proprietary or other confidential
information of the Company or Holdings including without limitation information
in any way relating to the Merger Agreement or transactions contemplated
thereunder. The Management Employee understands and agrees that this restriction
shall continue to apply after his or her employment terminates, regardless of
the reason for such termination.
4. WITHHOLDING. All payments made or benefits provided by the Company or
Holdings pursuant to this Agreement shall be reduced by the amount of any tax or
other amounts required
<PAGE> 2
- --------------
October 28, 1998
Page 2
to be withheld by the Company or Holdings under applicable law in connection
with the Agreement or the transactions contemplated hereby, and the Management
Employee agrees to reimburse the Company or Holdings for any such withholding
tax to the extent not so deducted.
5. CONDITIONS AND VESTING. Notwithstanding any other provision of this
Agreement, the Management Employee's right to the Bonus is contingent upon (i)
the consummation of the Sale Transaction pursuant to the Merger Agreement, (ii)
the Management Employee's compliance with the terms and conditions of this
Agreement, and (iii) the consent of the holders of more than 75% of the voting
power of all outstanding stock of the Company immediately prior to the Sale
Transaction. In addition, if the Management Employee resigns or otherwise
voluntarily terminates (in each case, a "TERMINATION") his or her employment
with the Company or Holdings prior to the second anniversary of the Closing
Date, the Management Employee will be required to repay (the "REPAYMENT") to the
Company an amount equal to (A) for the period commencing on the Closing Date and
ending on the day immediately preceding the one-month anniversary of the Closing
Date, twenty percent (20%) of the Bonus, and (B) for each subsequent month
thereafter, an amount equal to that percentage of the Bonus determined by the
following formula:
.20 x Bonus X # months from Closing Date
[.20 X Bonus] MINUS [ _____________________________________________ ]
24 months
Such Repayment is to be made by the Management Employee on or prior to the date
of Termination. The Company has the right to offset any such amount of Repayment
against amounts, if any, owed by the Company or Holdings to the Management
Employee.
6. ASSIGNMENT. This Agreement shall continue for the benefit of and be binding
upon (i) the Management Employee and his or her personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees and (ii) the Company and any successor of the Company by
reorganization, merger, consolidation or liquidation and any assignee
specifically assigned this Agreement in connection with an assignment of all or
substantially all of the business or assets of the Company.
7. MISCELLANEOUS. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supersedes and replaces all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof.
<PAGE> 3
- --------------
October 28, 1998
Page 3
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and return a copy to the Company, whereupon it shall
become a binding agreement among the Company, Holdings and you.
Very truly yours,
SIMMONS COMPANY
By:___________________________
Name:
Title:
SIMMONS HOLDINGS, INC.
By:___________________________
Name:
Title:
Accepted and agreed to:
_________________________________
Name of Management Employee:
<PAGE> 1
Exhibit 10.12
INDEX
-----
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I RECOGNITION AND UNION SECURITY.......................................................... 1
Employees Covered....................................................................... 1
Union Security.......................................................................... 1
Check-Off............................................................................... 2
Union Representative Seniority.......................................................... 3
Leave of Absence for UNION Activity..................................................... 3
Union Representatives Business.......................................................... 3
Specification Information .............................................................. 3
II DISCIPLINARY PROCEDURE.................................................................. 3
Just Cause.............................................................................. 3
Interview and Hearing................................................................... 3
Good Faith Duties....................................................................... 4
Correction of Offense................................................................... 4
Disciplinary Policy..................................................................... 4
III GRIEVANCE PROCEDURE AND ARBITRATION..................................................... 4
Grievance Procedure..................................................................... 4
Grievances - Step 1..................................................................... 5
Grievances - Step 2..................................................................... 5
Grievances - Step 3..................................................................... 5
Resolution by Default................................................................... 6
Arbitration of Disputes................................................................. 6
Selection of Arbitrators................................................................ 6
Authority of Arbitrator................................................................. 6
Expedited Arbitration................................................................... 7
IV HOURS OF WORK AND PREMIUM PAY........................................................... 7
Work Week............................................................................... 7
Overtime Hours.......................................................................... 8
Saturday and Sunday Work................................................................ 8
Availability for Scheduled Work......................................................... 8
No Pyramiding........................................................................... 9
Shift Schedule.......................................................................... 9
Temporary Assignment.................................................................... 10
Shift Premiums.......................................................................... 10
Reporting Pay........................................................................... 10
V NO STRIKE - NO LOCKOUT.................................................................. 10
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
VI MANAGEMENT RIGHTS CLAUSE................................................................ 10
VII SENIORITY............................................................................... 11
Accumulation of Seniority............................................................... 11
Loss of Seniority Rights ............................................................... 11
Layoff.................................................................................. 12
Right of Recall......................................................................... 14
Notice of Recall........................................................................ 14
Change of Address....................................................................... 14
Definition and Notice of Layoff ........................................................ 14
Furlough................................................................................ 15
Job Bidding............................................................................. 15
Disqualification ....................................................................... 16
Probationary Period .................................................................... 16
Return from Promotion out of Bargaining Unit............................................ 17
Seniority List.......................................................................... 17
Change in Union Representatives......................................................... 17
VIII WAGES................................................................................... 17
Skill Group Classifications and Labor Grade Rates ...................................... 17
Hiring Rate............................................................................. 18
Training Rate........................................................................... 19
Incentive Compensation Plans............................................................ 20
Inventory Work ......................................................................... 20
General Wage Increases.................................................................. 20
Reactivation of Old Classifications..................................................... 21
Establishment of New Classifications.................................................... 21
Borrowed Man............................................................................ 21
Average Rate Computation................................................................ 21
Work Wait............................................................................... 22
Electric Power Failure ................................................................. 22
Injured During Work..................................................................... 22
Work Hardening Procedures............................................................... 23
Union Meetings and Scheduled Overtime .................................................. 23
Overtime Agreement ..................................................................... 24
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
IX STANDARD ALLOWED HOURS.................................................................. 24
Incentive Compensation Plan............................................................. 24
New or Varied Jobs and Operations....................................................... 25
Standard Allowed Hour................................................................... 25
Written Confirmation and Effective Date of SAH.......................................... 26
Procedural Interpretation of Section.................................................... 26
Grievances Regarding Incentive Standards................................................ 27
Availability of Time Study Data......................................................... 28
Union Time Study Engineer............................................................... 28
Standard Data........................................................................... 29
X PAID HOLIDAYS........................................................................... 29
Holidays Observed....................................................................... 29
Eligibility............................................................................. 29
Leave of Absence........................................................................ 29
Sunday Holidays ........................................................................ 29
Tenth Paid Holiday ..................................................................... 30
Holidays on Saturday.................................................................... 30
Holiday Pay............................................................................. 30
Holidays During Approved Vacation....................................................... 30
Multiple Holidays on Same Day........................................................... 30
Pay Rate................................................................................ 30
Overtime and Premium Pay................................................................ 30
XI PAID VACATIONS.......................................................................... 30
Vacation................................................................................ 30
Pay Rate................................................................................ 31
Intermittent Vacation................................................................... 31
Plant Shutdown and Staggered Vacation................................................... 32
Eligibility............................................................................. 32
Scheduling of Staggered Vacations....................................................... 32
No Accumulation......................................................................... 32
Shift Premium........................................................................... 32
XII ABSENTEE - NO REPORT.................................................................... 33
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
XIII UIU PENSION TRUST....................................................................... 33
XIV UNITED STEELWORKERS HEALTH AND WELFARE FUND............................................. 35
Benefit Plan(s)......................................................................... 35
Contribution Rates...................................................................... 35
Eligibility............................................................................. 36
Employee Contributions.................................................................. 36
Sickness and Health and Life Insurance.................................................. 36
Payment of Contributions................................................................ 36
Coverage................................................................................ 36
Election of Category of Coverage and Right to Change.................................... 37
Requirements............................................................................ 37
Hold Harmless........................................................................... 37
Reinstatement of Coverage............................................................... 37
Part Time Employees..................................................................... 38
Audit Rights............................................................................ 38
Availability of Benefits................................................................ 38
XV JURY SERVICE............................................................................ 38
XVI BEREAVEMENT PAY......................................................................... 38
Definition.............................................................................. 38
Payment................................................................................. 39
XVII BULLETIN BOARDS......................................................................... 39
Bulletin Boards......................................................................... 39
Posting of Notices...................................................................... 39
XVIII MILITARY CLAUSE......................................................................... 39
XIX EMPLOYEE BIRTHDAY PAY................................................................... 40
XX EQUAL EMPLOYMENT OPPORTUNITY............................................................ 40
XXI SAVING CLAUSE........................................................................... 41
Separability............................................................................ 41
Federal and State Laws.................................................................. 41
</TABLE>
-iv-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
XXII SEVERANCE AND PLANT CLOSINGS............................................................ 41
XXIII DURATION AND TERMINATION OF SUPPLEMENT.................................................. 41
Effective Dates......................................................................... 41
Entire Agreement........................................................................ 41
Modification or Termination ............................................................ 41
XXIV CONTRACT RE-OPENER ..................................................................... 42
SIGNATURES.............................................................................. 43
APPENDIX "A"............................................................................ 44
</TABLE>
-v-
<PAGE> 6
JACKSONVILLE AGREEMENT
Language from Jacksonville Supplement
Language from Master Agreement
AGREEMENT
---------
This Agreement, made this 20th day of October, 1997, by and between
Simmons Company, Jacksonville, Florida (hereinafter referred to as the COMPANY)
and the United Steelworkers of America, AFL, CIO, CLC (hereinafter referred to
as the Union) on behalf of its Local Union No. 425, for and on behalf of itself
and the employees of said COMPANY at its plant located at Jacksonville, Florida.
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 COMPANY and
the UNION and, therefore, all Agreements or understandings concerning hours,
wages and working conditions between the COMPANY and the employees covered by
this contract are to be made by the COMPANY 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.
1.02 EMPLOYEES COVERED. The persons covered by this contract include
all employees of the COMPANY described in Article VIII, Section 8.01, employed
in its Jacksonville, Florida plant, excluding executives, sales employees,
office workers, supervisors, inspectors, departmental coordinators or persons in
any way identified with management.
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 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.
-1-
<PAGE> 7
(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 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.
(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, or 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 District Director
notifying him of the requested discharge. Failure of the
District Director to respond by Overnight mail within five
(5) days will be deemed concurrent 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 Section 7.11 of this
Agreement.
(f) The provisions of this section shall be applicable only to
the extent permitted by applicable state and federal law.
(g) No UNION member 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 Steelworkers UNION Executive Board 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 International
Secretary-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, claims, responsibility, damages
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.
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1.05 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.
1.06 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/she shall go where his/her
seniority will take him/her.
1.07 UNION REPRESENTATIVES BUSINESS. 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.
1.08 SPECIFICATION INFORMATION. Specification information will be made
available to employees or UNION officials as required.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The COMPANY shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).
2.02 INTERVIEW AND HEARING. 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.
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.
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A discharged employee shall be entitled to a hearing before the COMPANY
plant Labor Relations Committee at 10:00 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
COMPANY is not liable for any wage during such period.
2.03 GOOD FAITH DUTIES. 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 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (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.
2.05 DISCIPLINARY POLICY. The COMPANY'S 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 2.04,
each manager is cautioned with the need to believe that the employee has
corrected his/her 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.
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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)
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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/her 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 form signed
and dated by the aggrieved employee and/or his/her 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 two (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 (2) 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.
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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 RESOLUTION BY DEFAULT. 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 3.01 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 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
UNION files its written request for arbitration pursuant to Section 3.06 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.
In the event the UNION and the COMPANY are unable to agree to a base
rate on a new classification as provided in Section 8.11, 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 AUTHORITY OF ARBITRATOR. 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.
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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.
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 A) 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.
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4.02 OVERTIME HOURS.
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 8.13 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 SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work 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, 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 as peak months. Up to ten (10) hours may be
scheduled on Fridays and employees are required to work the
scheduled hours. For those working the scheduled Friday
hours, overtime on the succeeding Saturday and/or Sunday
will be on a voluntary basis. In those five (5) months
listed as peak months, 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 (5) months
need to be changed, a sixty (60) day notice will be given.
(b) During the months described above the Jacksonville 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.
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(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 NO PYRAMIDING. 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 SHIFT SCHEDULE. The following is the usual shift schedule. The
shift schedule below will be modified to permit local plant management to vary
the starting time up to 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. 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 COMPANY may adjust shift hours, plus or minus up to one
hour, with reasonable notice (reasonable means by the end of the prior working
day) without penalty of overtime premium.
A. The normal starting time for the first shift will be 7:00
a.m. and employees will receive a thirty (30) minute lunch
period without pay.
B. The normal starting time for the second shift will be 3:30
p.m. and employees will receive a thirty (30) minute lunch
period without pay. As customer requirements demand, the
start time can be varied, without penalty of overtime
premium, from between 2:30 and 4:30 p.m.
C. When three shifts are to be worked in any department, the
first shift will begin work at 7:00 a.m. and continue 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; and 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.
D. REST PERIODS. 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 period, and the other rest period is to be taken
after the lunch hour.
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4.07 TEMPORARY ASSIGNMENT. 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.
4.08 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.
4.09 REPORTING PAY. When an employee reports for work at the regular
starting time of his/her shift without previous notice not to report and his/her
regular work is not available for him/her, he/she 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/she will be paid at average rate as computed in Section 8.13 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
fire, Act of God, Act of Public Enemy, or because of conditions beyond the
control of the COMPANY.
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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.
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ARTICLE VII
-----------
SENIORITY
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.
7.01 ACCUMULATION OF SENIORITY. 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 as provided
herein.
(f) To be eligible for a leave of absence, an employee must
have completed the probationary period provided in Section
7.10 and the leave request must be in writing.
7.02 LOSS OF SENIORITY RIGHTS. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged;
(c) For absence from the EMPLOYER's payroll longer than twelve
(12) continuous months due to layoff. If an employee is
laid 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.
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(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 such
refusal will terminate the right of recall and result in
the loss of all seniority rights.
7.03 LAYOFF.
A. 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 7.03. The Company recognizes the
principle of seniority (last hired will be the first laid
off) among its employees and agrees that all lay offs
occasioned by lack of work and subsequent recalls from
layoff shall be by seniority. Bumping rights or options
will be given first to the most senior person to be laid
off.
B. In the event of a layoff, the reduction will be by
classification and seniority, giving the effected employee
the following options:
1. Bump the least senior employee in Group 5;
2. Bump least senior employee in the Plant;
3. Bump the least senior employee in a job class for
which the laid off employee has previously
qualified;
4. Be placed on surplus labor.
Inasmuch as both the Company and Union firmly believe in
the value of employee seniority, affected employees with 10
years or more of seniority will have the additional option
of bumping the least senior employee (providing this
employee has less than 10 years seniority) within any of
the classifications listed in 8.01 with the exception of
maintenance and lift truck operators. The senior employee
will have to qualify on the new job within the determined
training period per Section 8.01 or will be placed on the
least senior job in skill Group 5.
C. Each employee affected by lay off will be given an
interview regarding bump, surplus and recall. It is the
responsibility of the employee to identify in writing which
job he/she wishes to be recalled for. Employees may make
changes to the list of jobs (add/delete) they will return
to at anytime prior to
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<PAGE> 18
receiving notification of recall from the Company. These
changes must be made in writing through the Human Resources
office.
D. 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.
E. 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.
F. Refreshing of skills will be paid at average rate as
follows:
Employees who have been off the job:
Less than 60 days off job No training allowance
60 days - 6 months 12 hours training
greater than 6 months 24 hours training
G. Any employee who is trained on a new job may not declare
himself/herself ineligible for such skill until he/she has
made himself/herself available to the COMPANY for a minimum
of eighteen (18) months.
H. Any employee assigned to his/her secondary skill must be
assigned to such for a minimum of one (1) hour.
I. 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.
J. 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 the provisions of the above
Article VII and the remainder of this Agreement, the above shall govern.
7.04 RIGHT OF RECALL
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A. The COMPANY recognizes the principle of seniority (last
laid off will be first recalled) in line with the following
B. The Company will return the most senior employee on lay off
to such employee's former job classification, when an
opening occurs in that classification, before placing the
job up for bid provided the employee has specified in
writing they would return to their former classification
during a lay off interview. Employees will be recalled by
seniority then priority.
C. IN THE EVENT A JOB is posted and there are no bidders, the
most senior employee on lay off will be recalled for that
job in line with information provided in the lay off
interview.
7.05 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 the receipt of notice to report will result
in the termination of seniority. Overnight letters to 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 the employee's
last known address shall solely be that of the COMPANY.
7.06 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 7.05 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 the employee within the above five (5) days will mean forfeiture
of all seniority rights by the employee involved.
7.07 DEFINITION AND NOTICE OF LAYOFF. A temporary layoff is when an
employee is laid off for a period of more than eight (8) 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. On 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 COMPANY and the UNION for the
purpose of determining layoff.
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7.08 FURLOUGH. In order to provide 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 with the
affected classification. If there are not enough volunteers, then the COMPANY
will furlough the most junior employees(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 XIV 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 record keeping purposes, the President for Local #425 or his
appointee will be notified of such furlough by letter signed by the involved
Operations Manager.
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 into a
permanent layoff, the most senior employee may choose to remain out of work on
layoff status, with recall rights as granted in Section 7.04.
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 the UNION will meet to discuss the necessity prior to invoking
furlough of the affected employee.
7.09 JOB BIDDING. When it is necessary to fill a new job or vacancy,
such positions will be filled as follows:
A. Check the return to former classification forms of
employees presently on the active payroll.
B. Vacant jobs will be posted for bid by shift, and awarded by
seniority. Successful bidders who are changing shift only
will not be held to the 10 month penalty if they are
otherwise eligible to bid.
C. Position will be posted on the bulletin board for
twenty-four (24) hours. The COMPANY will award the job to
successful bidder with most seniority. In order to
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<PAGE> 21
be eligible to bid employee must have at least ten (10)
months seniority, and must not have been the successful
bidder on current job within last ten (10) months.
D. It is agreed that the successful bidder will remain at
his/her new job for a period of ten (10) months before
being eligible to bid on another job. Successful job
bidders will be transferred to their new job classification
within thirty days. Lead positions will not be posted for
job bids. If lead persons are designated for a
classification they shall be paid $1.00 per hour above the
highest rate of the classification(s) they are assigned to
lead.
7.10 DISQUALIFICATION.
A. In the event a successful bidder is unable to
satisfactorily learn the new job in accordance with the
learning curve, such employee may be placed on surplus
labor for the first disqualification. In the event an
employee twice fails to qualify on a job that was
successfully bid for, such employee will be disqualified
from further bidding.
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
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.
7.11 PROBATIONARY PERIOD. 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. 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, 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.
7.12 RETURN FROM PROMOTION OUT OF BARGAINING UNIT. In the event that an
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. He/she shall not be
eligible to replace any employee other than the one with the least seniority in
the classification in which he/she has experience.
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<PAGE> 22
7.13 SENIORITY LIST. Upon the first anniversary of 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 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 deletions and
hires shall be furnished to the UNION.
7.14 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.
ARTICLE VIII
------------
WAGES
SKILL GROUP CLASSIFICATIONS AND LABOR GRADE RATE
------------------------------------------------
JACKSONVILLE PLANT
------------------
8.01 The COMPANY and the UNION have agreed upon the following Labor
Grade Rates and the job evaluation assignment to Labor Grade for all employees:
<TABLE>
<CAPTION>
Skill Dir Labor Grade Effective Weeks of
---------------------
Group Classification Ind 10/16/97 10/16/98 10/15/99 10/16/00 Training
- -------------------- --- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
I. SEWING
------
A. Border Machine Op. Dir 9.19 9.49 9.79 10.09 6
B. Quilt Machines Dir 8.96 9.26 9.56 9.86 8
C. Box Spring Sewing Dir 8.82 9.12 9.42 9.72 8
D. Mattress Sewing Dir 8.82 9.12 9.42 9.72 8
E. Miscellaneous Border Operts Dir 8.75 9.05 9.35 9.65 4
F. Double Overcast Dir 9.02 9.32 9.62 9.92 4
II. MATTRESS
--------
A. Close Mattress Dir 9.60 9.90 10.20 10.50 20
B. Hog Ring Dir 8.89 9.19 9.49 9.79 6
III. BEAUTYREST/HMB
--------------
A. Ultrasonic Coilers Dir 9.19 9.49 9.79 10.09 8
B. HMB Assembly Dir 8.89 9.19 9.49 9.79 4
IV. BOX SPRING
----------
A. Assemble Frame Dir 8.89 9.19 9.49 9.79 4
B. Assemble Box Spring Dir 8.89 9.19 9.49 9.79 4
C. Upholster Box Spring Dir 8.89 9.19 9.49 9.79 4
V. INDIRECT LABOR
--------------
A. Warehouse Ind 9.40 9.70 10.00 10.30 3
B. Repair Quilt, Matt, Box Spring Ind 9.40 9.70 10.00 10.30 4
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
C. Material Handler Ind 9.03 9.33 9.63 9.93 2
D. Sweepers Ind 8.93 9.23 9.53 9.83 1
E. Packing Machine Ind 10.31 10.61 10.91 11.21 4
F. Lift Truck Operator Ind 9.90 10.20 10.50 10.80 4
G. Cutter Ind 9.23 9.53 9.83 10.13 4
VI. MAINTENANCE
-----------
1. One Skill Ind 12.20 12.50 12.80 13.10
2. Two Skills Ind 13.70 14.00 14.30 14.60
3. Three Skills Ind 15.20 15.50 15.80 16.10
</TABLE>
Continuation of skills through approved accredited curriculum will be
paid at .15 per hour.
Qualifications & Training
Due to the variety of functions that employees in the mechanics
classification must perform, it is imperative that employees entering the
classification have some formal education and training in maintenance functions.
This training may be through high school vocational courses, technical schools,
or community college courses, as long as the training can be verified by the
school. Vacant positions in the mechanics classification will be posted for bid
with qualifying skills that are necessary to enter into the job. To continue the
training and education of mechanics in the classification, the COMPANY will use
a tuition reimbursement program and reimburse employee costs of approved
training with a passing (C) grade. Further, those employees who go beyond the
three skill level will be eligible for an additional increase of .15 per hour on
their base rate for each skill they attain through an approved accredited
curriculum. Uniforms will be furnished to all employees designated in the
mechanics classification at an equally shared cost between the COMPANY and each
employee.
8.02 HIRING RATE.
A. New employees will be hired at $7.50 effective October 16, 1997.
B. Progression:
Incentive employees will receive either the hiring rate or their
incentive earnings, whichever is higher, once they demonstrate
that they can meet quality standards set by the COMPANY.
Hourly workers shall receive an increase of fifteen cents ($0.15)
per hour after completing thirty (30) days with the COMPANY and
shall receive an additional fifteen cents ($0.15) 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 vacation days will be paid. At the time
the COMPANY determines that
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<PAGE> 24
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-incentive classified.
C. Probationary Period.
New employees shall be considered probationary employees during
the first sixty (60) days of service with the COMPANY 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 COMPANY
8.03 TRAINING RATE. The training rate shall be $7.50 per hour for newly
hired employees. Base rate will be paid for employees who are transferred or who
are the successful bidders.
(i) Employees who are recalled, transferred, bids,
bumped or rolled to another incentive job shall
immediately receive the training rate where such
training rate is provided or their incentive
earnings for such job, which ever is higher. Any
employee who is recalled, transferred, bids, bumped
or rolled to a day work job shall immediately
receive the top rate for the classification of said
job.
(ii) 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.
8.04 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
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<PAGE> 25
earnings opportunity to experienced average employees twenty-five percent (25%)
higher than the labor grade rate. It is further agree that the COMPANY may at
any time discontinue and terminate 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.
8.05 INVENTORY WORK: The Company will select those employees best
suited to work inventory, based on the following factors: (1) length of service
and (2) qualifications (ability to read, write, compute, weigh and identify the
components and products). Direct workers will be paid at average rate, indirect
workers at base rate.
8.06 GENERAL WAGE INCREASE: A general wage increase of thirty (30)
cents per hour for all hourly employees and thirty (30) cents per hour for all
incentive employees will be granted effective October 16, 1997. For incentive
employees the increase will be applied to the previous quarterly average and
paid effective November 1, 1997. All basic rates, all hourly rates and all labor
grades will be increased to reflect the increase.
8.07 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.08 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 1999. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.09 A general wage increase of thirty (30) cents per hour for all
hourly employees and thirty (30) cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.10 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
-20-
<PAGE> 26
8.11 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). 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
of this Agreement set forth in 7.09.
8.12 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 hourly rate for the work being performed. In those
cases where an employee is borrowed into a job on which he/she has been
previously qualified, his earnings shall be at incentive rate for that job. The
Refreshing of Skills chart will apply to these individuals. Employees who have
been trained on a job may not delete themselves from that job unless it is
mutually agreed upon by both the COMPANY and the UNION. With respect to
training, seniority will be honored at the end of the training period
established by contract if an employee is borrowed during the training period.
Trainers will not be borrowed unless no one in the plant can do the job. Those
frequently borrowed will be eligible for an additional $.15 on their base rate
for additional skill qualification. The maximum number of skills carried would
be limited to three, the employee's regular skill classification plus two
additional skills.
8.13 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 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 the worker is in a holiday or vacation status, or time
working any classification other than the worker's 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.
In the event an employee has not established an average hourly rate due
to the fact that the employee has not worked during the immediately preceding
calendar quarter, then the employee's average rate shall be equal to the
employee's average rate for the last quarter the employee worked.
8.14 WORK WAIT If, due to absenteeism, mechanical failure, lack of
materials (component or supplies), an incentive worker is required to wait for
any continuous period of more than ten (10)
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<PAGE> 27
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.
8.15 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 be paid at his base rate
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 4.09 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 instructed to either go home or to resume work.
8.16 INJURED DURING WORK
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/her average
rate if an incentive worker or his/her 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/her scheduled shift at his/her average rate for
incentive worker and hourly rate for hourly worker. If the
doctor requests subsequent visit(s) during his/her
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
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<PAGE> 28
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.
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
pyramiding on disability payments or workers' compensation
payments.
8.17 WORK HARDENING PROCEDURES. Any employee who has suffered a work
related injury and has been released by his/her attending physician to return to
work on a limited status will be placed on a job which he/she can physically
perform without aggravating the injury. During this time, he/she will be paid
the rate of the job which he/she can perform.
It is expected that the employee will be used in this "work hardening"
job until such time as he/she is once again able to physically perform his/her
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 his/her 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.
8.18 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 workday of eight (8) hours
plus two (2) hours of overtime, or a schedule from 7:00 a.m. to 5:30 p.m. The
UNION calls a meeting at 3:30 p.m. that runs until 5:30, 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.
8.19 OVERTIME AGREEMENT.
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<PAGE> 29
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 (i.e: 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 his/her turn.
2. The rate of pay for work performed outside
the regular classification will be $8.50/hr.
ARTICLE IX
----------
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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 judgment, such a plan is
practicable. When an incentive program is implemented the
Company will provide the incentive earnings opportunity for the Plant as a whole
that will approximate the incentive earnings opportunity which existed prior to
the implementation of the new incentive program. Such incentive compensation
plans, when established, may be made applicable to individuals or groups of
individuals and will provide for skilled employees an incentive earning
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 the plant.
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<PAGE> 30
9.02 NEW OR VARIED JOBS AND OPERATIONS. 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 thirty (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/her average hourly rate until a new
standard is submitted.
The COMPANY shall select an average operator, or as close to average as
possible, for time methods analysis. Average is defined as an operator working
at a normal pace under normal working conditions, with the skills required for
the specific job. 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 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
---
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing a SIXTY
(60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%) rating
increased by a ten percent (10%) rest, fatigue, and delay allowance (effective
10/16/94, the RFD factor on new or revised standards shall be twelve and
one-half percent (12.5%)).
Basic Production Expectance = 60 MINUTE HOUR
--------------
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on new
or revised standards after 10/16/94)
Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
OPPORTUNITY OFFERED BY ABOVE FORMULA
------------------------------------
1362 SAH = TSM OF 8.1738
-------------
60 Minute Hour
7.3405 Pieces per hour
-25-
<PAGE> 31
Basic Production Expectancy = 60 MINUTE HOUR
(Cycle base minutes) --------------
7.4307 (100% Time/Piece) plus
.7431 (10% RFD Allowance)
TSM 8.1731 (Total Standard Minutes)
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
----
Base Rate 6.18 = 125% incentive
Earnings opportunity at +25% incentive pace
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH standard is
computed, it shall be submitted in writing to the
operator and become effective immediately. This
computation may consist on 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 standard 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.
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the COMPANY 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 any operation in the degree the change in the task affects the
standard upward or downward.
Where the change represents less than five percent (5%) of the cycle
base minutes, the COMPANY 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
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<PAGE> 32
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, the COMPANY 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 affected 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 SAH 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
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
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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 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.
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:
A. 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.
B. The COMPANY designee will respond by either selecting
from the UNION list or by offering alternative dates.
C. Once the above two (2) designees complete
arrangements, they will notify their respective local
COMPANY 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 the attendant difficulties occasioned by
disagreement over pace determination, the COMPANY will, whenever feasible, set
incentive job standards by use of pre-determined, 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
---------
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<PAGE> 34
PAID HOLIDAYS
10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:
New Years Day
Martin Luther King's Birthday
President's Day
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Friday after Thanksgiving Day
Day before or after Christmas as indicated by the COMPANY
Christmas Day
10.02 ELIGIBILITY. In order to be eligible for the holiday payment, an
employee must have completed his/her 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.
10.03 LEAVE OF ABSENCE. When an eligible employee is on an approved
leave of absence which does not exceed (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.)
10.04 SUNDAY HOLIDAYS. 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.
10.05 TENTH PAID HOLIDAY. 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.
10.06 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday
falls on 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.
10.07 HOLIDAY PAY. Holiday pay shall be included in the pay check for
the pay period in which the holiday falls.
10.08 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
fall within an eligible employee's approved vacation period and the employee is
absent from work during his
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<PAGE> 35
regularly scheduled work week because of such vacation, the employee shall be
paid for such holiday in addition to vacation pay and shall have such day off.
10.09 MULTIPLE HOLIDAYS ON SAME DAY: 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.
10.10 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in Section 8.13 for incentive workers;
day workers will be paid at eight (8) times the employees regular day work
hourly rate. Shift premium shall be included in holiday pay computation for
eligible employees. New employees (after qualified) will be paid the average of
the last two (2) full weeks if the average is over the base.
10.11 OVERTIME AND PREMIUM PAY. For purposes 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.
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The COMPANY will grant paid vacation to employees 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
continuos service shall receive four (4) weeks of
vacation with pay for one-hundred sixty (160) hours
if otherwise eligible;
(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 the
death of the employee;
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<PAGE> 36
(2) To the employee in the year of his or her
retirement.
(f) The COMPANY will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
11.02 PAY RATE. 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.
11.03 INTERMITTENT VACATION. 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 prorated basis of 1/12 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 an 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 a 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.
D. Beginning in 1998, employees entitled to 80 hours (2 weeks) of
vacation or more may take one (1) week of vacation at eight
(8) hour intervals (by days) with one (1) week or more notice
and seniority permitting. Time of payment for this week is to
be determined.
11.04 PLANT SHUTDOWN AND STAGGERED VACATION. The COMPANY shall notify
the UNION, no later than January 1 of each vacation year, whether the plant will
shut down or whether there shall be staggered vacation on an individual employee
basis. Prior to January 1 of each 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, and not required to work during the shutdown, will be
furloughed during the plant shutdown.
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.
11.05 ELIGIBILITY. 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.
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<PAGE> 37
11.06 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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 cases of
third or fourth week vacations during the period of May, June, July, August and
September may occasionally be arranged when the Staff Representative can
mutually agree to such with the Operations Manager or the Human Resources
Manager.
11.07 NO ACCUMULATION. 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.
11.08 SHIFT PREMIUM. Shift premium will be included in vacation pay
computation for employees otherwise eligible.
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<PAGE> 38
ARTICLE XII
-----------
ABSENTEES - NO REPORT
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
ARTICLE XIII
------------
UIU PENSION TRUST
UIU 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 Company 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 (10th) day of each month, to the UIU
Pension Trust a sum a 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
month. The Company shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the Company
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The Company
further agrees to supply to the Trust such 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 (12) months shall
be considered. Thereafter, the Company will make contributions each calendar
month. This exception for newly employed employees shall not apply in the case
of employees who have been previously
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<PAGE> 39
covered under the UIU Pension Trust in which event the Company 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 Company'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 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 Company's aforesaid contributions to the Trust
as herein above provided and for so long as the Company's participation in the
Trust is accepted by the Trustees, the Trustees will, beginning with the date of
receipt by the Trust of the Company's first said contribution and continuing for
such part of the duration of this Agreement as the Company 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 Company'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 UIU Pension Trust, but at a cost of the Company not to exceed to the cost of
the contribution hereunder.
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<PAGE> 40
ARTICLE XIV
-----------
THE UNITED STEELWORKERS OF AMERICA
HEALTH AND WELFARE FUND
14.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers Of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.
14.02 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 Company 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 11/1/97
-----------------
<TABLE>
<CAPTION>
The United Steelworker
---------------------- Employee
Of America Plan Company Contribution Total
--------------- ------- ------------ -----
<S> <C> <C> <C>
Single $209.02 $ 12.97 $221.99
Single Plus One 349.00 22.69 371.69
Family 445.53 31.21 476.74
</TABLE>
The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any increase in total insurance premium costs in the second
year which exceeds five (5%) percent over the total insurance premium costs in
the first year will give the Company the option to cease participation in the
USWA Health and Welfare Fund. This same option will apply if the total insurance
premium costs in the third year exceed by more than five (5%) percent the total
insurance premium costs from the second year and similarly if the fourth year
exceeds the third year by more than five (5%) per cent. Any contributions or
increases or decreases in insurance premium contribution costs in the second,
third, and or fourth years will be shared in the same ratio of eighty nine (89%)
percent employer and eleven (11%) percent employee. If the Company opts out, the
Company and the Union reserve the right to review the plan and mutually
determine continuation of coverage through a plan offering comparable coverage.
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<PAGE> 41
14.03 ELIGIBILITY. Eligible employees are all 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; or
C. Attendance at Union or fund Convention, seminar or
grievance hearing.
The Company is not required to make a contribution on an employee whose
employment is terminated during the wage month.
14.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the Company 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 Company agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the Company contributions.
Employees who refuse or neglect to provide the Company 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 Company with the required written authorization but because of lack of wages
the Company is unable to deduct the employee contribution for a particular
benefit month, it is the obligation of the employee to pay, in a timely fashion,
to the Company 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.
14.05 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 $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.
14.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the Company
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.
14.07 COVERAGE.
A. HOSPITAL AND MEDICAL BENEFITS. Coverage for newly
hired employees and any named dependents will begin
on the first (1st) day of the month following
completion of thirty (30) days of employment.
Previously covered employees shall be covered the
first (1st) day of the calendar month following their
return to work.
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<PAGE> 42
B. DISABILITY BENEFITS. Newly hired employees shall be
eligible for 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.
14.08 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 thirty-one (31) days of birth.
14.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company 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 Company 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.
14.10 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America 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 United Steelworkers Of America Health and
Welfare Fund to which the Company is not a signatory party.
14.11 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 Company are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.
14.12 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
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<PAGE> 43
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 Company pay a contribution for such employees. Nothing in this clause
shall be construed as an affirmation or negation of the Company's right to hire
part time employees.
14.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers Of America Health and Welfare Fund periodically.
14.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers Of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company'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 Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.
ARTICLE XV
----------
JURY SERVICE
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 earnings as computed in Section 8.13 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 the 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 XVI
-----------
BEREAVEMENT PAY
16.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) days for time lost due to death in the immediate family. Immediate
family is defined as mother, mother-in-law, father, grandparents, father-in-law,
brother, half brother, sister, half sister, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the COMPANY
with reasonable proof of death and relationship.
16.02 PAYMENT. The pay for such loss of time from work will be for
eight (8) 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 XVII
------------
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<PAGE> 44
BULLETIN BOARDS
17.01 BULLETIN BOARDS. The UNION may put up bulletin boards at
locations specified by the COMPANY for the following non-controversial UNION
announcements:
A. Notice of UNION recreational or social affairs;
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. Notices pertaining to The United Steelworkers Of
America Health and Welfare and UIU Pension Programs.
17.02 POSTING OF NOTICES. 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
Human Resources Manager 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 XVIII
-------------
MILITARY CLAUSE
The COMPANY agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.
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<PAGE> 45
ARTICLE XIX
-----------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday eligibility will
receive an additional eight (8) hours pay (computed as per Section 8.13) 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 abovementioned
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.
Employees who are eligible for birthday pay and elect to receive pay in
lieu of a day off by January 1 will receive a $100 birthday check, exclusive of
payroll deductions. If not elected by January 15, the appropriate clauses of the
contract will apply.
ARTICLE XX
----------
EQUAL EMPLOYMENT OPPORTUNITY
The 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), disability,
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 COMPANY 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's 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 or your Operations Manager. A confidential investigation will
be conducted.
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<PAGE> 46
ARTICLE XXI
-----------
SAVING CLAUSE
21.01 SEPARABILITY. If any provision of this 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.
21.02 FEDERAL AND STATE LAWS. 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 XXII
SEVERANCE AND PLANT CLOSINGS
----------------------------
In the event the COMPANY decides to close this facility presently
organized by the United Steelworkers, sixty (60) day notice of such event will
be given to the District Director of the United Steelworkers of America. Those
employees affected by the plant closing shall continue to be covered under their
existing USWA Health and Welfare Fund benefits as outlined in Article XIV 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.
ARTICLE XXIII
-------------
DURATION AND TERMINATION OF SUPPLEMENT
23.01. EFFECTIVE DATES. This Agreement shall be in full force and
effect from October 16, 1997 until October 15, 2001.
23.02. ENTIRE AGREEMENT. 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.
23.03. MODIFICATION OR TERMINATION. This Agreement, when signed by
the officers of the COMPANY and the UNION, shall become
effective as described above for a period of four (4) years
and shall continue to remain in full force and effect from
year to
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<PAGE> 47
year thereafter, unless written notices 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.
ARTICLE XXIV
------------
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the term of
this agreement. The Plan is called "Pay Plus". Certain features of the Plan
remain undetermined as of October 15, 1997. Therefore, the parties agree that
during the term of this agreement there will be a limited re-opener regarding
aspects of the Plan. The Company will notify the Union not less than forty-five
(45) days prior to the implementation date of the Pay Plus Plan at the
Jacksonvillle facility. During this forty-five (45) days period, the Company and
Union will meet to discuss such Pay Plus matters as (but not limited to) base
rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.
Notwithstanding Article V, if agreement is not reached regarding the
matters to be discussed during the forty-five (45) days or extension thereof,
the parties are free to exercise their rights to engage in activity in support
of their respective positions. In the case of the Union this shall include, but
not be limited to, a strike or other legal means in support of its position. In
the case of the Company this shall include, but not be limited to,
implementation of the Plan, a lockout, and/or in the case of a strike, the
hiring of replacements. The right to strike shall not give rise to a sympathy
strike in support of employees at other Simmons plants where the Pay Plus Plan
is implemented or in the process of being implemented. Further, the Union agrees
to provide a ten (10) day written notice prior to the commencement of a strike;
and the Company agrees to provide a ten (10) day written notice prior to the
commencement of a lockout.
Finally, nothing in this re-opener provision should be construed as
limiting the Company's rights under Article IX.
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<PAGE> 48
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated, this ___________ day of ___________, 1998.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #425
/s/ George F. Becker
______________________________________ ___________________________________
George F. Becker Company
International President
/s/ Leo W. Gerard /s/ Ken Barton
______________________________________ By: _______________________________
Leo W. Gerard, International
Secretary/Treasurer
/s/ Richard H. Davis
______________________________________
Richard H. Davis, International
Vice-President Administration
/s/ Leon Lynch
______________________________________
Leon Lynch, International
Vice-President, Human Affairs
/s/ Victoria Key
______________________________________
Victoria Key, Staff Representative
Coordinator
/s/ Homer Wilson
______________________________________
District Director
/s/ C. G. Lanharn
______________________________________
/s/ Allie M. Mill
______________________________________
Committee
/s/ Larry C. Worges
______________________________________
Committee
______________________________________
Committee
______________________________________
Committee
43
<PAGE> 49
JACKSONVILLE
------------
APPENDIX "A"
------------
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
Richard Adelman
Jack Clarke
David Concepcion
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
-44-
<PAGE> 1
Exhibit 10.13
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
<S> <C> <C>
I RECOGNITION AND UNION SECURITY...............................................................1
Employees Covered...................................................................1
Union Security......................................................................2
Check-Off...........................................................................3
Union Representatives' Seniority....................................................3
Definition of Union Representative..................................................3
Negotiation Committee...............................................................3
II DISCIPLINARY PROCEDURE.......................................................................3
Just Cause..........................................................................3
Interview and Hearing...............................................................4
Good Faith..........................................................................4
Correction of Offense...............................................................4
III GRIEVANCE PROCEDURE AND ARBITRATION..........................................................4
Grievance Procedure.................................................................4
Grievances - Step 1.................................................................5
Grievances - Step 2.................................................................5
Grievances - Step 3.................................................................5
Resolution by Default...............................................................6
Arbitration of Disputes.............................................................6
Selection of Arbitrators............................................................6
Authority of Arbitrator.............................................................6
Expedited Arbitration...............................................................7
IV HOURS OF WORK AND PREMIUM PAY................................................................7
Work Week...........................................................................7
Overtime Hours......................................................................8
Saturday and Sunday Work............................................................8
Availability for Scheduled Work.....................................................8
Premium Pay/No Pyramiding Provision.................................................9
Rest Period.........................................................................9
Shift Schedule......................................................................9
Shift Premiums.....................................................................10
Reporting Pay......................................................................10
Call-In Pay........................................................................10
Notice to Union of Other Work......................................................10
</TABLE>
-i-
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
<S> <C> <C>
V NO STRIKE-NO LOCKOUT........................................................................10
VI MANAGEMENT RIGHTS CLAUSE....................................................................10
VII SENIORITY...................................................................................11
Accumulation of Seniority..........................................................11
Termination of Seniority...........................................................11
Layoff Procedure...................................................................12
Notice of Recall...................................................................12
Change of Address..................................................................13
Employees Who Bump into a Classification When a Layoff Occurs......................13
Layoffs resulting in Combination Jobs..............................................13
Determination of Layoffs...........................................................14
Furlough...........................................................................14
Surplus Labor......................................................................15
Probationary Period................................................................15
Rehired or Transferred Employees...................................................15
Consolidation of Classification....................................................15
Status of Employees on Split Combination Jobs......................................16
Procedure on Filling Open Jobs.....................................................16
Procedure in Applying for New Jobs.................................................17
War Emergency......................................................................18
Seniority Bonus....................................................................18
VIII WAGES.......................................................................................18
Wage Rates.........................................................................18
Hiring, Progression and Classification Rates.......................................18
Pay of Union Officials.............................................................18
Reactivation of Old Classifications................................................19
Establishment of New Classifications...............................................19
Borrowed Employee..................................................................19
Average Rate Computation...........................................................20
Work Wait Pay......................................................................20
Injured During Work................................................................21
No Wage Assignments................................................................21
Time Element on Borrowed Employees.................................................21
IX STANDARD ALLOWED HOURS......................................................................22
Incentive Compensation Plan .......................................................22
New or Varied Jobs and Operations..................................................22
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
<S> <C> <C>
Standard Allowed Hour..............................................................23
Written Confirmation and Effective Date of SAH.....................................24
Procedural Interpretation of Section...............................................24
Grievances Regarding Incentive Standards...........................................25
Availability of Time Study Data....................................................26
Union Time Study Engineer..........................................................26
Standard Data......................................................................26
X PAID HOLIDAYS...............................................................................27
Holidays Observed..................................................................27
Eligibility........................................................................27
Sick Leave.........................................................................27
Holiday Pay........................................................................27
Holidays During Approved Vacation..................................................27
Multiple Holidays on Same Day......................................................27
Holidays on Sunday.................................................................28
Holidays on Saturday...............................................................28
Pay Rate...........................................................................28
Overtime and Premium Pay...........................................................28
XI PAID VACATIONS.............................................................................28
Vacation...........................................................................28
Calculation of Vacation Pay .......................................................29
Intermittent Vacation..............................................................29
Plant Shutdown and Staggered Vacation..............................................29
Eligibility........................................................................29
Scheduling of Staggered Vacations..................................................29
No Accumulation....................................................................30
Shift Premium......................................................................30
Return After Absence...............................................................30
Pay or Forfeiture..................................................................30
Bids...............................................................................30
XII INVENTORY WORK..............................................................................30
Selection..........................................................................30
Exceptions.........................................................................30
Rates..............................................................................31
XIII UIU PENSION TRUST...........................................................................31
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
<S> <C> <C>
XIV THE UNITED STEELWORKERS OF AMERICA
HEALTH AND WELFARE FUND.................................................................32
Benefit Plan(s)....................................................................32
Contribution Rates.................................................................32
Eligibility........................................................................33
Employee Contributions.............................................................33
Sickness and Health and Life Insurance.............................................34
Payment of Contributions...........................................................34
Coverage...........................................................................34
Election of Category of Coverage and Right to Change...............................34
Requirements.......................................................................34
Hold Harmless......................................................................34
Reinstatement of Coverage..........................................................35
Part Time Employees................................................................35
Audit Rights.......................................................................35
Availability of Benefits...........................................................35
XV JURY SERVICE................................................................................36
XVI BEREAVEMENT PAY.............................................................................36
Definition.........................................................................36
Payment............................................................................36
XVII BULLETIN BOARDS.............................................................................36
Bulletin Boards....................................................................36
Posting of Notices.................................................................37
XVIII MILITARY CLAUSE.............................................................................37
XIX EMPLOYEE BIRTHDAY PAY.......................................................................37
XX EQUAL EMPLOYMENT OPPORTUNITY................................................................38
XXI MISCELLANEOUS...............................................................................38
Cameras............................................................................38
Negotiating Committee..............................................................38
Training Non-Union Employees.......................................................38
Shipping Bonus Plan................................................................38
</TABLE>
-iv-
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE TITLE PAGE
XXII SAVING CLAUSE...............................................................................39
Separability.......................................................................39
Federal and State Laws.............................................................39
XXIII STATUS OF MECHANICS.........................................................................40
XXIV SEVERANCE AND PLANT CLOSINGS................................................................40
XXV DURATION AND TERMINATION OF SUPPLEMENT......................................................41
XXVI CONTRACT RE-OPENER..........................................................................41
SIGNATURES..................................................................................43
APPENDIX A - DISCIPLINARY POLICY............................................................44
APPENDIX B - INCENTIVE WORK BASIC TIMING RATES..............................................45
APPENDIX C - RATES FOR HOURLY WORKERS.......................................................46
APPENDIX D - ARBITRATORS FOR EXPEDITED ARBITRATION..........................................47
</TABLE>
-v-
<PAGE> 6
DALLAS AGREEMENT
----------------
Language from Dallas Supplement
Language from Master Agreement
AGREEMENT
This Agreement, made this 20th day of October, 1997, by and
between Simmons Company, Dallas, Texas (hereinafter referred to as the Company)
and the United Steelworkers of America, AFL, CIO, CLC (hereinafter referred to
as the Union) on behalf of its Local Union No. 422, for and on behalf of itself
and the employees of said Company at its plant located at Dallas, Texas.
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.
1.02. EMPLOYEES COVERED. The terms "employee" shall not include
supervisors, foremen, factory clerks, office employees, timekeepers, watchmen,
nor other persons in any way identified with MANAGEMENT.
-1-
<PAGE> 7
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 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 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.
(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, or 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 District Director notifying him of the
requested discharge. Failure of the District
Director 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 section 7.14
of this AGREEMENT.
(f) The provisions of this section shall be applicable
only to the extent permitted by applicable state and
federal law.
-2-
<PAGE> 8
(g) No Union member 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 Steelworkers of America UNION Executive Board 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 International
Secretary-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, claims, responsibility, damages
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 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 current term of contract expires, if such layoff
or transfer is objected to by a majority of those employees represented.
1.06 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.
1.07 NEGOTIATION COMMITTEE. The Negotiation Committee of the UNION
shall be limited to no more than five (5) members.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The Company shall not discharge, suspend, or
otherwise discipline any employee except for just cause, or as provided in
Section 1.03(e).
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<PAGE> 9
2.02 INTERVIEW AND HEARING. 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.
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 10:00 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 Company is not liable for any wage during such period.
2.03 GOOD FAITH DUTIES. 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 CORRECTION OF OFFENSE. Once an individual is reprimanded and
the offense is not committed again for a period of twelve (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.
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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
-4-
<PAGE> 10
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 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 two (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 (2) 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
-5-
<PAGE> 11
such meeting shall be given to the International Representative of the Union
within five (5) working days after such meeting.
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 RESOLUTION BY DEFAULT. 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 3.01 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 SELECTION OF ARBITRATORS. Within ten (10) calendar days after
the Union files its written request for arbitration pursuant to Section 3.06
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.
In the event the Union and the Company are unable to agree to
a base rate on a new classification as provided in Section 8.09 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 AUTHORITY OF ARBITRATOR. 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
-6-
<PAGE> 12
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.
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 "D", page 47) 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.
4.02 OVERTIME HOURS.
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<PAGE> 13
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 8.12 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 SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available
for all work 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, 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 as peak months. In those five
(5) months listed as peak months, 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 (5) months need to be
changed, a sixty (60) day notice will be given.
(b) During the months described above the Jacksonville
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.
(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.
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4.05. PREMIUM PAY/NO PYRAMIDING PROVISION. 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. 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.
4.07 SHIFT SCHEDULE. The following is the usual shift schedule. The
shift schedule below will be modified to permit local plant management to vary
the starting time up to 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. 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 o the employee(s) involved without
penalty of overtime premium.
SHIFTS. The first shift shall be from 7:00 a.m. 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 form 7:00 a.m.
to 3:00 p.m. with one-half hour lunch period, the second shift shall be form
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 form absence will be excused as per Section 4.04.
In the event it becomes necessary to deviate form 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.
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.
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.
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.
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4.08 SHIFT PREMIUMS. Employees assigned to work on the second or
third shift shall be paid a shift premium of twenty (20) cents per hour.
4.09 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 8.11 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 fire, Act of
God, Act of Public Enemy, or because of conditions beyond the control of the
Company.
4.10 CALL-IN PAY. An employee called in prior to the beginning of
his regularly scheduled shift who continues working into his regularly scheduled
shift shall be paid at the appropriate premium rate for such hours worked
between the time of the call-in and the time of the beginning of the regular
shift. An employee called back to work after having left the facility at the
conclusion of his regularly scheduled shift shall be paid the appropriate
premium for all hours worked in connection with the call-back.
4.11 NOTICE TO UNION OF OTHER WORK. Whenever there is work to be
performed outside the plant due to the re-opening of a service center, the
Company shall inform the Union.
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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
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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. The last employee hired shall be the
first laid off and all rehiring and layoffs shall be governed accordingly,
unless otherwise provided in Section 7.07.
7.01 ACCUMULATION OF SENIORITY. 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 as
provided herein.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period provided
in Section 7.14 and the leave request must be in
writing.
7.02 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged for just cause;
(c) When an employee is laid off longer than twelve (12)
months, except for right of recall as per section
7.04;
(d) When an 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 7.06;
(f) If an employee falsifies any information given in
connection with a leave of absence; and
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(g) When an employee obtains other employment while on an
approved leave of absence.
7.03 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 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 form 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 7.06 and
7.07.
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 place on he surplus labor list.
7.04 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 the receipt of notice to report will
result in the termination of seniority. Overnight letters to 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 the employee's
last known address shall solely be that of the Company.
7.05 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 7.05 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 the
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<PAGE> 18
employee within the above five (5) days will mean forfeiture of all seniority
rights by the employee involved.
7.06 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.
7.07 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 forwarded to the Personnel Office
where they will remain on file and shall be valid for a period of one (1) year
form 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
deliver, or unless because of absenteeism.
7.08 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.
7.09 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.
7.10 LAYOFFS RESULTING IN COMBINATION JOBS
(A) If, as a result of a layoff in accordance with Section 7.11
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 lease senior
employee or employees of this group will be laid off and the
senior employees will be assigned to the combined
classifications. In order to be eligible, the senior employee
must have part-time work in one of the combined
classifications.
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<PAGE> 19
(C) Where possible, day work an incentive jobs will be kept
separate in combination jobs.
7.11 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 no 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.
7.12 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 here 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 this
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. 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 7.03.
With regard to recall form 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.
7.13 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,
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<PAGE> 20
they may take a layoff and have their name place don the surplus labor list, and
shall be subject to be rehired in accordance with the provisions set forth in
this AGREEMENT.
7.14 PROBATIONARY PERIOD. 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. 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. New employees will be
introduced to the President and Vice President of the Local Union.
7.15. 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 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.
7.16 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 Procedures. When two or more day work classifications are combined,
the highest rate will apply to the combined classification. Should the
classification be segregated again, then original rates will be restored.
7.17 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
classifications) 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
job on a split classification set-up requires a full-time
employee.
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7.18 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 form Step B, the Personnel Office
will then post all full-time positions available on the
bulletin board located at the main employee plant entrance,
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,
Upholsters, 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.
7.19 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. Any full time 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
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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) has 24 hours after notification to refuse that job. If
that employee refuses the job, he 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.
7.20 Hours of work shall be so shared by the employees that each
member of a classification will receive, as nearly as possible each day, he same
number of hours as do the other members of this classification on the same
shift.
7.21 WAR EMERGENCY. 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.
7.22 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 or at the time of their vacation, as the employee
chooses.
ARTICLE VIII
------------
WAGES
8.01 WAGE RATES. The Company and the Union have agreed upon the
basic rates for incentive classifications as set forth in Schedule A and the
base or hourly rates of hourly classifications as set forth in Schedule B, which
are hereto annexed and a part hereof.
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8.02. HIRING, PROGRESSION, AND CLASSIFICATION RATES. The hiring rate
for all new employees shall be $8.30 per hour. After a 30-day trial period, new
employees shall receive progression increases of $0.05 per hour, which shall be
further raised by $0.05 per hour for each week until the classification rate is
reached for employees classified as incentive or the regular base or hourly rate
for hourly classified employees. The hiring rate set forth above is a flexible
minimum hire rate, and the parties can adust this rate as needed, depending on
the experience of applicants, as long as the classification rate is not
exceeded.
8.03 PAY TO UNION OFFICIALS. The Union Representatives as defined
in Article VII, paragraph C will be paid by the Company at each's average rate
for the time lost for handling any labor relations meeting or processing
grievances with a maximum total of fifteen (15) hours per week for the entire
time lost.
8.04 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1997. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1997. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.05 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.06 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1999. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.07 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.08 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
8.09 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.
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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). 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 of this agreement.
8.10 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 or the job rate whichever is higher.
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
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 form 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. Downtime 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.
8.11 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 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
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except those hours when the worker is in a holiday or vacation status, or time
working any classification other than the worker's own. Copies 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.
In the event an employee has not established an
average hourly rate due to the fact that the employee has not worked during the
immediately preceding calendar quarter, then the employee's average rate shall
be equal to the employee's average rate for the last quarter the employee
worked.
8.12 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. Other than paying for up to one (1) hour at base pay if
employees are not sent home, the Company in case of a breakdown of power or
light supply, fire, flood, Acts of God, or any other reasons beyond their
control.
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8.13 INJURED DURING WORK
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.
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
pyramiding on disability payments or workers'
compensation payments.
8.14 NO WAGE ASSIGNMENTS. As a condition of employment with the
Company, no employee can make an assignment of wages or salaries, whether earned
or unearned. The Company shall never be liable to any assignee because of an
assignment made by a Company employee.
8.15 TIME ELEMENT ON BORROWED EMPLOYEES. If a 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
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<PAGE> 27
to the original classification. A borrowed person will be compensated at their
average rate for he 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 IX
----------
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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 judgment, such a plan is
practicable. When an incentive program is implemented the Company will provide
the incentive earnings opportunity for the Plant as a whole that will
approximate the incentive earnings opportunity which existed prior to the
implementation of the new incentive program. 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 the Plant.
9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new
operation, or variation of an existing operation is set up, the supervisor 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 thirty (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/her average hourly rate until
a new standard is submitted.
The Company shall select an average operator or as close to
average as possible, for time and methods analysis. Average is defined as an
operator working at a normal pace, under normal working conditions, with the
skills required for the specific job. Until a new standard or incentive value is
submitted, the employee who work s on a unit for which there is no standard or
standard allowed hour will be paid his/her average hourly rate for such unit.
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<PAGE> 28
9.03 STANDARD ALLOWED HOUR. In all cases, the SAH will be
determined by dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
---
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing
a SIXTY (60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%)
rating increased by a ten percent (10%) rest, fatigue, and delay allowance
(effective 10/16/94, the RFD factor on new or revised standards shall be twelve
and one-half percent (12.5%)).
<TABLE>
<CAPTION>
<S> <C>
Basic Production Expectance = 60 MINUTE HOUR
--------------
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on new
or revised standards after 10/16/94)
</TABLE>
Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
Opportunity Offered by Above Formula
------------------------------------
1362 SAH = TSM of 8.1738
-------------
60 Minute Hour
7.3405 Pieces per hour
<TABLE>
<CAPTION>
<S> <C>
Basic Production Expectancy = 60 MINUTE HOUR
--------------
(Cycle base minutes) 7.4307 (100% Time/Piece) plus
.7431 (10% RFD Allowance)
------
TSM 8.1731 (Total Standard Minutes)
</TABLE>
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
----
Base Rate 6.18 = 125% incentive
Earnings opportunity at +25% incentive pace
-23-
<PAGE> 29
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH standard is
computed, it shall be submitted in writing to the
operator and become effective immediately. This
computation may consist on 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 standard 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.
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the Company 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 any operation in the degree the change in the task
affects the standard upward or downward.
Where the change represents less than five percent (5%) of the
cycle base minutes, the Company 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, the Company 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 affected 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
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<PAGE> 30
appropriate addition or deletion is developed, such time will be translated into
an SAH 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
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 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.
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<PAGE> 31
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:
A. 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.
B. The Company designee will respond by either selecting
from the Union list or by offering alternative dates.
C. Once the above two (2) designees complete
arrangements, they will notify their respective local
Company 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 the attendant difficulties occasioned
by disagreement over pace determination, the Company will, whenever feasible,
set incentive job standards by use of pre-determined, 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.
-26-
<PAGE> 32
ARTICLE X
---------
PAID HOLIDAYS
10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:
New Years Day
Martin Luther King's Birthday
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Friday after Thanksgiving Day
Last Work Day before Christmas
Christmas Day
Washington's Birthday (President's Birthday)
10.02 ELIGIBILITY. In order to qualify for holiday pay, the employee
must have six (6) calendar months of continuous service with the Company, must
work eight (8) hours during the calendar week in which the holiday occurs, and
must be on the active payroll at the time of the holidays (employee shall not
have quit or been discharged or be on leave of absence at the time). The
employee must work the full shift of the last preceding scheduled work day prior
to the holiday (exception: failure of an employee to work on the Saturday
following a Friday holiday will not result in forfeiture of such holiday pay).
Similarly, eligible employees will be paid for Saturday holidays or any holidays
occurring during plant shutdown.
10.03 SICK LEAVE. Employees on sick leave during the week before or
during a holiday will be eligible for holiday pay. Where the employee is absent
due to illness or injury and a holiday falls in that period, the employee will
be paid for one holiday, as long as the employee provides a doctor's
certificate.
10.04 HOLIDAY PAY. Holiday pay shall be included in the pay check
for the pay period in which the holiday falls.
10.05 HOLIDAYS DURING APPROVED VACATION. When any of the above
holidays falls within an eligible employee's approved vacation period and the
employee is absent from work during his regularly scheduled work week because of
such vacation, the employee shall be paid for such holiday in addition to
vacation pay and shall have such day off.
10.06 MULTIPLE HOLIDAYS ON SAME DAY. 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.
-27-
<PAGE> 33
10.07 HOLIDAYS ON SUNDAY. 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.
10.08 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a
holiday falls on 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.
10.09 PAY RATE. Holiday pay will be at eight (8) times the
employee's average hourly earnings rate as computed in section 8.11 for
incentive workers; day workers will be paid at eight (8) times the employees
regular day work hourly rate. Shift premium shall be included in holiday pay
computation for eligible employees.
10.10 OVERTIME AND PREMIUM PAY. For purposes 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.
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The Company will grant paid vacation to employees 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
continuos service shall have the option of taking a
fourth week of vacation in lieu of the seniority
bonus (section 7.18) 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 circumstances:
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<PAGE> 34
(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) The Company will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
11.02 CALCULATION OF VACATION PAY. The employee's vacation pay will
be calculated by multiplying the previous quarterly average times forty (40)
hours.
11.03 INTERMITTENT VACATION. Employees entitled to eighty (80) hours
vacation or more may take one (1) week of vacation at eight (8) hour intervals
(by days) with one (1) week or more notice and seniority permitting. Days taken
due to legitimate illness will be paid. Unused vacation days will be paid at
year end.
Holiday pay will not be paid in the case of an unscheduled
vacation day taken the day before or the day after a holiday.
11.04 PLANT SHUTDOWN AND STAGGERED VACATION. The Company may
determine the weeks in which it will shut down for vacation purposes. The
Company shall notify the Union, no later than January 1 of each vacation year,
whether the plant will shut down or whether there shall be staggered vacation on
an individual employee basis. Prior to January 1 of each 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, and not required to work
during the shutdown, will be furloughed during the plant shutdown.
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.
11.05 ELIGIBILITY. 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.
11.06 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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. Changes in vacation schedules must be
made no less than
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<PAGE> 35
ten (10) days prior to the scheduled time off. Vacation time will not be altered
except when operational needs are affected by illness. Exceptional cases of
third or fourth week vacations during the period of May, June, July, August and
September may occasionally be arranged when the Staff Representative can
mutually agree to such with the Operations Manager or the Human Resources
Manager.
11.07 NO ACCUMULATION. 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.
11.08 SHIFT PREMIUM. Shift premium will be included in vacation
pay computation for employees otherwise eligible.
11.09 RETURN AFTER ABSENCE. An employee returning to work after a
90-day absence for medical, maternity, or layoff reasons must work sixty (60)
days in order to be eligible to receive vacation benefits.
11.10 PAY OR FORFEITURE. The employee may receive pay for the
first or second week of vacation prior to the time the employee actually takes
the time off. Otherwise, vacation preferences will follow Section 11.06, except
that employees cannot be forced to take vacation at Christmas unless the Company
schedules a total plant shutdown during that period. Employees wanting to change
their scheduled vacation must give ten (10) days' notice. Otherwise, vacation
must be taken when scheduled or the time off will be forfeited. The Company may
approve exceptions for illness or emergency.
11.11 BIDS. Where employees bid into a new classification, their
seniority for vacation preferences become secondary to conflicting vacation
preferences of other employees in the classification for that year.
ARTICLE XII
-----------
INVENTORY WORK
12.01 SELECTION. In selecting employees for inventory purposes, the
Company will give preference to the qualified senior hourly workers. If
additional employees are needed, the qualified senior incentive workers may bid
for the openings.
12.02 EXCEPTIONS. 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.
12.03 RATES. Inventory rates for incentive employees will be
material handler's rate. Day workers receive their regular classification rates
when working on inventory.
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<PAGE> 36
ARTICLE XIII
------------
UIU PENSION TRUST
UIU 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 Company 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 (10th) day of each month, to the UIU
Pension Trust a sum a 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
month. The Company shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the Company
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The Company
further agrees to supply to the Trust such 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 (12) months shall
be considered. Thereafter, the Company 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 UIU Pension Trust in
which event the Company 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 Company'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
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<PAGE> 37
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 Company's aforesaid contributions to
the Trust as herein above provided and for so long as the Company's
participation in the Trust is accepted by the Trustees, the Trustees will,
beginning with the date of receipt by the Trust of the Company's first said
contribution and continuing for such part of the duration of this Agreement as
the Company 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 Company'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 UIU Pension Trust, but at a cost of the Company not to
exceed to the cost of the contribution hereunder.
ARTICLE XIV
-----------
THE UNITED STEELWORKERS OF AMERICA
HEALTH AND WELFARE FUND
14.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers Of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.
14.02 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 Company 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 11/1/97
<TABLE>
<CAPTION>
The United Steelworker
---------------------- Employee
of America Plan Company Contribution Total
--------------- ------- ------------ -----
<S> <C> <C> <C>
Single $209.02 $ 12.97 $221.99
Single Plus One 349.00 22.69 371.69
Family 445.53 31.21 476.74
</TABLE>
The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any
-32-
<PAGE> 38
increase in total insurance premium costs in the second year which exceeds five
(5%) percent over the total insurance premium costs in the first year will give
the Company the option to cease participation in the USWA Health and Welfare
Fund. This same option will apply if the total insurance premium costs in the
third year exceed by more than five (5%) percent the total insurance premium
costs from the second year and similarly if the fourth year exceeds the third
year by more than five (5%) per cent. Any contributions or increases or
decreases in insurance premium contribution costs in the second, third, and or
fourth years will be shared in the same ratio of eighty nine (89%) percent
employer and eleven (11%) percent employee. If the Company opts out, the Company
and the Union reserve the right to review the plan and mutually determine
continuation of coverage through a plan offering comparable coverage.
14.03 ELIGIBILITY. Eligible employees are all 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; or
C. Attendance at Union or fund Convention, seminar or
grievance hearing.
The Company is not required to make a contribution on an
employee whose employment is terminated during the wage month.
14.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the Company 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 Company agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the Company contributions.
Employees who refuse or neglect to provide the Company 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 Company with the required written authorization but because of
lack of wages the Company is unable to deduct the employee contribution for a
particular benefit month, it is the obligation of the employee to pay, in a
timely fashion, to the Company 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.
14.05 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 $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.
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<PAGE> 39
14.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the
Company 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.
14.07 COVERAGE.
A. HOSPITAL AND MEDICAL BENEFITS. Coverage for newly
hired employees and any named dependents will begin
on the first (1st) day of the month following
completion of thirty (30) days of employment.
Previously covered employees shall be covered the
first (1st) day of the calendar month following their
return to work.
B. DISABILITY BENEFITS. Newly hired employees shall be
eligible for 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.
14.08 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 thirty-one (31) days of birth.
14.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company 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 Company 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.
14.10 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America 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
-34-
<PAGE> 40
to The United Steelworkers Of America Health and Welfare Fund to which the
Company is not a signatory party.
14.11 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 Company are paid in full. If
coverage is reinstated prospectively, there shall, nevertheless, be no coverage
for illnesses first manifested during the ten (10) day period following the date
of reinstatement.
14.12 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 Company
pay a contribution for such employees. Nothing in this clause shall be construed
as an affirmation or negation of the Company's right to hire part time
employees.
14.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers Of America Health and Welfare Fund periodically.
14.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers Of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company'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 Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.
-35-
<PAGE> 41
ARTICLE XV
----------
JURY SERVICE
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 earnings as computed in Section 8.11 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 the 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 XVI
-----------
BEREAVEMENT PAY
16.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) 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, grandparents, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the Company
with reasonable proof of death and relationship.
16.02 PAYMENT. The pay for such loss of time from work will be for
eight (8) 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 XVII
------------
BULLETIN BOARDS
17.01 BULLETIN BOARDS. The Union may put up bulletin boards at
locations specified by the Company for the following non-controversial Union
announcements:
A. Notice of Union recreational or social affairs;
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. Notices pertaining to The United Steelworkers Of
America Health and Welfare and UIU Pension Programs.
-36-
<PAGE> 42
17.02 POSTING OF NOTICES. 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 Human Resources Manager 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 XVIII
-------------
MILITARY CLAUSE
The Company agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.
ARTICLE XIX
-----------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday
eligibility will receive an additional eight (8) hours pay (computed as per
Section 10.09) 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
abovementioned 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.
Employees who are eligible for birthday pay and elect to
receive pay in lieu of a day off by January 1 will receive a $100 birthday
check, exclusive of payroll deductions. If not elected by January 15, the
appropriate clauses of the contract will apply.
-37-
<PAGE> 43
ARTICLE XX
----------
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, mental retardation, HIV infection, AIDS or
AIDS-related complex, 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 veteran's 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 XXI
-----------
MISCELLANEOUS
21.01 CAMERAS. Cameras will be used only for appropriate security
measures. Mr. Barton will discuss with all appropriate Plant Managers.
21.02 NEGOTIATING COMMITTEE. The Union Negotiating Committee shall
be limited to no more than five (5) members.
21.03 TRAINING NON-UNION EMPLOYEES. No Union member can be forced to
train a non-union employee.
21.04 SHIPPING BONUS PLAN. Eligible employees are all personnel in
Department 495. There are three (3) areas in which they can receive Bonuses.
This program will be monitored on a weekly basis and will be paid on a monthly
basis. Payment will be received on the first pay period of the month. They are
DAMAGES, DISCREPANCIES, AND UNITS PER MAN HOUR.
A. DAMAGES. $25.00 Bonus if three (3) occurrences or
less per week are met.
This Bonus is determined by damage done within the
warehouse before loading and if there is damage also
on the trailer when a customer note on the Bill of
Lading "Refused for Damage or Soilage."
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<PAGE> 44
B. Discrepancies. $25.00 Bonus if three (3) occurrences
or less per week are met.
This Bonus is determined by any discrepancy,
Examples: Piece was short on trailer, Piece was extra
on trailer, or Piece was produced and could not be
found. NOTE: If Pieces were not produced they will
not count against this bonus.
C. UNITS PER MAN HOUR.
<TABLE>
<CAPTION>
<S> <C> <C>
13.0 Units per man hour - $55.00
14.0 Units per man hour - $65.00
15.0 Units per man hour - $75.00
</TABLE>
This Bonus is determined by Pieces shipped divided by
total man hours for the department. Example:
<TABLE>
<S> <C> <C>
5,500 Pieces shipped = 15 Units per man hour
--------------------
367 total man hours
</TABLE>
Company reserves the right to modify this program at any time
to insure a fare and consistent application of this program.
ARTICLE XXII
------------
SAVING CLAUSE
22.01 SEPARABILITY. If any provision of this 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 FEDERAL AND STATE LAWS. 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.
-39-
<PAGE> 45
ARTICLE XXIII
-------------
STATUS OF MECHANICS
23.01 Employees in the mechanic classification cannot be bumped by
production or unskilled day workers.
23.02 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 Company-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
<TABLE>
<S> <C>
Hired at: $11.25
After 90 days, increased by a minimum of .20
After 6 months, increased by a minimum of .35
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
</TABLE>
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 he gets the job, the
employee will not come under the training schedule and will receive the top rate
of the classification.
ARTICLE XXIV
------------
SEVERANCE AND PLANT CLOSINGS
In the event the Company decides to close this facility
presently organized by the United Steelworkers of America, sixty (60) day notice
of such event will be given to the District Director of the United Steelworkers
of America. Those employees affected by the plant closing shall continue to be
covered under their existing USWA Health and Welfare Fund benefits as outlined
in Article XV 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.
-40-
<PAGE> 46
ARTICLE XXV
-----------
DURATION AND TERMINATION OF SUPPLEMENT
25.01 Effective Dates. This AGREEMENT shall be in full force and
effect from October 16, 1997 until October 15, 2001.
25.02 Entire Agreement. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this Agreement and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.
25.03 Modification or Termination. This AGREEMENT, when signed by
the officers of the COMPANY and the UNION, shall become effective as described
above for a period of four (4) years and shall continue to remain in full force
and effect from year to year thereafter, unless written notices 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.
ARTICLE XXVI
------------
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the
term of this agreement. The Plan is called "Pay Plus". Certain features of the
Plan remain undetermined as of October 15, 1997. Therefore, the parties agree
that during the term of this agreement there will be a limited re-opener
regarding aspects of the Plan. The Company will notify the Union not less than
forty-five (45) days prior to the implementation date of the Pay Plus Plan at
the Dallas facility. During this forty-five (45) days period, the Company and
Union will meet to discuss such Pay Plus matters as (but not limited to) base
rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.
Notwithstanding Article V, if agreement is not reached
regarding the matters to be discussed during the forty-five (45) days or
extension thereof, the parties are free to exercise their rights to engage in
activity in support of their respective positions. In the case of the Union this
shall include, but not be limited to, a strike or other legal means in support
of its position. In the case of the Company this shall include, but not be
limited to, implementation of the Plan, a lockout, and/or
-41-
<PAGE> 47
in the case of a strike, the hiring of replacements. The right to strike shall
not give rise to a sympathy strike in support of employees at other Simmons
plants where the Pay Plus Plan is implemented or in the process of being
implemented. Further, the Union agrees to provide a ten (10) day written notice
prior to the commencement of a strike; and the Company agrees to provide a ten
(10) day written notice prior to the commencement of a lockout.
Finally, nothing in this re-opener provision should be
construed as limiting the Company's rights under Article IX.
-42-
<PAGE> 48
IN WITNESS WHEREOF, the parties hereunto set their hands and
seals as hereinbefore stated, this ________ day of ______________, 1998.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #422
/s/ George Becker
- -------------------------------------- --------------------------------
George F. Becker Company
International President
/s/ Leo W. Gerard By: /s/ Ken Barton
- -------------------------------------- -----------------------------
Leo W. Gerard, International
Secretary/Treasurer
/s/ Richard H. Davis
- --------------------------------------
Richard H. Davis, International
Vice-President Administration
/s/ Leon Lynch
- --------------------------------------
Leon Lynch, International
Vice-President, Human Affairs
/s/ Victoria Key
- --------------------------------------
Victoria Key, Staff Representative
Coordinator
/s/ Cheryl Barruch
- --------------------------------------
District Director
/s/ Freddie S.
- --------------------------------------
/s/ J. R. Wiles
- --------------------------------------
Committee
/s/ Manuel Fernando
- --------------------------------------
Committee
- --------------------------------------
Committee
- --------------------------------------
Committee
-43-
<PAGE> 49
APPENDIX A
SIMMONS COMPANY - DALLAS PLANT
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 2.04
of this 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.
-44-
<PAGE> 50
APPENDIX B
SIMMONS COMPANY - DALLAS PLANT
INCENTIVE WORK BASIC TIMING RATES
<TABLE>
<CAPTION>
EFFECTIVE
CLASSIFICATIONS 10/16/97 10/16/98 10/16/99 10/16/00
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CUT AND SEW
- -----------
B/S (Hem, Label, Tape) $ 8.95 $ 9.25 $ 9.55 $ 9.85
QUILT
- -----
Sew Matt (Overcast) $ 9.07 $ 9.37 $ 9.67 $ 9.97
Sew Labels $ 9.15 $ 9.45 $ 9.75 $ 10.05
Run Quilt Machines $ 8.96 $ 9.26 $ 9.56 $ 9.86
BORDER
- ------
Run Matt & B/S Borders $ 9.34 $ 9.64 $ 9.94 $ 10.24
Attach Cord Handles & Vents
- -Convexco $ 9.70 $ 10.00 $ 10.30 $ 10.60
Join, Tack Borders on Bechick
5051 Machine $ 9.28 $ 9.58 $ 9.88 $ 10.18
MATTRESS
- --------
Close Mattress (All Types) $ 10.35 $ 10.65 $ 10.95 $ 11.25
Hog Ring (All Types) $ 9.54 $ 9.84 $ 10.14 $ 10.44
BEAUTYREST(R) HMB
- -----------------
Run Beautyrest(R)Pocket Machine $ 9.24 $ 9.54 $ 9.84 $ 10.14
Assemble B/R Construction $ 9.23 $ 9.53 $ 9.83 $ 10.13
BOX SPRING CONSTRUCTION
- -----------------------
Top Off Assembler $ 9.20 $ 9.50 $ 9.80 $ 10.10
WOOD SHOP
- ---------
Assemble Box Spring Frame $ 9.18 $ 9.48 $ 9.78 $ 10.08
Box Spring Radius &
Ease Corners $ 9.61 $ 9.91 $ 10.21 $ 10.51
BOX SPRING
- ----------
Pre-Upholster and Upholster
Box Spring $ 9.68 $ 9.98 $ 10.28 $ 10.58
</TABLE>
-45-
<PAGE> 51
APPENDIX C
SIMMONS COMPANY - DALLAS PLANT
RATES FOR HOURLY WORKERS
<TABLE>
<CAPTION>
EFFECTIVE
CLASSIFICATIONS 10/16/97 10/16/98 10/16/99 10/16/00
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
General Warehouse
(Shipping & Receiving) $ 9.90 $ 10.20 $ 10.50 $ 10.80
Sweeper $ 9.90 $ 10.20 $ 10.50 $ 10.80
Inspector $ 9.90 $ 10.20 $ 10.50 $ 10.80
Cutter $ 9.90 $ 10.20 $ 10.50 $ 10.80
Mechanic $ 13.80 $ 14.10 $ 14.40 $ 14.70
Material Handler $ 9.90 $ 10.20 $ 10.50 $ 10.80
Repair (Matt/Box Spring) $ 9.93 $ 10.23 $ 10.53 $ 10.83
Packing Machine Attendant $ 10.15 $ 10.45 $ 10.75 $ 11.05
</TABLE>
-46-
<PAGE> 52
DALLAS
APPENDIX D
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
-------------------
Richard Adelman
Jack Clarke
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
----------------------
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
-47-
<PAGE> 1
Exhibit 10.14
<TABLE>
<CAPTION>
INDEX
ARTICLE TITLE PAGE
<S> <C>
I RECOGNITION AND UNION SECURITY.......................................................... 1
Employees Covered....................................................................... 1
Union Security.......................................................................... 1
Check-Off............................................................................... 2
Committee Meetings...................................................................... 3
II DISCIPLINARY PROCEDURE.................................................................. 3
Just Cause.............................................................................. 3
Interview and Hearing................................................................... 3
Good Faith Duties....................................................................... 4
Correction of Offense................................................................... 4
Disciplinary Policy..................................................................... 4
III GRIEVANCE PROCEDURE AND ARBITRATION..................................................... 4
Grievance Procedure..................................................................... 4
Grievances - Step 1..................................................................... 5
Grievances - Step 2..................................................................... 5
Grievances - Step 3..................................................................... 5
Resolution by Default................................................................... 5
Arbitration of Disputes................................................................. 6
Selection of Arbitrators................................................................ 6
Authority of Arbitrator................................................................. 6
Expedited Arbitration................................................................... 7
IV HOURS OF WORK AND PREMIUM PAY........................................................... 7
Work Week............................................................................... 7
Overtime Hours.......................................................................... 7
Pay Rate for Saturday and Sunday Work................................................... 8
Availability for Scheduled Work......................................................... 8
No Pyramiding........................................................................... 8
Shift Schedule.......................................................................... 9
Rest Periods............................................................................ 9
Shift Premiums.......................................................................... 9
Reporting Pay........................................................................... 9
Notice of Shift Changes................................................................. 10
Shift Seniority......................................................................... 10
Report Absences......................................................................... 10
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
T
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
V NO STRIKE - NO LOCKOUT.................................................................. 10
VI MANAGEMENT RIGHTS CLAUSE................................................................ 10
VII SENIORITY............................................................................... 11
Accumulation of Seniority............................................................... 11
Termination of Seniority................................................................ 11
Layoff.................................................................................. 12
Right of Recall......................................................................... 12
Notice of Recall........................................................................ 13
Change of Address....................................................................... 13
Furlough................................................................................ 13
Probationary Period..................................................................... 14
Bidding................................................................................. 14
Failure to Succeed on Bid Job........................................................... 15
Disqualification Following Bump or Transfer............................................. 15
Combined Classifications................................................................ 15
Training................................................................................ 15
Refreshing of Skills.................................................................... 16
Skill Group Classifications............................................................. 16
Approved Leave.......................................................................... 17
Leave of Absence for Union Activity..................................................... 18
Procedure for Rehiring from Leave of Absence............................................ 18
Bumping-Production and Mechanical Employees............................................. 18
Hiring Rate and Progression............................................................. 19
War Emergency........................................................................... 19
Seniority Bonus......................................................................... 19
VIII WAGES................................................................................... 19
Hourly Rates............................................................................ 19
General Wage Increases.................................................................. 19
Reactivation of Old Classifications..................................................... 20
Establishment of New Classifications.................................................... 20
Borrowed Man............................................................................ 20
Average Rate Computation................................................................ 21
Injured During Work..................................................................... 21
Pay Shortages........................................................................... 22
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
IX STANDARD ALLOWED HOURS.................................................................. 22
Incentive Compensation Plan............................................................. 22
New or Varied Jobs and Operations....................................................... 22
Standard Allowed Hour................................................................... 23
Written Confirmation and Effective Date of SAH.......................................... 24
Procedural Interpretation of Section.................................................... 24
Grievances Regarding Incentive Standards................................................ 25
Availability of Time Study Data......................................................... 26
Union Time Study Engineer............................................................... 26
Standard Data........................................................................... 26
X PAID HOLIDAYS........................................................................... 26
Holidays Observed....................................................................... 26
Eligibility............................................................................. 27
Sick Leave.............................................................................. 27
Holiday Pay............................................................................. 27
Holidays During Approved Vacation....................................................... 27
Multiple Holidays on Same Day........................................................... 27
Holidays on Sunday...................................................................... 27
Holidays on Saturday.................................................................... 27
Pay Rate................................................................................ 27
Overtime and Premium Pay................................................................ 28
Plant Shutdown.......................................................................... 28
XI PAID VACATIONS.......................................................................... 28
Vacation................................................................................ 28
Pay Rate................................................................................ 29
Plant Shutdown and Staggered Vacation................................................... 29
Eligibility............................................................................. 29
Scheduling of Staggered Vacations....................................................... 29
No Accumulation......................................................................... 30
Shift Premium........................................................................... 30
XII INVENTORY WORK.......................................................................... 30
Preference ............................................................................. 30
Pay Rate................................................................................ 30
Pieceworkers............................................................................ 30
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
XIII LEAVE OF ABSENCE........................................................................ 30
Leave................................................................................... 30
Return.................................................................................. 30
XIV UIU PENSION TRUST....................................................................... 31
XV UIU HEALTH AND WELFARE FUND............................................................. 32
Benefit Plan(s)......................................................................... 32
Contribution Rates...................................................................... 32
Eligibility............................................................................. 33
Employee Contributions.................................................................. 33
Sickness and Health and Life Insurance.................................................. 34
Payment of Contributions................................................................ 34
Coverage................................................................................ 34
Election of Category of Coverage and Right to Change.................................... 34
Requirements............................................................................ 34
Hold Harmless........................................................................... 34
Reinstatement of Coverage............................................................... 35
Part Time Employees..................................................................... 35
Audit Rights............................................................................ 35
Availability of Benefits................................................................ 35
XVI JURY SERVICE............................................................................ 35
XVII BEREAVEMENT PAY......................................................................... 36
Definition.............................................................................. 36
Payment................................................................................. 36
XVIII BULLETIN BOARDS......................................................................... 36
Bulletin Boards......................................................................... 36
Posting of Notices...................................................................... 36
XIX MILITARY CLAUSE......................................................................... 37
XX EMPLOYEE BIRTHDAY PAY................................................................... 37
XXI LEGAL COUNSEL........................................................................... 37
XXII GROUP OPERATIONS........................................................................ 37
</TABLE>
-iv-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C>
XXIII MECHANIC AND MACHINIST APPRENTICE
TRAINING SCHEDULE AND PAY
RATE PROGRESSION SCALE.............................................................. 38
XXIV WORK WAIT............................................................................... 38
Work Wait............................................................................... 38
Electric Power Failure.................................................................. 39
XXV TEMPORARY EMPLOYEES..................................................................... 39
Temporary Jobs.......................................................................... 39
Temporaries............................................................................. 39
XXVI EQUAL EMPLOYMENT OPPORTUNITY............................................................ 39
XXVII MISCELLANEOUS........................................................................... 40
XXVIII SAVING CLAUSE........................................................................... 40
Separability............................................................................ 40
Federal and State Laws.................................................................. 40
XXIX SEVERANCE AND PLANT CLOSINGS............................................................ 40
XXX DURATION AND TERMINATION OF SUPPLEMENT.................................................. 41
Effective Dates......................................................................... 41
Entire Agreement........................................................................ 41
Modification or Termination............................................................. 41
XXXI CONTRACT RE-OPENER...................................................................... 41
SIGNATURES.............................................................................. 43
APPENDIX I & II......................................................................... 44
APPENDIX III............................................................................ 46
</TABLE>
-v-
<PAGE> 6
Language from Atlanta Supplement
Language from Master Agreement
AGREEMENT
This Agreement, made this 20th day of October, 1997, by and
between Simmons Company, Atlanta, Georgia (hereinafter referred to as the
Company) and the United Steelworkers of America, AFL, CIO, CLC (hereinafter
referred to as the Union) on behalf of its Local Union No. 2401, for and on
behalf of itself and the employees of said Company at its plant located at
Atlanta, Georgia.
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 Company and
the Union and, therefore, all Agreements or understandings concerning hours,
wages and working conditions between the Company the employees covered by this
contract are to be made by the Company 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.
1.02 EMPLOYEES COVERED. The persons covered by this contract include
all production employees of the Company described in Appendices 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.
1.03 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 later. All
employees who become members of
<PAGE> 7
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 required 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.
(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, or 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 section 7.08
of this Agreement.
(f) The provisions of this section shall be applicable
only to the extent permitted by applicable state and
federal law.
(g) No Union member 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 Steelworkers Union Executive Board 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 International
Secretary-Treasurer. This
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<PAGE> 8
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, claims, responsibility, damages 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 COMMITTEE MEETINGS. Department committee meetings or conferences
with the Company, if held during regular working hours, shall result in no loss
of pay to the employees.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The Company shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).
2.02 INTERVIEW AND HEARING. 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.
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 10:00 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 Company is not liable for any wage during such period.
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<PAGE> 9
2.03 GOOD FAITH DUTIES. 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 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (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.
2.05 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 2.04
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.
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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
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<PAGE> 10
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 3.01(C) above, the grievance shall be reduced to
writing on forms to be made available for such purpose, with each 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 two (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 (2) 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.
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 RESOLUTION BY DEFAULT. 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.
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<PAGE> 11
3.06 ARBITRATION OF DISPUTES. If the grievance is subject to
arbitration as provided herein and all conditions in Section 3.01 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 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
Union files its written request for arbitration pursuant to Section 3.06 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.
In the event the Union and the Company are unable to agree to
a base rate on a new classification as provided in Section 8.04, 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 AUTHORITY OF ARBITRATOR. 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.
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<PAGE> 12
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 III, page 46) 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.
4.02 OVERTIME HOURS.
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 8.06 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.
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<PAGE> 13
4.03 PAY RATE FOR SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work 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.
4.05 NO PYRAMIDING. 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.
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 this Agreement. In those five (5)
months, 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 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.
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.
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.
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<PAGE> 14
F. Employees are required to work on a daily basis until
the schedule is complete, up to ten (10) hours per
day, provided they have been notified on their
previous shift. Notice may be posted by Company on a
daily basis.
G. Overtime on Friday up to ten (10) hours will be
scheduled as mandatory overtime provided that these
employees are exempt from Saturday work.
4.06 SHIFT SCHEDULE. The following is the usual shift schedule which
may be varied by the Company 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 individuals involved.
Failure to give three (3) days notice for shift varying times will not release
the Company from payment of overtime premium.
A. The normal first shift schedule will be from 7:00
a.m. until 3:30 p.m. with a thirty (30) minute unpaid
lunch period staggered between 11:30 a.m. and 12:30
p.m.
B. The normal second shift will be from 3:30 p.m. until
12:00 midnight with a thirty (30) minute unpaid lunch
period from 7:30 p.m. to 8:00 p.m.
C. When 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
unpaid lunch period from 3:00 a.m. to 3:30 a.m.
4.07 REST PERIODS. There shall be two (2) ten (10) minute rest
periods daily.
First shift rest periods: (1) 9:30 a.m. to 9:40 a.m. (2) 2:00
p.m. to 2:10 p.m.
Second shift rest periods: (1) 5:30 p.m. to 5:40 p.m. (2) 9:20
p.m. to 9:30 p.m.
Third shift rest periods: (1) 1:30 a.m. to 1:40 a.m. (2) 5:20
a.m. to 5:30 a.m.
These rest periods and lunch periods will prevail unless
mutually agreed upon changes are made between the Union and
Management.
4.08 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.
4.09 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
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<PAGE> 15
be paid at average rate as computed in Section 8.06 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 fire, Act of God, Act of Public
Enemy, or because of conditions beyond the control of the Company.
4.10 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 without penalty of overtime premium.
4.11 SHIFT SENIORITY. Whenever more than one shift is necessary,
employees with seniority shall be allowed to choose the shift on which they will
work upon entering the job classification. However, the necessity for exceptions
shall be discussed between the Local Union Unit Chairperson or Unit Griever and
the department foreman.
4.12 REPORTING ABSENCES. If an employee is unable to report to work,
the employee must report his/her absence to the personnel office within the
first hour and one-half of his/her shift starting time for day-shift employees;
and within the first hour of his/her shift starting time for night shift
employees.
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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.
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<PAGE> 16
ARTICLE VII
-----------
SENIORITY
7.01 ACCUMULATION OF SENIORITY. The Company recognizes the principle of
seniority among its employees and agrees that all layoffs occasioned by lack of
work and recalls form layoffs shall be by seniority as herein provided.
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 as
provided herein.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period provided
in Section 7.08 and the leave request must be in
writing.
7.02 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged for just cause;
(c) When an employee is laid off longer than twelve (12)
months, except for right of recall as per section
7.04;
(d) When an 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 7.05;
(f) If an employee falsifies any information given in
connection with a leave of absence; and
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<PAGE> 17
(g) When an employee obtains other employment while on an
approved leave of absence.
7.03 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. When there is not
sufficient work for all employees, probationary
employees with less than sixty (60) days seniority,
shall first be laid off.
B. In the event of a layoff, the reduction will be by
classification and seniority, giving the affected
employee the right to bump one of the following at
the time of his/her layoff interview:
* the least senior employee in the
plant
* the least senior employee in Group
5
* the least senior employee in a job
class for which the laid off
employee was previously qualified
in
If an employee does not wish to bump they may be
placed on surplus labor.
Any employee laid off for lack of work shall have
his/her name placed on a surplus labor list. If an
employee's seniority has been broken his name shall
be removed from such list.
C. Each employee affected by the layoff will be given an
interview regarding bump, surplus and recall. It is
the responsibility of the employee to identify in
writing which job he/she wishes to be recalled for.
7.04 RIGHT OF RECALL
A. The Company recognizes the principle of seniority
(first laid off be the first recalled) in line will
the following.
B. The Company will return the most senior employee on
layoff to such employee's former job classification,
when an opening occurs in that classification, before
placing the job up for bid provided the employee has
specified in writing they would return to their
former classification during the layoff interview.
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<PAGE> 18
C. In the event a job is posted and there are no
bidders, the most senior employee on layoff will be
recalled for that job in line with information
provided in their layoff interview.
D. 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.
E. RETURN FROM SURPLUS LABOR. Return From Surplus Labor
- if due to Seniority Rules in Section 7.03 B. above,
an affected employee must go on surplus labor, the
same rules would apply returning to open jobs.
F. If an employee is laid off longer than 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
7.05 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 the receipt of notice to report will result
in the termination of seniority. Overnight letters to 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 the employee's
last known address shall solely be that of the Company.
7.06 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 7.05 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 the employee within the above five (5) days will mean forfeiture
of all seniority rights by the employee involved.
7.07 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 meet 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
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<PAGE> 19
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 benefits 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.
7.08 PROBATIONARY PERIOD. 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. 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 thirty (30) days of rehire.
7.09 BIDDING. Any employee with greater than 60 days seniority is
eligible to bid, except as noted in 7.07(A).
When it is necessary to fill a new job, such positions shall
be posted by the Company 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 the Company shall fill
this job with the qualified bidder having the greatest seniority. In the event
an employee with from sixty (60) days to six (6) months seniority is the
successful bidder, the company has the right to award or decline the bid. The
determination of qualifications shall be exclusively a right of the Company.
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 the Company will have the opportunity to
provide a suitable replacement.
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<PAGE> 20
D. Should the Company choose to withdraw a posted job that was
successfully bid on, that job cannot be posted for sixty (60)
calendar days. If posted prior to 60 days, the job will be
awarded per the original bids.
7.10 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 leaning curve, such employee may return to
his/her former job, if available. If not available,
such employee may:
* bump the least senior employee in
the plant
* bump the least senior employee in
Group 5
* bump the least senior in a job
class for which previously
qualified.
B. Employees may be disqualified from a job
classification for bona fide physical reason, in
which event they may bump the youngest in the plant
or go on surplus labor. The term "bona fide physical
reason" as used herein shall mean that the employee
has a permanent physical disability or condition that
prevents him/her from performing the job in a
satisfactory manner and such disability is verified
in writing by a licensed physician.
7.11 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 permitted to roll or bump the
youngest employee in Group V or be placed on surplus labor. Employees who have
been disqualified three (3) times will be terminated.
7.12 COMBINED CLASSIFICATIONS.
A. In an effort to provide more equal level of hours,
the Company may combine two (2) or three (3)
different job classifications.
B. 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.
7.13 TRAINING.
A. The Company will train senior employees that request
training in new jobs. Payment for training purposes
will be at the existing labor grade rate of the new
or old job, whichever is higher. When the employee
earns piecework, he/she shall receive such.
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<PAGE> 21
B. The Company has the right to train employees in any
particular job grouping provided such employees are
the youngest untrained in seniority.
7.14 REFRESHING OF SKILLS.
Refreshing of Skills will be paid as follows:
less than 30 days off the job = No training
30 to 60 days off the job = 8 hours training
60 days to 6 months off job = 16 hours training
excess of 6 months off job = 24 hours training
7.15 SKILL GROUP CLASSIFICATIONS.
NEW CLASSIFICATION STRUCTURE
FOR ATLANTA PLANT
<TABLE>
<CAPTION>
SKILL GROUP CLASSIFICATION DESIGNATION WEEKS OF TRAINING
- ----------- -------------------------- -----------------
<S> <C> <C>
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
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C> <C>
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
</TABLE>
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
7.16 APPROVED LEAVE. Approved leave requires at least three working
days notice. In the event of extreme emergency, an employee must call in to the
Human Resources Manager and request the leave. Documentation must be presented
the following day to the Human Resources Manager 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 2401 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 (1) week vacation will be eligible for one
(1) unpaid day per year;
Employees eligible for two (2) weeks vacation will be eligible for one
(1) paid day per year;
Employees eligible for three (3) weeks vacation will be eligible for
one (1) paid day and one (1) unpaid day per year;
Employees eligible for four (4) weeks vacation will be eligible for two
(2) paid days per year;
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<PAGE> 23
Approved Paid Leave will be reimbursed via the number of days
of paid 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.
7.17 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 the Company, may be
granted for a thirty (30) day period, subject to the Company's review at the end
of the thirty (30) day period.
7.18 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.
7.19 BUMPING (ROLLING) PRODUCTION AND MECHANICAL EMPLOYEES.
A. No production employee, pieceworker, or day worker
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 day worker.
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 in 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, 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.
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<PAGE> 24
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.
7.20 HIRING RATE & PROGRESSION. All new employees will be hired at
$8.00 per hour effective 10/16/97. Incentive employees will be paid hire rate or
level of productivity, whichever is greater until the end of their probationary
period. Hourly workers will be paid their hire rate until the end of their
probationary period, at which time they will be paid rate of the job.
7.21 WAR EMERGENCY. 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.
7.22 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 or at the time of their vacation, as the employee chooses.
ARTICLE VIII
------------
WAGES
8.01 HOURLY RATES. The Company and the Union have agreed upon the
hourly base rates as set forth in Appendix I and II combined by Skill Group.
8.02 GENERAL WAGE INCREASES.
A. A general wage increase of Thirty (30) Cents per hour
for all hourly employees and Thirty Cents per hour
for all incentive employees will be granted effective
October 16, 1997. For incentive employees the
increase will be applied to the previous quarterly
average and paid effective November 1, 1997. All
basic rates, all hourly rates and all labor grades
will be increased to reflect the increase.
B. A general wage increase of Thirty (30) Cents per hour
for all hourly employees and Thirty (30) Cents per
hour for all incentive employees will be granted
effective October 16, 1998. For incentive employees
the increase will be applied to the previous
quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor
grades will be increased to reflect the increase.
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<PAGE> 25
C. A general wage increase of Thirty (30) Cents per hour
for all hourly employees and Thirty (30) Cents per
hour for all incentive employees will be granted
effective October 16, 1999. For incentive employees
the increase will be applied to the previous
quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor
grades will be increased to reflect the increase.
D. A general wage increase of Thirty (30) Cents per hour
for all hourly employees and Thirty (30) Cents per
hour for all incentive employees will be granted
effective October 16, 2000. For incentive employees
the increase will be applied to the previous
quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor
grades will be increased to reflect the increase.
8.03 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
8.04 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). 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 of this agreement set forth in ARTICLE VII Section 7.09.
8.05 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 is greater than his/her earnings on
incentive or the day work rate for the work being performed. An employee will be
paid the rate of the job if there is no work in an employee's job classification
and they are offered work in another classification and accept such work.
No job may be filled by borrowed personnel for more than sixty
(60) days during any twelve (12) month period except by mutual Agreement between
the Company and the Union, except in situations in which the training period
exceeds sixty (60) days.
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<PAGE> 26
8.06 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 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 the worker is in a holiday or vacation status, or time
working any classification other than the worker's 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.
In the event an employee has not established an
average hourly rate due to the fact that the employee has not worked during the
immediately preceding calendar quarter, then the employee's average rate shall
be equal to the employee's average rate for the last quarter the employee
worked.
8.07 INJURED DURING WORK
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.
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<PAGE> 27
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
pyramiding on disability payments or workers'
compensation payments.
8.08 PAY SHORTAGES. Employees who establish a shortage in pay, due to
Company errors, 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. Special checks for pay shortages due to employee error, such
as not turning in piecework paperwork at end of shift, will not be granted.
ARTICLE IX
----------
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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 judgment, such a plan is
practicable. When an incentive program is implemented the Company will provide
the incentive earnings opportunity for the Plant as a whole that will
approximate the incentive earnings opportunity which existed prior to the
implementation of the new incentive program. 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.
9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the supervisor 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 thirty (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/her average hourly rate until
a new standard is submitted.
The Company shall select an average operator or as close to
average as possible, for time study methods analysis. Average is defined as an
operator working at a normal pace, under normal working conditions, with the
skills required for the specific job. Until a new standard or
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<PAGE> 28
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 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
-----
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing
a SIXTY (60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%)
rating increased by a ten percent (10%) rest, fatigue, and delay allowance
(effective 10/16/94, the RFD factor on new or revised standards shall be twelve
and one-half percent (12.5%)).
Basic Production Expectance = 60 MINUTE HOUR
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on new
or revised standards after
10/16/94)
Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
Opportunity Offered by Above Formula
------------------------------------
.1362 SAH = TSM OF 8.1738
---------------
60 Minute Hour
7.3405 Pieces per hour
<TABLE>
<S> <C>
Basic Production Expectancy = 60 MINUTE HOUR
(Cycle base minutes) 7.4307 (100% Time/Piece) plus
.7431 (10% RFD Allowance)
------
TSM 8.1731 (Total Standard Minutes)
</TABLE>
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
----
Base Rate 6.18 = 125% incentive
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<PAGE> 29
Earnings opportunity at +25% incentive pace
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH standard is
computed, it shall be submitted in writing to the
operator and become effective immediately. this
computation may consist on 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 standard 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.
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the Company 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 any operation in the degree the change in the task
affects the standard upward or downward.
Where the change represents less than five percent (5%) of the
cycle base minutes, the Company 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, the Company 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 affected by change. Similarly, it is
contemplated that
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<PAGE> 30
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 SAH 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
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 must be a qualified time study engineer.
The
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<PAGE> 31
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.
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. When the Union desires to have a
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:
A. 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.
B. The Company designee will respond by either selecting
from the Union list or by offering alternative dates.
C. Once the above two (2) designees complete
arrangements, they will notify their respective local
Company 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 the attendant difficulties occasioned by
disagreement over pace determination, the Company will, whenever feasible, set
incentive job standards by use of pre-determined, 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
---------
PAID HOLIDAYS
10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:
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<PAGE> 32
New Years Day
Martin Luther King's Birthday
Good Friday
Memorial Day
Fourth of July
Labor Day
Wednesday before Thanksgiving
Thanksgiving Day
Friday after Thanksgiving
Day Last work day before Christmas
Christmas Day
10.02 ELIGIBILITY. In order to receive holiday pay, an employee must
have sixty (60) days or more of service and must have worked the full scheduled
day before and after the holiday except in case of sickness except in the case
of sickness to the individual and evidence of such sickness supported by a
doctor's certificate and unless excused by the Company.
10.03 SICK LEAVE . When an eligible employee is on sick leave, he/she
shall receive pay for one such holiday. An employee on an approved leave of
absence as described in Section 13.01 of this Agreement will not receive holiday
pay.
10.04 HOLIDAY PAY. Holiday pay shall be included in the pay check for
the pay period in which the holiday falls.
10.05 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
falls within an eligible employee's approved vacation period and the employee is
absent from work during his regularly scheduled work week because of such
vacation, the employee shall be paid for such holiday in addition to vacation
pay and shall have such day off.
10.06 MULTIPLE HOLIDAYS ON SAME DAY. 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.
10.07 HOLIDAYS ON SUNDAY. 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.
10.08 HOLIDAYS ON SATURDAY. The parties agree that whenever a holiday
falls on 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.
10.09 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in section 8.06 for incentive workers;
day workers will be paid at eight
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<PAGE> 33
(8) times the employees regular day work hourly rate. Shift premium shall be
included in holiday pay computation for eligible employees. The following
conditions apply to receive holiday pay:
A. 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.
B. The time allowed for holidays and not actually worked by
employees shall be included in determining the number of hours
worked during the week with respect to overtime compensation.
10.10 OVERTIME AND PREMIUM PAY. For purposes 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.
10.11 PLANT SHUTDOWN. 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, eligible employees will
receive compensation for the paid holiday involved.
10.12 In conformance with Federal law enacted in 1968 and effective
1/1/71, certain Mondays shall be observed as legal holidays - Memorial Day (last
Monday in May) and Labor Day (first Monday in September).
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The Company will grant paid vacation to employees 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
continuos service shall have the option of taking a
fourth week of vacation in lieu of the seniority
bonus
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<PAGE> 34
(section 7.22) 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 circumstances:
(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) The Company will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
11.02 PAY RATE. 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.
11.03 PLANT SHUTDOWN AND STAGGERED VACATION. The Company shall notify
the Union, no later than January 1 of each vacation year, whether the plant will
shut down or whether there shall be staggered vacation on an individual employee
basis. Prior to January 1 of each 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, and not required to work during the shutdown, will be
furloughed during the plant shutdown.
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. 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 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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
third 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 cases
of third or fourth week vacations during the period
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<PAGE> 35
of May, June, July, August and September may occasionally be arranged when the
Staff Representative or Local Union Unit Chairperson can mutually agree to such
with the Operations Manager or the Labor Relations Specialist.
11.06 NO ACCUMULATION. 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. Shift premium will be included in vacation pay
computation for employees otherwise eligible.
ARTICLE XII
-----------
INVENTORY WORK
12.01 PREFERENCE. In selecting the employees needed for inventory
purposes, preference will be given to those employees best suited to do the
work. Division superintendents may assign unqualified day workers to material
handling, cleaning, etc.
12.02 PAY RATE. Day workers will be paid the rate of their
classification for all inventory work.
12.03 PIECEWORKERS. 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 XIII
------------
LEAVE OF ABSENCE
13.01 LEAVE. It is mutually agreed that any employee asking for a leave
of absence will be granted such leave at the exclusive discretion of the
Company. 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 the
Company 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 the denial is unreasonable. The
Company agrees to give due consideration to Union request.
13.02 RETURN. On the return of an employee from a leave of absence,
he/she shall be returned to work consistent with Section 7.04 E.
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<PAGE> 36
ARTICLE XIV
-----------
UIU PENSION TRUST
UIU 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 Company 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 (10th) day of each month, to the UIU
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 Company shall transmit to said Trust, with each
contribution, a "Contribution Report," on the form furnished by the Trust which
the Company shall report the names, hire and termination dates as applicable,
and total gross earnings of all such employees during such calendar month. The
Company further agrees to supply to the Trust such 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
(12) months shall be considered. Thereafter, the Company 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 UIU Pension
Trust in which event the Company 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 Company'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.
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<PAGE> 37
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 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 Company's aforesaid contributions to
the Trust as herein above provided and for so long as the Company's
participation in the Trust is accepted by the Trustees, the Trustees will,
beginning with the date of receipt by the Trust of the Company's first said
contribution and continuing for such part of the duration of this Agreement as
the Company 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 Company'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 UIU Pension Trust, but at a cost of the Company not to
exceed to the cost of the contribution hereunder.
ARTICLE XV
----------
THE UNITED STEELWORKERS OF AMERICA HEALTH AND WELFARE FUND
15.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.
15.02 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 Company 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 11/1/97
<TABLE>
<CAPTION>
THE UNITED Steelworker Employee
of America Plan Company Contribution Total
------- -----
<S> <C> <C> <C>
Single $209.02 $ 12.97 $221.99
Single Plus One 349.00 22.69 371.69
Family 445.53 31.21 476.74
</TABLE>
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<PAGE> 38
The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any increase in total insurance premium costs in the second
year which exceeds five (5%) percent over the total insurance premium costs in
the first year will give the Company the option to cease participation in the
USWA Health and Welfare Fund. This same option will apply if the total insurance
premium costs in the third year exceed by more than five (5%) percent the total
insurance premium costs from the second year and similarly if the fourth year
exceeds the third year by more than five (5%) percent. Any contributions or
increases or decreases in insurance premium contribution costs in the second,
third, and or fourth years will be shared in the same ratio of eighty nine (89%)
percent employer and eleven (11%) percent employee. If the Company opts out, the
Company and the Union reserve the right to review the plan and mutually
determine continuation of coverage through a plan offering comparable coverage.
15.03 ELIGIBILITY. Eligible employees are all 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; or
C. Attendance at Union or fund Convention, seminar or
grievance hearing.
The Company is not required to make a contribution on an
employee whose employment is terminated during the wage month.
15.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the Company 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 Company agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the Company contributions.
Employees who refuse or neglect to provide the Company 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 Company with the required written authorization but because of
lack of wages the Company is unable to deduct the employee contribution for a
particular benefit month, it is the obligation of the employee to pay, in a
timely fashion, to the Company 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.
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<PAGE> 39
15.05 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 $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers of America Health and Welfare Fund Trust.
15.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the Company
on the tenth (10th) day of the benefit month, commencing with the month of
November 1997 and each and every month thereafter so long as this Agreement is
in force.
15.07 COVERAGE.
A. HOSPITAL AND MEDICAL BENEFITS. Coverage for newly
hired employees and any named dependents will begin
on the first (1st) day of the month following
completion of thirty (30) days of employment.
Previously covered employees shall be covered the
first (1st) day of the calendar month following their
return to work.
B. DISABILITY BENEFITS. Newly hired employees shall be
eligible for 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.
15.08 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 thirty-one (31) days of birth.
15.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company 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 Company 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.
15.10 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America Health and
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<PAGE> 40
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 United Steelworkers of
America Health and Welfare Fund to which the Company is not a signatory party.
15.11 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 Company are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.
15.12 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 Company
pay a contribution for such employees. Nothing in this clause shall be construed
as an affirmation or negation of the Company's right to hire part time
employees.
15.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers of America Health and Welfare Fund periodically.
15.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company'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 Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.
ARTICLE XVI
-----------
JURY SERVICE
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 earnings as computed in Section 8.06 if an
incentive worker or the hourly day work rate for the
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<PAGE> 41
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 the 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 XVII
------------
BEREAVEMENT PAY
17.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) days for time lost due to death in the immediate family. Immediate
family is defined as mother, mother-in-law, father, father-in-law, grandparents,
brother, half brother, sister, half sister, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the Company
with reasonable proof of death and relationship.
17.02 PAYMENT. The pay for such loss of time from work will be for
eight (8) 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 XVIII
-------------
BULLETIN BOARDS
18.01 BULLETIN BOARDS. The Union may put up bulletin boards at
locations specified by the Company for the following non-controversial Union
announcements:
A. Notice of Union recreational or social affairs;
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. Notices pertaining to the UIU Health and Welfare and
UIU Pension Programs.
18.02 POSTING OF NOTICES. 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
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<PAGE> 42
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 XIX
-----------
MILITARY CLAUSE
The Company agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.
ARTICLE XX
----------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday
eligibility will receive an additional eight (8) hours pay (computed as per
Section 10.09) 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
abovementioned 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.
Employees who are eligible for birthday pay and elect to
receive pay in lieu of a day off by January 1 will receive a $100 birthday
check, exclusive of payroll deductions. If not elected by January 15, the
appropriate clauses of the contract will apply.
ARTICLE XXI
-----------
LEGAL COUNSEL
Whenever the Union or the Company desires to have outside legal counsel
present at any meeting between the Union Bargaining Committee and the Company,
it shall notify the other party.
ARTICLE XXII
------------
GROUP OPERATIONS
In group or team operations, employees will not split their earnings,
unless it is mutually agreed between them that they do so.
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<PAGE> 43
ARTICLE XXIII
MECHANIC & MACHINIST APPRENTICE TRAINING SCHEDULE AND PAY RATE PROGRESSION SCALE
Effective October 16, 1997
<TABLE>
<S> <C> <C>
Hired at $10.90
After 30 days increased $11.10 if satisfactory
After 90 days increased $11.20 if satisfactory
After 6 months increased $11.30 if satisfactory
After 12 months increased $11.40 if satisfactory
After 18 months increased $11.50 if satisfactory
After 2 years increased $11.60 if satisfactory
After 30 months top of bracket $11.90 if satisfactory
</TABLE>
After demonstrating the ability to fill in for experienced
mechanics in all phases of operation, pay will increase to $13.90/hr. on October
16, 1997; to $14.20/hr. on October 16, 1998; to $14.50/hr. on October 16, 1999;
and to $14.80 on October 16, 2000. All progression steps will be increased by
the same thirty (30) cents on the same dates listed above.
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.
ARTICLE XXIV
------------
WORK WAIT
24.01 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 Pay provision of this agreement in the
event of a break down of electric power outside
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<PAGE> 44
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.
24.02 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 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 be paid at their base
rate 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 lost
time in accordance with Section 24.01 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 resume work.
ARTICLE XXV
-----------
TEMPORARY EMPLOYEES
25.01 TEMPORARY JOBS. Temporary jobs will only be posted in the event
of illness to a full time employee and if said employee is on an authorized sick
leave.
25.02 TEMPORARIES. The Company may use a maximum of ten (10)
temporaries or part-time employees at one time for no more than sixty (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 sixty (60) days the
position is still needed, the job will be posted for bidding.
ARTICLE XXVI
------------
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), disability, 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,
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<PAGE> 45
religion, sex, national origin, age, handicap, or veteran's 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 XXVII
-------------
MISCELLANEOUS
A. CAMERAS. Cameras will be used ONLY for appropriate security
measures.
B. Safety and Health Committee. The Company and the Union agree
to establish a joint safety and health committee consisting of
four (4) representatives from each side. One of the Union
representatives will be the Unit Chairperson. The Committee
will meet quarterly and will recommend establishment and
implementation of criteria for maintaining a safe and healthy
workplace. The Company will compensate the Union
representatives for up to one (1) hour at their average rate
of pay for attendance at the meetings.
ARTICLE XXVIII
--------------
SAVING CLAUSE
28.01 SEPARABILITY. If any provision of this 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.
28.02 FEDERAL AND STATE LAWS. 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 XXIX
------------
SEVERANCE AND PLANT CLOSINGS
In the event the Company decides to close this facility
presently organized by the United Steelworkers, sixty (60) day notice of such
event will be given to the District Director of the United Steelworkers of
America. Those employees affected by the plant closing shall continue to be
covered under their existing USWA Health and Welfare Fund benefits as outlined
in Article XV
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<PAGE> 46
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. .
ARTICLE XXX
-----------
DURATION AND TERMINATION OF SUPPLEMENT
30.01 EFFECTIVE DATES. This Agreement shall be in full force and effect
from October 16, 1997 until October 15, 2001.
30.02 ENTIRE AGREEMENT. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this AGREEMENT and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.
30.03 MODIFICATION OR TERMINATION. This AGREEMENT, when signed by the
officers of the COMPANY and the UNION, shall become effective as described above
for a period of four (4) 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.
ARTICLE XXXI
------------
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the
term of this Agreement. The Plan is called "Pay Plus". Certain features of the
Plan remain undetermined as of October 15, 1997. Therefore, the parties agree
that during the term of this Agreement there will be a limited re-opener
regarding aspects of the Plan. The Company will notify the Union not less than
forty-five (45) days prior to the implementation date of the Pay Plus Plan at
the Atlanta facility. During this forty-five (45) days period, the Company and
Union will meet to discuss such Pay Plus matters as (but not limited to) base
rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.
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<PAGE> 47
Notwithstanding Article V, if agreement is not reached
regarding the matters to be discussed during the forty-five (45) days or
extension thereof, the parties are free to exercise their rights to engage in
activity in support of their respective positions. In the case of the Union this
shall include, but not be limited to, a strike or other legal means in support
of its position. In the case of the Company this shall include, but not be
limited to, implementation of the Plan, a lockout, and/or in the case of a
strike, the hiring of replacements. The right to strike shall not give rise to a
sympathy strike in support of employees at other Simmons plants where the Pay
Plus Plan is implemented or in the process of being implemented. Further, the
Union agrees to provide a ten (10) day written notice prior to the commencement
of a strike; and the Company agrees to provide a ten (10) day written notice
prior to the commencement of a lockout.
Finally, nothing in this re-opener provision should be
construed as limiting the Company's rights under Article IX.
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<PAGE> 48
IN WITNESS WHEREOF, the parties hereunto set their hands and
seals as hereinbefore stated, this day of , 1998.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #2401
/s/ George F. Becker
- ------------------------------------- --------------------------------
George F. Becker Company
International President
/s/ Leo W. Gerard By: /s/ Ken Barton
- ------------------------------------ ----------------------------
Leo W. Gerard, International
Secretary/Treasurer
/s/ Richard H. Davis
- ------------------------------------
Richard H. Davis, International
Vice-President Administration
/s/ Leon Lynch
- ------------------------------------
Leon Lynch, International
Vice-President, Human Affairs
/s/ Victoria Key
- ------------------------------------
Victoria Key, Staff Representative
Coordinator
/s/ Homer Wilson
- ------------------------------------
District Director
- ------------------------------------
- ------------------------------------
/s/ Thomas E. Pittman
- ------------------------------------
Committee
- ------------------------------------
Committee
- ------------------------------------
Committee
- ------------------------------------
Committee
SIMMONS COMPANY ATLANTA PLANT
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<PAGE> 49
CLASSIFICATION STRUCTURE
EFFECTIVE OCTOBER 16, 1997
APPENDIX I AND APPENDIX II
<TABLE>
<CAPTION>
SKILL CLASSIFICATION
GROUP DESIGNATION 10/16/97 10/16/98 10/16/99 10/16/00
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
I. Cutter DW $ 9.97 $10.27 $10.57 $10.87
Slitter DW $ 9.97 $10.27 $10.57 $10.87
Overcast Borders DW $10.55 $10.85 $11.15 $11.45
Incentive $ 8.93 $ 9.23 $ 9.53 $ 9.83
II. Box Spring Sewing INC $ 8.79 $ 9.03 $ 9.39 $ 9.69
Flange Sewing INC $ 8.93 $ 9.23 $ 9.53 $ 9.83
Label Sewing INC $ 8.93 $ 9.23 $ 9.53 $ 9.83
Quilt Machine INC $ 8.91 $ 9.21 $ 9.51 $ 9.81
Bechik INC $ 9.28 $ 9.58 $ 9.88 $10.18
Pillowtop Sewing INC $ 8.93 $ 9.23 $ 9.53 $ 9.83
Border Quilt Machine DW $10.55 $10.85 $11.15 $11.45
Incentive $8.93 $ 9.23 $ 9.53 $ 9.83
III. Closer INC $ 9.43 $ 9.73 $10.03 $10.33
Hog Ring INC $ 9.47 $ 9.77 $10.07 $10.37
IV. Wood Frame INC $ 9.38 $ 9.68 $ 9.98 $10.28
Top Off INC $ 9.09 $ 9.39 $ 9.69 $ 9.99
Pre-Load INC $ 9.08 $ 9.38 $ 9.68 $ 9.98
Upholstery INC $ 9.72 $10.02 $10.32 $10.62
V. Inspection DW $ 9.28 $ 9.58 $ 9.88 $10.18
Material Handler DW $ 9.08 $ 9.38 $ 9.68 $ 9.98
Repair DW $ 9.30 $ 9.60 $ 9.90 $10.20
Shipping DW $10.10 $10.40 $10.70 $11.00
Receiving DW $ 9.50 $ 9.80 $10.10 $10.40
Sweeper DW $ 9.05 $ 9.35 $ 9.65 $ 9.95
Packing/Inspection DW $10.50 $10.80 $11.10 $11.40
Lead Person DW $ 9.33 $ 9.63 $ 9.93 $10.23
VI. Mechanic DW $13.90 $14.20 $14.50 $14.80
Lead Mechanic DW $14.10 $14.40 $14.70 $15.00
VII. Coil Machine Oprt INC $ 8.94 $ 9.24 $ 9.54 $ 9.84
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C>
Hot Melt INC $ 9.09 $ 9.39 $ 9.69 $ 9.99
</TABLE>
The following classifications will be eliminated via attrition
(bid off, retirement, quit, etc.). The incumbents will not be replaced in these
specific classifications. This will serve to eliminate memorandums of agreement
which created these "red circle" rates:
<TABLE>
<S> <C> <C>
Finish & Inspect Beautyrest Constructions Harry Stokley Sr. $12.10
Repair Mattress Finish Ed Casselberry $12.10
Lead Person Quilt Ronald Davis $10.10
Lead Person Cut & Sew Liz Johnson $10.10
Returns Lead Person Jimmie Copeland $10.10
Lead Person Receiving Roy Cody $10.90
Repair Quilt Janie Perez $ 9.45
Bailer/Sweeper/Machine Operator Steve Jones $ 9.50
Lead Person Pre-Load John Anderson $10.10
Lead Person Pre-Load Donald Brooks $10.10
</TABLE>
-45-
<PAGE> 51
ATLANTA
-------
APPENDIX III
------------
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
Richard Adelman
Jack Clarke
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
-46-
<PAGE> 1
Exhibit 10.15
INDEX
<TABLE>
<CAPTION>
Article Item Page Number
-----------
<S> <C>
I RECOGNITION AND UNION SECURITY................................................................03
II DISCIPLINARY PROCEDURE........................................................................06
III GRIEVANCE PROCEDURE AND ARBITRATION...........................................................07
IV HOURS OF WORK AND PREMIUM PAY.................................................................13
V NO STRIKE - NO LOCKOUT........................................................................17
VI MANAGEMENT RIGHTS CLAUSE......................................................................18
VII SENIORITY--LAYOFF AND RECALL..................................................................18
VIII WAGES.........................................................................................30
IX STANDARD ALLOWED HOURS........................................................................35
X HOLIDAYS......................................................................................41
XI PAID VACATIONS................................................................................45
XII U.I.U PENSION TRUST...........................................................................49
XIII UIU HEALTH AND WELFARE FUND...................................................................51
XIV JURY SERVICE..................................................................................56
XV BEREAVEMENT PAY...............................................................................56
XVI BULLETIN BOARDS...............................................................................57
XVII MILITARY CLAUSE...............................................................................58
XVIII CONTROLLING AGREEMENT.........................................................................58
XIX TRAINING PERIOD...............................................................................58
XX PAY DURING TREATMENT OF WORK-CONNECTED INJURIES...............................................59
XXI EQUAL EMPLOYMENT OPPORTUNITY..................................................................60
XXII SAVING CLAUSE.................................................................................61
XXIII EMPLOYEE BIRTHDAY PAY.........................................................................61
XXIV DURATION AND TERMINATION......................................................................62
XXV MISCELLANEOUS.................................................................................63
XXVI SEVERANCE AND PLANT CLOSINGS..................................................................63
SIGNATURES...........................................................................................64
APPENDIX A DISCIPLINARY POLICY.....................................................................65
SCHEDULE "A".........................................................................................66
SCHEDULE "B".........................................................................................67
ADDENDUM.............................................................................................68
</TABLE>
-2-
<PAGE> 2
SHAWNEE, KANSAS LABOR AGREEMENT
THIS AGREEMENT, entered into this 23rd day of April 1997, by
and between SIMMONS COMPANY, a Delaware corporation, for and on behalf of its
plant at Shawnee, Kansas, hereinafter referred to as the COMPANY.
and
THE UNITED STEEL WORKERS OF AMERICA, A.F.L., C.I.O., C.L.C.,
on behalf of its members in Local Union 173. in the Shawnee, Kansas Plant 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.
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
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<PAGE> 3
connection with all its operations in the Shawnee, Kansas plant covered by this
Shawnee Labor Agreement, (SKLA) excluding executives, sales employees, office
workers, supervisors, foremen, timekeepers mechanics or machinist .
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.
(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
-4-
<PAGE> 4
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.
(f) The provisions of this section shall be applicable only to
the extent permitted by applicable state and federal
legislation.
(g) No UNION member 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 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.
-5-
<PAGE> 5
1.05 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.
1.06 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.
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.
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.
-6-
<PAGE> 6
A discharged employee shall be entitled to a hearing before
the COMPANY AND THE UNION GRIEVANCE 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 Company 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.
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.
-7-
<PAGE> 7
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.
D. UNION/MANAGEMENT MEETINGS - METHOD OF PAYMENT
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.
E. 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.
-8-
<PAGE> 8
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 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.
-9-
<PAGE> 9
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 the Federal Mediation and Conciliation Service 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.
-10-
<PAGE> 10
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.
-11-
<PAGE> 11
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 Federal Mediation Conciliation
Service to request the first available Arbitrator from a National pre-agreed
panel of seven (7) arbitrators 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.
-12-
<PAGE> 12
4.02 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 a.m. 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 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.
4.03 LUNCH PERIOD. There will be a thirty (30) minute unpaid lunch
period. Whenever three (3) shifts are necessary, each shift shall be paid for
eight (8) hours work with the thirty (30)
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<PAGE> 13
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.
4.04 REST PERIOD. All employees will be allowed two (2) ten (10)
minute rest periods daily.
4.05 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.
4.06 OVERTIME. All work performed in excess of forty (40) hours in
one (1) week or eight (8) hours in one (1) day, provided the employee works all
scheduled hours each day, Monday through Friday unless contractually excused or
excused by management, 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.
4.07 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 determined by the Company. Work
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<PAGE> 14
in excess of 8 hours on Friday will be addressed by the
parties to this agreement. In those five (5) months
determined by the Company, 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.
4.08 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.
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.
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<PAGE> 15
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.
4.09 The COMPANY agrees, insofar as feasible, to divide reasonably
equally the available work among qualified employees who constitute the various
classifications.
4.10 (a) SHIFT SCHEDULE. The shift schedule language
described in this Agreement will be modified t
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.
(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.
4.11 SHIFT PREMIUMS. Employees assigned to work on the second or
third shift shall be paid a shift premium of fifty (50) cents per hour.
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<PAGE> 16
4.12 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 fire, act of
God, act of public enemy or because of conditions beyond the control of the
COMPANY.
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,
including but not limited to a sympathy 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
------------------------------
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<PAGE> 17
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. There shall be a ninety (90) day
probationary period for incentive workers. During
the probationary period an employee may be
discharged at the discretion of the COMPANY with or
without cause.
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.
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
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<PAGE> 18
renewal thereof. The UNION shall give the COMPANY
two (2) weeks prior notice in such situation.
(e) The manner of return to employment is set forth
below.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period and the
leave must be in writing.
7.04 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When the employee resigns.
(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 this
Agreement.
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.
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<PAGE> 19
7.07 LAYOFF NOTICES. Definitions, determinations and notices of
layoffs are set forth in this agreement.
7.08 SURPLUS LABOR LIST. Any employee laid off for lack of work
shall have his/her name placed on a surplus labor list. 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.
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 this Agreement.
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.
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<PAGE> 20
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.
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.
Wherever a conflict exists between the preceding Sections 7.01
through 7.14 and the following Sections 7.15 through 7.30, Sections 7.15 through
7.30 will control.
7.15 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.
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<PAGE> 21
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.
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.
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<PAGE> 22
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.
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<PAGE> 23
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
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.
SHAWNEE, KANSAS 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
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<PAGE> 24
III. MATTRESS
A. Close Mattress
B. Hog Ring
C. Tuft
D. Pack Matts. & Box Springs
IV. BOX SPRING
A. Top-Off Assembler
B. Pre-Load
C. Upholster Box Spring
V. Beautyrest Coil Assembly
A. H.M.B. Operator
B. Ultra-Sonic Operator
VI. INDIRECT LABOR
A. Inspection
B. Material Handlers
C. Shipping
D. Receiving
E. Sweepers
F. Repair
7.16 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
classification, he/she must return to that classification.
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<PAGE> 25
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 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.
7.17 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.
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<PAGE> 26
7.18 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 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.
7.19 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.
7.20 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.
7.21 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.
7.22 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.
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<PAGE> 27
7.23 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.
7.24 Any employee who secures a leave of absence for illness in
accordance with Section 7.03 of the SKLA 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.
7.25 (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.
7.25 (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.
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<PAGE> 28
7.26 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.
- 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.
7.27 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.
7.28 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.
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<PAGE> 29
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 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.
7.29 ACTIVE SENIORITY LIST. The COMPANY will post on the bulletin
board the active seniority list of employees and will revise same quarterly.
7.30 LEAVE OF ABSENCE. 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
------------
WAGES
-----
8.01 A general wage increase will be negotiated between the
Steelworkers and Simmons during multi-plant bargaining. The amount of any
increase and the effective date of any such increase will be made applicable to
this agreement as appropriate during the term of this Agreement.
8.02 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.
8.03 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.
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<PAGE> 30
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 this Agreement.
8.04 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.
8.05 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 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.
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<PAGE> 31
8.06 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.
Where ever there is a conflict between the preceding 8.01 through
8.06 and the following Sections 8.07 through 8.14, Sections 8.07 through 8.14
will control.
8.07 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.
8.08 TRAINING AND HIRING RATES
<TABLE>
<CAPTION>
TRAINING
RATE FOR
HIRING HIRING INCENTIVE
RATE RATE (PART TIME) WORKERS
---- ---- ----------- -------
<S> <C> <C> <C>
$6.00 $6.50* $6.00
</TABLE>
*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(cent)) 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 worker's
classification rate, so that the classification rate will be reached by the end
of three (3) months, except for the following classifications:
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<PAGE> 32
<TABLE>
<CAPTION>
TIME REQUIRED
CLASSIFICATION TO REACH RATE
<S> <C>
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
</TABLE>
8.09 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.
8.10 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.
8.11 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.
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
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<PAGE> 33
COMPANY does not instruct any employee within one (1) 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.
8.12 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.
8.13 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.
8.14 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.
8.15 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.
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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.
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/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
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<PAGE> 35
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%.)
<TABLE>
<S> <C>
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
----
</TABLE>
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<PAGE> 36
Base rate 6.18 = 125% Incentive
Earnings Opportunity at +25% Incentive Pace.
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.
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<PAGE> 37
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
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<PAGE> 38
(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.
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<PAGE> 39
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 the attendant difficulties occasioned
by disagreement over pace determination, the COMPANY will,
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<PAGE> 40
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.
INTRODUCTION OF NEW PAY PLAN it is understood that shortly
after occupying the Shawnee, Kansas facility the company will introduce a new
production and pay plan referred to as UNITE. The company reserves the exclusive
right to introduce such a production and pay plan. However, the company will
discuss with the union the components and structure of the plan in an effort to
reach agreement. Nothing in this agreement shall be construed or interpreted as
precluding the company from implementing the UNITE program even if agreement is
not reached between the parties. Furthermore, the commitment to discuss the
UNITE program shall not give rise to the right of the Union to strike. At the
point in time the UNITE plan is implemented, all provisions of Article IX that
are inconsistent or in conflict with the UNITE plan will be null and void and of
no force or effect. It is further understood that at the expiration of this
agreement the term and conditions of the UNITE program shall be negotiable.
ARTICLE X
---------
10.01 The following paid holidays shall be celebrated:
New Year's Day Independence Day
Birthday of Martin Thanksgiving Day
Luther King, Jr. Day following Thanksgiving day
Memorial Day Last working before Christmas
Good Friday Christmas Day
Independence Day Day following Christmas Day
10.02 Holiday pay will be paid to employees provided they meet all
of the following conditions:
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<PAGE> 41
(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
(c) The employee must have worked the last scheduled
work day prior to and the next scheduled work day
after such holiday.
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 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
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<PAGE> 42
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).
Wherever there is a conflict between the preceding sections 10.01
through 10.10 and the following sections 10.11 through 10.17, Sections 10.11
through 10.19 will control.
10.11 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.
10.12 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.
10.13 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.
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<PAGE> 43
10.14 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.
10.15 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.
10.16 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 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.
10.17 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:
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<PAGE> 44
(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
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 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.
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<PAGE> 45
(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 1979-1982
Upholsterer's Agreement.
(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 The COMPANY can freely choose which particular weeks, if
any, it will shut down for vacation purposes.
11.03 (a) The COMPANY shall notify the UNION, no later than
January 1st of each vacation year, whether the 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.
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<PAGE> 46
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 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.
11.08 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 this. 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.
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<PAGE> 47
11.09 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.
11.10 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.
11.11 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.
11.12 COMPANY agrees that an employee will not be required to work
Saturday or Sunday immediately preceding the start of his/her vacation.
11.13 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 holidays for the balance of the
quarter during which their averages current at the time of the reductions are in
effect.
Wherever there is a conflict between the preceding section 11.01
though 11.07 and the following sections ll.08 to 11.13, the sections 11.08 to
11.13 shall prevail.
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<PAGE> 48
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 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.
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<PAGE> 49
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 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.
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<PAGE> 50
12.02 NEGOTIATED BENEFIT OR CONTRIBUTION CHANGES It is understood
that future negotiations between United Steel Workers and Simmons Company will
result in some benefit and contribution changes. Those changes and the effective
date of those changes will be applicable to this agreement.
ARTICLE XIII
------------
U.I.U. HEALTH AND WELFARE FUND
------------------------------
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
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.
<TABLE>
<CAPTION>
EFFECTIVE 11/1/94
-----------------
UIU PLAN COMPANY UNION TOTAL
-------- ------- ----- -----
<S> <C> <C> <C>
Single $ 200.76 $ 25.24 $226.00
Single Plus One 363.13 43.87 407.00
Family 469.58 60.42 530.00
DENTAL PLAN COMPANY UNION TOTAL
----------- ------- ----- -----
Single $ 6.30 $ .70 $ 7.00
Single Plus One 13.50 1.50 15.00
Family 18.00 2.00 20.00
</TABLE>
The Employer and the Union agree that in the event of an increase
in the above stated premiums in 1995 and 1996, the company and the employee will
share proportionately in the
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<PAGE> 51
increase up to 6.5 % ( percent) each year at the same percentage of premium.
Should either plan premium increase exceed 6.5 % (percent), 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. Contribution rates will be negotiated in the future and any changes in
the contribution rates and the effective dates of those changes will be
applicable to this agreement.
13.03 - ELIGIBILITY
Eligible employees are all 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.
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.
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<PAGE> 52
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 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 May, 1997, 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.
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(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
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
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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.
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 right 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
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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.
13.15 NEGOTIATED BENEFIT OR CONTRIBUTION CHANGES It is understood
that future negotiations between United Steel Workers and Simmons Company will
result in some benefit and contribution changes. Those changes and the effective
date of those changes will be applicable to this agreement.
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 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
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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;
(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
------------
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MILITARY CLAUSE
---------------
17.01 The COMPANY agrees to comply with all applicable laws
relating to re-employment rights of employees called for military duty.
ARTICLE XVIII
-------------
CONTROLLING AGREEMENT
---------------------
18.01 The parties agree that this agreement supersedes and
replaces an agreement referred to as the Master Multi-plant Working Agreement.
No terms affecting wages, hours or working conditions from the Master
Multi-plant Working Agreement shall be binding on the parties unless expressly
agreed to in this agreement. Further, no bargaining requirements or practices
embodied in the Master Multi-plant Working Agreement are binding on the parties
to this agreement. Neither party will require or request of the other party
bargaining as part of a multi-plant bargaining process.
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 this agreement 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 this Agreement.
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.
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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.
(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.
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<PAGE> 59
(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
---
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 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.
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<PAGE> 60
ARTICLE XXII
----
SAVING CLAUSE
-------------
22.01 If any provision of this Shawnee, Kansas Labor Agreement is
invalid or illegal, or declared inoperative or invalid, then such prevision(s)
shall be considered to be deleted in its entirety and the remaining provisions
of the agreement shall remain 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 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.
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.
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<PAGE> 61
ARTICLE XXIV
------------
DURATION AND TERMINATION OF CONTRACT
------------------------------------
24.01 This AGREEMENT shall be in full force and effect from April
23, 1997 until April 22, 1999.
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 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.
24.03 This AGREEMENT, shall become effective as described above
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
-62-
<PAGE> 62
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.
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 this facility,
sixty (60) day notice of such event will be given to the District Director.
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.
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<PAGE> 63
IN WITNESS WHEREOF, the parties hereunto set their hands and seals
as hereinbefore stated.
SIMMONS COMPANY THE UNITED STEEL WORKERS OF AMERICA,
A.F.L., C.I.O., C.L.C.
By
---------------------------------- ---------------------------------
Robert K. Barton George F. Becker
Senior Vice President, Human Resources International President
---------------------------------
Leo W. Gerard
International Secy.-Treas.
---------------------------------
Richard H. Davis
Int. V.P. (Administration)
---------------------------------
Leon Lynch
Int. V. P. (Human Affairs)
---------------------------------
David A. Foster
Director, District 11
---------------------------------
Jerry T. Johnson
Staff Representative
---------------------------------
Greg Crane
President LU173
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<PAGE> 64
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 2.04
of this 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.
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<PAGE> 65
SHAWNEE, KANSAS PLANT
SCHEDULE "A"
INCENTIVE WORK BASIC TIMING RATES
<TABLE>
<CAPTION>
DEPT CLASSIFICATION RATES EFFECTIVE
10/16/94 10/16/95 10/16/96
<S> <C> <C> <C> <C>
BORDER DEPT.
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 DEPT.
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 DEPT.
120 Quilt Machine Operator 8.22 8.47 8.72
QUILT SEWING DEPT.
120 Misc. Quilt Sewing 8.04 8.27 8.54
MATTRESS & 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
</TABLE>
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<PAGE> 66
SHAWNEE, KANSAS PLANT
SCHEDULE "B"
RATES FOR HOURLY WORKERS
<TABLE>
<CAPTION>
CLASSIFICATION RATES EFFECTIVE
10/16/94 10/16/95 10/16/96
<S> <C> <C> <C>
Shipping/Receiving 8.50 8.80 9.10
Inspector 8.50 8.80 9.10
Cutter 8.56 8.86 8.16
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 & 8.25 8.55 8.85
Borders
H.M.B. Inspector 8.25 8.55 8.85
Automatic Pack 8.75 9.05 9.35
Mach/Inspec
Part Time 7.00 7.30 7.60
</TABLE>
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<PAGE> 67
SHAWNEE, KANSAS PLANT
ADDENDUM
The AGREEMENT detailed below between SIMMONS COMPANY, Shawnee, Kansas and
the United Steel Workers of America, AFL, CIO, Local UNION No. 173 will take
effect on and continue until the termination date of this Agreement.
In all cases where the language below conflicts or is otherwise in
disagreement with the "SKLA" 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 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 counter productive and is not in the best interest of SIMMONS
COMPANY or its employees.
The COMPANY'S intent is to have the flexibility needed to work overtime
on a limited basis to satisfy the customers.
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<PAGE> 68
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 months 24 hours at average
6 months - 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 upon 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 subtracted to combination of
Classifications in less more years of continuous service will be
subtracted to combinations of Classifications
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<PAGE> 69
in less than an eight-hour-per-day job, he/she will be subjected to
Article II Seniority Section 1:11- Determination of Layoffs.
4. The COMPANY will provide some type incentive for material handlers int he
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 department to a
minimum.
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<PAGE> 1
Exhibit 10.16
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I RECOGNITION AND UNION SECURITY.......................................................... 1
Employees Covered....................................................................... 1
Union Security.......................................................................... 1
Check-Off............................................................................... 3
II DISCIPLINARY PROCEDURE.................................................................. 3
Just Cause.............................................................................. 3
Interview and Hearing................................................................... 3
Good Faith Duties....................................................................... 4
Correction of Offense................................................................... 4
Disciplinary Policy..................................................................... 4
III GRIEVANCE PROCEDURE AND ARBITRATION..................................................... 5
Grievance Procedure..................................................................... 5
Grievances - Step 1..................................................................... 5
Grievances - Step 2..................................................................... 5
Grievances - Step 3..................................................................... 6
Resolution by Default................................................................... 6
Arbitration of Disputes................................................................. 6
Selection of Arbitrators................................................................ 6
Authority of Arbitrator................................................................. 7
Expedited Arbitration................................................................... 7
IV HOURS OF WORK AND PREMIUM PAY........................................................... 8
Work Week............................................................................... 8
Overtime Hours.......................................................................... 8
Saturday and Sunday Work................................................................ 8
Availability for Scheduled Work......................................................... 8
No Pyramiding........................................................................... 9
Shift Premiums.......................................................................... 9
Reporting Pay........................................................................... 9
Shift Change ........................................................................... 10
Temporary Employees..................................................................... 10
V NO STRIKE - NO LOCKOUT.................................................................. 10
VI MANAGEMENT RIGHTS CLAUSE................................................................ 10
</TABLE>
-i-
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
VII SENIORITY............................................................................... 10
Accumulation of Seniority............................................................... 11
Termination of Seniority................................................................ 11
Workshare Hours......................................................................... 12
Furlough................................................................................ 12
Recall From Furlough.................................................................... 12
Layoffs................................................................................. 12
Job Bidding ............................................................................ 13
Promotions Outside Bargaining Unit...................................................... 14
Seniority Accumulation During Leave of Absence.......................................... 14
Overtime Procedures..................................................................... 14
Steward Seniority ...................................................................... 14
Surplus Labor List...................................................................... 14
Recall.................................................................................. 14
Notice of Recall........................................................................ 15
Change of Address....................................................................... 15
Probationary Period..................................................................... 15
War Emergency........................................................................... 15
Seniority Bonus......................................................................... 15
Severance Notice........................................................................ 15
Inventory............................................................................... 16
VIII WAGES................................................................................... 16
Wage Agreement.......................................................................... 16
Incentive Compensation Plans............................................................ 16
Work Wait............................................................................... 16
Incentive Pay Computation............................................................... 16
Hiring Rate............................................................................. 17
Incentive Employee Progression and Training............................................. 17
General Wage Increases.................................................................. 17
Reactivation of Old Classifications..................................................... 18
Establishment of New Classifications.................................................... 18
Rate of Borrowed Man.................................................................... 18
Average Rate Computation................................................................ 19
Injured During Work..................................................................... 19
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
IX STANDARD ALLOWED HOURS.................................................................. 20
Incentive Compensation Plan............................................................. 20
New or Varied Jobs and Operations....................................................... 20
Standard Allowed Hour................................................................... 20
Written Confirmation and Effective Date of SAH.......................................... 21
Procedural Interpretation of Section.................................................... 22
Grievances Regarding Incentive Standards................................................ 23
Availability of Time Study Data......................................................... 23
Union Time Study Engineer............................................................... 24
Standard Data........................................................................... 24
X PAID HOLIDAYS........................................................................... 24
Holidays Observed....................................................................... 24
Eligibility............................................................................. 25
Holiday Pay or Sick Leave............................................................... 25
Pay For Holidays Worked................................................................. 25
Holidays on Saturday.................................................................... 25
Holiday Pay............................................................................. 25
Holidays During Approved Vacation....................................................... 25
Multiple Holidays on Same Day........................................................... 25
Pay Rate................................................................................ 25
Overtime and Premium Pay................................................................ 25
XI PAID VACATIONS.......................................................................... 26
Vacation................................................................................ 26
Pay Rate................................................................................ 26
Scheduling.............................................................................. 27
Plant Shutdown and Staggered Vacation................................................... 27
Eligibility............................................................................. 27
Scheduling of Staggered Vacations....................................................... 27
No Accumulation......................................................................... 27
Shift Premium........................................................................... 28
XII LEAVE OF ABSENCE ....................................................................... 28
Purpose................................................................................. 28
Leave For Union Business................................................................ 28
XIII REST PERIODS............................................................................ 28
XIV UIU PENSION TRUST....................................................................... 28
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
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<S> <C> <C>
XV HEALTH AND WELFARE FUND................................................................. 30
Benefit Plan(s)......................................................................... 30
Contribution Rates...................................................................... 30
Eligibility............................................................................. 30
Employee Contributions.................................................................. 31
Life Insurance.......................................................................... 31
Payment of Contributions................................................................ 31
Coverage................................................................................ 31
Election of Category of Coverage and Right to Change.................................... 32
Requirements............................................................................ 32
Hold Harmless........................................................................... 32
Reinstatement of Coverage............................................................... 32
Part Time Employees..................................................................... 32
Availability of Benefits................................................................ 33
XVI JURY SERVICE............................................................................ 33
XVII BEREAVEMENT PAY......................................................................... 33
Definition.............................................................................. 33
Payment................................................................................. 33
XVIII BULLETIN BOARDS......................................................................... 33
Bulletin Boards......................................................................... 33
Posting of Notices...................................................................... 34
XIX MILITARY CLAUSE......................................................................... 34
XX PICKET LINE CLAUSE...................................................................... 34
XXI EMPLOYEE BIRTHDAY PAY................................................................... 35
XXII GENERAL CONDITIONS ..................................................................... 35
Business Representative ................................................................ 35
Stewards ............................................................................... 35
XXIII EQUAL EMPLOYMENT OPPORTUNITY............................................................ 36
XXIV SAVING CLAUSE........................................................................... 36
Separability............................................................................ 36
Federal and State Laws.................................................................. 36
</TABLE>
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<TABLE>
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ARTICLE TITLE PAGE
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XXV SEVERANCE AND PLANT CLOSINGS............................................................ 37
XXVI CONTRACT RE-OPENER .................................................................... 37
XXVI DURATION AND TERMINATION OF SUPPLEMENT.................................................. 38
Effective Dates......................................................................... 38
Entire Agreement........................................................................ 38
Modification or Termination ............................................................ 38
SIGNATURES.............................................................................. 39
APPENDIX "A"............................................................................ 40
APPENDIX "B"............................................................................ 41
</TABLE>
-v-
<PAGE> 6
LOS ANGELES AGREEMENT
Language from Los Angeles Supplement
Language from Master Agreement
AGREEMENT
This Agreement, made this 20th day of October, 1997, by and between
Simmons Company, Los Angeles, California (hereinafter referred to as the
COMPANY) and the United Steelworkers of America, AFL, CIO, CLC (hereinafter
referred to as the Union) on behalf of its Local No. 515U, for and on behalf of
itself and the employees of said COMPANY at its plant located at, Los Angeles,
California.
WITNESSETH
NOW, THEREFORE, in consideration of the promises and of mutual
covenants and Articles 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 COMPANY and
the UNION and, therefore, all Agreements or understandings concerning hours,
wages and working conditions between the COMPANY and the employees covered by
this contract are to be made by the COMPANY 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.
1.02 EMPLOYEES COVERED. 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 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 later. All
employees who become members of the
<PAGE> 7
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 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.
(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, or 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 District Director notifying him of the
requested discharge. Failure of the District Director
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 Section 7.16
of this Agreement.
(f) Whenever the COMPANY 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 COMPANY
from securing employees from other sources and the
COMPANY may select employees without discrimination
as to UNION or non-UNION status, race, color ,
religion, national origin, gender, age or disability.
(g) After new employees are hired, the COMPANY agrees to
provide to the UNION the employee's name, address,
date of birth, social security number, date of hire,
rate of pay, classification assignment, and clock
number.
-2-
<PAGE> 8
(h) Whenever employees are transferred, granted a leave
of absence, terminated, rehired or quit, such
information will be made available to the UNION.
(i) The provisions of this section shall be applicable
only to the extent permitted by applicable state and
federal law.
(j) No UNION member 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 Steelworkers UNION Executive Board 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 International Secretary-
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, claims, responsibility, damages 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.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The COMPANY shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).
2.02 INTERVIEW AND HEARING. 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.
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.
-3-
<PAGE> 9
A discharged employee shall be entitled to a hearing before the COMPANY
Plant Labor Relations Committee at 10:00 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 and provided 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.
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
COMPANY is not liable for any wage during such period.
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 this Agreement. In exchange for the thirty (30) calendar day
period described above, it is agreed that the COMPANY shall not be liable for
any retroactivity, should the employee be subsequently reinstated.
2.03 GOOD FAITH DUTIES. No employee acting in the capacity of a UNION
officer, UNION representative, Shop Steward, Department Steward or Shop
Committee member shall be disciplined for carrying out in good faith his duties
under the provisions of this Agreement or as permitted by applicable law
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.
2.04 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (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.
2.05 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 2.04,
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.
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<PAGE> 10
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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 3.01(C) above, the grievance shall be reduced to
writing on forms to be made available for such purpose, with each 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 two (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 (2) days shall meet
-5-
<PAGE> 11
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.
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 RESOLUTION BY DEFAULT. 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 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.
3.07 ARBITRATION OF DISPUTES. If the grievance is subject to
arbitration as provided herein and all conditions 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.
3.08 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
UNION files its written request for arbitration pursuant to Section 3.07 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.
-6-
<PAGE> 12
In the event the UNION and the COMPANY are unable to agree to a base
rate on a new classification as provided in Section 8.12, 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.
3.09 AUTHORITY OF ARBITRATOR. 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.
3.10 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 A) 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.
-7-
<PAGE> 13
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
4.02 OVERTIME HOURS.
A. All authorized time worked in excess of forty (40)
hours in one (1) week or eight (8) hours in one (1)
day, 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 8.14 reflecting the earnings for
the week in which the overtime is worked. This
paragraph shall not prevent payment of double time
wherever such payment is specified. Any exception to
the above shall only be upon mutual agreement between
the COMPANY and the UNION.
B. Anyone reporting to work after their regular starting
time will receive overtime pay only upon completion
of eight (8) hours work.
4.03 SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work 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, 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 following
months. In those five (5) months listed, employees
shall be available for Saturday work when
-8-
<PAGE> 14
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 (5) months need
to be changed, a sixty (60) day notice will be given.
(b) 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. Overtime preference is determined by
seniority within classification and department.
Employees who have a valid reason shall be excused by
the COMPANY from working regular or overtime work at
any particular time.
(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 pant will
be utilized in the assignment of such overtime work.
(d) 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.
(e) If a holiday falls on Friday, then Saturday work
shall be performed by volunteers.
4.05 NO PYRAMIDING. 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 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.
4.07 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, he will receive a minimum of three (3) hours work or pay
at the base rate of the job he is assigned, provided, however, at the COMPANY's
option, he may be assigned to another classification for any portion of said
three (3) 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.
4.08 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.
-9-
<PAGE> 15
4.09 TEMPORARY EMPLOYEES. The COMPANY may utilize up to ten (10)
temporary employees (temps) for four (4) months. 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 (4) months (whichever comes first), the job
will be filled in accordance with the contract.
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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.
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 manner
inconsistent with any of the other provisions of this contract.
ARTICLE VII
-----------
SENIORITY
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.
7.01 ACCUMULATION OF SENIORITY. Seniority shall continue and accumulate
while the employee is continuously employed by the COMPANY and during the
following periods of absence from work:
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<PAGE> 16
(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 as
provided herein.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period provided
in Section 7.16 and the leave request must be in
writing.
7.02 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged for just cause;
(c) When an employee is laid off longer than twelve (12)
months, except for right of recall;
(d) When an 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 7.13;
(f) If an employee falsifies any information given in
connection with a leave of absence; and
(g) When an employee obtains other employment while on an
approved leave of absence.
(h) For failure to progress in learning within reasonable
time limits set by the COMPANY
(i) 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
-11-
<PAGE> 17
rights provided they are physically capable of
satisfactorily performing available work.
7.03 WORKSHARE HOURS. In the event of a one (1) day shortage of work,
the available hours of work will be shared between the first and second shifts.
This can occur no more than four (4) 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 4.10).
7.04 FURLOUGH. If a shortage of work extends beyond one (1) day an
employee is furloughed by classification department and shift for up to six (6)
weeks. Senior employees are given the right of refusal for a furlough, however,
if they change shifts they must remain on that shift until their quarterly shift
change (Article 4.10).
7.05 RECALL FROM FURLOUGH. If recalled from a voluntary furlough an
employee has five (5) days to return to work. If recalled from an involuntary
furlough an employee has three (3) days to return to work.
7.06 LAYOFFS.
A. 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 7.06.
B. 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
2. Training, skill and physical ability
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 above 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 7.11.
C. 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
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<PAGE> 18
job if there is such a job open and available and the
employee is qualified to do the work.
7.07 JOB BIDDING. The COMPANY will provide an opportunity for qualified
employees seeking promotion to higher rated incentive classifications by posting
open jobs for bid for a twenty-four (24) hour period. Posted jobs my 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 the 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.
(c) Be actively working at the time the job bid is
posted.
2. Posted bid job will be awarded to the most qualified eligible
bidder with the most seniority.
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/her
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
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<PAGE> 19
4. Incentive employees with a combined age and years of service
equal to or in excess of 75 will be considered for hourly
non-incentive job openings. The incentive employee must have
worked for at least 12 years in an incentive classification to
be eligible for a job change. If the position is filled in
this manner the incentive employee would transfer to the
hourly job once a replacement is trained in the incentive
position. If the hourly job is not filled by an eligible
incentive employee the Company reserves the right to hire
hourly employees in the manner they choose. The job change of
a senior incentive employee would not result in the transfer
of another senior employee within the same occurrence. The
senior employee would be expected to work in the hourly
position with equal or greater effort.
7.08 PROMOTIONS OUTSIDE BARGAINING UNIT. In the event that an employee
covered by this Agreement is promoted to a position outside of the bargaining
unit, and such 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 the one with the least
seniority in the department to which he/she returned.
After an employee has been transferred out of the bargaining unit for a
period in excess of six (6) months, he shall not have any seniority rights under
Article VII, unless such is mutually agreed to by the COMPANY and the UNION in
writing.
7.09 SENIORITY ACCUMULATION DURING LEAVE OF ABSENCE. Leaves of absence
granted in accordance with the terms of this Agreement, unless herein otherwise
specifically provided, shall be considered as service for seniority purposes.
7.10 OVERTIME PREFERENCE. Senior employees will be given preference on
available overtime in their particular job assignment.
7.11 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.
7.12 SURPLUS LABOR LIST. Any employee laid off for lack of work shall
have his/her name placed on a surplus labor list. If an employee's seniority has
been broken, his/her name shall be removed from such list.
7.13 RECALL. If an employee is laid off longer than twelve (12) months,
he/she shall have recall rights for an additional six (6) months period without
loss of seniority. This additional six (6) months grace period for recall
purposes only may not be extended for any other purpose and shall not be
credited toward accumulation of seniority.
7.14 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 the
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<PAGE> 20
receipt of notice to report will result in the termination of seniority.
Overnight letters to 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 the employee's
last known address shall solely be that of the COMPANY.
7.15 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 7.05 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 the employee within the above five (5) days will mean forfeiture
of all seniority rights by the employee involved.
7.16 PROBATIONARY PERIOD. 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. 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.
7.17 WAR EMERGENCY. 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.
7.18 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 or at the time of their vacation, as the employee chooses.
7.19 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 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.
7.20 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
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<PAGE> 21
the rate of their classification. Incentive workers when selected will receive
base rate of their classification.
ARTICLE VIII
------------
WAGES
SKILL GROUP CLASSIFICATIONS AND LABOR GRADE RATE
------------------------------------------------
8.01 WAGE AGREEMENT. The COMPANY and the UNION have agreed to Labor
Grade Rates and relative job values as described in this Agreement.
8.02 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.
8.03 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 from the first minute.
An incentive worker's work wait status shall commence only after he
notifies his own Supervisor who shall forthwith record the time. If the
employee's own Supervisor is not available he shall notify any other Supervisor.
Other than paying for up to one (1) hour at base pay if employees are
not sent home, 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.
8.04 INCENTIVE PAY COMPUTATION. Individual average hourly earnings rate
for employees working on inventive 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 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.
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<PAGE> 22
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.
8.05 HIRING RATE.
A. The hiring rate for new employees will be two dollars
($2.00) below the base rate of their classification.
Experienced new hires may be paid at base rates at
the time they are employed.
B. If the employee is retained, he/she will be paid at
the base rate of the classification after sixty (60)
days of employment.
8.06 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 day (60) 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.
The UNION and the COMPANY agree that all incentive employees will be
encouraged and expected to produce to the full extent of their capabilities and
that this productivity must exceed 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.
8.07 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1997. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1997. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.08 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.09 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1999.
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<PAGE> 23
For incentive employees the increase will be applied to the previous quarterly
average and paid effective November 1, 1999. All basic rates, all hourly rates
and all labor grades will be increased to reflect the increase.
8.10 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.11 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
8.12 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). 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
of this Agreement set forth in Article Section .
8.13 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 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 he used in order to develop the quarterly average
hourly rate. Borrowed man would carry seniority to borrowed classification for
overtime purposes.
8.14 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 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 the worker is in a holiday or vacation status, or time
working any classification other than the worker's own. A copy of such average
hourly earnings shall be made
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<PAGE> 24
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.
In the event an employee has not established an average hourly rate due
to the fact that the employee has not worked during the immediately preceding
calendar quarter, then the employee's average rate shall be equal to the
employee's average rate for the last quarter the employee worked.
8.15 INJURED DURING WORK
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.
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
pyramiding on disability payments or workers'
compensation payments.
ARTICLE IX
----------
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<PAGE> 25
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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 judgment, such a plan is
practicable. When an incentive program is implemented the COMPANY will provide
the incentive earnings opportunity for the Plant as a whole that will
approximate the incentive earnings opportunity which existed prior to the
implementation of the new incentive program. 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 the plant.
9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the supervisor 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 thirty (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/her average hourly rate until a new
standard is submitted.
The COMPANY shall select an average operator or as close to average as
possible, for time and methods analysis. Average is defined as an operator
working at a normal pace, under normal working conditions, with the skills
required for the specific job. 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 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
----
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing a SIXTY
(60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%) rating
increased by a ten percent (10%) rest, fatigue, and delay allowance (effective
10/16/94, the RFD factor on new or revised standards shall be twelve and
one-half percent (12.5%)).
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<PAGE> 26
Basic Production Expectance = 60 MINUTE HOUR
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on new
or revised standards after
10/16/94)
Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
Opportunity Offered By Above Formula
------------------------------------
1362 SAH = TSM 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% RFD Allowance)
TSM 8.1731 (Total Standard Minutes)
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
-----
Base Rate 6.18 = 125% incentive
Earnings opportunity at +25% incentive pace
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH standard is
computed, it shall be submitted in writing to the
operator and become effective immediately. This
computation may consist on 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 standard changes can be effected
without a written job methods change.
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<PAGE> 27
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.
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the COMPANY 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 any operation in the degree the change in the task affects the
standard upward or downward.
Where the change represents less than five percent (5%) of the cycle
base minutes, the COMPANY 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, the COMPANY 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 affected 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 SAH 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
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.
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<PAGE> 28
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 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.
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:
A. 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.
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<PAGE> 29
B. The COMPANY designee will respond by either selecting
from the UNION list or by offering alternative dates.
C. Once the above two (2) designees complete
arrangements, they will notify their respective local
COMPANY 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 the attendant difficulties occasioned by
disagreement over pace determination, the COMPANY will, whenever feasible, set
incentive job standards by use of pre-determined, 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
---------
PAID HOLIDAYS
10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:
New Years Day
Martin Luther King's Birthday
Washington's Birthday
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Friday after Thanksgiving Day
Day before Christmas
Christmas Day
10.02 ELIGIBILITY. In order to be eligible for the holiday payment, an
employee must have completed thirty (30) days or more of service on the day of
the holiday and have worked the last scheduled work day before and the first
scheduled work day after the 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 will
be paid for such holiday.
10.03 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.
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<PAGE> 30
10.04 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 Article XXI Birthday Pay.
10.05 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday
falls on 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 two (2) weeks in advance. In the above situation,
no work will be scheduled on such Saturday to avoid holiday premium pay.
10.06 HOLIDAY PAY. Holiday pay shall be included in the pay check for
the pay period in which the holiday falls.
10.07 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
falls within an eligible employee's approved vacation period and the employee is
absent from work during his regularly scheduled work week because of such
vacation, the employee shall be paid for such holiday in addition to vacation
pay and shall have such day off.
10.08 MULTIPLE HOLIDAYS ON SAME DAY: 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.
10.09 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in Section 8.14 for incentive workers;
day workers will be paid at eight (8) times the employees regular day work
hourly rate. Shift premium shall be included in holiday pay computation for
eligible employees.
10.10 OVERTIME AND PREMIUM PAY. For purposes 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.
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<PAGE> 31
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The COMPANY will grant paid vacation to employees 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 7.18) 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 circumstances:
(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) The COMPANY will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
(g) Commencing in 1998, employees with eighty (80) hours
or more vacation, may take one week (forty (40)
hours) of vacation at eight (8) hour intervals (by
days) with notice and seniority permitting.
11.02 PAY RATE. 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 Labor Grade Rate if paid on an
hourly rate, including shift differential but excluding overtime premiums.
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<PAGE> 32
11.03 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 arise between two employees scheduling a vacation at the
same time, the employee with the most seniority will be given preference.
11.04 PLANT SHUTDOWN AND STAGGERED VACATION. The COMPANY shall notify
the UNION, no later than January 1 of each vacation year, whether the plant will
shut down or whether there shall be staggered vacation on an individual employee
basis. Prior to January 1 of each 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, and not required to work during the shutdown, will be
furloughed during the plant shutdown.
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.
11.05 ELIGIBILITY. 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. 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 1/12 for each month
worked -- five (5) working days will be considered a month worked (1/12 credit).
11.06 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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 cases of
third or fourth week vacations during the period of May, June, July, August and
September may occasionally be arranged when the Staff Representative or Shop
Steward can mutually agree to such with the Operations Manager or the Human
Resources Manager.
11.07 NO ACCUMULATION. 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.
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<PAGE> 33
11.08 SHIFT PREMIUM. Shift premium will be included in vacation pay
computation for employees otherwise eligible.
ARTICLE XII
-----------
LEAVE OF ABSENCE
12.01 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.
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
COMPANY.
12.02 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.
ARTICLE XIII
------------
REST PERIODS
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.
At least thirty (30) minutes (unpaid) shall be allowed for the lunch
period.
ARTICLE XIV
-----------
UIU PENSION TRUST
UIU 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.
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<PAGE> 34
The COMPANY 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 (10th) day of each month, to the UIU
Pension Trust a sum a 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
month. The COMPANY shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the COMPANY
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The COMPANY
further agrees to supply to the Trust such 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 (12) months shall
be considered. Thereafter, the COMPANY will make contributions each calendar
month. This exception for newly employed employees shall not apply in the case
of employees how have been previously covered under the UIU Pension Trust in
which event the COMPANY 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 COMPANY'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 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 COMPANY's aforesaid contributions to the Trust
as herein above provided and for so long as the COMPANY's participation in the
Trust is accepted by the Trustees, the Trustees will, beginning with the date of
receipt by the Trust of the COMPANY's first said contribution and continuing for
such part of the duration of this Agreement as the COMPANY 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
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<PAGE> 35
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 COMPANY'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 UIU Pension
Trust, but at a cost of the COMPANY not to exceed to the cost of the
contribution hereunder.
ARTICLE XV
----------
HEALTH AND WELFARE FUND
15.01 BENEFIT PLAN(S). 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 with contributions being made to Pacific
Federal Administrators.
15.02 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 COMPANY 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 11/1/97
<TABLE>
<CAPTION>
COMPANY EMPLOYEE TOTAL
------- -------- -----
<S> <C> <C> <C>
Single $138.00 $12.50 $150.50
Single Plus One 270.47 21.50 291.97
Family 370.80 32.70 403.50
</TABLE>
The Employer and the Union shall have the right to confirm any increase
or decrease in contribution rates occurring during the term of this Agreement.
The Fund shall provide the Employer and the Union with information, including
carrier reports and other source documentation, reasonably necessary to confirm
such rate changes. Moreover, if requested the Fund will make a personal
presentation on an annual basis of any increases or decreases in contribution
rates. Any increase in total insurance premium costs in the second year which
exceeds five (5%) percent over the total insurance premium costs in the first
year will give the Company the option to cease participation in the Fund. This
same option will apply if the total insurance premium costs in the third year
exceed by more than five (5%) percent the total insurance premium costs from the
second year and similarly if the fourth year exceeds the third year by more than
five (5%) percent. Any contributions or increases or decreases in insurance
premium contribution costs in the second, third, and or fourth years will be
shared in the same ratio of eighty nine (89%) percent employer and eleven (11%)
percent employee. If the Company opts out, the Company and the Union reserve the
right to review the plan and mutually determine continuation of coverage through
a plan offering comparable coverage.
15.03 ELIGIBILITY. Eligible employees are all 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:
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<PAGE> 36
A. Disability due to sickness or accident, up to a maximum of six
(6) months per disability;
B. Vacation; or
C. Attendance at UNION or fund Convention, seminar or grievance
hearing.
The COMPANY is not required to make a contribution on an employee whose
employment is terminated during the wage month.
15.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the COMPANY 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 COMPANY agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the COMPANY contributions.
Employees who refuse or neglect to provide the COMPANY 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 COMPANY with the required written authorization but because of lack of wages
the COMPANY is unable to deduct the employee contribution for a particular
benefit month, it is the obligation of the employee to pay, in a timely fashion,
to the COMPANY 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.
15.05 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 $5.00 for life insurance coverage as
provided by Pacific Federal Administrators.
15.06 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 1997, and each and every month thereafter so long as this
agreement is in force.
15.07 COVERAGE.
A. 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. These provisions for newly hired employees shall not
apply in the case of those employees who have been
"Previously Covered" under the Fund. Such
-31-
<PAGE> 37
employees and their dependents shall be eligible for
all benefits from the date of hire.
15.08 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 thirty-one (31) days of birth.
15.09 REQUIREMENTS. The COMPANY shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the COMPANY 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 COMPANY 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.
15.10 HOLD HARMLESS. The COMPANY agrees solely to make the
contributions required by the terms of this Agreement. The UNION agrees 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 Fund to which the COMPANY is not a signatory
party.
15.11 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 COMPANY are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.
15.12 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 COMPANY
pay a contribution for such employees. Nothing in this clause shall be construed
as an affirmation or negation of the COMPANY's right to hire part time
employees.
15.13 AVAILABILITY OF BENEFITS. In consideration of the COMPANY's
aforesaid payment to said Fund as herein above provided, the UNION warrants the
Board of Trustees of The Fund will, beginning on the date of receipt by the Fund
of the COMPANY's first said payment, and during such
-32-
<PAGE> 38
part of the life of this Agreement as the COMPANY fully complies with the terms
of such Agreement in all respects, extend and make available to COMPANY'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 COMPANY has not paid the required
contribution to the Fund except as, and only to the extent otherwise required by
an applicable state disability benefit insurance law.
ARTICLE XVI
-----------
JURY SERVICE
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 earnings as computed in Section 8.10 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 the 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 XVII
------------
BEREAVEMENT PAY
17.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) days for time lost due to death in the immediate family. Immediate
family is defined as mother, mother-in-law, father, father-in-law, grandparents,
brother, half brother, sister, half sister, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the COMPANY
with reasonable proof of death and relationship.
17.02 PAYMENT. The pay for such loss of time from work will be for
eight (8) 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 XVIII
-------------
BULLETIN BOARDS
18.01 BULLETIN BOARDS. The UNION may put up bulletin boards at
locations specified by the COMPANY for the following non-controversial UNION
announcements:
A. Notice of UNION recreational or social affairs;
B. Notice of UNION nominations or elections and results
of such elections and nominations;
C. Notice of UNION appointment;
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<PAGE> 39
D. Notice of UNION meetings;
E. Notices pertaining to The United Steelworkers Of
America Health and Welfare and UIU Pension Programs.
18.02 POSTING OF NOTICES. 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
Human Resources Manager 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 XIX
-----------
MILITARY CLAUSE
The COMPANY agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.
ARTICLE XX
----------
PICKET LINE CLAUSE
It shall not be considered a violation of this Agreement if USWA
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 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.
-34-
<PAGE> 40
ARTICLE XXI
-----------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday eligibility will
receive an additional eight (8) hours pay (computed as per Section 10.09) 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 abovementioned
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.
Employees who are eligible for birthday pay and elect to receive pay in
lieu of a day off by January 1 will receive a $100 birthday check, exclusive of
payroll deductions. If not elected by January 15, the appropriate clauses of the
contract will apply.
ARTICLE XXII
------------
GENERAL CONDITIONS
22.01 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 the COMPANY.
22.02 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.
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 for that purpose.
When a new employee is hired, he/she shall be introduced by his/her
supervisor to the department steward.
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<PAGE> 41
ARTICLE XXIII
-------------
EQUAL EMPLOYMENT OPPORTUNITY
The 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), disability,
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 veteran's 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 or your Operations Manager. A confidential investigation will
be conducted.
ARTICLE XXIV
------------
SAVING CLAUSE
24.01 SEPARABILITY. If any provision of this 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.
24.02 FEDERAL AND STATE LAWS. 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.
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<PAGE> 42
ARTICLE XXV
-----------
SEVERANCE AND PLANT CLOSINGS
In the event the COMPANY decides to close this facility presently
organized by the United Steelworkers, sixty (60) day notice of such event will
be given to the District Director of the United Steelworkers of America. Those
employees affected by the plant closing shall continue to be covered under their
existing Fund benefits as outlined in Article XV 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.
ARTICLE XXVI
------------
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the term of
this agreement. The Plan is called "Pay Plus". Certain features of the Plan
remain undetermined as of October 15, 1997. Therefore, the parties agree that
during the term of this agreement there will be a limited re- opener regarding
aspects of the Plan. The Company will notify the Union not less than forty-five
(45) days prior to the implementation date of the Pay Plus Plan at the Los
Angeles facility. During this forty-five (45) days period, the Company and Union
will meet to discuss such Pay Plus matters as (but not limited to) base rates,
rates paid to successful bidders and employees affected by layoffs, average rate
computations, borrowed man rates, movement within pay ranges, starting rates,
wage ranges, pay rates for non work time such as vacations, holidays, jury duty
and bereavement, grieving new standards and revisions to Article IX Standard
Allowed Hour. The forty-five (45) day period may be extended by mutual
agreement.
Notwithstanding Article V, if agreement is not reached regarding the
matters to be discussed during the forty-five (45) days or extension thereof,
the parties are free to exercise their rights to engage in activity in support
of their respective positions. In the case of the Union this shall include, but
not be limited to, a strike or other legal means in support of its position. In
the case of the Company this shall include, but not be limited to,
implementation of the Plan, a lockout, and/or in the case of a strike, the
hiring of replacements. The right to strike shall not give rise to a sympathy
strike in support of employees at other Simmons plants where the Pay Plus Plan
is implemented or in the process of being implemented. Further, the Union agrees
to provide a ten (10) day written notice prior to the commencement of a strike;
and the Company agrees to provide a ten (10) day written notice prior to the
commencement of a lockout.
Finally, nothing in this re-opener provision should be construed as
limiting the Company's rights under Article IX.
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<PAGE> 43
ARTICLE XXVII
-------------
DURATION AND TERMINATION OF SUPPLEMENT
27.01. EFFECTIVE DATES. This AGREEMENT shall be in full force and
effect from October 16, 1997 until October 15, 2001.
2702. ENTIRE AGREEMENT. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this AGREEMENT and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.
27.03. MODIFICATION OR TERMINATION. This AGREEMENT, when signed by the
officers of the COMPANY and the UNION, shall become effective as described above
for a period of four (4) years and shall continue to remain in full force and
effect from year to year thereafter, unless written notices 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.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC-
ON BEHALF OF ITS LOCAL #515
- --------------------------------- --------------------------
George F. Becker Company
International President
By:
- -------------------------------- -----------------------
Leo W. Gerard, International
Secretary/Treasurer
- --------------------------------
Richard H. Davis, International
Vice-President Administration
- --------------------------------
Leon Lynch, International
Vice-President, Human Affairs
- --------------------------------
Victoria Key, Staff RepresentativeCoordinator
- --------------------------------
Terry L. Bonds, Director District 12
- --------------------------------
Wayne A. Clary, Sub-District Director
- --------------------------------
Raymond E. Valdez, Staff Representative
- --------------------------------
Richard Bermal, Business Representative
- --------------------------------
Committee
- --------------------------------
Committee
- --------------------------------
Committee
- --------------------------------
Committee
- --------------------------------
Committee
LOS ANGELES
39
<PAGE> 45
APPENDIX "A"
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
Richard Adelman
Jack Clarke
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
40
<PAGE> 46
MEMORANDUM ON APPRENTICESHIP SCHEDULE, QUALIFICATIONS OF
APPRENTICE AND JOB DESCRIPTION OF
SPECIALIZED MAINTENANCE MECHANIC
APPENDIX "B"
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.
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
41
<PAGE> 47
MEMORANDUM 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 the job
The COMPANY reserves the right to disqualify 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.
42
<PAGE> 48
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 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.
(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.
43
<PAGE> 49
(E) 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.
(F) 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.
It is the desire of the parties that the foregoing language
will have a positive effect upon the regular employees in the regular
classification in the utility grouping as contained in the local plant
supplement Agreements.
44
<PAGE> 50
PENSION AND WAGES
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.
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
<TABLE>
<CAPTION>
Labor Grade
Related Effective
-----------------
JOB TITLE 10/16/97 10/16/98 10/16/99 10/16/00
- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Closer 11.16 11.46 11.76 12.06
Upholster Box Spring Units 10.23 10.53 10.83 11.13
Nailing Machine Operator 9.80 10.10 10.40 10.70
Box Spring Frame Assembler 9.80 10.10 10.40 10.70
Assemble Box Spring Units 9.80 10.10 10.40 10.70
Misc. Borders 9.70 10.00 10.30 10.60
Mattress and Box Spring Sewer 9.70 10.00 10.30 10.60
Quilting Machine Operator 9.80 10.10 10.40 10.70
R Coiler (Ultrasonic) Operator 9.80 10.10 10.40 10.70
HMB Operator 9.80 10.10 10.40 10.70
Hog-Ring Operator 9.53 9.83 10.13 10.43
Border Machine Operator 9.48 9.78 10.08 10.38
Miscellaneous Sewers Quilt 9.48 9.78 10.08 10.38
</TABLE>
45
<PAGE> 51
HOURLY RATED JOBS
<TABLE>
<S> <C> <C> <C> <C>
Cutting 9.28 9.58 9.88 10.18
Material Handler 9.95 10.25 10.55 10.85
Material Coordinator 10.15 10.45 10.75 11.05
Janitor 9.95 10.25 10.55 10.85
Inspector 9.55 10.25 10.55 10.85
Quilt Repair Operator 10.10 10.40 10.70 11.00
Wrapper & Bagger,
Packer, Inspector 9.95 10.25 10.55 10.85
Stock Clerk 10.15 10.45 10.75 11.05
Specialized Maintenance Mechanic 13.85 14.15 14.45 14.75
Repairman 11.03 11.33 11.63 11.93
Flotation Assembler 10.25 10.55 10.85 11.15
Lead Person $ .50 per hour above labor grade rate
</TABLE>
46
<PAGE> 1
Exhibit 10.17
INDEX
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I RECOGNITION AND UNION SECURITY.......................................................... 1
Employees Covered....................................................................... 1
Union Security.......................................................................... 2
Check-Off............................................................................... 3
Information Furnished to the Union Office by Personnel.................................. 3
Union Representatives' Seniority........................................................ 4
Leaves of Absence for UNION Business.................................................... 4
Change in Membership-Officers and Shop Steward of UNION................................. 4
Payment for Union Officials Time Spent in Conference
With Management.................................................................... 4
II DISCIPLINARY PROCEDURE.................................................................. 4
Just Cause.............................................................................. 4
Interview and Hearing................................................................... 4
Good Faith Duties....................................................................... 5
Correction of Offense................................................................... 5
Disciplinary Policy..................................................................... 5
Automatic Discharge - Three (3) Warning Notices......................................... 5
Retention of Documentation.............................................................. 5
III GRIEVANCE PROCEDURE AND ARBITRATION..................................................... 6
Grievance Procedure..................................................................... 6
Grievances - Step 1..................................................................... 6
Grievances - Step 2..................................................................... 7
Grievances - Step 3..................................................................... 7
Resolution by Default................................................................... 7
Arbitration of Disputes................................................................. 7
Selection of Arbitrators................................................................ 7
Authority of Arbitrator................................................................. 8
Expedited Arbitration................................................................... 8
IV HOURS OF WORK AND PREMIUM PAY........................................................... 9
Work Week............................................................................... 9
Overtime Hours.......................................................................... 9
Saturday and Sunday Work................................................................ 9
Availability for Scheduled Work......................................................... 9
Overtime................................................................................ 10
No Pyramiding........................................................................... 11
Shift Schedule.......................................................................... 11
Changes in Shift Schedule............................................................... 12
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
Lunch Periods........................................................................... 12
Payment for Work During Lunch Period.................................................... 12
Rest Periods............................................................................ 12
Requests to Report to Work Without Prior Scheduling..................................... 13
Shift Preferences....................................................................... 13
Employees Sent Home Early or Absent Due to Lack of Orders............................... 13
Shift Premiums.......................................................................... 13
Reporting Pay........................................................................... 13
V NO STRIKE - NO LOCKOUT.................................................................. 13
VI MANAGEMENT RIGHTS CLAUSE................................................................ 14
VII SENIORITY............................................................................... 14
Accumulation of Seniority............................................................... 14
Termination of Seniority................................................................ 14
Layoff.................................................................................. 15
Furlough................................................................................ 15
Return to Former Classification......................................................... 16
Changes in Return to Former Classification.............................................. 16
Interviews at Personnel for Employees Involved in a Layoff.............................. 16
Presence of UNION Delegate During Layoff Interviews..................................... 16
Requests Not to be Returned to Certain Types of Work.................................... 17
Determination of Layoffs................................................................ 17
Layoff Notices.......................................................................... 17
Notice of Recall........................................................................ 17
Change of Address....................................................................... 18
Reasons for Absence to be Reported to Personnel by Employees............................ 18
Probationary Period..................................................................... 18
Procedure on Filing Open and New Jobs................................................... 18
Procedure on Filling Temporary Jobs..................................................... 21
Temporary Employees..................................................................... 21
One (1) Year Freeze After Return to Former Classification............................... 21
Refusal to Accept Return to Former Classification When Opening Occurs................... 22
Refusal to Accept Job After Having Bid Successfully..................................... 22
Seniority of Employees Who Bid or Transfer Prior to Layoff ............................. 22
Employees Who Bump Into a Classification When a Layoff Occurs .......................... 22
Increases and Decreases in Production - Notification to Shop Stewards .................. 23
New and Transferred Employees - Training Period And Rate ............................... 23
Training Program on New Jobs............................................................ 23
War Emergency........................................................................... 23
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
Seniority Bonus......................................................................... 23
VIII WAGES................................................................................... 23
Reactivation of Old Classifications..................................................... 24
Establishment of New Classifications.................................................... 24
Rate for Borrowed Man................................................................... 24
Average Rate Computation................................................................ 25
Work Wait Compensation.................................................................. 25
Conditions Beyond Control of COMPANY.................................................... 27
Employees Borrowed as a Lead Person..................................................... 27
Inventory............................................................................... 27
Rehiring on Unfamiliar Work............................................................. 28
IX STANDARD ALLOWED HOURS.................................................................. 28
Incentive Compensation Plan............................................................. 28
New or Varied Jobs and Operations....................................................... 28
Standard Allowed Hour................................................................... 29
Written Confirmation and Effective Date of SAH.......................................... 30
Procedural Interpretation of Section.................................................... 30
Grievances Regarding Incentive Standards................................................ 31
Availability of Time Study Data......................................................... 32
Union Time Study Engineer............................................................... 32
Standard Data........................................................................... 32
X PAID HOLIDAYS........................................................................... 32
Holidays Observed....................................................................... 32
Eligibility for Holiday Pay............................................................. 33
Holiday Pay - Employees Absent Due to Illness or Accident............................... 34
Holiday Pay............................................................................. 34
Holidays During Approved Vacation....................................................... 34
Multiple Holidays on Same Day........................................................... 34
Holidays on Sunday...................................................................... 34
Holidays on Saturday.................................................................... 34
Pay Rate................................................................................ 34
Overtime and Premium Pay................................................................ 34
Monday Holidays......................................................................... 34
XI PAID VACATIONS.......................................................................... 35
Vacation................................................................................ 35
Scheduling of Staggered Vacations....................................................... 36
Eligibility............................................................................. 36
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
No Accumulation......................................................................... 36
Shift Premium........................................................................... 36
Pay For Quits And Discharges............................................................ 36
Rate to be Used for Computing Vacation Pay.............................................. 36
Vacation Pay - Leaves of absence - Layoff............................................... 36
XII UIU PENSION TRUST....................................................................... 37
XIII UNITED STEELWORKERS HEALTH AND WELFARE FUND............................................. 38
Benefit Plan(s)......................................................................... 38
Contribution Rates...................................................................... 38
Eligibility............................................................................. 39
Employee Contributions.................................................................. 39
Sickness and Health and Life Insurance.................................................. 40
Payment of Contributions................................................................ 40
Coverage................................................................................ 40
Election of Category of Coverage and Right to Change.................................... 40
Requirements............................................................................ 40
Hold Harmless........................................................................... 41
Reinstatement of Coverage............................................................... 41
Part Time Employees..................................................................... 41
Audit Rights............................................................................ 41
Availability of Benefits................................................................ 41
XIV JURY SERVICE............................................................................ 42
XV BEREAVEMENT PAY......................................................................... 42
Definition.............................................................................. 42
Payment................................................................................. 42
XVI BULLETIN BOARDS......................................................................... 42
Bulletin Boards......................................................................... 42
Posting of Notices...................................................................... 43
XVII MILITARY CLAUSE......................................................................... 43
XVIII EMPLOYEE BIRTHDAY PAY................................................................... 43
XIX EQUAL EMPLOYMENT OPPORTUNITY............................................................ 43
XX LEAVES.................................................................................. 44
</TABLE>
-iv-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
Sick Leave.............................................................................. 44
Injury in Course of Employment.......................................................... 44
Employees on Leaves of Absence - Seniority Rights....................................... 44
XXI MISCELLANEOUS........................................................................... 45
Foul Weather Clothing................................................................... 45
New Piece of Equipment - Displacement of Personnel...................................... 45
Supervisor's Working.................................................................... 45
Premium Payment - Successful Bidders Not Assigned to New Jobs........................... 45
Pay Shortages........................................................................... 46
Rotation of Employees - Overtime and Department Shutdown................................ 46
XXII MODIFIED DUTY WORK HARDENING PROGRAM.................................................... 46
XXIII SAVING CLAUSE........................................................................... 46
Separability............................................................................ 46
Federal and State Laws.................................................................. 47
XXIV SEVERANCE AND PLANT CLOSINGS............................................................ 47
XXV DURATION AND TERMINATION OF SUPPLEMENT.................................................. 47
Effective Date.......................................................................... 47
Entire Agreement........................................................................ 47
Modification or Termination............................................................. 47
XXVI CONTRACT RE-OPENER...................................................................... 48
SIGNATURES.............................................................................. 49
APPENDIX I.............................................................................. 50
APPENDIX II............................................................................. 51
APPENDIX III............................................................................ 52
APPENDIX IV............................................................................. 53
</TABLE>
-v-
<PAGE> 6
PISCATAWAY AGREEMENT
--------------------
Language from Piscataway Supplement
Language from Master Agreement
AGREEMENT
This Agreement, made and entered into this 20th day of
October, 1997, by and between Simmons Company, 365 Randolphville Road
Piscataway, New Jersey, 08854, signatory hereto, party of the first part,
hereinafter referred to as the Company and the United Steelworkers of America,
AFL, CIO, CLC, (hereinafter referred to as the Union) on behalf of its Local
Union No. 420, 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.
1.02 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.
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<PAGE> 7
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 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 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.
(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, or 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 District Director notifying him of the
requested discharge. Failure of the District Director
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 section 7.15
of this AGREEMENT.
(f) The provisions of this section shall be applicable
only to the extent permitted by applicable state and
federal law.
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<PAGE> 8
(g) No Union member shall be compelled to train employees
of a non-Union shop.
1.04 CHECK-OFF. The COMPANY , where so authorized and directed by an
employee in writing, not less than thirty (30) days from the effective date of
this agreement for present employees, and not less than fifty (50) working days
from start of employment for new employees, upon an authorization form, will
deduct monthly dues, including initiation fees and lawful assessments, as
designated by the constitution and by the International Secretary/Treasurer. The
initiation fee for newly hired employees, after the probationary period shall be
$10.00.
Monthly dues for a member shall be an amount equal to $1.3% of
the said member's total earnings during the month, provided that monthly dues
shall not be less than $5.00 and provided further that monthly dues shall not be
more than 2.5 times the member's average hourly earnings. For lump sum payments,
dues shall be calculated separately by applying the 1.3% to such payments.
All dues remittance shall be mailed to the International
Secretary/Treasurer, at United Steelworkers of America, Five Gateway Center,
Department 1880, Pittsburgh, Pennsylvania 15278. Each remittance shall be
accompanied by a list setting forth the names of those from whom the amounts of
dues and initiation fees were deducted.
1.05 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.
(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.
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<PAGE> 9
(h) PERSONNEL TURNOVER. The Company will continue to
provide the UNION with labor turnover sheets in the
manner they presently do.
1.06 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. Limit the appointment of department stewards to one steward per shift.
1.07 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.
1.08 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.
1.09 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 8.08 of this 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. Two Union Representatives
will be paid by the Company at each's average rate for Steps 2 & 3 for time lost
for the first 12 grievances in a contract year.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The Company shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).
2.02 INTERVIEW AND HEARING. 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,
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<PAGE> 10
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.
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 10:00 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 Company is not liable for any wage during such period.
2.03 GOOD FAITH DUTIES. 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 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (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.
2.05 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 2.04,
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.
2.06 AUTOMATIC DISCHARGE - THREE (3) WARNING NOTICES. The parties agree
to a progressive disciplinary program by where an employee may be automatically
discharged after receipt of three (3) written reprimands of same offense in a
continuous twelve (12) month period.
2.07 RETENTION OF DOCUMENTATION. The COMPANY agrees to retain all
warning notices or memos or disciplinary action for a reasonable length of time
for UNION inspection. Evidence
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<PAGE> 11
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.
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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 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 two (2) work days to answer.
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<PAGE> 12
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 (2) 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.
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 RESOLUTION BY DEFAULT. 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 3.01 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 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
Union files its written request for arbitration pursuant to Section 3.06 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.
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In the event the Union and the Company are unable to agree to
a base rate on a new classification as provided in Section 8.06 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 AUTHORITY OF ARBITRATOR. 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.
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 III, page 51) 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
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<PAGE> 14
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.
4.02 OVERTIME HOURS.
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 8.08 reflecting the earnings for the week in
which the overtime is worked.
B. Anyone reporting to work after their regular staring
time will receive overtime pay only upon completion
of eight (8) hours work.
4.03 SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work 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 this Agreement. In those five (5)
months, employees shall be available for
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<PAGE> 15
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 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.
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 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; and
(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 notify the Union at the earliest
possible moment of the need for working more
than two (2) consecutive Saturdays.
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<PAGE> 16
4.06 NO PYRAMIDING. 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.
4.07 SHIFT SCHEDULE. The following is the usual shift schedule. The
shift schedule below will be modified to permit local plant management to vary
the starting time up to 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 seven (7) 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
seven (7) days notice for shift varying times will not release the COMPANY from
payment of overtime premium pay. 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.
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
p.m. with a half-hour lunch period.
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<PAGE> 17
4.08 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.
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.
4.09 LUNCH PERIODS.
--------------
<TABLE>
<S> <C> <C>
ONE SHIFT: On a one-shift schedule there shall be a lunch period from 12:00 noon
---------- to 12:30 p.m. 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. If the start time for the second shift
is 4:30 p.m., then the lunch period will be from 8:30 p.m. to 9:00 p.m.
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.
</TABLE>
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.
4.10 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.
4.11 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:
<TABLE>
<S> <C>
1st Shift: 9:20 a.m. to 9:30 a.m. - 2:20 p.m. to 2:30 p.m.
2nd Shift: 5:30 p.m. to 5:40 p.m. - 10:00 p.m. to 10:10 p.m. If the second shift
begins at 4:30 p.m., the first break will be from 6:30 p.m. to 6:40 p.m.
3rd Shift: 1:00 a.m. to 1:10 a.m. - 5:00 a.m. to 5:10 a.m.
</TABLE>
4.12 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 compensation from the regular
reporting time of their assigned shift, even though they may be required to
report
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<PAGE> 18
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, as outlined in this
agreement.
4.13 SHIFT PREFERENCES. Shift preference will be given to employees
presently working on a classification before requisitions for additional
employees are sent to Personnel Department.
4.14 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.
4.15 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.
4.16 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 8.08 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 fire, Act of God, Act of Public
Enemy, or because of conditions beyond the control of the Company.
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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<PAGE> 19
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
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.
7.01 ACCUMULATION OF SENIORITY. 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 as
provided herein.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period provided
in Section 7.15 and the leave request must be in
writing.
7.02 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged for just cause;
(c) When the employee is laid off longer than twelve (12)
months, except for right of recall as described
below. 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
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<PAGE> 20
period for recall purposes only may not be extended
for any other purpose and shall not be credited
toward accumulation of seniority;
(d) When an 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 7.12;
(f) If an employee falsifies any information given in
connection with a leave of absence; and
(g) When an employee obtains other employment while on an
approved leave of absence.
7.03 LAYOFF. When a layoff occurs the youngest employee in point of
service, in the classification, shall be laid off. That employee may apply their
seniority against the youngest employee in point of service provided he/she is
qualified. In the event this option is not available and less senior employees
are still working, this employee shall have the option of applying his/her
seniority against the youngest employees in point of service in their department
or in the plant. Any employee laid off for lack of work shall have his/her name
placed on a surplus labor list. If an employee's seniority has been broken,
his/her name should be removed from such list.
7.04 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 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.
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<PAGE> 21
7.05 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." This application 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.
7.06 CHANGES IN RETURN TO FORMER CLASSIFICATION. Employees desiring a
change in their Return to Former Classification may do so, provided they
previously have held or have had proven ability in that classification and
provided that no requisitions have been sent to the Personnel Department
indicating vacancies currently exist in that classification.
7.07 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.
7.08 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 counseling 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.
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.
7.09 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
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<PAGE> 22
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
acknowledgment by the UNION President and the Labor Relations MANAGER no later
than thirty (30) working days following the notice of layoff.
7.10 DETERMINATION OF LAYOFFS. When the hours of work fall below
thirty-two (32) hours per week for four (4) 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.
7.11 LAYOFF NOTICES. On a permanent layoff the COMPANY will give a
notice of five (5) working days. A permanent layoff is when an employee is laid
off for more than five (5) working days.
7.12 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 employee 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.
7.13 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 7.12 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.
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<PAGE> 23
7.14 REASONS FOR ABSENCE TO BE REPORTED TO PERSONNEL BY EMPLOYEES. It
is the responsibility of each employee to immediately report the reasons 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.
7.15 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.
7.16 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 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.
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<PAGE> 24
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
8.09(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.
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.
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<PAGE> 25
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 the final posting of the successful
bidder. This written notice shall consist of the
special form indicating the change by the employee.
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 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
canceled 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.
7.17 - 1 PROCEDURE ON FILLING TEMPORARY JOBS
A. Where an employee obtains a temporary job by bid and
the job is made a permanent job, preference will be
given to the aforesaid employee.
B. In selection of employees for temporary jobs, it is
understood that if a job shall last for a period of
less than sixty (60) working days, any employees from
Surplus Labor may be assigned to the job. However,
the Company may
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mandate the least senior employee on the surplus list
to take the temporary job, if no employee accepts it.
C. When laid off, all employees filling temporary jobs
are to have the right to bump the youngest in the
Plant by qualification.
D. Company will permit a temporary man to be bumped if
there is a layoff in the classification held by the
employee on a leave of absence if the bumping
employee has more seniority than the temporary
employee and is a qualified employee. Changes when
necessary will be made as soon as possible. The
Company agrees to note the employees on leave of
absence on the record of the substitute in each
instance.
7.17 - 2 TEMPORARY EMPLOYEES
A. Temporary employee will receive no benefits, pension,
holidays, or vacation payment.
B. The Company will not have temporary employee as long
as there are permanent employees on surplus.
C. 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.
7.18 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.
7.19 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.
7.20 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 six (6) months.
7.21 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:
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<PAGE> 27
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.
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.
7.22 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.
7.23 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.
7.24 NEW AND TRANSFERRED EMPLOYEES - TRAINING PERIOD AND RATE. All new
and transferred (bid, bump, roll or promoted) employees must earn the training
rate of their jobs within ninety (90) 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 ninety (90)
day period will be laid off. Employees who are recalled, transferred, bid,
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<PAGE> 28
bump or roll to another incentive job shall immediately receive the training
rate described in this Agreement 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.
7.25 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.
7.26 WAR EMERGENCY. 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.
7.27 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 or at the time of their vacation, as the employee chooses.
ARTICLE VIII
------------
WAGES
8.01 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1997. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1997. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.02 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.03 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1999. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.04 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
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<PAGE> 29
8.05 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
8.06 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 Section 3.09 [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 this AGREEMENT.
8.07 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 sixty (60) days during any twelve (12) month
period except by mutual AGREEMENT between the COMPANY
and the UNION, except in situations in which the
training period exceeds sixty (60) days.
8.08 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 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 the worker is in a holiday or vacation status, or time
working any classification other than the worker's 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.
In the event an employee has not established an average hourly rate due
to the fact that the employee has not worked during the immediately preceding
calendar quarter, then the employee's average rate shall be equal to the
employee's average rate for the last quarter the employee worked.
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<PAGE> 30
8.09 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. 9:15 a.m. or 5:25 p.m.) will be compensated in
accordance with sub- paragraph (E) of this Section
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
a.m. 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
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waiting at one hundred percent (100%) at his/her
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 continuos
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 ninety
(90) days satisfactory experience in that
classification as hereinbefore set forth in Section
7.24. In the event the COMPANY is unable to assign an
"experienced employee" as a 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
production 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.
8.10 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
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that in the event of power failure employees will stand by until instructed by
the COMPANY to go home or return to work. Employees will be paid their base rate
for up to the first hour of the wait under this Section.
8.11 EMPLOYEES BORROWED AS A LEAD PERSON
A. Any employee who is borrowed as a lead person is to
receive his/her average rate plus $1.75 per day in
addition to $1.00 per hour, for every hour such
employee is engaged in such capacity.
B. Any employee appointed by the Company to lead person
shall receive a special bonus of fifty cents ($.50)
per hour for all such work.
C. Pay for lead persons will be included in vacation and
holiday pay.
8.12 INVENTORY.
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.
8.13 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 standard method 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 SAH is submitted.
ARTICLE IX
----------
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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
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its judgment, such a plan is practicable. When an incentive program is
implemented the Company will provide the incentive earnings opportunity for the
Plant as a whole that will approximate the incentive earnings opportunity which
existed prior to the implementation of the new incentive program. 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 the Plant.
9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the supervisor 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 thirty (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/her average hourly rate until
a new standard is submitted.
The Company shall select an average operator or as close to
average as possible, for time and methods analysis. Average is defined as an
operator working at a normal pace, under normal working conditions, with the
skills required for the specific job. Until a new standard or incentive value is
submitted, the employee who work s 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 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
---
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing
a SIXTY (60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%)
rating increased by a ten percent (10%) rest, fatigue, and delay allowance
(effective 10/16/94, the RFD factor on new or revised standards shall be twelve
and one-half percent (12.5%)).
Basic Production Expectance = 60 minute hour
--------------
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on
new or revised standards after
10/16/94)
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Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
Opportunity Offered By Above Formula
------------------------------------
1362 SAH = TSM 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% RFD Allowance)
-----
TSM 8.1731 (Total Standard Minutes)
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
----
Base Rate 6.18 = 125% incentive
Earnings opportunity at +25% incentive pace
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH 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 standard 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.
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<PAGE> 35
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the Company 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 any operation in the degree the change in the task
affects the standard upward or downward.
Where the change represents less than five percent (5%) of the
cycle base minutes, the Company 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, the Company 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 affected 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 SAH 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
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
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<PAGE> 36
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 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.
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:
A. 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.
B. The Company designee will respond by either selecting
from the Union list or by offering alternative dates.
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C. Once the above two (2) designees complete
arrangements, they will notify their respective local
Company 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 the attendant difficulties occasioned by
disagreement over pace determination, the Company will, whenever feasible, set
incentive job standards by use of pre-determined, 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
---------
HOLIDAYS
10.01 HOLIDAYS OBSERVED. It is agreed that the following holidays shall
be granted at the plant of the COMPANY, 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
Presidential Election Day - UNPAID HOLIDAY
(1st Tuesday after 1st Monday in
November every fourth year)
The day before or after Christmas
10.02 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.
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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 have worked the full
scheduled day after the holiday unless excused for
reasonable cause by management and shall not 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.
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.
10.03 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; those employees
with ten (10) or more years service will be entitled to a second paid holiday,
said holidays being the first and or second (if applicable) coming after the
commencement date of the illness or accident.
10.04 HOLIDAY PAY. Holiday pay shall be included in the pay check for
the pay period in which the holiday falls.
10.05 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
falls within an eligible employee's approved vacation period and the employee is
absent from work during his regularly scheduled work week because of such
vacation, the employee shall be paid for such holiday in addition to vacation
pay and shall have such day off.
10.06 MULTIPLE HOLIDAYS ON SAME DAY. 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.
10.07 HOLIDAYS ON SUNDAY. 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.
10.08 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday
falls on 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.
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10.09 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in section 8.08 for incentive workers;
day workers will be paid at eight (8) times the employees regular day work
hourly rate. Shift premium shall be included in holiday pay computation for
eligible employees.
10.10 OVERTIME AND PREMIUM PAY. For purposes 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.
10.11 MONDAY HOLIDAYS. 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).
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<PAGE> 40
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The Company will grant paid vacation to employees 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
continuos service shall have the option of taking a
fourth week of vacation in lieu of the seniority
bonus (section 7.27) 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 circumstances:
(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) The Company will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
11.02 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 the event the anniversary date of
hiring shall be the determining factor for eligible purposes.
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Any employees eligible for a third week of vacation shall
receive same at a time selected by MANAGEMENT.
11.03 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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 cases of
third or fourth week vacations during the period of May, June, July, August and
September may occasionally be arranged when the Staff Representative can
mutually agree to such with the Operations Manager or the Human Resources
Manager.
11.04 ELIGIBILITY. 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 NO ACCUMULATION. 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.
11.06 SHIFT PREMIUM. Shift premium will be included in vacation pay
computation for employees otherwise eligible.
11.07 PAY FOR QUITS AND DISCHARGES. Quits and discharges will receive
pro rata share based on the actual number of complete months worked during the
calendar year during which such employee quit or was discharged. Reinstated
discharges will receive full vacation benefits they are otherwise eligible for.
11.08 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 8.08.
11.09 VACATION PAY - LEAVES OF ABSENCE - LAYOFF. 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.
ARTICLE XII
-----------
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<PAGE> 42
UIU PENSION TRUST
UIU 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 Company 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 (10th) day of each month, to the UIU
Pension Trust a sum a 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
month. The Company shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the Company
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The Company
further agrees to supply to the Trust such 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 (12) months shall
be considered. Thereafter, the Company 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 UIU Pension Trust in
which event the Company 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 Company'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 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.
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In consideration of the Company's aforesaid contributions to
the Trust as herein above provided and for so long as the Company's
participation in the Trust is accepted by the Trustees, the Trustees will,
beginning with the date of receipt by the Trust of the Company's first said
contribution and continuing for such part of the duration of this Agreement as
the Company 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 Company'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 UIU Pension Trust, but at a cost of the Company not to
exceed to the cost of the contribution hereunder.
ARTICLE XIII
------------
THE UNITED STEELWORKERS OF AMERICA
HEALTH AND WELFARE FUND
13.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers Of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.
13.02 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 Company 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 11/1/97
<TABLE>
<CAPTION>
The United Steelworker Employee
of America Plan Company Contribution Total
--------------- ------- ------------ -----
<S> <C> <C> <C>
Single $209.02 $ 12.97 $221.99
Single Plus One 349.00 22.69 371.69
Family 445.53 31.21 476.74
</TABLE>
The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any increase in total insurance premium costs in the second
year which exceeds five (5%) percent over
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<PAGE> 44
the total insurance premium costs in the first year will give the Company the
option to cease participation in the USWA Health and Welfare Fund. This same
option will apply if the total insurance premium costs in the third year exceed
by more than five (5%) percent the total insurance premium costs from the second
year and similarly if the fourth year exceeds the third year by more than five
(5%) per cent. Any contributions or increases or decreases in insurance premium
contribution costs in the second, third, and or fourth years will be shared in
the same ratio of eighty nine (89%) percent employer and eleven (11%) percent
employee. If the Company opts out, the Company and the Union reserve the right
to review the plan and mutually determine continuation of coverage through a
plan offering comparable coverage.
13.03 ELIGIBILITY. Eligible employees are all 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; or
C. Attendance at Union or fund Convention, seminar or
grievance hearing.
The Company 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 Company 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 Company agrees to make the required deductions and to
promptly transmit same to the Fund. Employee contributions are due at the same
time as the Company contributions.
Employees who refuse or neglect to provide the Company 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 Company with the required written authorization but because of
lack of wages the Company is unable to deduct the employee contribution for a
particular benefit month, it is the obligation of the employee to pay, in a
timely fashion, to the Company 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 $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.
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13.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the Company
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 (1st) day of the month following
completion of thirty (30) days of employment.
Previously covered employees shall be covered the
first (1st) day of the calendar month following their
return to work.
B. DISABILITY BENEFITS. Newly hired employees shall be
eligible for 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 thirty-one (31) days of birth.
13.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company 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 Company 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 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America 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
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<PAGE> 46
to The United Steelworkers Of America 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 Company are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.
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 Company
pay a contribution for such employees. Nothing in this clause shall be construed
as an affirmation or negation of the Company's right to hire part time
employees.
13.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers Of America Health and Welfare Fund periodically.
13.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers Of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company'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 Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.
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<PAGE> 47
ARTICLE XIV
-----------
JURY SERVICE
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 earnings as computed in Section 8.08 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 the 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 (3) 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, grandparents, grandchildren, spouse, or child. No
pay shall be granted if 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 (8) 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 BULLETIN BOARDS. The Union may put up bulletin boards at
locations specified by the Company for the following non-controversial Union
announcements:
A. Notice of Union recreational or social affairs;
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. Notices pertaining to The United Steelworkers Of
America Health and Welfare and UIU Pension Programs.
16.02 POSTING OF NOTICES. 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
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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 Human Resources Manager 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
The Company agrees to comply with all applicable laws relating
to re-employment rights of employees called for military duty.
ARTICLE XVIII
-------------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday
eligibility will receive an additional eight (8) hours pay (computed as per
Section 10.09) 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
abovementioned 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.
Employees who are eligible for birthday pay and elect to
receive pay in lieu of a day off by January 1 will receive a $100 birthday
check, exclusive of payroll deductions. If not elected by January 15, the
appropriate clauses of the contract will apply.
ARTICLE XIX
-----------
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), disability, 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
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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's 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 or your Operations Manager. A confidential investigation will
be conducted.
ARTICLE XX
LEAVES
20.01 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 a temporary employee. If sick leave extends for
longer than thirty (30) days then Article 7.17 applies.
20.02 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 Section
8.09(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.
20.03 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, provided the COMPANY has been supplied with an accurate
address/phone number by which to contact the employee. 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 COMPANY in writing. Such
leave of absence shall not be renewed and seniority will accumulate during the
leave.
20.04 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.
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Misrepresentation as to breakage in the course of employment shall subject
offenders to immediate discharge.
ARTICLE XXI
-----------
MISCELLANEOUS
21.01 FOUL WEATHER CLOTHING. The COMPANY will provide foul weather
clothing for employees required to fight fires, flood and for use in inclement
weather. Four 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.
21.02 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.
21.03 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.
21.04 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 such employees are
protected only against severance of seniority with no claim on any particular
job classification.
21.05 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.
21.06 PAY SHORTAGES. Employee who establish a shortage in pay shall
receive a special check provided the amount is in excess of fifty dollars
($50.00) within twenty-four (24) hours after
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<PAGE> 51
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.
21.07 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.
ARTICLE XXII
MODIFIED DUTY
WORK HARDENING PROGRAM
An employee who suffers a work related injury and for all such
cases receives an appropriate release from the treating Company physician, and
if necessary, corroborated by designated personal physician will be used in this
"modified duty/work hardening" job until such time as they are once again able
to physically perform their regular job. During the first two (2) weeks of
modified duty/work hardening the employee will receive his/her average rate.
Every two (2) weeks thereafter, the employee's pay will be reduced by 10%. At no
point will employee's earnings be less than base rate. 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" as corroborated by Company and
personal physician, the COMPANY will reimburse the employee for the difference
in pay between their regular rate of pay and the modified duty/work hardening
rate reductions.
NOTE: Visit to personal physician is at employee's own expense.
ARTICLE XXIII
SAVING CLAUSE
23.01 SEPARABILITY. If any provision of this 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.
23.02 FEDERAL AND STATE LAWS. 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
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<PAGE> 52
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 XXIV
SEVERANCE AND PLANT CLOSINGS
In the event the Company decides to close this facility
presently organized by the United Steelworkers of America, sixty (60) day notice
of such event will be given to the District Director of the United Steelworkers
of America. Those employees affected by the plant closing shall continue to be
covered under their existing USWA Health and Welfare Fund benefits as outlined
in Article XV 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.
ARTICLE XXV
DURATION AND TERMINATION OF SUPPLEMENT
25.01 EFFECTIVE DATES. This AGREEMENT shall be in full force and effect
from October 16, 1997 until October 15, 2001.
25.02 ENTIRE AGREEMENT. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this Agreement and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.
25.03 MODIFICATION OR TERMINATION. This AGREEMENT, when signed by the
officers of the COMPANY and the UNION, shall become effective as described above
for a period of four (4) years and shall continue to remain in full force and
effect from year to year thereafter, unless written notices 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.
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<PAGE> 53
ARTICLE XXVI
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the
term of this agreement. The Plan is called "Pay Plus". Certain features of the
Plan remain undetermined as of October 15, 1997. Therefore, the parties agree
that during the term of this agreement there will be a limited re-opener
regarding aspects of the Plan. The Company will notify the Union not less than
forty-five (45) days prior to the implementation date of the Pay Plus Plan at
the Piscataway facility. During this forty-five (45) days period, the Company
and Union will meet to discuss such Pay Plus matters as (but not limited to)
base rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.
Notwithstanding Article V, if agreement is not reached
regarding the matters to be discussed during the forty-five (45) days or
extension thereof, the parties are free to exercise their rights to engage in
activity in support of their respective positions. In the case of the Union this
shall include, but not be limited to, a strike or other legal means in support
of its position. In the case of the Company this shall include, but not be
limited to, implementation of the Plan, a lockout, and/or in the case of a
strike, the hiring of replacements. The right to strike shall not give rise to a
sympathy strike in support of employees at other Simmons plants where the Pay
Plus Plan is implemented or in the process of being implemented. Further, the
Union agrees to provide a ten (10) day written notice prior to the commencement
of a strike; and the Company agrees to provide a ten (10) day written notice
prior to the commencement of a lockout.
Finally, nothing in this re-opener provision should be
construed as limiting the Company's rights under Article IX.
-48-
<PAGE> 54
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated, this 21st day of October, 1998.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #420
/s/ George F. Becker
- ------------------------------------- --------------------------
George F. Becker Company
International President
/s/ Leo W. Gerard By: /s/ Ken Barton
- ------------------------------------- ------------------------
Leo W. Gerard, International
Secretary/Treasurer
/s/ Richard H. Davis
- -------------------------------------
Richard H. Davis, International
Vice-President Administration
/s/ Leon Lynch
- -------------------------------------
Leon Lynch, International
Vice-President, Human Affairs
/s/ Victoria Key
- -------------------------------------
Victoria Key, Staff Representative
Coordinator
/s/ Louis J. Thomas
- -------------------------------------
District Director
/s/ Willoughby Sharp
- -------------------------------------
/s/ Jay Fernandez
- -------------------------------------
Committee
/s/ S. G. Pease
- -------------------------------------
Committee
- -------------------------------------
Committee
- -------------------------------------
Committee
-49-
<PAGE> 55
PISCATAWAY PLANT SUPPLEMENT
APPENDIX I
HIRING RATE - $7.75
-----
EFFECTIVE
10/16/97
$7.75
-----
<TABLE>
<CAPTION>
10/16/97 10/16/98 10/16/99 10/16/00
ITEM JOB TITLE END RATE END RATE END RATE END RATE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
01 Border Machine $11.15 $11.45 $11.75 $12.05
8 Control Room-Matts &B/S $ 9.88 $10.18 $10.48 $10.78
11 Cutting Type #2 $ 9.80 $10.10 $10.40 $10.70
22 Inspector (1st Class) $ 9.99 $10.29 $10.59 $10.89
51 Special $ 9.52 $ 9.82 $10.12 $10.42
62 Storeroom (1st Class) $10.05 $10.35 $10.65 $10.95
81 General Labor $ 9.93 $10.23 $10.53 $10.83
83 Inventory Rate $ 9.71 $10.01 $10.31 $10.61
89 Repair $ 9.88 $10.16 $10.48 $10.78
95 Material Handlers $ 9.71 $10.01 $10.31 $10.61
101 Truck Loaders $12.85 $13.15 $13.45 $13.75
Conveyor $12.85 $13.15 $13.45 $13.75
799 Plastic Wrap Operator $11.10 $11.40 $11.70 $12.00
*** Sr. 2nd Class Cutter $11.04 $11.34 $11.64 $11.94
*** Sr. Control Room $13.91 $14.21 $14.51 $14.81
*** Material Control Analyst $11.15 $11.45 $11.75 $12.05
**** Specialty Services Team
Closer $14.30 $14.60 $14.90 $15.20
Hog Ring $14.30 $14.60 $14.90 $15.20
Sewing Machine $13.30 $13.60 $13.90 $14.20
</TABLE>
* 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.
-50-
<PAGE> 56
PISCATAWAY PLANT SUPPLEMENT
APPENDIX II
-----------
HIRING RATE - $7.75
-----
EFFECTIVE
10/16/97
$7.75
-----
Progression Rate: An additional ten cents (10(cent)) per week the
second week of employment and five cents (5(cent)) per week thereafter to be
added to the hiring rate listed above until end training rate is reached as
indicated.
END
<TABLE>
<CAPTION>
TRAINING RATES BASIC RATES
JOB CLASS EFFECTIVE 10/16/97 EFFECTIVE 10/16/97
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
02 Bechik $ 8.61 $ 9.69
12 Finish Box Spring $ 8.61 $ 9.79
09 Hog Ring Open Coil $ 8.56 $ 9.07
24 Hog Ring Beautyrest $ 8.56 $ 9.07
25 Hog Ring (any type) $ 8.56 $ 9.07
08 Close Mattress (any type) $ 8.71 $11.25
15 Box Spring Frame and Route $ 8.61 $ 9.45
07 Run Quilt Machine $ 9.00 $ 9.60
03 Sew Labels $ 8.56 $ 9.12
06 Overcast $ 8.56 $ 9.12
04 Sew Boxspring Panels to Border $ 8.56 $ 9.12
17 Ultrasonsic Operator $ 8.31 $ 9.68
16 B/R Assembly Machine $ 8.26 $10.08
26 Box Spring Top-Off $ 8.61 $ 9.80
</TABLE>
Above End Training Rates and Base Rates will be increased by
thirty (30(cent)) cents per hour on each of the following dates: 10/16/98;
10/16/99; and 10/16/00.
-51-
<PAGE> 57
PISCATAWAY
APPENDIX III
------------
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
Richard Adelman
Jack Clarke
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
-52-
<PAGE> 58
APPENDIX IV
-----------
PISCATAWAY
PAY PLUS BONUS PLAN LANGUAGE
1. TITLE: ESTABLISHMENT OF BASE RATES FOR MOVEMENT BETWEEN JOB CLASSIFICATIONS:
(Addendum to Article VIII - Wages)
For all employees covered by this contract any movement between
classifications (i.e. bumping, bidding, RFC, etc.) shall be governed by
the rules below:
A. An existing employee who changes his/her classification that
involves a DROP* from one pay range to another would retain
his/her current base rate or the midpoint of the new range,
whichever is lower. (Revision #1).
B. An existing employee who changes his/her classification that
involves MOVING UP* from one pay range to another would
receive $.50 increase to their current base rate or the
midpoint of the next range, whichever is higher. (Revision
#1).
C. An existing employee who moves from class to class within a
pay range would remain at their current base rate.
DEFINITIONS:
CLASSIFICATION - defined by the current job titles as defined in the Piscataway
contract in Appendix I & II.
RANGE - the newly established payroll groupings defined in the P.P.B. proposal
as 1D, 2D, 3I, 4T.
DROP - means moving from Range 1D to 2D, 1D to 3I, and 2D to 3I.
MOVING UP - means moving from 2D to 1D, 3I to 1D, and 3I to 2D.
2. TITLE: PAY FOR ADDITIONAL SKILLS - MULTI SKILLED EMPLOYEE
(Addendum to Article VIII - Wages)
Any one employee can have up to a maximum of three (3) additional skills. Each
additional skill will receive a $.25 premium applied to their current base rate
and shall remain a permanent part of their base rate as long as the employee is
deemed a "Multi Skilled Employee". The Company will allow the maximum of 13
individuals that may be eligible for this additional benefit.
A bid shall be posted for a "Multi Skilled Employee" for a particular job.
Bidding procedures will be followed as defined in the Piscataway contract.
-53-
<PAGE> 59
All bidders shall be required to establish competency and the final selection of
successful bidder(s) will be based upon seniority. Competency will be determined
by the Company and may require the employee to physically perform the job in
question for a period of time not to exceed two (2) weeks.
3. TITLE: NEWLY HIRED EMPLOYEES AND ESTABLISHMENT OF JOB RATES
(Addendum to Article VIII - Wages,; note Article VII Section 7.24 needs
to be modified to omit reference to training rate and his/her incentive
earnings).
All new hires will be paid at the 4T rate and be eligible for the plant bonus
immediately. An additional $.15 per week will be added to their base rate
beginning the second week of employment and each week thereafter until that
employee has reached the lowest rate of the pay range for that job
classification.
4. TITLE: BASE RATE CHANGES FOR NEWLY HIRED OR TRANSFERRED EMPLOYEES
(Addendum to Article VIII - Wages)
During the first year all newly hired or transferred employees may petition the
Company for a base rate evaluation. A request should be submitted to the Company
by the Union for a performance evaluation that will involve a review of that
individuals performance based upon the individual skills defined in the P.P.B.
(Quality, Productivity, Teamwork, etc.). This reevaluation may involve a merit
increase, but will never reduce the current base rate.
Requests for reevaluation may be made no more than twice during the first year
with no less than three (3) months between requests.
GRIEVING CHANGES IN STANDARD:
If there is a change in any standard, the Company will provide the Union with
the methods description at the time the change is made effective. The Union has
thirty (30) days to grieve the new standard and if not grieved within 30 days,
the Union will lose the right to grieve and/or arbitrate the new standard.
CHANGES TO EXISTING CONTRACT:
The following clauses will be removed from the contract as long as the Pay Plus
compensation program is in effect. If the Company and the Union agree to
reestablish a piece work system the clauses will be put back in the contract as
they are stated in the contract dated October 15, 1997:
-54-
<PAGE> 60
Article 3.07 - 2nd &3rd paragraphs
Article 8.07 - all
Article 8.09 - all
Article 8.13 - all
Article IX
PAY PLUS PRODUCTIVITY IMPROVEMENT COMMITTEE
The Union and Company agree to form a committee consisting of 5 Union and 5
Company representatives, those members selected by the Union and Company
respectively at their discretion. This committee will meet as needed not to be
less than once per month. The purpose of this committee is to present and
discuss issues concerning communication, problem resolution, opportunities for
improvement, and the like. This committee will be a standing committee.
-55-
<PAGE> 1
Exhibit 10.18
INDEX
-----
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
I RECOGNITION AND UNION SECURITY.......................................................... 1
Employees Covered....................................................................... 1
Union Security.......................................................................... 2
Check-Off............................................................................... 3
Union Representative Seniority.......................................................... 3
Procedure for Returning from Leave of Absence for Union Activity........................ 3
II DISCIPLINARY PROCEDURE.................................................................. 3
Just Cause.............................................................................. 3
Interview and Hearing................................................................... 3
Good Faith Duties....................................................................... 4
Correction of Offense................................................................... 4
Disciplinary Policy..................................................................... 4
III GRIEVANCE PROCEDURE AND ARBITRATION..................................................... 4
Grievance Procedure..................................................................... 4
Grievances - Step 1..................................................................... 5
Grievances - Step 2..................................................................... 5
Grievances - Step 3..................................................................... 5
Resolution by Default................................................................... 6
Arbitration of Disputes................................................................. 6
Selection of Arbitrators................................................................ 6
Authority of Arbitrator................................................................. 6
Expedited Arbitration................................................................... 7
IV HOURS OF WORK AND PREMIUM PAY........................................................... 7
Work Week............................................................................... 7
Overtime Hours.......................................................................... 8
Saturday and Sunday Work................................................................ 8
Availability for Scheduled Work......................................................... 8
No Pyramiding........................................................................... 9
Shift Schedule.......................................................................... 9
Shift Premiums.......................................................................... 10
Reporting Pay........................................................................... 10
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
V NO STRIKE - NO LOCKOUT.................................................................. 11
VI MANAGEMENT RIGHTS CLAUSE................................................................ 11
VII SENIORITY............................................................................... 11
Accumulation of Seniority............................................................... 11
Termination of Seniority................................................................ 12
Layoff.................................................................................. 12
Right of Recall......................................................................... 14
Notice of Recall........................................................................ 15
Change of Address....................................................................... 15
Layoff Notice........................................................................... 15
Furlough................................................................................ 15
Equalization of Work Wherever Practicable............................................... 15
Probationary Period..................................................................... 16
Return from Promotion out of Bargaining Unit............................................ 16
Seniority List.......................................................................... 16
Change in Union Representatives......................................................... 16
Job Bidding Procedures.................................................................. 16
Transfer After Successful Bid........................................................... 17
In the Event of No Bidders.............................................................. 17
War Emergency........................................................................... 17
Seniority Bonus......................................................................... 17
VIII WAGES................................................................................... 18
Hiring Rate............................................................................. 18
Hourly Rates............................................................................ 18
Shop Committee Meetings................................................................. 18
General Wage Increases.................................................................. 19
Reactivation of Old Classifications..................................................... 19
Establishment of New Classifications.................................................... 19
Rate for Borrowed Man................................................................... 19
Average Rate Computation................................................................ 20
Work Wait Compensation.................................................................. 20
Injured During Work..................................................................... 21
Qualified Incentive Workers............................................................. 22
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
IX STANDARD ALLOWED HOURS.................................................................. 22
Incentive Compensation Plan............................................................. 22
New or Varied Jobs and Operations....................................................... 23
Standard Allowed Hour................................................................... 23
Written Confirmation and Effective Date of SAH.......................................... 24
Procedural Interpretation of Section.................................................... 25
Grievances Regarding Incentive Standards................................................ 25
Availability of Time Study Data......................................................... 26
Union Time Study Engineer............................................................... 26
Standard Data........................................................................... 27
X PAID HOLIDAYS........................................................................... 27
Holidays Observed....................................................................... 27
Eligibility............................................................................. 27
Leave of Absence........................................................................ 27
Holiday Pay............................................................................. 28
Holidays During Approved Vacation....................................................... 28
Multiple Holidays on Same Day........................................................... 28
Holidays on Sunday...................................................................... 28
Holidays on Saturday.................................................................... 28
Pay Rate................................................................................ 28
Overtime and Premium Pay................................................................ 28
XI PAID VACATIONS.......................................................................... 28
Vacation................................................................................ 28
Pay Rate................................................................................ 29
Intermittent Vacation................................................................... 29
Plant Shutdown and Staggered Vacation................................................... 29
Eligibility............................................................................. 30
Scheduling of Staggered Vacations....................................................... 30
No Accumulation......................................................................... 30
Shift Premium........................................................................... 30
XII INVENTORY WORK.......................................................................... 30
XIII LEAVE OF ABSENCE........................................................................ 31
Return from Leave of Absence............................................................ 31
Determination of Layoffs................................................................ 31
XIV UIU PENSION TRUST....................................................................... 31
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
XV UNITED STEELWORKERS HEALTH AND WELFARE FUND............................................. 32
Benefit Plan(s)......................................................................... 32
Contribution Rates...................................................................... 33
Eligibility............................................................................. 33
Employee Contributions.................................................................. 34
Sickness and Health and Life Insurance.................................................. 34
Payment of Contributions................................................................ 34
Coverage................................................................................ 34
Election of Category of Coverage and Right to Change.................................... 34
Requirements............................................................................ 35
Hold Harmless........................................................................... 35
Reinstatement of Coverage............................................................... 35
Part Time Employees..................................................................... 35
Audit Rights............................................................................ 36
Availability of Benefits................................................................ 36
XVI JURY SERVICE............................................................................ 36
XVII BEREAVEMENT PAY......................................................................... 36
Definition.............................................................................. 36
Payment................................................................................. 37
XVIII BULLETIN BOARDS......................................................................... 37
Bulletin Boards......................................................................... 37
Posting of Notices...................................................................... 37
XIX MILITARY CLAUSE......................................................................... 37
XX EMPLOYEE BIRTHDAY PAY................................................................... 38
XXI EQUAL EMPLOYMENT OPPORTUNITY............................................................ 38
</TABLE>
-iv-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
XXII MISCELLANEOUS........................................................................... 39
Information............................................................................. 39
Safety Shoes............................................................................ 39
Cameras................................................................................. 39
Hand Cleaner............................................................................ 39
Skills Audits........................................................................... 39
Incentive Systems....................................................................... 39
XXIII SAVING CLAUSE........................................................................... 39
Separability............................................................................ 39
Federal and State Laws.................................................................. 39
XXIV SEVERANCE AND PLANT CLOSINGS............................................................ 40
XXV DURATION AND TERMINATION OF SUPPLEMENT.................................................. 40
Effective Dates......................................................................... 40
Entire Agreement........................................................................ 40
Modification or Termination ............................................................ 40
XXVI CONTRACT RE-OPENER...................................................................... 40
SIGNATURES.............................................................................. 42
APPENDIX "A" RATES FOR HOURLY WORKERS................................................... 43
APPENDIX "B" RATES FOR INCENTIVE WORKERS................................................ 45
APPENDIX "C" ARBITRATORS FOR EXPEDITED
ARBITRATION.................................................................... 47
</TABLE>
-v-
<PAGE> 6
COLUMBUS AGREEMENT
Language from Columbus Supplement
Language from Master Agreement
AGREEMENT
This Agreement, made this 20th day of October, 1997, by and between
Simmons Company, Columbus, Ohio (hereinafter referred to as the Company) and the
United Steelworkers of America, AFL, CIO, CLC (hereinafter referred to as the
Union) on behalf of its Local Union No. 424, for and on behalf of itself and the
employees of said Company at its plant located at Columbus, Ohio.
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.
1.02 EMPLOYEES COVERED. The Company hereby recognizes the Union as the
sole and exclusive collective bargaining agent for all the Company's employees
employed by it at its Columbus, Ohio plant. The persons covered by this contract
include all production employees of the Company employed in its Columbus, Ohio,
plant, excluding executives, sales employees, office workers, timekeepers,
watchmen, office janitors, maintenance department employees, truck drivers,
foremen, supervisors, private chauffeurs, main office, clerical, and engine room
and power plant employees.
<PAGE> 7
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 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 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.
(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, or 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 District Director notifying him of the
requested discharge. Failure of the District Director
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 section 7.10
of this AGREEMENT.
(f) The provisions of this section shall be applicable
only to the extent permitted by applicable state and
federal law.
-2-
<PAGE> 8
(g) No Union member 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 Steelworkers of America UNION Executive Board 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 International
Secretary-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, claims, responsibility, damages
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 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, Treasurer, and three (3) Trustees.
1.06 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.
ARTICLE II
----------
DISCIPLINARY PROCEDURE
2.01 JUST CAUSE. The Company shall not discharge, suspend, or otherwise
discipline any employee except for just cause, or as provided in Section
1.03(d).
2.02 INTERVIEW AND HEARING. 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.
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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 10:00 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 Company is not liable for any wage during such period.
2.03 GOOD FAITH DUTIES. 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 CORRECTION OF OFFENSE. Once an individual is reprimanded and the
offense is not committed again for a period of twelve (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.
2.05 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 2.04,
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.
ARTICLE III
-----------
GRIEVANCE PROCEDURE AND ARBITRATION
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.
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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 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 two (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 (2) 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.
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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 RESOLUTION BY DEFAULT. 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 3.01 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 SELECTION OF ARBITRATORS. Within ten (10) calendar days after the
Union files its written request for arbitration pursuant to Section 3.06 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.
In the event the Union and the Company are unable to agree to
a base rate on a new classification as provided in Section 8.09 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 AUTHORITY OF ARBITRATOR. 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.
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<PAGE> 12
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.
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 "C", page 47) 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.
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4.02 OVERTIME HOURS.
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 8.11 reflecting the earnings for the week in
which the overtime is worked.
B. Anyone reporting to work after their regular staring
time will receive overtime pay only upon completion
of eight (8) hours work.
4.03 SATURDAY AND SUNDAY WORK. 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 AVAILABILITY FOR SCHEDULED WORK. Employees must be available for
all work 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.
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).
(a) 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 voluntary basis only.
(b) 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
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<PAGE> 14
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.
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.
(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 NO PYRAMIDING. 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 SHIFT SCHEDULE. The following is the usual shift schedule. The
shift schedule below will be modified to permit local plant management to vary
the starting time up to 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. 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 Company may adjust shift hours, plus or minus up to one
hour, with reasonable notice (reasonable means by the end of the prior working
day) without penalty of overtime premium.
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 unpaid 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 unpaid
lunch period between 11:00 a.m. to 12:30
p.m.
2. The second shift will work from 3:30 p.m.
until 12:00 midnight with a one-half hour
unpaid lunch period between 7:30 p.m. to
8:00 p.m.
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<PAGE> 15
C. When three 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 3:00 p.m. with a one- half hour paid
lunch period between 11:00 a.m. to 12:30
p.m.
2. The second shift will work from 3:00 p.m.
until 11:00 p.m. with a one-half hour paid
lunch period between 7:00 p.m. to 7:30 p.m.
3. The third shift will work from 11:00 p.m.
until 7:00 a.m. with a one-half hour paid
lunch period between 3:00 a.m. to 3:30 a.m.
D. 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.
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 up to 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.
E. FRIDAY NIGHT SHIFT. Employees who work the night
shift on Friday will not be made to work before 11:00
a.m. Saturday.
F. REST PERIODS. There shall be two (2) ten (10) minute
rest periods daily.
G. RIGHT OF REFUSAL FOR INCENTIVE EMPLOYEES. 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.
4.07 SHIFT PREMIUMS. Employees assigned to work on the second or third
shift shall be paid a shift premium of twenty (20) cents per hour.
4.08 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 8.11 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 fire, Act of God, Act of Public
Enemy, or because of conditions beyond the control of the Company.
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<PAGE> 16
ARTICLE V
---------
NO STRIKE - NO LOCKOUT
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
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
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.
7.01 ACCUMULATION OF SENIORITY. 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;
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<PAGE> 17
(e) The manner of return to employment shall be as
provided herein.
(f) To be eligible for a leave of absence, an employee
must have completed the probationary period provided
in Section 7.10 and the leave request must be in
writing.
7.02 TERMINATION OF SENIORITY. Seniority shall terminate for the
following reasons:
(a) When an employee resigns;
(b) When an employee is discharged for just cause;
(c) When an employee is laid off longer than twelve (12)
months, except for right of recall as per section
7.04;
(d) When an 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 7.05;
(f) If an employee falsifies any information given in
connection with a leave of absence; and
(g) When an employee obtains other employment while on an
approved leave of absence.
7.03 LAYOFF.
A. When increases or decreases in workforce become
necessary, they shall be made on the basis of
seniority.
B. When there is not sufficient work for all employees,
probationary employees with less than (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 7.03A.
C. Bumping rights or options will be given first to the
most senior person to be laid off. If an employee is
not qualified in any classification, they will have
the right to bump the least senior employee in the
plant.
D. In the event a layoff is necessary, the employee must
roll or bump into a position in which he or she can
perform without additional training. The maximum
number of bumps will be limited to six. The first
five bumps will
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<PAGE> 18
follow the guidelines established in Section 7.03A.
The fifth person bumped shall have the right to bump
the least senior person in the plant.
E. 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 the job that the ailing
employee can perform without further training.
F. The Company has a right to train employees. When the
employee requests training, they shall be paid at
their base rate. If the Company mandates training,
piecework employees shall receive 85% of their
average or base wage which ever is greater and hourly
employees shall receive their base wage.
G. Time allowed for the refreshment of skills will be as
follows:
Employees who have been off the job:
0-29 days No training allowance
30-89 days 4 hours at average
90-6 months 8 hours at average
6 months - 1 year 24 hours at average
1 year - 3 years 40 hours at average
3 or more years Retrain completely
The above refreshment of skills shall also apply to Section
8.10, Rate for Borrowed Man.
H. Before Section 7.03 is placed in effect, each
employee will be interviewed to determine his/her
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.)
I. Any employee who is trained on a new job may not
declare himself/herself 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.
J. 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.
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<PAGE> 19
K. The borrowed man clause will be available whenever an
employee is taken off his/her regular classification
for the convenience of the COMPANY when an individual
did not request training.
7.04 RIGHT OF RECALL
A. The Company will return the most senior employee on
layoff, provided such employee can successfully
perform the work available without additional
training. If no one is qualified, the most senior
person on layoff will be recalled.
B. If an employee is laid off longer than 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.
C. SURPLUS LABOR LIST. Any employee laid off for lack of
work shall have his/her name placed on a surplus
labor list. If an employee's seniority has been
broken, his/her name shall be removed from such list.
D. PROCEDURE IN REPLACING EMPLOYEES ON FORMER
CLASSIFICATION
1. The Human Resource Office will check "return
to former classification" file involving
employees presently working in the plant.
2. Failing to find applicants from step "A,"
the Human Resource Office will check the
surplus labor list and select employees on
the basis of seniority.
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 Human Resource 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.
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<PAGE> 20
E. The Company will furnish to the Union, monthly, a
current list of all people laid off.
7.05 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 the receipt of notice to report will result
in the termination of seniority. Overnight letters to 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 the employee's
last known address shall solely be that of the Company.
7.06 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 7.05 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 the employee within the above five (5) days will mean forfeiture
of all seniority rights by the employee involved.
7.07 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.
7.08 FURLOUGH. When a temporary reduction in a classification becomes
necessary, the Company will seek volunteers for a 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 (3) weeks
and be a minimum of one (1) 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. In the event there is an opening
in another classification for which there are no employees available in such
classification 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.
7.09 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.
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<PAGE> 21
7.10 PROBATIONARY PERIOD. 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. 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.
7.11 RETURN FROM PROMOTION OUT OF BARGAINING UNIT. In the event that an
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 classification 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.
7.12 SENIORITY LIST. 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.
7.13 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.
7.14 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 Sunday and holidays) from accepting the bid until
transfer to the new job. The successful bidder can refuse to accept the job
awarded in this forty-eight (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
twelve (12) months. Rules 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
the Plant. If disqualified a second time, he/she shall be laid off and have
his/her name placed on the surplus
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<PAGE> 22
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 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.
7.15 TRANSFER AFTER SUCCESSFUL BID. 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.
7.16 IN THE EVENT OF NO BIDDERS. 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 the
Company his/her desire to identify the job he/she wishes to return to in
writing.
7.17 WAR EMERGENCY. 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.
7.18 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 or at the time of their vacation, as the employee chooses.
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<PAGE> 23
ARTICLE VIII
------------
WAGES
8.01 HIRING RATE.
A. The hiring rate for all new employees shall be $8.00
per hour. After thirty (30) days the rate for day
workers will be increased by one-dollar ($1.00) and
by fifty cents ($.50) for incentive workers. After
sixty (60) days, day workers will be brought up to
the base rate for the job.
B. TRAINING RATE. The training rate shall be $8.00
per hour.
(i) Employees who are recalled, transferred,
bids, bumped or rolled to another incentive
job shall immediately receive the training
rate where such training rate is provided or
his/her incentive earnings for such job,
which ever is higher. Any employee who is
recalled, transferred, bids, bumped or
rolled to a day work job shall immediately
receive the top rate for the classification
of said job.
(ii) 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.
8.02 HOURLY RATES. The Company 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."
8.03 SHOP COMMITTEE MEETINGS. Shop committee meetings or conferences
with any member of said committee, if called or approved by the Company during
working hours, shall be compensated for at the employee's basic rate.
8.04 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1997. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1997. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
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8.05 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1998. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1998. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.06 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 1999. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
1999. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.07 A general wage increase of Thirty (30) Cents per hour for all
hourly employees and Thirty (30) Cents per hour for all incentive employees will
be granted effective October 16, 2000. For incentive employees the increase will
be applied to the previous quarterly average and paid effective November 1,
2000. All basic rates, all hourly rates and all labor grades will be increased
to reflect the increase.
8.08 REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
classification is reactivated, it is understood that all intervening wage
adjustments shall automatically be added to the original rate thereof.
8.09 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. When new jobs, split jobs, or combined jobs are created,
preference for filling those jobs will be given to the employees currently
performing those jobs based on their seniority. If no employee who is currently
performing those functions wants to perform the newly defined position, the job
will be posted and filled according to the posting provisions outlined in this
Agreement.
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). 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 of this agreement.
8.10 RATE FOR 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 day work rate for the work
being
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<PAGE> 25
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.
No job may be filled by borrowed personnel for more than sixty
(60) days during any twelve (12) month period except by mutual Agreement between
the Company and the Union, except in situations in which the training period
exceeds sixty (60) days.
8.11 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 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 the worker is in a holiday or vacation status, or time
working any classification other than the worker's 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.
In the event an employee has not established an average hourly
rate due to the fact that the employee has not worked during the immediately
preceding calendar quarter, then the employee's average rate shall be equal to
the employee's average rate for the last quarter the employee worked.
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.
An employee who qualifies on a piecework job 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 cutoff 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.
8.12 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.
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<PAGE> 26
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 sixty (60) minutes after the moment
of the occurrence, instructs an employee to go home
or to return to work, the employee will be paid base
pay for time lost within this sixty (60) minute
period. If the Company does not instruct any employee
within sixty (60) 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 8.11 above, 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.
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.
8.13 INJURED DURING WORK
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
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<PAGE> 27
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.
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
pyramiding on disability payments or workers'
compensation payments.
8.14 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.
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 IX
----------
STANDARD ALLOWED HOURS
9.01 INCENTIVE COMPENSATION PLAN. 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 judgment, such a plan is
practicable. When an incentive program is implemented the Company will provide
the incentive earnings opportunity for the Plant as a whole that will
approximate the incentive earnings opportunity which existed prior to the
implementation of the new incentive program. 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,
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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 the
Plant.
9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the supervisor 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 thirty (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/her average hourly rate until
a new standard is submitted.
The Company shall select an average operator or as close to
average as possible, for time and methods analysis. Average is defined as an
operator working at a normal pace, under normal working conditions, with the
skills required for the specific job. Until a new standard or incentive value is
submitted, the employee who work s 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 STANDARD ALLOWED HOUR. In all cases, the SAH will be determined by
dividing the TOTAL STANDARD MINUTES by a SIXTY (60) MINUTE HOUR.
SAH per piece = TSM
----
60
The Basic Rate of the Classification will be as stated herein.
The BASIC PRODUCTION EXPECTANCY will be determined by dividing
a SIXTY (60) MINUTE HOUR by the TIME PER PIECE at one hundred percent (100%)
rating increased by a ten percent (10%) rest, fatigue, and delay allowance
(effective 10/16/94, the RFD factor on new or revised standards shall be twelve
and one-half percent (12.5%)).
Basic Production Expectance = 60 MINUTE HOUR
--------------
100% Time/Piece Allowance Plus
10% RFD Allowance (12.5% on
new or revised standards after
10/16/94)
Basic Production Expectance x SAH = Hours Earned
Hours Earned x Base Rate = Rate per Hour
Example of Incentive Earnings
Opportunity Offered By Above Formula
------------------------------------
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<PAGE> 29
1362 SAH = TSM 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% RFD Allowance)
-----
TSM 8.1731 (Total Standard Minutes)
A. 7.3405 pieces/hour 100% at 25% incentive pace equals
9.1756 pieces/hour
B. 9.1756 pieces @ SAH .1362 = 1.25 hours earned
C. Base Rate - $6.18
D. 1.25 hours earned x Base Rate 6.18 = $7.72/hour
E. Earnings/Hour 7.72
----
Base Rate 6.18 = 125% incentive
Earnings opportunity at +25% incentive pace
9.04 WRITTEN CONFIRMATION AND EFFECTIVE DATE OF SAH.
A. It is agreed that, whenever an SAH standard is
computed, it shall be submitted in writing to the
operator and become effective immediately. This
computation may consist on 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 standard 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.
9.05 PROCEDURAL INTERPRETATION OF SECTION. Current standards are
guaranteed unless the Company 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
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reflect the changes of the job, operation, or variation of any operation in the
degree the change in the task affects the standard upward or downward.
Where the change represents less than five percent (5%) of the
cycle base minutes, the Company 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, the Company 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 affected 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 SAH 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
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
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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 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.
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:
A. 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.
B. The Company designee will respond by either selecting
from the Union list or by offering alternative dates.
C. Once the above two (2) designees complete
arrangements, they will notify their respective local
Company 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 the attendant difficulties occasioned by
disagreement over pace determination, the Company will,
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<PAGE> 32
whenever feasible, set incentive job standards by use of pre-determined,
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
---------
PAID HOLIDAYS
10.01 HOLIDAYS OBSERVED. The following paid holidays shall be
celebrated:
New Years Day
Martin Luther King's Birthday
Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Friday after Thanksgiving Day
Day before Christmas
Christmas Day
Day before New Year's Day
10.02 ELIGIBILITY. In order to receive holiday pay, an employee must
have sixty (60) days or more of service and must work his/her full regularly
scheduled shift preceding and following the holiday, unless excused by
management for reasonable cause. The Company will pay holiday benefits
consistent with past contract and policy.
10.03 LEAVE OF ABSENCE. 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.
10.04 HOLIDAY PAY. Holiday pay shall be included in the pay check for
the pay period in which the holiday falls.
10.05 HOLIDAYS DURING APPROVED VACATION. When any of the above holidays
falls within an eligible employee's approved vacation period and the employee is
absent from work during his regularly scheduled work week because of such
vacation, the employee shall be paid for such holiday in addition to vacation
pay and shall have such day off.
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<PAGE> 33
10.06 MULTIPLE HOLIDAYS ON SAME DAY. 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.
10.07 HOLIDAYS ON SUNDAY. 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.
10.08 HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday
falls on 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.
10.09 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in section 8.11 for incentive workers;
day workers will be paid at eight (8) times the employees regular day work
hourly rate. Shift premium shall be included in holiday pay computation for
eligible employees.
10.10 OVERTIME AND PREMIUM PAY. For purposes 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.
ARTICLE XI
----------
PAID VACATIONS
11.01 VACATION. The Company will grant paid vacation to employees 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
continuos service shall have the option of taking a
fourth week of vacation in lieu of the seniority
bonus
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<PAGE> 34
(section 7.18) 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 circumstances:
(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) The Company will pay one additional week vacation pay
at vacation rate for employees with twenty five (25)
or more years of seniority with no additional time
off.
11.02 PAY RATE. 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.
11.03 INTERMITTENT VACATION. One (1) week of vacation can be taken at
eight (8) hour intervals (by days) with one (1) week or more notice and
seniority permitting. Time of payment for this week to be determined.
11.04 PLANT SHUTDOWN AND STAGGERED VACATION. The Company shall notify
the Union, no later than January 1 of each vacation year, whether the plant will
shut down or whether there shall be staggered vacation on an individual employee
basis. Prior to January 1 of each 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, and not required to work during the shutdown, will be
furloughed during the plant shutdown.
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.
11.05 ELIGIBILITY. 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.
11.06 SCHEDULING OF STAGGERED VACATIONS. 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 third and fourth 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
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<PAGE> 35
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 cases of third or fourth week vacations during the period of May,
June, July, August and September may occasionally be arranged when the Staff
Representative can mutually agree to such with the Operations Manager or the
Human Resources Manager.
11.07 NO ACCUMULATION. 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.
11.08 SHIFT PREMIUM. Shift premium will be included in vacation pay
computation for employees otherwise eligible.
ARTICLE XII
-----------
INVENTORY WORK
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); and (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 judgment of the Company, the factors in
Item 2 are relatively equal.
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<PAGE> 36
ARTICLE XIII
------------
LEAVE OF ABSENCE
13.01 RETURN FROM LEAVE OF ABSENCE. 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 twelve (12) months) consistent with Article VII, Seniority,
above. Any employee returning from a leave of absence of more than thirty (30)
days must give two (2) working days advance notice of his/her return.
13.02 DETERMINATION OF LAYOFFS. If the hours of work in any
classification fall below thirty (30) hours per week 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 XIV
-----------
UIU PENSION TRUST
UIU 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 Company 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 (10th) day of each month, to the UIU
Pension Trust a sum a 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
month. The Company shall transmit to said Trust, with each contribution, a
"Contribution Report," on the form furnished by the Trust which the Company
shall report the names, hire and termination dates as applicable, and total
gross earnings of all such employees during such calendar month. The Company
further agrees to supply to the Trust such 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 (12) months shall
be considered. Thereafter, the Company 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 UIU Pension Trust in
which event the Company shall report such employees and
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<PAGE> 37
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 Company'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 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 Company's aforesaid contributions to the Trust
as herein above provided and for so long as the Company's participation in the
Trust is accepted by the Trustees, the Trustees will, beginning with the date of
receipt by the Trust of the Company's first said contribution and continuing for
such part of the duration of this Agreement as the Company 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 Company'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 UIU Pension Trust, but at a cost of the Company not to exceed to the cost of
the contribution hereunder.
ARTICLE XV
----------
THE UNITED STEELWORKERS OF AMERICA
HEALTH AND WELFARE FUND
15.01 BENEFIT PLAN(S). The parties to this Agreement desire that the
benefits now granted by the Board of Trustees of The United Steelworkers Of
America Health and Welfare Fund, hereinafter "Fund," in their plan of benefits
designated as Medical Plan E, Prescription Drug, Dental Plan, Accidental Death
and Dismemberment and Short Term Disability as more fully described in the
Participation Agreement be provided to the employees employed in the Union's
bargaining unit.
-32-
<PAGE> 38
15.02 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 Company 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 11/1/97
<TABLE>
<CAPTION>
The United Steelworker Employee
Of America Plan Company Contribution Total
--------------- ------- ------------ -----
<S> <C> <C> <C>
Single $209.02 $ 12.97 $221.99
Single Plus One 349.00 22.69 371.69
Family 445.53 31.21 476.74
</TABLE>
The Employer and the Union shall have the right to confirm any
increase or decrease in contribution rates occurring during the term of this
Agreement. The Fund shall provide the Employer and the Union with information,
including carrier reports and other source documentation, reasonably necessary
to confirm such rate changes. Moreover, if requested the Fund will make a
personal presentation on an annual basis of any increases or decreases in
contribution rates. Any increase in total insurance premium costs in the second
year which exceeds five (5%) percent over the total insurance premium costs in
the first year will give the Company the option to cease participation in the
USWA Health and Welfare Fund. This same option will apply if the total insurance
premium costs in the third year exceed by more than five (5%) percent the total
insurance premium costs from the second year and similarly if the fourth year
exceeds the third year by more than five (5%) per cent. Any contributions or
increases or decreases in insurance premium contribution costs in the second,
third, and or fourth years will be shared in the same ratio of eighty nine (89%)
percent employer and eleven (11%) percent employee. If the Company opts out, the
Company and the Union reserve the right to review the plan and mutually
determine continuation of coverage through a plan offering comparable coverage.
15.03 ELIGIBILITY. Eligible employees are all 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; or
C. Attendance at Union or fund Convention, seminar or
grievance hearing.
The Company is not required to make a contribution on an
employee whose employment is terminated during the wage month.
15.04 EMPLOYEE CONTRIBUTIONS. Each such employee must, in writing,
authorize the Company 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 Company agrees to make the
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<PAGE> 39
required deductions and to promptly transmit same to the Fund. Employee
contributions are due at the same time as the Company contributions.
Employees who refuse or neglect to provide the Company 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 Company with the required written authorization but because of
lack of wages the Company is unable to deduct the employee contribution for a
particular benefit month, it is the obligation of the employee to pay, in a
timely fashion, to the Company 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.
15.05 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 $70.62 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.
15.06 PAYMENT OF CONTRIBUTIONS. Contributions are due from the Company
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.
15.07 COVERAGE.
A. HOSPITAL AND MEDICAL BENEFITS. Coverage for newly
hired employees and any named dependents will begin
on the first (1st) day of the month following
completion of thirty (30) days of employment.
Previously covered employees shall be covered the
first (1st) day of the calendar month following their
return to work.
B. DISABILITY BENEFITS. Newly hired employees shall be
eligible for 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.
15.08 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 thirty-one (31) days of birth.
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<PAGE> 40
15.09 REQUIREMENTS. The Company shall transmit to the Fund with each
contribution a contribution report on the form furnished by the Fund on which
the Company 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 Company 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.
15.10 HOLD HARMLESS. The Company agrees solely to make the
contributions required by the terms of this Agreement. The Union and The United
Steelworkers of America 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 United Steelworkers Of
America Health and Welfare Fund to which the Company is not a signatory party.
15.11 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 Company are paid in full. If coverage is
reinstated prospectively, there shall, nevertheless, be no coverage for
illnesses first manifested during the ten (10) day period following the date of
reinstatement.
15.12 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 Company
pay a contribution for such employees. Nothing in this clause shall be construed
as an affirmation or negation of the Company's right to hire part time
employees.
Temporary Employees may be used for positions vacant due to sick leave,
vacation, unfilled after posted for bid or seasonal needs. 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. When a need arises for temporary employees the
Union will be notified. (Temporary employees will not be eligible for benefits).
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<PAGE> 41
15.13 AUDIT RIGHTS. The Company shall have the right to audit The
United Steelworkers Of America Health and Welfare Fund periodically.
15.14 AVAILABILITY OF BENEFITS. In consideration of the Company's
aforesaid payment to said Fund as herein above provided, the Union warrants the
Board of Trustees of The United Steelworkers Of America Health and Welfare Fund
will, beginning on the date of receipt by the Fund of the Company's first said
payment, and during such part of the life of this Agreement as the Company fully
complies with the terms of such Agreement in all respects, extend and make
available to Company'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 Company has not
paid the required contribution to the Fund except as, and only to the extent
otherwise required by an applicable state disability benefit insurance law.
ARTICLE XVI
-----------
JURY SERVICE
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 earnings as computed in Section 8.11 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 the 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 XVII
------------
BEREAVEMENT PAY
17.01 DEFINITION. Bereavement pay will be granted up to a maximum of
three (3) 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, grandparents, grandchildren, spouse, or child. No
pay shall be granted if an employee fails upon request to furnish the Company
with reasonable proof of death and relationship.
7.02 PAYMENT. The pay for such loss of time from work will be for eight
(8) 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 XVIII
-------------
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<PAGE> 42
BULLETIN BOARDS
18.01 BULLETIN BOARDS. The Union may put up bulletin boards at
locations specified by the Company for the following non-controversial Union
announcements:
A. Notice of Union recreational or social affairs;
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. Notices pertaining to The United Steelworkers Of
America Health and Welfare and UIU Pension Programs.
18.02 POSTING OF NOTICES. 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 Human Resources Manager 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 XIX
-----------
MILITARY CLAUSE
The Company agrees to comply with all applicable laws relating to
re-employment rights of employees called for military duty.
-37-
<PAGE> 43
ARTICLE XX
----------
EMPLOYEE BIRTHDAY PAY
Each employee who meets the requirements for holiday eligibility will
receive an additional eight (8) hours pay (computed as per Section 10.09) 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 abovementioned
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.
Employees who are eligible for birthday pay and elect to receive pay in
lieu of a day off by January 1 will receive a $100 birthday check, exclusive of
payroll deductions. If not elected by January 15, the appropriate clauses of the
contract will apply.
ARTICLE XXI
-----------
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),
disability, 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 veteran's 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 or your Operations Manager. A confidential investigation will
be conducted.
ARTICLE XXII
------------
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<PAGE> 44
MISCELLANEOUS
-------------
22.01 INFORMATION. The Company agrees to cooperate with the Union
representative on information regarding workers' compensation and unemployment
compensation.
22.02 SAFETY SHOES. The Company will contribute $2.00 towards the
purchase of safety shoes.
22.03 CAMERAS. Cameras will be used ONLY for appropriate security
measures.
22.04 HAND CLEANER. The Company will furnish the same type of hand
cleaner as the IAM for the following departments: 160 - 225 - 490.
22.05 SKILLS AUDITS. The Company and Union agree to update Skills
Audits on a timely basis.
22.06 INCENTIVE SYSTEMS. The Company and Union will discuss incentive
systems for some hourly positions.
ARTICLE XXIII
-------------
SAVING CLAUSE
23.01 SEPARABILITY. If any provision of this 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.
23.02 FEDERAL AND STATE LAWS. 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.
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<PAGE> 45
ARTICLE XXIV
------------
SEVERANCE AND PLANT CLOSINGS
In the event the Company decides to close this facility presently
organized by the United Steelworkers of America, sixty (60) day notice of such
event will be given to the District Director of the United Steelworkers of
America. Those employees affected by the plant closing shall continue to be
covered under their existing USWA Health and Welfare Fund benefits as outlined
in Article XV 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.
ARTICLE XXV
-----------
DURATION AND TERMINATION OF SUPPLEMENT
25.01. Effective Dates. This AGREEMENT shall be in full force and
effect from October 16, 1997 until October 15, 2001.
25.02. Entire Agreement. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this Agreement and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.
25.03. Modification or Termination. This AGREEMENT, when signed by the
officers of the COMPANY and the UNION, shall become effective as described above
for a period of four (4) years and shall continue to remain in full force and
effect from year to year thereafter, unless written notices 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.
ARTICLE XXVI
------------
CONTRACT RE-OPENER
The Company will introduce a new incentive pay plan during the term of
this agreement. The Plan is called "Pay Plus". Certain features of the Plan
remain undetermined as of October 15, 1997. Therefore, the parties agree that
during the term of this agreement there will be a limited re-opener
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<PAGE> 46
regarding aspects of the Plan. The Company will notify the Union not less than
forty-five (45) days prior to the implementation date of the Pay Plus Plan at
the Columbus facility. During this forty-five (45) days period, the Company and
Union will meet to discuss such Pay Plus matters as (but not limited to) base
rates, rates paid to successful bidders and employees affected by layoffs,
average rate computations, borrowed man rates, movement within pay ranges,
starting rates, wage ranges, pay rates for non work time such as vacations,
holidays, jury duty and bereavement, grieving new standards and revisions to
Article IX Standard Allowed Hour. The forty-five (45) day period may be extended
by mutual agreement.
Notwithstanding Article V, if agreement is not reached regarding the
matters to be discussed during the forty-five (45) days or extension thereof,
the parties are free to exercise their rights to engage in activity in support
of their respective positions. In the case of the Union this shall include, but
not be limited to, a strike or other legal means in support of its position. In
the case of the Company this shall include, but not be limited to,
implementation of the Plan, a lockout, and/or in the case of a strike, the
hiring of replacements. The right to strike shall not give rise to a sympathy
strike in support of employees at other Simmons plants where the Pay Plus Plan
is implemented or in the process of being implemented. Further, the Union agrees
to provide a ten (10) day written notice prior to the commencement of a strike;
and the Company agrees to provide a ten (10) day written notice prior to the
commencement of a lockout.
Finally, nothing in this re-opener provision should be construed as
limiting the Company's rights under Article IX.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated, this day of , 1998.
THE UNITED STEELWORKERS OF SIMMONS COMPANY
AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #424
- --------------------------------------- ---------------------------
George F. Becker Company
International President
By:
- -------------------------------------- ------------------------
Leo W. Gerard, International
Secretary/Treasurer
- ---------------------------------------
Richard H. Davis, International
Vice-President Administration
- ---------------------------------------
Leon Lynch, International
Vice-President, Human Affairs
- ---------------------------------------
Victoria Key, Staff Representative
Coordinator
- ---------------------------------------
District Director
- ---------------------------------------
- ---------------------------------------
Committee
- ---------------------------------------
Committee
- ---------------------------------------
Committee
- ---------------------------------------
Committee
COLUMBUS
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<PAGE> 48
COLUMBUS
APPENDIX "A"
RATES FOR HOURLY WORKERS
<TABLE>
<CAPTION>
Effective
JOB DESCRIPTION CODE 10/16/97 10/16/98 10/16/99 10/16/00
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fork Life Truck Operator D-1 $10.07 $10.37 $10.67 $10.97
Truck Checker D-2 $10.02 $10.32 $10.62 $10.92
Utility Receiving D-4 $10.10 $10.40 $10.70 $11.00
Material Handlers-Heavy D-5 $ 9.85 $10.15 $10.45 $10.75
(frames, springs, etc.)
Janitors D-7 $ 9.78 $10.08 $10.38 $10.68
Truck Checkers &
Loaders Shipping D-8 $10.02 $10.32 $10.62 $10.92
Storekeeper-Cover Cage D-9 $10.10 $10.40 $10.70 $11.00
Fold & Inspect Covers, etc D-11 $ 9.78 $10.08 $10.38 $10.68
Sort & Stack D-12 $10.00 $10.30 $10.60 $10.90
Inspector, 1st Class
Finish Product D-13 $10.03 $10.33 $10.63 $10.93
Repair Mattress (Closer) D-15 $10.08 $10.38 $10.68 $10.98
</TABLE>
-43-
<PAGE> 49
COLUMBUS
APPENDIX "A"
------------
HOURLY RATE EFFECTIVE
<TABLE>
<CAPTION>
JOB DESCRIPTION CODE 10/16/97 10/16/98 10/16/99 10/16/00
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Repair Mattress &
Box Spring D-21 $ 9.83 $10.13 $10.43 $10.73
Utility-Cut & Sew D-22 $10.09 $10.39 $10.69 $10.99
Cutter Mattress & Box D-24 $ 9.78 $10.08 $10.38 $10.68
Hem/Double Overcast
Borders D-37 $ 9.78 $10.08 $10.38 $10.68
Inventory-Heavy (frames,
Springs, etc.) D-45 $ 9.93 $10.23 $10.53 $10.83
Inventory-Light (covers,
borders, thread, etc.) D-46 $ 9.63 $ 9.93 $10.23 $10.53
Lead Inspector &
Coordinator D-47 $ 9.85 $10.15 $10.45 $10.75
Construction Opener D-50 $ 9.95 $10.25 $10.55 $10.85
Inspector/Packer D-53 $10.24 $10.54 $10.84 $11.14
</TABLE>
-44-
<PAGE> 50
COLUMBUS
APPENDIX "B"
------------
PIECEWORK BASIC TIMING
RATE EFFECTIVE
<TABLE>
<CAPTION>
JOB CLASS CODE 10/16/97 10/16/98 10/16/99 10/16/00
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEPARTMENT 105-BORDER
001 Mattress Border
Machine Operator B-1 $ 9.48 $ 9.78 $10.08 $10.38
002 Operate Bechik
4-hold punch with
hand switch or
foot pedal B-2 $ 9.28 $ 9.58 $ 9.88 $10.18
003 Attach handles to
border (other than
Bechik)
DEPARTMENT 115-CUT & SEW
Sew & tape mattress &
box spring cover,
match dot fasteners S-2 $ 8.71 $ 9.01 $ 9.31 $ 9.61
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 $ 9.34 $ 9.64 $ 9.94 $10.24
048 Sew labels to matt &
box spring panels
049 Overcast
055 Hemming
057 Overcast & sew Osnaburg
(Galkin Machine) S-4 $ 9.34 $ 9.64 $ 9.94 $10.24
DEPARTMENT 120-QUILT
Quilt Machine
Operator D-48 $ 9.08 $ 9.38 $ 9.68 $ 9.98
DEPARTMENT 150-BOX SPRING
008 Top Off X-1 $ 9.54 $ 9.84 $10.14 $10.44
</TABLE>
-45-
<PAGE> 51
COLUMBUS
APPENDIX "B"
------------
PIECEWORK BASIC TIMING
RATE EFFECTIVE
<TABLE>
<CAPTION>
JOB CLASS JOB DESCRIPTION CODE 10/16/97 10/16/98 10/16/99 10/16/00
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DEPARTMENT 160-BOX SPRING
009 Fill, upholster & trim
Box Spring X-2 $ 9.31 $ 9.61 $ 9.91 $10.21
Pre-Loader X-4 $ 8.95 $ 9.25 $ 9.55 $ 9.85
DEPARTMENT 130-MATTRESS
Close mattresses,
all types M-1 $ 9.37 $ 9.67 $ 9.97 $10.27
089 Close mattress on
closing machine
098 Close Beautyrest(R)
on closing machine
062 Pocket Machine Operator
(Beautyrest(R)) M-5 $ 8.77 $ 9.07 $ 9.37 $ 9.67
063 Assemble Beautyrest(R)
Construction M-6 $ 8.38 $ 8.68 $ 8.98 $ 9.28
Hog ring panel
to construction M-7 $ 9.37 $ 9.67 $ 9.97 $10.27
087 Hog ring open coil
096 Hog ring Beautyrest(R)
DEPARTMENT 04-WOOD ROOM
Assemble box
spring frames W-1 $ 9.62 $ 9.92 $10.22 $10.52
016 Radius Box spring
corners
019 Assemble & nail box
spring frames
(Pneumatic nailer)
015 Nailing Machine W-3 $ 9.61 $ 9.91 $10.21 $10.51
</TABLE>
-46-
<PAGE> 52
COLUMBUS
--------
APPENDIX "C"
ARBITRATORS FOR EXPEDITED ARBITRATION
GENERAL ARBITRATORS
Richard Adelman
Jack Clarke
David Concepcion
Donald Crane
William Heekin
I. B. Helburn
Diane Dunham Massey
Elvis Stephens
Michael Rappaport
David Vaughn
TIME STUDY ARBITRATORS
Herman Birnbrauer
John Lillich
Louis Imundo, Jr.
Lawrence Mann, Jr.
James Reynolds
-47-
<PAGE> 1
EXHIBIT 10.19
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> 2
<TABLE>
<CAPTION>
Item Page Item Page
<S> <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> 3
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> 4
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> 5
(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> 6
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 "punchlist" 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
[Please Initial]
3
<PAGE> 7
[Illegible]
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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[Illegible]
(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> 10
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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<PAGE> 12
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
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<PAGE> 13
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]
FORCE 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.
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<PAGE> 14
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> 15
"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.
(formerly FIA Associates,
Inc.), investment manager and
duly authorized agent of
California Public Employees'
Retirement System
BY: /s/
------------------------------------
Its: Managing Director
BY: /s/ Leslie Ann Brown
------------------------------------
Its: Assistant Vice President
(CORPORATE SEAL)
<PAGE> 16
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> 17
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.
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<PAGE> 18
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 Building. 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
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<PAGE> 19
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
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<PAGE> 20
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> 21
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> 22
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> 23
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> 24
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> 25
EXHIBIT "B"
SPACE PLAN OF THE PREMISES
CORPORATE CENTER ONE
REFERENCED TO PLANS BY WAKEFIELD BEASLEY
JOB # 9116
DATED 8/12/91
<PAGE> 26
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> 27
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> 28
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> 29
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> 30
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> 31
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> 32
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> 33
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> 34
EXHIBIT "F"
[BLUEPRINT DIAGRAM]
Concourse - 7th Floor
1 Concourse Parkway
Atlanta, Georgia
THE LANDMARKS GROUP
<PAGE> 35
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
<PAGE> 1
EXHIBIT 10.20
PHASE V
- -------
LEASE BEAVER RUIN BUSINESS CENTER - PHASE V
THIS LEASE, made this 19th day of October, 1994, by and between ST. PAUL
---- -------
PROPERTIES, INC., a Delaware corporation, (hereinafter referred to as
"Landlord") and SIMMONS COMPANY, a corporation of the State of Delaware
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
In consideration of the rentals, agreements and covenants set forth
hereinbelow and of the mutual promises herein contained, Landlord and Tenant
hereby agree as follows:
1. PREMISES.
1.1 Description. Landlord hereby leases to Tenant, and Tenant hereby
rents and hires from Landlord, in accordance with all the terms, conditions and
provisions of this Lease, that certain real property described in Exhibit "A"
attached hereto and incorporated herein by reference, together with a certain
office/warehouse space containing approximately 38,000 square feet of floor
space (the "Building") to be known as No. 1875 Beaver Ridge Circle, Gwinnett
County, Georgia, according to the present system of naming streets and numbering
buildings in Gwinnett County, Georgia, (said real property, the Building and any
and all other improvements to said real property being hereinafter collectively
referred to as the "Premises"). The Premises constitute a portion of Landlord's
office/warehouse center known as the "Beaver Ruin Business Center" (hereinafter
referred to as the "Center") located in Gwinnett County, Georgia and being more
particularly described on Exhibit "B" attached hereto and incorporated herein by
reference and also constitutes Phase V of the Center, said Phase being
hereinafter referred to as the "Complex". The Complex includes the Building,
together with all common areas and other buildings and improvements which are
now or may hereafter be located in the Complex.
Tenant accepts the Premises subject to and agrees to comply with and abide
by the terms, provisions and conditions contained in that certain "Declaration
of Protective Covenants and Restrictions for Beaver Ruin Business Center", dated
June 30, 1983 and recorded in Deed Book 2591, page 262, Gwinnett County, Georgia
Records, a copy of which is attached hereto as Exhibit "G" and incorporated
herein by reference.
1.2 Common Areas. During the term of this Lease, Tenant shall have the
right to use, in common with others, those common areas and facilities within
the Complex and the Center which Landlord shall designate for the general,
non-exclusive use and convenience of Tenant, Landlord, the other tenants of
Landlord and their respective employees, agents, invitees and licensees
(hereinafter collectively referred to as the "Common Areas"). The Common Areas
generally include, without limitation, driveways, parking and loading areas,
landscaped areas and other areas outside the Building and all other buildings
within the Center. Tenant's right to use the Common Areas shall terminate upon
the expiration or earlier termination of this Lease. Landlord shall manage and
maintain the Common Areas and determine the expenditures with regard thereto as
shared among tenants of the Center in the manner set forth hereinbelow in
Paragraph 5.1.
1.3 Acceptance. By taking possession of the Premises, Tenant shall be
deemed to accept the Premises in their condition existing on the date of
occupancy by Tenant, subject to all applicable zoning, municipal, county, state
and federal laws, ordinances and regulations governing and relating to the use
of the Premises. Notwithstanding the foregoing, Tenant shall not be deemed to
have accepted the Premises by taking possession thereof with respect to those
items for which Tenant submits to Landlord within twenty (20) days following
Tenant's taking possession of the Premises, a punchlist (hereinafter referred to
as the "Punchlist") of items which have not been completed or constructed in
accordance with the Plans, as defined in Exhibit "E" or are otherwise defective.
Landlord agrees to use reasonable efforts to repair or complete such items on
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the Punchlist within thirty (30) days after receipt of the Punchlist. Nothing
contained in this Paragraph 1.3 shall excuse Tenant from the payment of base
monthly rental or any additional rental or other amounts due under this Lease,
during such time when Landlord is repairing the items on the Punchlist.
1.4 Landlord's Work and Tenant's Work. Any and all construction work
to be performed upon the Premises and the designation of the party financially
responsible for such work or portions thereof shall be described on the
Construction Addendum attached hereto as Exhibit "C" and incorporated herein by
reference.
2. TERM.
2.1 Length and Period; Commencement Date. The term of this Lease shall
be for a period of one hundred twenty (120) MONTHS, beginning on the earlier to
occur of (i) the date Tenant accepts delivery of the Premises or (ii) the date
on which a final Certificate of Occupancy is issued by Gwinnett County, Georgia
evidencing completion of Landlord's work as referred to in said Exhibit "C",
Landlord hereby agreeing to use reasonable efforts to give Tenant at least
thirty (30) days prior notice of such date (such date being hereinafter referred
to as the "Commencement Date"), which Commencement Date shall in no event be
later than June 1, 1995, and ending and expiring on May 31, 2005, (the
"Expiration Date"), the tenth (10th) anniversary of the Commencement Date;
provided, however, that if the Commencement Date falls on a day other than the
first (1st) day of a calendar month, the term of this Lease and all obligations
of Landlord and Tenant under this Lease shall be extended until the last day of
the calendar month in which the Expiration Date occurs. Notwithstanding the
foregoing, Landlord shall use reasonable good faith efforts to deliver the
Premises to Tenant for occupancy on or before April 1, 1995. The Commencement
Date shall be set forth in an Addendum to this Lease to be executed by Landlord
and Tenant in accordance with the foregoing provisions of this Paragraph 2.1.
2.2 Delay in Delivery of Premises. In the event that Landlord is
unable to deliver possession of the Premises on the Commencement Date, Landlord
shall have no liability to Tenant for any consequential loss or damage, nor
shall this Lease be void or voidable but shall remain valid and continue in full
force and effect; provided, however, that Tenant shall not be obligated to begin
payment of rental hereunder until Landlord delivers possession of the Premises
to Tenant. [SEE EXHIBIT "C", SECTION D]
3. RENTAL.
3.1 Manner of Payment. Tenant shall pay to Landlord or Landlord's
managing agent all amounts due hereunder, whether for rental or otherwise,
during the entire term of this Lease in lawful money of the United States,
without deduction or setoff at the address initially furnished to Tenant by
Landlord or Landlord's managing agent or at such other address as Landlord may
from time to time designate in writing to Tenant.
3.2 Base Monthly Rental. Tenant shall pay to Landlord base monthly
rental during the entire term of this Lease, in advance, in monthly installments
in accordance with the schedule contained in Special Stipulation #1 of this
Lease, commencing on the Commencement Date and continuing thereafter on or
before the first (1st) day of each successive month during the term of this
Lease. In the event that the Commencement Date falls on a date other than the
first (1st) day of a calendar month, rental for the partial month in which the
Commencement Date falls shall be prorated. Tenant shall pay the base monthly
rental for the first (1st) month of the term of this Lease at the time of
Tenant's execution of this Lease. [See Special Stipulation #1].
3.3 Taxes and Insurance. As additional rental hereunder, Tenant shall
pay to Landlord the amount of (i) Landlord's costs of taxes, as hereinafter
defined, on the Premises and (ii) Landlord's cost of insurance, as hereinafter
defined, on the Premises. Tenant shall reimburse Landlord for such costs of
taxes and insurance within fifteen (15) calendar days after Tenant's receipt of
billings therefor from Landlord.
For the purposes of the foregoing, the terms "taxes" shall be deemed
to include, without limitation, all real and personal property taxes and
assessments and all other taxes, charges, levies and license and permit fees of
any kind or nature whatsoever, foreseen or unforeseen, general or special,
whether payable in the year assessed or payable over a period of years, which
are levied upon or assessed with respect to all or any portion of the Premises
and the improvements, fixtures, and appurtenances thereto; together with any
taxes of whatsoever nature and however characterized which become payable by
Landlord, whether or not now customary or within the contemplation of Landlord
or Tenant, which are levied in addition to or in lieu of such real or personal
property taxes or assessments (i) upon, allocable to or measured by rent or
other amounts payable to Landlord hereunder (ii) with respect to the receipt of
such rents or amounts by Landlord or (iii) with respect to any activity or right
of Tenant in the leasing, possession, occupancy, use, operation, management,
repair, maintenance, alteration or improvement of the Premises; and any
interest, penalties or delinquency charges added to such taxes, assessments and
other charges for any reason other than late payment or non-payment thereof by
Landlord; provided, however, that the term "taxes" as used hereinabove shall be
deemed not to include any taxes or assessments against the personal property of
Tenant of any other tenant within the Premises, nor to include any income tax,
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franchise tax or transfer tax for which Landlord may be or become personally
liable.
For the purposes of the foregoing, the term "insurance" shall be
deemed to include all premiums or other costs to maintain (i) "All Risk" or
equivalent casualty insurance coverage (including, if Landlord deems necessary,
flood and earthquake insurance) against loss or damage to the Building and all
other improvements now or hereinafter located on the Premises; (ii) liability
insurance in the Commercial General Liability form (or reasonable equivalent
thereto) covering the Complex and the Common Areas thereof against claims for
personal injury or death, property damage and product liability occurring upon,
in or about the Complex and the Common Areas; (iii) insurance in the "All Risk"
or equivalent form against abatement or loss of rental by reason of the
occurrences covered by the insurance described in subsection (i) above; (iv)
workman's compensation insurance to the extent required by the laws of the State
of Georgia; and (v) all other insurance carried by Landlord on the Complex and
the Common Areas. All such insurance shall be in amounts and coverages and have
such deductibles as Landlord shall reasonably deem necessary.
3.4 Security Deposit. Upon executing this Lease, Tenant shall post a
deposit (the "Security Deposit") with Landlord or Landlord's managing agent in
the amount of Thirteen Thousand Nine Hundred Sixty-Five and No/100 Dollars
($13,965.00). Such Security Deposit shall secure Tenant's obligations hereunder
to pay rental and all other sums due under this Lease, to maintain the Premises
and repair all damage thereto, to surrender the Premises to Landlord in
accordance with the provisions of Paragraph 19 of this Lease and to discharge
Tenant's other obligations under this Lease fully and in a timely manner.
Landlord shall have the right to use and commingle the Security Deposit with
other funds of Landlord. If Tenant fails to perform any of its obligations under
this Lease, Landlord shall have the right, but not the obligation, to apply all
or any portion of the Security Deposit toward fulfillment of Tenant's
unperformed obligations. If Landlord does so apply any portion of the Security
Deposit, Tenant shall, upon demand by Landlord, immediately pay Landlord a
sufficient amount of money to restore the Security Deposit to its full original
amount. In no event shall Tenant have the right to designate or apply the
Security Deposit or any portion thereof against payment of the last month's or
any other month's rental due hereunder; provided, however, that, if Tenant has
then fully paid all sums due hereunder and fully and timely performed all of
Tenant's other obligations hereunder, including, without limitation, Tenant's
obligations pursuant to this Paragraph 3.4, Landlord shall return the Security
Deposit to Tenant, with interest, no later than thirty (30) calendar days
following the expiration of the term of this Lease. [See Special Stipulation #6]
3.5 Late Payment Charge. Tenant hereby acknowledges and agrees that
any payment of rental or other amounts due from Tenant received by Landlord at
any time after the fifth (5th) calendar day following written notice from
Landlord to Tenant that such amount is past due shall cause Landlord to incur
certain costs (including, without limitation, bookkeeping, personnel and
processing charges and any late charges and interest payable by Landlord as a
result of Landlord's late receipt of rental hereunder) and that the exact amount
of such costs may be impossible to ascertain. Accordingly, Tenant hereby agrees
with Landlord that Tenant shall pay to Landlord, in addition to any late payment
of rental or other sum due under this Lease, a late charge equal to Twenty-Five
and no/100 Dollars ($25.00) or five (5%) percent of the amount not paid or paid
late, as the case may be, whichever amount is greater. Additionally, a charge
equal to the greater of the amount then charged by Landlord's bank or Ten and
no/100 Dollars ($10.00) shall be paid by Tenant to Landlord for each returned
check.
3.6 Taxes on Tenant's Personal Property. Tenant shall pay, before
delinquency, directly to the tax collecting authority, all taxes, assessments,
license fees and public charges which become due during the term of this Lease
upon Tenant's personal property, inventory, equipment, trade fixtures and
fixtures at the Premises.
4 USE.
4.1 Permitted Use. Throughout the term of this Lease, Tenant shall use
the Premises only for office, warehouse, showroom, distribution, prototype
bedding manufacturing and research and development purposes and all uses
reasonably related thereto and for no other use or purpose whatsoever without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, delayed or conditioned. In no event shall Tenant use the Premises for
any unlawful purpose or in any way which would vitiate Landlord's insurance
coverage of the Premises, the Building, the Complex or the Center. Tenant shall
comply with the Rules and Regulations set forth in Exhibit "F" attached hereto
and incorporated herein by reference.
5 EXPENSES FOR COMMON AREAS.
5.1 Payment of Tenant's Share of Expenses for Common Areas. Tenant
shall pay to Landlord, as additional rent under this Lease, Tenant's Share of
Expenses for the Common Areas, as such expenses are defined hereinbelow, during
the term of this Lease. As used herein the term "Tenant's Share of Expenses for
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<PAGE> 4
the Common Areas" shall mean eight and 1/2 percent (8.5%) of the total amount of
the expenses of the Common Areas of the Center, as such expenses are referred to
hereinbelow in Paragraph 5.2 of this Lease; the parties acknowledge that
Tenant's Share of Expenses for the Common Areas of the Center is the ratio of
the square footage of the Premises to the square footage within each and every
Building in the Center. Landlord shall maintain accurate records of such
Expenses for the Common Areas, which records Tenant may examine during
Landlord's normal business hours at Landlord's office not more frequently than
quarterly.
On or about January 1, 1996, and thereafter at the beginning of
each calendar year during the term of this Lease, Landlord shall deliver to
Tenant a statement reasonably estimating Tenant's Share of Expenses for the
Common Areas for such then-existing calendar year (hereinafter referred to as
the "Current Year"). Tenant shall thereafter, on the first day of each month
during the Current Year, pay to Landlord one-twelfth (1/12) of such estimated
amount with each installment of base monthly rental due in the Current Year.
Landlord shall not be obligated to remit monthly bills to Tenant for such
charges. If for any reason such statement is not received by Tenant at the
beginning of any calendar year, Tenant shall continue to pay the previous year's
monthly estimates until Tenant receives from Landlord such new estimate. If such
new monthly estimate is lower than the previous year's monthly estimate,
Landlord shall credit any overpayment by Tenant against Tenant's next-accruing
estimated monthly payment (or promptly refund such amount to Tenant if the Lease
has expired) or, in the event of any underpayment by Tenant of such estimated
payments, on the first day of the month following Tenant's receipt of such new
estimate, Tenant shall pay to Landlord the difference between the total amount
of the estimated payments already made by Tenant and the total amount which
would have been due in the newly-estimated amount for each month having then
elapsed during the Current Year.
Within approximately one hundred (100) days following the end of
each calendar year during the term of this Lease, Landlord shall furnish Tenant
with a reconciliation of the total amount of Tenant's estimated payments during
the preceding calendar year and with the actual amount of Tenant's Share of
Expenses for the Common Areas for such preceding year. If such reconciliation
shows an overpayment by Tenant, Landlord shall credit such overpayment against
Tenant's next-accruing Expenses for the Common Areas (or promptly refund such
amount to Tenant if the Lease has expired) or, in the event of any underpayment
by Tenant of such Expenses for the Common Areas, on the first day of the month
following Tenant's receipt of such reconciliation, Tenant shall pay to Landlord
the difference between the estimated payments made by Tenant for the preceding
calendar year and the actual amount of Tenant's Share of Expenses for the Common
Areas for such preceding year. Landlord's failure to so provide an accounting
within such one hundred (100) day period shall in no way bar Landlord from
providing Tenant any such accounting at a later date, nor limit Tenant's
liability for the Tenant's Share of Expenses for the Common Areas.
The provisions of this Lease concerning the payment of Expenses
for the Common Areas shall survive the expiration or earlier termination of this
Lease, and upon Landlord's determination of the Expenses for the Common Areas
during the final calendar year of the term hereof, Landlord shall either, as the
case may be, submit to Tenant an invoice for any amount then due from Tenant,
which amount shall be paid to Landlord within thirty (30) calendar days
following Tenant's receipt thereof, or remit to Tenant within thirty (30)
calendar days the amount of any overpayment of such Expenses for the Common
Areas made by Tenant during such final calendar year of the term hereof.
5.2 Expenses for Common Areas. As used herein the term "Expenses for
the Common Areas" shall mean the sum of the following costs:
The cost of all maintenance, replacement and repairs Landlord causes to be
performed to or for the benefit of the Common Areas (except if such cost was
incurred in connection with services provided for another tenant of the Center
for which such tenant has been billed separately); the cost of any alteration
upon or within the Center required by any governmental authority which
requirement is not attributable primarily to the particular use made by a
particular tenant or occupant of the Premises; the cost of electricity, water,
sewer, sewer service and other utilities used for the Common Areas and not
separately metered to particular tenants; the cost of periodic painting of the
exterior of any buildings in the Center; the cost of all service contracts
benefiting the Commons Areas; the cost of any service employed to attempt to
obtain accurate and equitable governmental assessment of the Center for real
property tax purposes; the cost of all landscaping and lawn grounds care and
improvements within the Common Areas; the cost, including interest, amortized
over its useful life, of any capital improvements made to the Center by Landlord
after the date of this Lease which are required under any governmental law or
regulation which was not applicable to the Center at the time of its
construction; together with the cost of all repair or replacement of any
sidewalks, driveways, parking areas and loading areas within the Common Areas;
and together with such costs of administration as are reasonably included in the
cost of maintaining, managing, repairing, replacing and operating the Common
Areas.
6. UTILITIES.
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6.1 Payment by Tenant. Tenant shall pay for all gas, heat, light,
water, power, telephone and other communication services, sanitary, sewer and
sewer service charges, all janitorial services and all other utilities and
services consumed on or supplied to the Premises, whether separately metered to
the Premises or charged directly to Tenant or the Premises by the supplier of
the utility service. The Premises shall be separately metered for gas, electric
service, water and fire protection, all of which shall be billed directly to and
paid by Tenant. Landlord shall pay the cost of installing all lines in order to
bring such utility service to the Premises. Tenant shall pay any costs arising
from any initial service call to initiate utility service to the Premises and
any deposits required by such utility providers. Landlord shall not be liable to
Tenant for any loss or damage Tenant may sustain from any lack or failure of
service in connection with such utilities and services, except for lack or
failure of service resulting from the negligence or willful misconduct of
Landlord, its agents or employees.
7. MAINTENANCE REPAIRS AND ALTERATIONS.
7.1 Landlord's Obligations. Landlord, at Landlord's expenses (subject
to pass-through to Tenant in accordance with the terms of Paragraph 5 of this
Lease) throughout the term of this Lease, shall maintain the exterior walls,
foundations and roof of the Building in good and sanitary order and repair.
Landlord shall, at its sole cost and expense, upon notice by Tenant within one
(1) year after the Commencement Date, repair or replace all defects in the
construction of the Premises. Landlord shall have no obligation to maintain or
repair the Premises except as specifically provided by this Lease.
7.2 Tenant's Obligations. At all times during the term of this Lease,
Tenant shall, at Tenant's expense, maintain the entirety of the Premises (other
than those portions of the Premises to be maintained by Landlord in accordance
with the terms of this Lease) in good working order and in clean and sanitary
order, condition and repair excepting only reasonable wear and tear and damage
caused by fire, condemnation or other casualty which this Lease does not
otherwise obligate Tenant to repair. Tenant's obligations of maintenance under
this Paragraph 7.2 shall be inclusive and shall extend, without limitation, to
the maintenance, repair and replacement of: (i) the interior of the Premises,
including without limitation, all floors; all loading doors, loading docks and
pads;all windows, doors and locks; all entryways; all plate glass and all
glazing (including without limitation all windows and skylights); all plumbing
systems, electrical systems and heating, air conditioning and ventilating
systems; all equipment in the Premises; (ii) all underground utility lines
within the Premises; (iii) all other improvements to the Premises; (iv) any and
all damage to the Premises, the Complex or the Center caused as a result of the
negligence or willful misconduct of Tenant or Tenant's employees and invitees;
and (v) all signs permitted by Landlord and belonging to Tenant.
7.3 Exterior Portions of the Premises. Tenant shall maintain the
aesthetic appearance of the Premises, both interior and exterior, in a neat and
attractive condition. Tenant shall not store supplies, work in process,
inventory or other materials, or waste or garbage outside the Building or in the
Common Areas. Tenant shall obtain any containers or dumpsters desired by Tenant
for trash, garbage or rubbish at Tenant's expense and shall contract and pay for
all trash, garbage and rubbish disposal and removal. Tenant shall maintain the
areas around such trash containers and any dumpster in orderly and sanitary
condition.
7.4 Service Contracts. If Tenant shall propose to use an independent
contractor or other party to discharge Tenant's obligations under this Lease to
maintain, repair and replace portions of the Premises or any equipment therein
or to enter into a service contract with an independent contractor or other
party for such purpose, Tenant shall notify Landlord in advance of the name of
such proposed independent contractor or other party and of the terms of any such
service contract; provided, however, if such proposed independent contractor
shall be hired to perform work which does not affect in any way the structure of
the Building or the systems of the Building, such as plumbing, HVAC or electric
service, Tenant may hire such independent contractor without the necessity of
notifying Landlord as otherwise provided in this Paragraph 7.4. Each service
contract shall provide for automatic termination if and when, for any reason,
this Lease terminates and for the assignment to Landlord, upon termination of
this Lease, of any causes of action arising under the service contract against
the independent contractor.
7.5 Personal Property of Tenant. Tenant shall have the right to
install in the Premises, furniture, fixtures, equipment and machinery
(hereinafter collectively referred to as "Tenant's Trade Fixtures") necessary
for the business which this Lease permits Tenant to conduct in the Premises.
Tenant's Trade Fixtures shall be and remain the personal property of Tenant,
which Tenant may replace and remove during the term of this Lease and which
Tenant shall remove at the termination of this Lease; provided, however, that
Tenant shall not have the right to remove any such personal property of Tenant
or any of Tenant's Trade Fixtures at any time at which Tenant is in default of
any term, condition or provision of this Lease. Tenant shall, at Tenant's cost,
repair all damage to the Premises which the installation, replacement, repair or
removal of Tenant's Trade Fixtures has caused.
7.6 Alterations. Tenant shall not make or suffer any alteration,
improvement or addition ("Tenant's Alterations") to the Premises, other than
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installation of Tenant's Fixtures as provided in Paragraph 7.5 of this Lease and
all maintenance and repairs to be performed by Tenant as provided in Paragraph
7.2 of this Lease, without obtaining Landlord's prior written consent, which
consent shall not be unreasonably withheld, delayed or conditioned; provided,
however, if such Tenant's Alterations shall cost less than $5,000 and do not
affect the structure of the Building or constitute a material modification to
the systems of the Building, such as plumbing, HVAC or electric service, Tenant
may perform such Tenant's Alterations without Landlord's consent, provided that
all such work is performed in accordance with any and all applicable laws,
rules, order and codes pertaining to the performance of such work. Tenant's
Alterations shall include, without limitation, any work by Tenant which affects
the exterior of the Premises or any structural, plumbing, electrical or
mechanical component of the Premises or the Building. Any and all of Tenant's
Alterations shall be deemed to be part of the Premises for the purposes of
Tenant's obligations hereunder to maintain and repair the Premises. Upon the
expiration or earlier termination of this Lease, Tenant's Alterations shall
become the property of the Landlord, which property Tenant shall surrender with
the Premises unless Landlord, by written notice to Tenant prior to installation
of such Tenant's Alterations, requires Tenant to remove all or some portion of
such Tenant's Alterations in which latter case Tenant shall, at Tenant's cost,
remove Tenant's Alterations or such portion thereof as Landlord requires, repair
any damage such removal causes, and restore the Premises to their condition
prior to installation of such Tenant's Alterations.
7.7 Mechanic's Liens. Tenant shall keep the Premises and Tenant's
leasehold hereunder free of any lien which may arise out of any work, materials
or labor furnished to the Premises for or at the instance of Tenant, by paying
or bonding off any such lien within thirty (30) days after Tenant receives
notice of such lien. If Landlord requests, Tenant shall furnish Landlord with
such security, including a performance and payment bond, as Landlord shall deem
reasonably necessary to protect the Premises against the attachment or
foreclosure of any such lien.
8. ENTRY BY LANDLORD.
8.1 Entry by Landlord. Landlord and Landlord's agents shall have the
right to enter the Premises at all reasonable times during regular business
hours after providing Tenant with reasonable notice thereof (except in cases of
emergency in which case Landlord may enter without notice, at any time) to
perform Landlord's obligations hereunder, to inspect Tenant's performance of
Tenant's obligations hereunder, to exhibit the Premises to actual or prospective
lenders or purchasers and for any other reasonable purpose. Landlord shall have
the right to place "for sale" and "for rent" signs on the Premises, which Tenant
shall neither remove nor obscure, and to exhibit the Premises to prospective
tenants during the last one hundred eighty (180) days of the term of this Lease.
The performance of work on the Premises by Landlord, whether to discharge
Landlord's obligations hereunder or to prevent waste or deterioration, including
the placement in the Premises of supplies and materials necessary for such work,
shall not be deemed to constitute a partial or total eviction of Tenant, and
neither rental nor any other obligation of Tenant hereby shall abate as a result
of any entry of work performed by Landlord hereunder. Landlord shall, however,
use its best efforts in the conduct of any such entry or work to minimize any
interference with Tenant's use of the Premises. None of Landlord's rights under
this Paragraph 8.1 shall be deemed to impose upon Landlord any obligation for
the maintenance or repair of the Premises unless specifically imposed upon
Landlord by any of the terms, provisions or conditions of this Lease.
9. INSURANCE
9.1 LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
maintain in force during the term of this Lease, liability insurance in the
Commercial General Liability form (or reasonable equivalent thereto) to protect
against any liability to the public resulting from the use of or any accident
occurring in or about the Premises. The coverage under such insurance shall be
not less than One Million and no/100 Dollars ($1,000,000.00) for any one injury
(including death), Three Million and no/100 Dollars ($3,000,000.00 for any one
accident or occurrence and One Million and no/100 Dollars ($1,000,000.00) for
property damage.
9.2 TENANT'S PROPERTY. Throughout the term of this Lease, Tenant
shall, at Tenant's cost, cause all Tenant's Trade Fixtures and Tenant's other
personal property in the Premises to be fully insured against loss or damage by
theft, fire and such other risks as are now or hereafter included under general
"All Risk: insurance coverage in common use for tenant business property in the
Atlanta, Georgia area in an amount equal to the full insurable value thereof and
written on a comprehensive replacement cost basis. Landlord shall have no
liability to Tenant for theft, damage or other casualty to any property of
Tenant.
9.3 FIRE AND EXTENDED COVERAGE. Throughout the term of this Lease,
Landlord shall cause the Building (but not Tenant's Trade Fixtures or any other
property of Tenant) to be insured against loss or damage by fire and such other
risks as are now or hereafter included under "All Risk" insurance coverage in
common use for commercial structures in Atlanta, Georgia area, including,
without limitation, if Landlord deems necessary, earthquake and flood insurance,
the cost of which shall be paid by Tenant in accordance with Paragraph 3.3 of
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this Lease. Tenant shall have no interest in nor any right to the proceeds of
such insurance. All proceeds thereunder shall be paid to Landlord and disbursed
by Landlord if the damage is to be repaired and the affected improvements
restored, in accordance with such progress payment schedule as Landlord may
approve, or to be retained in full by Landlord if this Lease is terminated on
account of the casualty giving rise to such insurance proceeds.
9.4 FORM of POLICIES. Tenant shall carry all insurance which this
Lease requires Tenant to maintain with insurance companies with a Best rating of
A or better and licensed to do business in the State of Georgia. All policies
evidencing such coverage shall provide that: (i) any loss shall be payable
notwithstanding any act or negligence of Landlord which might otherwise result
in a forfeiture of coverage; (ii) the carrier waives the right of subrogation
against Landlord and against Landlord's agents and representatives;(iii) the
policies evidencing such coverage are primary and non-contributing with any
insurance that may be carried by Landlord, and (iv) Landlord shall be named as
an additional insured under such policy.
9.5 PROCEDURES and REMEDIES. Tenant shall deliver to Landlord, in the
manner hereinafter required for notices, (a) certificates evidencing all
insurance this Lease requires Tenant to carry, and (b) proof reasonably
satisfactory to Landlord that Tenant has fully paid the premiums for the
procurement and maintenance of such coverage, all within the following time
limits:
(i) For insurance required at the Commencement Date upon
execution hereof.
(ii) For insurance required at a later date, at least thirty (30)
days before the requirement takes effect, and
(iii) For any renewal or replacement of a policy already in
existence, at least thirty (30) days before expiration or
other termination of the existing policy.
If Tenant fails or refuses to procure or to maintain the insurance coverage
required hereunder, or fails or refuses to furnish Landlord with proof that said
coverage has been produced and is in force and paid for, Landlord shall have the
right, at Landlord's election and without notice to Tenant, but without any
obligation to do so, to procure and maintain such coverage, and all costs of
such coverage expended by Landlord shall be payable by Tenant as additional
rental under this Lease. Tenant shall reimburse Landlord on demand for any
premiums so paid by Landlord, together with interest at the highest legal rate
for the period falling between the date of such payment by Landlord and such
reimbursement by Tenant.
10. INDEMNITY.
10.1 WAIVER OF DAMAGES. Landlord shall not be liable to Tenant, and
Tenant hereby waives any claim against Landlord, for injury to or death of any
person or damage to any property that may result from any cause whatsoever
within the Premises, the Building, the Complex and the Center, other than where
such injury, death or damage is caused in part or in whole, directly or
indirectly by the negligence or willful misconduct of Landlord, its agents or
employees. Tenant hereby fully assumes all risk of damage, from any source, to
any property in the Premises.
10.2 INDEMNIFICATION. Tenant shall indemnify, defend and hold Landlord
harmless against any and all claims or liability for the death of or any injury
to any person and for damage to any property whatsoever, at the Premises or any
part thereof if any such death, injury or damage is caused in part or in whole,
directly or indirectly, by the negligence and willful misconduct of Tenant or of
Tenant's directors, officers, employees, agents, contractors, invitees or
licensees. Tenant's indemnity set forth in this Paragraph 10.2 shall include,
without limitation, any death, injury or damage caused by water leakage (whether
from roof, walls, floor, basement or otherwise) or caused by gas, oil,
electricity or any other matter if caused in part or in whole, directly or
indirectly, by the negligence or willful misconduct of Tenant or of Tenant's
directors, officers, employees, agents, contractors, invitees or licensees. If
any action or proceeding based on any such death, injury or damage is brought
against Landlord then, upon written request from Landlord, Tenant shall, at
Tenant's cost, defend such action or proceeding and, if appropriate, file such
counteractions or counter-proceedings as the circumstances require, all through
legal counsel reasonably acceptable to Landlord.
Landlord shall indemnify, defend and hold Tenant harmless against any
and all claims or liability for the death or any injury to any person and for
damage to any property whatsoever, in the Common Areas or any part thereof, if
any such death, injury or damage is caused in part or in whole, directly or
indirectly, by the negligence or willful misconduct of Landlord or Landlord's
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directors, officers, employees, agents, contractors, invitees or licensees. If
any action or proceeding based on any such death, injury or damage is brought
against Tenant then, upon written request from Tenant, Landlord shall, at
Landlord's cost, defend such action or proceeding and, if appropriate, files
such counteractions or counter-proceedings as the circumstances require, all
through legal counsel reasonably acceptable to Tenant.
11. DAMAGE AND DESTRUCTION.
11.1 DAMAGE AND DESTRUCTION. If the Premises are destroyed in whole or
in part by any cause, Landlord, after consulting with Tenant and considering
Tenant's recommendations, shall have the right to elect either to restore the
Premises or to terminate this Lease. Provided, however, if in Landlord's
reasonable discretion, the Premises can be restored in one hundred eighty (180)
days or less from the date of such casualty, and sufficient insurance proceeds
are available to complete such restoration, Landlord shall elect to restore the
Premises. If the Premises cannot be restored, in Landlord's reasonable
discretion, within such one hundred eighty (180) day period, this Lease shall
terminate, unless Landlord and Tenant agree in writing that Landlord shall
restore the Premises, despite the fact that it shall take longer than one
hundred eighty (180) days. Landlord shall notify Tenant of its election within
sixty (60) calendar days after such casualty.
11.2 RESTORATION. If Landlord elects to restore the Premises, Landlord
shall promptly restore the same to their condition immediately prior to such
casualty, provided that such restoration can be completed within a period of one
hundred eighty (180) calendar days following such casualty, which period shall
be extended one (1) day for each day of delay resulting from causes beyond
Landlord's control after Landlord's notice of election to Tenant. Rental under
this Lease shall abate from the date of casualty in the proportion that Tenant
is, in the reasonable opinion of Landlord and Tenant, actually deprived of use
of the Premises.
11.3 TERMINATION. If Landlord elects to terminate this Lease, rental
shall terminate as of the date of such casualty, and, from the date notice of
such election is given by Landlord to Tenant, the parties shall have no further
obligations under this Lease except for obligations which arose prior to the
casualty.
In the event that Landlord elects to restore the Premises, and such
Premises are not completely restored by Landlord within two hundred seventy
(270) days from the date of such casualty, Tenant shall have the right, upon
written notice to Landlord after the end of such two hundred seventy (270) day
period, to terminate this Lease, in which case the parties shall have no further
obligations under this Lease except for obligations which arose prior to the
casualty or which expressly survive the termination of this Lease.
12. COMPLIANCE WITH LAW AND QUIET POSSESSION
12.1 COMPLIANCE WITH LAW. Throughout the term of this Lease, Tenant
shall faithfully observe and promptly comply with all present and future
requirements of all governmental authorities with jurisdiction over the Premises
and all recorded covenants, conditions and restrictions which are applicable to
the Premises. Landlord agrees that, as of the Commencement Date of this Lease,
the Premises shall comply with all requirements of all governmental authorities
with jurisdiction over the Premises and with all recorded covenants, conditions
and restrictions which are applicable to the Premises. If any modifications or
work to the exterior portion of the Premises are required by governmental
authorities with jurisdiction over the Premises subsequent to the date of this
Lease, such modifications or work shall be performed by Landlord, at Landlord's
sole cost and expense.
12.2 QUIET POSSESSION. So long as no default on the part of Tenant
exists hereunder, Landlord shall secure to Tenant the quiet and peaceful
possession of the Premises against any persons who claim a paramount interest in
the Premises through or under Landlord.
13. DEFAULT.
13.1 EVENT of DEFAULT. Any of the following events or occurrences
shall constitute a breach of this Lease by Tenant and shall constitute an "Event
of Default" under this Lease, and upon the occurrence of an Event of Default,
Landlord shall have all the rights and remedies set forth in this Paragraph 13.1
and through and including Paragraph 13.5 hereinbelow, as well as all other
rights and remedies available under this Lease and at law and in equity. The
following occurrences shall each constitute an Event of Default.
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(a) The failure by Tenant to pay any rental or other amount due
under this Lease in full within five (5) calendar days after written notice from
Landlord of such failure.
(b) The failure by tenant to perform any other obligation
hereunder, if such failure has continued for a period of thirty (30) calendar
days after Landlord demands in writing that Tenant cure such failure; provided,
however, that if such default is not reasonably susceptible of cure within a
period of thirty (30) calendar days after such failure, Tenant shall cure such
default over such longer period as is reasonably necessary to cure the failure
if, and only if, Tenant has promptly commenced to cure such default within said
initial thirty (30) day period and shall thereafter diligently pursue such cure
to completion;
(c) A general assignment by Tenant for the benefit of Tenant's
creditors; any voluntary filing, petition or application by Tenant under any law
relating to insolvency or bankruptcy, whether for a declaration of bankruptcy,
whether for a declaration of bankruptcy, a reorganization, an arrangement or
otherwise, the abandonment, vacating or surrender of the Premises by Tenant
without Landlord's prior written consent; or the dispossession of Tenant from
the Premises (other than by Landlord) by process of law or otherwise;
(d) The involuntary filing against Tenant of (i) a petition to
have Tenant declared a bankrupt, or (ii) a petition for reorganization or
arrangement of Tenant under any law relating to insolvency or bankruptcy,
unless, in the case of any involuntary filing, the same is dismissed within
sixty (60) calendar days after the filing thereof; the appointment of a trustee
or receiver to take possession of all or substantially all of Tenant's assets,
or the attachment, execution or other judicial seizure of all or substantially
all of Tenant's assets, or the attachment, execution or other judicia seizure of
all or substantially all of Tenant's assets located at the Premises, or of
Tenant's interest in this Lease, unless such appointment, attachment, execution
or seizure is discharged within forty-five (45) calendar days after the date of
appointment of such trustee or receiver; or
(e) Tenant's violation of any of the (i) covenants or
restrictions contained in that certain "Declaration of Protective Covenants and
Restrictions for Beaver Ruin Business Center" more particularly described in
Paragraph 1.1 of this Lease or (ii) of any of the Rules and Regulations
promulgated by Landlord to govern the conduct of tenants within the Complex and
the Center, after notice from Landlord to Tenant and an opportunity for Tenant
to cure such violation within the time periods set forth in Paragraph 13.1(b)
above.
13.2 LANDLORD'S REMEDIES UPON AN EVENT OF DEFAULT. Upon the occurrence
of any such Events of Default, Landlord shall, in addition to any other rights
or remedies available to Landlord under this Lease and at law and in equity,
have the right immediately: (a) To terminate this Lease and all rights of Tenant
hereunder by giving Tenant written notice that this Lease is terminated if
Landlord so terminates this Lease, then Landlord may recover from Tenant the
amount of money necessary to compensate Landlord for all damage caused by
Tenant's failure to perform Tenant's obligations under this Lease; or (b) to
re-enter the Premises, without terminating this Lease, and remove all persons
and property from the Premises and either (i) recover from Tenant such damages
as allowed under Georgia law or (ii) relet the Premises or any part thereof on
behalf of Tenant for such term or terms, at such rent or rents and pursuant to
such other provisions as Landlord, in Landlord's sole discretion, shall deem
advisable, with the right, at Tenant's expense, to incur all costs of reletting
including, without limitation, rental commission and the making of such
alterations and repairs to the Premises as will reasonably place the Premises in
a more rentable condition and to receive from Tenant any deficiency between the
total amounts due Landlord under this Lease and the amounts received by Landlord
from such reletting, less the aforesaid costs of reletting. Landlord shall have
the right to cause all property of Tenant to be removed from the Premises and
either stored in a public or private warehouse or elsewhere at the expense and
for the account of Tenant or discarded, sold or otherwise disposed of if
unclaimed by Tenant within a reasonable period of time.
13.3 REMEDIES CUMULATIVE. The rights, privileges, elections and
remedies of the Landlord under this Lease shall be cumulative, and Landlord
shall have the right to exercise such remedies at any time and from time to time
singly and in combination. No provision of this Paragraph 13.3 shall be deemed
to limit or negate Landlord's rights under this Lease to indemnification from
Tenant (or Tenant's insurance carriers) for any liability asserted against or
imposed upon Landlord, whether before or after termination of this Lease, which
liability is directly or indirectly based upon death, bodily injury, property
damage or other matters occurring prior to the termination of this Lease.
13.4 INTEREST ON DEFAULT. Any amount payable by Tenant to Landlord
under this Lease and not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof) until the date of
full payment of such past due amount with interest. Neither the accrual nor the
payment of any such interest shall be deemed to excuse or cure any breach or
Event of Default under this Lease on the part of Tenant. In the event that any
interest paid or charged hereunder shall exceed the maximum legal rate then
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applicable in the State of Georgia, then such rate so charged by Landlord shall
be automatically reduced to the current maximum legal rate of interest, and
Landlord shall promptly refund to Tenant the excess amount of interest paid over
such maximum legal rate of interest.
13.5 ATTORNEY'S FEES AND COLLECTION CHARGES. In the event any rental
or other amounts of money due under this Lease are collected by or through an
attorney at law, Tenant shall pay all reasonable attorney's fees incurred by
Landlord in such collection, action or proceeding, together with all costs and
attorney's fees incurred by Landlord in connection with such collection, action
or proceeding.
14. CONDEMNATION
14.1 DEFINITION: For the purpose of this Lease.
(a) The term "Taking" shall mean a taking of the Premises or
damage thereto related to the exercise of the power of eminent domain and shall
include a sale in lieu of condemnation or court proceedings to any agency,
authority, public utility, person or corporate entity empowered to condemn
property.
(b) The term "Total Taking" shall mean the taking of the entire
Premises or so much of the Premises as prevents the use thereof by Tenant for
the uses herein specified, provided, however, that in no event shall the taking
of less than twenty-five percent (25%) of the Premises be considered a Total
Taking, unless in Landlord's and Tenant's reasonable discretion, such taking
would render the Premises untenantable for Tenant's intended use of the Premises
in accordance with Paragraph 4.1 of this Lease.
(b) The term "Partial Taking" shall mean the taking of a portion
of the Premises which does not constitute a Total Taking.
(c) The term "Date of Taking" shall mean the date upon which
title to the Premises, or a portion thereof, passes to and vests in the
condemnor.
(e) The term "Award" shall mean the amount of any award made,
consideration paid, or damages ordered as a result of a Taking.
14.2 TOTAL TAKING. In the event of a Total Taking during the term of
this Lease, all rights of Tenant under this Lease and all Tenant's leasehold
interest in and to the Premises shall terminate as of the Date of Taking.
Landlord shall thereupon refund to Tenant any prepaid rent, and Tenant shall pay
to Landlord any rent or charges due Landlord under the Lease, each of such
payments to be prorated as of the Date of Taking. Any Award shall be paid in
full to and be the property of Landlord.
14.3 PARTIAL TAKING. In the event of a Partial Taking during the term
of this Lease, the rights of Tenant under this Lease and the leasehold estate of
Tenant in and to the portion of the Premises so taken, but not the remaining
portion, shall terminate as of the Date of Taking. From and after the Date of
Taking the monthly rental payable under this Lease shall be equitably reduced in
the proportion that the square footage of the Premises taken bears to the square
footage of the Premises prior to the Taking. The total Award shall be paid to
and be the property of Landlord, and Landlord shall promptly commence to repair
any damage to Premises caused by such Partial Taking, at least to the extent of
the amount of the Award.
15. SUBORDINATION.
Provided tenant receives a non-disturbance agreement from the holder of
such interest, this Lease shall automatically be subordinate to any mortgage,
security deed or any other hypothecation for security, whether existing at the
date of this Lease or subsequently placed upon the Premises or the property of
Landlord 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. If the holder of any such security deed
shall elect to have this Lease made prior to the lien and security interest of
such holder's security deed, such holder shall give written notice to Tenant to
such effect; thereupon this Lease shall be deemed prior to such security deed,
whether this Lease is dated prior to or following the date of execution or
recordation of such security deed. Tenant hereby agrees with Landlord that,
within ten (10) calendar days following request by Landlord, Tenant shall
execute a subordination agreement, in form reasonably acceptable to Tenant, with
any holder or prospective holder of such a security deed, and Landlord shall
cause the holder of such security deed to agree in writing that this Lease shall
not be terminated in the case of any foreclosure or sale of the Premises
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pursuant to the terms of such security deed so long as Tenant is not then in
default of any of the terms, provisions or conditions of this Lease.
16. HOLDING OVER
If Tenant continues in possession of the Premises after expiration of the
term of this Lease, Tenant shall become a tenant from month to month of the
Premises. Either party may terminate such tenancy from month to month by giving
thirty (30) calendar days prior written notice to the other party. The
provisions of this Lease, so far as applicable, shall govern such tenancy,
except that the monthly rental for such tenancy shall be at a rate equal to one
hundred fifty percent (150%) of the rental payable by Tenant during the last
full month of the term of this Lease.
17. ASSIGNMENT AND SUBLETTING.
17.1 LANDLORD"S CONSENT REQUIRED. Tenant shall not assign, mortgage or
hypothecate this Lease or any interest herein, nor sublease nor permit the use
of the Premises by any other party without obtaining Landlord's prior written
consent to such assignment, subletting or use, which consent shall not be
unreasonably withheld, delayed or conditioned. Any transfer of this Lease by
operation of law, whether resulting from death, merger, consolidation,
liquidation or any transfer of fifty percent (50%) or more of the stock,
partnership interest or other interest of a party or parties originally
comprising Tenant under this Lease, shall constitute an assignment for purposes
of this Paragraph 17.1. Consent to any one (1) assignment, subletting or other
transfer shall not be deemed to constitute consent to any subsequent assignment,
subletting or other transfer.
17.2 NO RELEASE OF TENANT. No subletting or assignment, even with
Landlord's consent, shall relieve the original Tenant of its duties to pay the
rental and to perform all such original obligations as "tenant" under this
Lease.
17.3 PERMITTED ASSIGNMENTS. Tenant may assign or sublet this Lease
without Landlord's consent to any entity (i) formed by Tenant becoming a
publicly traded company or being acquired by a publicly traded company; (ii)
which is a controlled "affiliate" of the Tenant or (iii) where Tenant is
involved in a merger transaction and Tenant is the surviving entity of such
merger; provided, however, that such publicly traded company, controlled
affiliate or merged entity shall have a net worth of not less than the net worth
of the Tenant.
18. TRANSFERS AND REFINANCING
18.1 CONVEYANCE OF LANDLORD'S INTEREST. In the event that Landlord
sells, assigns or otherwise transfers, in whole or in part, Landlord's interest
in this Lease or the reversion of such interest hereunder (other than under a
mortgage, security deed or any other hypothecation for security). Landlord shall
require the transferee to accept such interest, subject to this Lease. Upon
Landlord's furnishing Tenant with a documentation evidencing such transfer,
Landlord shall be released from any further obligations to Tenant hereunder,
and, from and after the date of any such transfer, Tenant shall look solely to
the transferee for the performance of the obligations of the Landlord under this
Lease. If Landlord transfers any security deposit or other security Landlord
holds for performance of Tenant's obligations under this Lease to such
transferee, and Landlord so notifies Tenant of such transfer in writing,
Landlord shall have no further liability to Tenant concerning such security
deposit, and Tenant shall thereafter look solely to such transferee for such
deposit.
18.2 ESTOPPEL CERTIFICATE AND FINANCIAL STATEMENTS. Within twenty
(20) calendar days after written request from Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a statement in writing (a) 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), the dates to which rental and other charges
payable by Tenant hereunder are paid in advance, if any, and the amount of the
Security Deposit, (b) 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 and (c) in case of a transfer of Landlord's
interest, attorning to the transferee. Tenant hereby acknowledges that
prospective purchasers or encumbrances of the Premises (or of the property of
Landlord of which the Premises are a part) may incur obligations or extend
credit in reliance upon the representations of Tenant contained in such
statement. Tenant's failure to deliver such statement to Landlord within said
ten (10) calendar day period shall be conclusive evidence of Tenant's
representations and agreements as follows: that this Lease is in full force and
effect, without modification, except as Landlord may represent, that there are
no uncured defaults in Landlord's performance hereunder, and that Landlord is
not holding a Security Deposit in excess of one (1) month's rental under this
Lease.
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Additionally, if Tenant has failed to pay base monthly rental in a timely
manner, prior to the requirement of Landlord to give notice of such failure as
provided in Paragraph 13.1(a) of this Lease, at least two (2) times in any
calendar year, Tenant shall be required to deliver to Landlord, at any time
within thirty (30) calendar days after written request therefore from Landlord,
but not more frequently than once per calendar year, Tenant's financial
statement for Tenant's immediately preceding fiscal year, prepared in accordance
with generally accepted principles of accounting and in such reasonable detail
and with such supporting date as Landlord may request, certified by an officer
of Tenant, together with a written statement of Tenant's current income from and
expenses of the business operated within the Premises.
19. CONDITION AT TERMINATION
Upon expiration or termination of this Lease for any reason, Tenant shall
surrender the Premises to Landlord in at lease as good a condition as when
received from Landlord excepting only (a) reasonable wear and tear and (b) such
of Tenant's Alterations as Tenant is not required to remove pursuant to
Paragraph 7.6 above, and (c) damage caused by fire, condemnation or other
casualty which the Lease does not otherwise obligate Tenant to repair. Provided
Tenant is not then in default under this Lease, Tenant shall promptly discharge
its obligations hereunder to remove Tenant's Trade Fixtures and to repair any
and all damage which such removal from the Premises may cause. Any personal
property of Tenant which Tenant fails to remove from the Premises shall be
deemed abandoned within five (5) business days following the date of expiration
or termination of this Lease.
20. SIGNS AND WINDOW TREATMENTS.
Tenant covenants and agrees that no signs, advertising devices of any
nature, window treatments or blinds shall be installed, erected or maintained on
the Premises or the Building except as provided in the Sign and Window Treatment
Criteria attached hereto as Exhibit "E" or as may otherwise be approved in
writing by Landlord. Tenant shall maintain all such permitted signs in neat
condition and repair throughout the term of this Lease. Tenant shall remove all
signs belonging to Tenant from the Premises at the expiration of the term of
this Lease and shall simultaneously repair any damage which the removal of
Tenant's signs shall cause.
21. WASTE, QUIET CONDUCT, PARKING AND STORAGE.
21.1 PROHIBITED USES. Tenant shall not do or permit anything to be
done in or about the Premises, nor bring or keep anything on the Premises, which
will violate any applicable requirements of any governmental authority or which
will in any way vitiate the fire insurance on the Premises or any property in
the Premises. Tenant shall not do or suffer any act in its use and occupancy of
the Premises which will constitute waste or a public or private nuisance. Tenant
shall not use or allow the Premises to be used for any improper, immoral or
objectionable purpose or in a manner which, in Landlord's reasonable judgment,
interferes with the rights or enjoyment of visitors or other tenants or
occupants of the property of Landlord of which the Premises are a part.
21.2 PARKING AREAS AND PARKING. The Premises shall be constructed to
provide Tenant with sixty (60) non-assigned parking spaces for the exclusive use
of Tenant, its employees and invitees, and there shall be no assigned parking
within the Complex or the Center, unless Landlord so designates in specific
instances, of which designation Tenant shall be notified in writing.
Tenant shall neither park nor allow the parking or locating within the
Complex or the Center of any recreational vehicles, satellite dishes,
non-motorized vehicles or other items of equipment such areas. No lubrication,
painting or other vehicle maintenance or repair shall be allowed in the Complex
or the Center, nor shall Tenant allow any servicing of any vehicle, equipment or
machinery in such areas. No lubrication, painting or other maintenance or repair
shall be allowed within the Complex or the Center and no abandoned vehicle or
equipment shall be allowed within the Complex or the Center. This restriction
shall apply to Tenant's vehicles and equipment as well as vehicles and equipment
of Tenant's employees, agents, visitors, licensees, invitees, contractors and
customers.
22. NOTICES.
22.1 NOTICES. Any notice required or desired to be given under this
Lease shall be in writing with copies directed to the indicated parties and
shall be personally served, sent by a nationally recognized overnight delivery
service (such as Federal Express), telecopied, faxed or given by certified mail,
return receipt requested. Notices shall be addressed as indicated below or as a
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party may otherwise by written notice give pursuant to this paragraph:
Landlord: St. Paul Properties, Inc.
385 Washington Street
St. Paul, Minnesota 55102
Attn: Vice President/Asset Management
With a copy to: Alston & Bird, Attorneys At Law
Attn: Jeff Israel
3575 Koger Boulevard, Suite 200
Duluth, Georgia 30136-4958
and
Prentiss Properties Ltd., Inc.
Attn: Scott Farber
Suite 3600, One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Tenant: Simmons Company
Attn: Roger Franklin
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328-5369
With a copy to: Jones, Day Reavis & Pogue
Attn: Lizanne Thomas, Esq.
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30328-3242
Notices shall be deemed received on the day personally delivered, the day of
receipt if by overnight courier, telecopy or fax transmission, or on the fifth
(5th) calendar day after proper posting thereof. Changes of addresses shall be
effective when provided in writing to the other parties receiving notice.
23. HAZARDOUS SUBSTANCES.
The term "Hazardous Substances" as hereinafter used in this Lease shall
mean pollutants, contaminants, toxic or hazardous wastes or any other
substances, the removal of which is required or the use of which is restricted,
prohibited or penalized by any "environmental Law," which term shall mean any
federal, state or local law or ordinance relating to pollution or protection of
the environment. Tenant hereby agrees with Landlord that during the term of this
Lease (i) Tenant its employees, licensees, invitees, agents and contractors
shall not conduct any activity on the Premises that will produce any Hazardous
Substances; (ii) Tenant, its employees, licensees, invitees, agents and
contractors will not use any portion of the Premises as a landfill or a dump;
(iii) Tenant will not install any underground tanks of any type; (iv) Tenant
will not cause any surface or subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute, a public
or private nuisance; (v) Tenant will not bring or permit Hazardous Substances to
be brought onto the Premises in violation of any Environmental Law, and if so
brought or permitted, the same shall be brought onto the Premises in violation
of any Environmental Law, and if so brought or permitted, the same shall be
immediately removed, with proper disposal thereof, and all required cleanup
procedures shall be diligently undertaken and completed pursuant to all
Environmental Laws. Tenant shall, and hereby does, indemnify and hold Landlord
harmless from all claims, demands, actions, liabilities, costs, expenses,
damages and obligations of any nature arising from or as a result of Tenant's
failure to fulfill the foregoing obligations. The foregoing indemnification
shall survive the termination or expiration of this Lease. Landlord hereby
represents and states, to the best of Landlord's knowledge based solely on a
review of that certain Report of Preliminary Environmental Site Assessment,
Limited Visual Asbestos Survey and Limited Survey for Radon Gas, dated February
1994, prepared by Law Engineering, Inc. (Project No. 579-06551.01), that there
are no Hazardous Substances located on the Premises or any portion thereof.
24. MISCELLANEOUS.
This Lease, together with all Exhibits hereto, constitutes the sole
agreement between Landlord and Tenant and supersedes all prior written or oral
agreements or understandings between such parties pertaining to the transactions
contemplated herein. All modifications hereof must be in writing and signed by
the parties hereto. Neither party has made to the other any representations,
warranties or inducements, express or implied, except as set forth herein. Time
is and shall be of the essence of this Lease. Where a party hereto consists of
more than one (1) person, each such person shall be jointly and severally liable
for the performance of such party's obligations hereunder. The captions in this
Lease are for convenience only, are not a part of this Lease and do not in any
way limit or amplify the provisions hereof. This Lease shall be interpreted and
enforced in accordance with the laws of the State of Georgia.
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The provisions of this Lease shall bind and inure to the benefit of
Landlord and Tenant and their permitted successors and assigns, as such
successors and assigns of Tenant are restricted under the terms of this Lease.
The parties intend by this Lease to establish the relationship of landlord and
tenant only, and do not intend to create a partnership, joint venture, joint
enterprise, an estate for years or any business relationship other than that of
landlord and tenant. No waiver or failure by Landlord or Tenant to enforce any
provision of this Lease shall be deemed to be a waiver of any other provision of
this Lease or of any subsequent breach of the same or any other provision. If,
after the occurring of an Event of Default by Tenant, Landlord accepts rental or
performance of any other obligation by Tenant, Landlord shall not be deemed to
have waived or forgiven any breach or Event of Default unless Landlord expressly
so states in writing.
If any provision of this Lease, or the application thereof to any person or
circumstance, shall to any extent be or become invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances to than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
25. LIMITED LIABILITY.
Exculpation. Any provision of this Lease to the contrary notwithstanding,
Landlord shall have no personal liability for payment of any damages or
performance of any term, provision or condition under this Lease or under any
other instrument in connection with this Lease, and Tenant shall look for such
payment or performance to Landlord's interest in the Center, the rents, issues
and profits therefrom in satisfaction of any claim, order or judgment Tenant may
at any time obtain against Landlord in any connection with this Lease.
26. SPECIAL STIPULATIONS.
Any special stipulations to this Lease agreed upon by Landlord and Tenant
and attached hereto and made a part hereof shall, if in conflict with the
foregoing terms of this Lease, govern and control.
27. MANAGING AGENT FOR PROPERTY.
Prentiss Properties Ltd., Inc. has represented Landlord in this transaction
as an independent contractor and will be compensated by Landlord for its
services. Prentiss Properties Ltd., Inc. has not represented Tenant in this
transaction. Corporate Property Advisors has represented Tenant in this
transaction as an independent contractor and will be compensated by Landlord for
its services. Corporate Property Advisors has not represented Landlord in this
transaction.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed and sealed and their hands and seals to be set forth hereunto by duly
authorized officers thereof, the day and year first above written. UNDER SEAL.
LANDLORD
ST. PAUL PROPERTIES, INC., a
Delaware Corporation
By:__________________________
Name:_____________________
Title:____________________
TENANT:
SIMMONS COMPANY, a
Delaware Corporation
By:__________________________
Name:_____________________
Title:____________________
By:__________________________
Name:_____________________
Title:____________________
SPECIAL STIPULATIONS
--------------------
1. Tenant shall pay base monthly rental in accordance with Paragraph 3.2 of
this Lease and in the amount specified as follows:
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<PAGE> 15
MONTH PER SQUARE PER MONTH PER YEAR
===== ========== ========= ========
FOOT
====
1-12 $4.41 $13,965.00 $167,580.00
13-24 $4.58 $14,503.33 $174,040.00
25-36 $4.76 $15,073.33 $180,880.00
37-48 $4.95 $15,675.00 $188,100.00
49-60 $5.14 $16,276.67 $195,320.00
61-72 $5.37 $17,005.00 $204,060.00
73-84 $5.60 $17,333.33 $212,800.00
85-96 $5.85 $18,525.00 $222,300.00
97-108 $6.11 $19,348.33 $232,180.00
109-120 $6.37 $20,171.67 $242,060.00
2. Provided there is no event of default by Tenant under this Lease either
at the time for giving notice or at the effective date of any extension
hereunder, Tenant shall have the option to extend the Term of this Lease for two
(2) consecutive terms of three (3) years each (the "Extended Term(s)" by
Tenant's giving written notice to Landlord no later than nine (9) months prior
to the expiration of the term or the Extended Term, if applicable. Base Monthly
Rental for the Premises shall be the Market Rent for such Premises and all other
terms and conditions of this Lease shall remain the same as existed on the last
day of the term or the Extended Term, if applicable. Base Monthly Rental for the
Premises shall be the Market Rent for such Premises and all other terms and
conditions of this Lease shall remain the same as existed on the last day of the
Term hereof or the Extended Term, if applicable. For purposes of this Special
Stipulation 2, the term "Market Rent" shall mean rent which is comparable to
rent then being charged for premises of a similar size located within Class "A"
warehouse/industrial/office parks of a similar nature to the Center located in
the Gwinnett County, "I-85" area, as agreed upon by Landlord and Tenant. If
Landlord and Tenant are unable to agree on Market Rent, Landlord and Tenant
shall appoint a third party, expert in the Market Rent shall be and is hereby
deemed to be final and conclusive. If Tenant does not extend this Lease in a
timely manner, Tenant's rights with respect to the Extended Term(s) shall expire
and be of no further force and effect.
3. Tenant shall have the right at all times during this Lease, in
conjunction with Landlord (Landlord agreeing to cooperate with Tenant in such
efforts), to contest the payment of any taxes and assessments on the Premises,
provided that Tenant shall proceed to contest the same, in conjunction with
Landlord, by legal proceedings conducted in good faith and with due diligence
and, further provided, that if any lien or charge on the Premises is involved or
would be incurred by such contest, Landlord shall be furnished with such
security in respect of such lien or charge and against any loss or injury by
reason of such contest as Landlord may reasonably require.
4. Notwithstanding anything contained in this Lease to the contrary
Landlord and Tenant each hereby waive any right of subrogation and right of
recovery or cause of action for injury or loss to the extent that such injury or
loss is covered by fire, extended coverage, "All Risk" or similar policies
covering real property or personal property (or which should have been covered
if Tenant and Landlord were carrying the insurance required by this Lease). Said
waiver shall be in addition to, and not in limitation or derogation of, any
other waiver or release contained in this Lease. Written notice of the terms of
the above mutual waiver shall be given to the insurance carriers of Landlord and
Tenant and the parties' insurance policies shall be properly endorsed, if
necessary to prevent the invalidation of said policies by reason of such
waivers.
5. Landlord hereby represents and warrants to Tenant as follows:
a. Landlord holds fee simple title to the Center, including, without
limitation, the Premises.
b. Landlord has full authority to enter into this Lease and fulfill
all of the obligations of Landlord hereunder.
c. This Lease does not violate any of the covenants contained in the
Declaration of Protective Covenants and Restrictions for Beaver Ruin Business
Center, a copy of which is attached to this Lease as Exhibit "G";
d. To the best of Landlord's knowledge, no laws, rules, regulations or
orders prohibit the intended use of the Premises by Tenant as specified in
Paragraph 4.1 of this Lease;
e. This Lease is a valid and binding obligation of Landlord.
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<PAGE> 16
f. All of the representations of Landlord contained in this Special
Stipulation No. 5 are true as of the date of this Lease, and
g. The Premises constitute a separate tax parcel.
6. In the event that Tenant is not in default under any of the terms and
conditions of this Lease, at the end of the fifth (5th) year of the term of this
Lease, Landlord shall return to Tenant at such time a portion of the Security
Deposit equal to $6,982.50, representing one-half (1/2) of the principal amount
of the Security Deposit.
7. Notwithstanding anything contained in this Lease to the contrary, upon
the expiration or earlier termination of this Lease, Tenant shall, at Tenant's
sole cost and expense, relocate the entry doors to the Building to their
standard location as currently located on the other buildings of the Center to
the reasonable satisfaction of Landlord, at a cost not to exceed $10,000.00.
FLOOR PLAN
page 1277 is a drawing of the floor plan by SANFORD EPSTEIN & ASSOCIATES, PC -
ARCHITECT and is the last page of this set.
The beginning of this document is filed under 1263.127 and the wordprocessor
entered to and including "8. ENTRY BY LANDLORD, page 5.
This portion ----6411\1268.277 begins with 9. INSURANCE on page 6 and continues
to "1277".
STATE OF GEORGIA
COUNTY OF GWINNETT
DECLARATION OF PROTECTIVE COVENANTS AND
RESTRICTIONS FOR BEAVER RUIN BUSINESS CENTER
THIS DECLARATION OF PROTECTIVE COVENANTS AND RESTRICTIONS
is made as of the 30 day of June, 1983, by WACHOVIA BANK AND TRUST COMPANY,
--
N.A., AS TRUSTEE for R. J. Reynolds Industries, Inc., and certain
affiliated companies as set forth in that Master Trust Agreement made as of
January 1, 1972, amended and restated as of January 1, 1976, as amended
(hereinafter referred to as "Declarant") to govern the ownership,
development and use of certain real property lying and being in Gwinnett
County, Georgia and being more particularly described in Exhibit "A"
attached hereto and by this reference made a part hereof and to govern the
ownership, design, construction, use and maintenance of improvements to be
constructed thereon, all as set forth hereinbelow, it being to the
interest, benefit and advantage of Declarant and each and every person or
entity who shall hereafter purchase or lease any portion of the aforesaid
real property that these protective covenants and restrictions be
established, promulgated and declared.
ARTICLE I
DECLARATION
-----------
1.00. For and in consideration of the benefits to be derived by
Declarant and each and every subsequent owner and lessee of any portion of
the aforesaid real property, Declarant does hereby establish, promulgate,
and declare the following covenants and restrictions to govern the
ownership, development and use of the aforesaid real property and every
part thereof and the ownership, design, construction, use and maintenance
of improvements to be constructed thereon. These covenants and restrictions
shall become effective immediately, shall run with the land and shall be
binding for a period of twenty (20) years from and after the date this
Declaration is recorded, at which time this Declaration may be terminated
or extended in whole or in part as provided in Article XI hereinbelow.
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<PAGE> 17
ARTICLE II
DEFINITIONS
-----------
2.00. The following terms shall have the meanings set forth in this
Article II.
2.01. Architectural Guidelines. "Architectural Guidelines" shall
------------------------
mean any guidelines that may be issued from time to time by the Committee
in furtherance of the purposes of this Declaration.
2.02. Association. "Association" shall mean the non-profit
-----------
association which may be created by Site Owners pursuant to Article IV
hereinbelow.
2.03. Building. "Building" shall mean a fixed, roofed and walled
--------
structure designed for permanent use and all projections or extensions
thereof, including without limitation any outside platforms and docks,
carports, canopies, porches, and ancillary structures.
2.04. Committee. "Committee" shall mean the Review Committee
---------
which may be created pursuant to Article III hereinbelow.
2.05. Declarant. "Declarant" shall mean Wachovia Bank and Trust
---------
Company, N.A., as Trustee for R. J. Reynolds Industries, Inc., and certain
affiliated companies as set forth in that Master Trust Agreement made as of
January 1, 1972, amended and restated as of January 1, 1976, as amended,
and any entity succeeding, directly or indirectly to the fee simple
ownership interest of Wachovia Bank and Trust Company, N.A., as Trustee, in
Beaver Ruin Business Center (hereinafter referred to as "the Park"), but
excluding the Association, the purchasers of individual Sites, and all
public utility companies and governmental authorities.
2.06. Declaration. "Declaration" shall mean this Declaration of
-----------
Protective Covenants and Restrictions.
2.07. Improvements. "Improvements" shall mean all improvements to
------------
the Park or any part thereof of any type or description, including without
limitation, Buildings, underground installations, slope and fill work,
roads, driveways, parking areas, sidewalks, fences, screening walls and
barriers, retaining walls, stairs, decks, windbreaks, trees and shrubs,
poles, signs, and loading areas.
2.08. Occupant. "Occupant" shall mean any person or entity that
--------
occupies a Site or a part of a Site, whether as a Site Owner or as a lessee
under a Site Owner, or otherwise.
2.09. Park. "Park" shall mean the real property described in
----
Exhibit "A" attached hereto and by this reference made a part hereof, any
and all improvements that may be constructed thereon and the business park
to be operated thereon. The name of the park shall be the "Beaver Ruin
Business Center".
2.10. Plans. "Plans" shall mean plans and specifications for
-----
the construction of Improvements in the Park, site plans, landscaping
plans, architect's renderings, engineering drawings, topographical studies,
soil test reports, and such other information of a similar nature that the
Declarant or Committee may require with respect to the development and
improvement of a Site.
2.11. Site. "Site" shall mean a parcel of land in the Park
----
owned by one Site Owner. A parcel shall not be deemed to be a Site unless
so designated by Declarant in accordance with the provisions of Paragraph
9.11 hereinbelow or unless conveyed by Declarant, for reasons other than as
security for the extension of credit, to a grantee other than a successor
Declarant.
2.12. Site Owner. "Site Owner" shall mean the owner (including
----------
Declarant) of the fee simple title to a Site; provided, however, that in
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<PAGE> 18
-------- -------
each situation in which the owner of the fee simple title to a Site conveys
such Site by security deed as security for the construction of permanent
financing of the improvements to be constructed on the Site, the grantee in
such security deed shall not be the Site Owner until such time as the
grantee in such security deed may acquire the underlying fee simple title
to the Site by judicial foreclosure, sale under power, or a conveyance in
lieu of foreclosure.
ARTICLE III
REVIEW COMMITTEE
----------------
3.01. Committee. Declarant hereby creates a Review Committee.
---------
The Committee shall consist initially of three persons, who may be, but do
not have to be, Site Owners. The right to appoint and remove the members of
the Committee shall be and is hereby vested solely in Declarant until such
time as Declarant shall have conveyed all of its interests in real property
in the Park to Site Owners. Once Declarant has so conveyed all of its
interests in real property in the Park, the right to appoint and remove the
members of the Committee shall automatically vest in the Association or
other comparable governing entity created by the Site Owners pursuant to
Article IV hereinbelow.
3.02. Function. It shall be the function of the Committee to
--------
approve and disapprove the overall development of the Park and the
development of and construction of Improvements upon each Site, to
establish and maintain architectural guidelines and standards to carry out
the intent of this Declaration, to review, evaluate, approve and disapprove
proposed Plans, and to review, evaluate and control the ongoing operations
of the Park.
3.03. Approval Required. No Improvements shall be constructed,
-----------------
erected, placed, altered, maintained or permitted to remain on a Site until
final Plans with respect thereto shall have been submitted to and approved
by the Committee. The Plans must be submitted in a form satisfactory to the
Committee and must be in sufficient detail to enable the Committee and must
be in sufficient detail to enable the Committee to make a reasonable
decision. All proposed changes in approved Plans must also be submitted to
the Committee for approval.
3.04. Basis for Disapproval. The Committee shall have the right
---------------------
to disapprove the Plans if the Committee in good faith makes any one or
more of the following determinations:
(i) That the Plans are incomplete or insufficiently
specific; or
(ii) That the Plans are in a form that renders them
unnecessarily difficult to interpret; or
(iii) That the Improvements contemplated by the Plans do not
conform to the provisions and intent of the Declaration; or
(iv) That the Improvements contemplated by the Plans do not
conform to the provisions and intent of the Architectural Guidelines;
or
(v) That the Improvements contemplated by the Plans are
contrary to the best interests of the Park and other Site Owners. In
addition to the foregoing provisions of this Paragraph 3.04 and not in
limitation thereof, the Committee shall have the right to base its approval
or disapproval on the adequacy of Site dimensions, the conformity and
harmony of external design with neighboring structures, the effect of the
location and use of proposed Improvements on neighboring Sites, and the
relation of topography, grade and finished ground elevation of the Site
being improved to that of neighboring Sites and the proper facing of the
Improvements.
3.05. Time for Approval or Disapproval. The Committee shall
--------------------------------
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<PAGE> 19
approve or disapprove submitted Plans within forty-five calendar days
following the Committee's receipt thereof. The Committee shall use its best
efforts to respond to such Plans within a reasonable time not to exceed
such period of forty-five calendar days.
3.06. Expiration of Approval. If Plans for a Site have been
----------------------
approved but work has not commenced in accordance with the Plans within six
months after the date of approval, the Committee's approval shall be deemed
to have expired, unless the Committee in its sole discretion has extended
the time for commencing work. For the purposes of this Paragraph 3.06, work
shall be deemed to have commenced only if all grading and preliminary Site
work has been completed and the pouring of the foundation has begun.
ARTICLE IV
SITE OWNERS' ASSOCIATION
------------------------
4.01. Creation and Functions. Upon the first sale by Declarant of
----------------------
Site, Declarant shall have the express option to cause a non-profit
association to be incorporated under the laws of the State of Georgia with
the following functions: (i) the maintenance of any undeveloped Sites; (ii)
the enforcement of this Declaration against all parties then owning a Site
through the use of all rights available to the Association under the laws
of the State of Georgia, expressly including without limitation the right
to make assessments for work which the Association is forced to perform on
behalf of Site Owners or Occupants in an attempt to assure uniform
compliance with these Protective Covenants and Restrictions after refusal
or failure of any Site Owner or Occupant to so comply, or for other
expenditures for the benefit of the Park and properly approved by the
Association, and to place liens against any Site in the amount of such
unpaid assessments; (iii) after but only after Declarant shall have
conveyed all of its interest in the Park, the appointment and removal of
members of the Review Committee; and (iv) the performance of any other
functions that may be set forth elsewhere in this Declaration or as may be
determined by the Declarant and the Site Owners at the time of
incorporation of the Association. The membership of the Association shall
consist of Site Owners only (the definition of which term includes
Declarant), and each Site Owner shall automatically be a member of the
Association. The Association shall perform its functions in a prudent and
cost-conscious manner.
4.02. Voting Rights. The Association shall consist of all the
-------------
Site Owners (the definition of which term includes Declarant). The members
shall be vested with the sole voting rights of the Association, and shall
then be entitled to one (1) vote for each Site owned by such member.
Members shall not have the right, power, or authority to expand the
functions of the Association or to implement actions detrimental to the
Association or to any Site Owner. Declarant's voting rights for undeveloped
and unsold Sites are set forth in paragraph 9.11 hereinbelow.
4.03. Conflict of Provisions. In the event of a conflict between
----------------------
the Declaration and the articles and by-laws of the Association, the
Declaration shall control.
ARTICLE V
SITE DEVELOPMENT AND IMPROVEMENTS
---------------------------------
5.01. Building Set-Back Lines. No Building shall be placed,
-----------------------
situated, constructed or located within fifty feet of the right-of-way of
any public street or highway, including without limitation the
rights-of-way of Beaver Ridge Circle, Beaver Ruin Road and Interstate
Highway-85, or within twenty feet of the side yard line of any Site, or
within fifteen feet of the rear lot line of any Site except where the side
or rear line of such Site borders a right-of-way of any public street, in
which case the above described fifty foot setback requirements shall apply.
5.02. Parking and Truck Maneuvering. The Plans shall include
-----------------------------
adequate paved off-street parking for all vehicles upon the Site, and parking
will not be permitted along any public street or in any other paved areas except
in approved parking spaces. Adequate space shall be provided for the maneuvering
of spaces. Adequate space shall be provided for the maneuvering of trucks and
other vehicles into and out of parking and loading spaces on the Site
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<PAGE> 20
without entering the right-of-way of any street and in no event blocking any
street or any access to other Sites. All paved areas shall be curbed.
5.03. Outside Storage. No outside storage of any type will be
---------------
permitted without the approval of the Committee.
Outside storage, if permitted by the Committee, shall be adequately
screened from public view by an attractive visual barrier at least as high
as the material being stored, the construction of such barrier to be in
accordance with detailed plans approved by the Committee.
5.04. Landscaping. The entire area of a Site shall be landscaped
-----------
except for areas covered by Buildings and paved areas. A minimum strip of
landscaping ten feet wide shall be installed and maintained along any
portion of the Site bordering a public right-of-way except for entrance
driveways onto the Site. The landscaping plan submitted to the Committee
for approval as part of the Plans shall indicate such things as the
planting of trees, shrubs and the grass and the installation of screens as
appropriate. The landscaping of each Site shall be completed within ninety
calendar days of occupancy or substantial completion of the Building
thereon, whichever occurs first. Buildings built for purposes other than
prompt occupancy shall be deemed to be substantially completed when the
exterior walls and roof have been installed.
5.05. Loading Areas. No materials, supplies, merchandise or
-------------
equipment shall be stored in any area on a Site except inside of a closed
building, or behind a visual barrier screening such areas so that they are
not unsightly from the neighboring properties or public streets.
Loading doors and docks shall not be constructed facing any public
street or highway without the Committee's express prior written approval.
5.06. Signs. No permanent billboard or advertising signs shall be
-----
permitted other than those identifying the names, businesses, and products
of the Occupants. No sign shall project above the roofline, nor shall any
sign have flashing lights or moving parts. All signs of a permanent nature,
including without limitation traffic control signs, shall be installed only
upon the prior written approval of the Committee and shall in every event
comply with the Committee's standard criteria for signage as well as with
all applicable governmental requirements.
5.07. Exterior Walls. Exterior walls shall be of masonry
--------------
construction, its equivalent or better, in textures and colors approved by
the Committee. Other materials may be permitted when used in combination
with masonry construction, its equivalent or better in a fashion found to
be acceptable by the Committee when considered in context with the overall
design of the Building.
5.08. Maintenance During Construction. During construction the Site
-------------------------------
Owner shall be responsible for keeping the Site in a reasonably neat
condition, shall prevent the accumulation of trash and debris, shall
prevent soil erosion, shall prevent the runoff of water onto other Sites,
and shall not create or permit the continuance of a nuisance on or about
the Site.
5.09. Location of Improvements. The Improvements contemplated for
------------------------
each Site shall be confined within the boundaries of the Site and comply
with all requirements of the applicable zoning ordinance.
5.10. Completion of Improvements. Once construction has commenced of
--------------------------
any Improvements, the Site Owners shall pursue such construction diligently
to completion. If construction on a Site should fail to progress materially
for a period of six months, regardless of the reason, the Site Owner shall
promptly commence and complete such action as may be necessary to beautify
the Site, including without limitation the completion of landscaping, the
removal of trash, debris, materials and equipment from the Site, and the
screening or removal of partially constructed Improvements.
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<PAGE> 21
ARTICLE VI
PERMITTED USES
--------------
6.00. The Park shall be used only for office, warehouse, distribution,
storage, light assemblage and light manufacturing purposes meeting the
requirements of applicable zoning ordinances, provided such use (i) is
performed and carried out entirely within a Building constructed in
accordance with approved Plans, (ii) complies with all applicable
environmental laws and regulations, and (iii) does not cause or create a
nuisance (as to excessive noise, odors, dust, emissions, gas, smoke, fumes
or otherwise) or an unsafe condition. Without limiting the foregoing
provisions of this Article VI, in no event shall a Site or any portion
thereof ever be used as a junkyard, dump landfill, stockyard, tannery,
paper mill, fat rendering plant or slaughterhouse.
ARTICLE VII
RESERVATIONS OF EASEMENTS
-------------------------
7.00. Declarant hereby reserves for the use and benefit of Declarant,
the Association and the Site Owners perpetual non-exclusive easements in,
onto, over, across and through all Sites as follows:
7.01. Utility Easements. Declarant hereby reserves perpetual non-
-----------------
exclusive easements as aforesaid for the installation, use, maintenance,
repair and replacement of utility lines and facilities, some of which
utility easements have been granted by Declarant prior to the date of this
Declaration. Declarant shall have the right to release from time to time
any segment or area of the easements reserved herein provided Declarant
causes any utility or utilities existing therein to be relocated without
expense to the users thereof and without any unreasonable interruption of
the utility services furnished thereby.
7.02. Drainage Easements. Declarant hereby reserves perpetual non-
------------------
exclusive easements through all Sites as aforesaid for the natural drainage
of the Park and for the installation, use, maintenance, repair and
replacement where appropriate of retention ponds, pipes and culverts to
control such natural drainage.
7.03. No Implied Release of Easements. Absent an express waiver or
-------------------------------
release, no conveyance by Declarant of any Site or any interest therein
shall be either deemed to be or construed as a waiver or release of any
easements reserved herein as to the Site so conveyed regardless of whether
such conveyance purports to convey such Site in fee simple or purports to
convey Declarant's entire interest therein.
ARTICLE VIII
GRANT OF EASEMENTS AND PROVISIONS REGARDING USE
-----------------------------------------------
8.00. Declarant grants for the use and benefit of the Site Owners
perpetual non-exclusive easements in, onto, over, across and through the
Park as follows:
8.01. Utility Easements. Declarant hereby grants perpetual non-
-----------------
exclusive easements as aforesaid for the installation, use, maintenance,
repair and replacement of utility lines and facilities, whether installed
by or with the permission of Declarant or of the Association, but with
respect to Site said easements shall pertain only to the easement areas
reserved under Paragraph 7.01 of Article VII hereinabove.
8.02. Drainage Easements. Declarant hereby grants to each of the
------------------
Site Owners perpetual non-exclusive easements as aforesaid for the natural
drainage of the Site into retention pounds constructed or to be constructed
by Declarant within the Park, and for the use of such pipes, retention
ponds, and culverts as may be in place from time to time to control the
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<PAGE> 22
drainage of the Park. No Site Owner may restrict or impede the free flow of
the drainage of any portion of the Park.
8.03. Appurtenances to Site. The easements granted under this
---------------------
Article VIII shall be appurtenances to each of the Sites and the
non-exclusive rights and interests created thereby for the benefit of the
Site Owners shall be deemed to be conveyed automatically with each
conveyance of a Site regardless of whether such easements are specified in
the deed of conveyance.
8.04. General Maintenance. The utility and drainage facilities
-------------------
identified respectively in Paragraphs 8.01 and 8.02 hereinabove shall be
maintained at the sole cost and expense of Declarant during such time as
Declarant owns such facilities. Should such facilities be conveyed to the
Association as part of the Common Areas pursuant to the provisions of this
Declaration, the Association shall bear the cost of maintenance of such
facilities thereafter.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.01. Site Maintenance. Landscaping shall be adequately maintained,
----------------
and landscaped areas shall be sprinklered at each Site Owner's expense in
accordance with plans for such yard sprinkler systems as shall be approved
in advance by the Committee. No rubbish or debris of any kind shall be
placed or permitted to accumulate upon or adjacent to any Site, except in
approved waste containers which shall be adequately screened from view and
be located no less than 100 feet from any public street.
9.02. Repair and Maintenance of Improvements. Each Site Owner shall
--------------------------------------
keep the Improvements on its Site in good condition and repair, properly
maintained and adequately painted or otherwise finished.
9.03. Right of Entry. During reasonable hours and subject to
--------------
reasonable security requirements, Declarant, the Committee and their
authorized representatives shall have the right to enter any part of the
Park and any Building or other Improvements therein for the purpose of
ascertaining whether the Declaration is being complied with.
9.04. Agreement Not to Apply for Rezoning. Each and every Site
-----------------------------------
Owner, tenant, lessee, licensee or Occupant, by acquiring such interest in
the use of the Park, hereby agrees to bring no action nor any suit to
change the zoning of any portion of the Park and to seek no zoning
variances with respect to the Site or any other portion of the Park without
Declarant's prior written consent.
9.05. Effect of Invalidation. If any provision of the Declaration is
----------------------
held to be invalid by any Court, the invalidity of such provision shall not
affect the validity or enforceability of the remaining provisions of the
Declaration.
9.06. Notice. Any and all notices or other communications required
------
or permitted by this Declaration or by law to be served on or given to
Declarant shall be in writing and shall be deemed duly served and given
when received by Declarant by certified United States mail, return receipt
requested with proper postage prepaid, addressed to Declarant as follows:
Declarant: Wachovia Bank and Trust Company,
N.A., as Trustee
Real Estate Investment Department
Post Office Box 3099
Winston-Salem, North Carolina 27102
Attention: N. L. Bartmess,
Vice President
With copies to: Altson & Bird, Attorneys at Law
Attention: Rawson Foreman
1200 C&S National Bank Building
35 Broad Street, N.W.
Atlanta, Georgia 30335
and
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<PAGE> 23
MK Management Company
Attention: E. E. Gluck
Post Office Box 19859
Atlanta, Georgia 30325-0859
For the purposes of this paragraph, Declarant may change its address by
recordation of a notice of change of address in the Office of the Clerk of
the Superior Court of Gwinnett County, Georgia as an addendum to this
instrument. Notice to any Site Owner or Occupant shall be deemed duly
served when delivered to the Site or deposited in the United States mail,
postage prepaid, addressed to the address of the Site.
9.07. Governing Law. This Declaration and the interpretation and
-------------
enforcement hereof shall be governed by the laws of the State of Georgia.
9.08. Time of the Essence. Time is of the essence of this
-------------------
Declaration and each and every provision hereof.
9.09. Headings. The headings set forth in this Declaration are for
--------
convenience only and shall not be deemed to limit the scope or intent of
the provisions set forth herein.
9.10. No Liability. Neither Declarant nor the Committee or any
------------
member of the Committee nor any agent or representative of Declarant or of
the Committee nor their successors or assigns shall be liable to any Site
Owner or Occupant by reason of any mistake in judgment, failure of
performance under the Declaration, or enforcement or failure of enforcement
of the Declaration or any part thereof. Every Site Owner and every
Occupant, by acquiring its interest in the Park, agrees not to bring any
action or suit against Declarant, its successors or assigns or the
Committee or any member thereof, or any agent or representative of
Declarant or of the Committee, or their successors and assigns to recover
any such damages or to seek equitable relief with respect to any such
mistake in judgment, failure of performance, or enforcement or failure of
enforcement of the Declaration or any part thereof.
9.11. Sites Owned by Declarant. That portion of the Park that
------------------------
Declarant may own from time to time shall be deemed to be a Site or Sites,
regardless of whether Declarant shall have designated such portion of the
Park as a Site or Sites, for each of the following purposes: (i) extending
the duration of this Declaration pursuant to Paragraph 11.01 hereinbelow;
and (ii) modifying this Declaration pursuant to Paragraph 11.03
hereinbelow; and (iii) voting rights in the Association as described in
Article IV of this Declaration, for which purpose Declarant shall be
entitled to one (1) vote for each proposed Site still owned by Declarant as
shown on Declarant's then-current plans for development of the Park.
ARTICLE X
ENFORCEMENT
-----------
10.01. General Rights and Remedies. Declarant, the Association, all
---------------------------
Site Owners and all Occupants, or any of them, may proceed at law or in
equity against any Site Owner or Occupant to prevent or correct a breach or
violation of the Declaration. All Site Owners and Occupants shall comply
both with all provisions of the Protective Covenants and Restrictions set
forth in this Declaration and with all provisions of the applicable zoning
ordinance and any other statue, law, code or ordinance affecting their Site
or Sites. In the event any use, requirement, condition or other matter
restricted or prohibited by this Declaration is or may in the future be
permitted under such applicable zoning ordinance or any other such statute,
law, code or ordinance, the more restrictive provisions of this Declaration
shall nonetheless apply.
-23-
<PAGE> 24
10.02. Declarant's and Association's Additional Rights and Remedies.
------------------------------------------------------------
Declarant and the Association, or either of them, by and through their duly
authorized agents, shall have the right, at any time and from time to time
during a continuing breach or violation of the Declaration to enter upon
the Site as to which the breach or violation exists and to correct such
breach or violation at the expense of the Site Owner who owns the Site, all
without liability for trespass.
10.03. Cumulative Remedies. The rights and remedies hereby granted
-------------------
are cumulative and are not mutually exclusive.
10.04. Failure to Enforce or to Seek Remedy Not a Waiver of Rights.
-----------------------------------------------------------
No delay or failure to seek or to invoke any available remedy with respect
to a violation of the Declaration shall be deemed to be a waiver by or to
work an estoppel against any party having rights under the Declaration with
respect to the recurrence or continuance of such violation or the
occurrence of a different violation.
10.04. Failure to Enforce or to Seek Remedy Not a Waiver of Rights.
-----------------------------------------------------------
No delay or failure to seek or to invoke any available remedy with respect
to a violation of the Declaration shall be deemed to be a waiver by or to
work an estoppel against any party having rights under the Declaration with
respect to the recurrence or continuance of such violation or the
occurrence of a different violation.
10.05. No Duty to Seek Remedies. Anything contained herein to the
------------------------
contrary notwithstanding, Declarant shall have no duty or obligation
whatsoever to enforce the Declaration or to seek or invoke remedies with
respect to any violation of the Declaration.
ARTICLE XI
DURATION AND MODIFICATION OF DECLARATION
----------------------------------------
11.01. Duration. The Declaration shall continue and remain in full
--------
force and effect at all times with respect to the Park and each part
thereof (subject, however, to the right to amend and repeal as provided for
herein) for a period beginning the date first above written and ending
twenty years thereafter. Upon the expiration of such twenty year period,
the Declaration may be extended upon the concurrence of the Site Owners who
collectively own at least seventy-five (75%) percent of the total area of
the Sites; provided, however, that as long as Declarant owns any interest
-------- -------
in the Park, no such extension shall be effective without prior written
consent of Declarant. Such an extension shall be effected by the execution
of an extension agreement by the Site Owners who collectively own at least
seventy-five (75%) percent of the total area of the Sites, and by Declarant
if required as provided above in this paragraph, and the recording of such
agreement in the Office of the Clerk of the Superior Court of Gwinnett
County, Georgia.
11.02. Variances. The Committee is hereby authorized and empowered
---------
to grant variances in good faith from the provisions of the Declaration in
order to overcome practical difficulties and to prevent unnecessary
hardship in the application of the provisions contained herein; provided,
--------
however, that such variances shall not materially affect any of the Sites
-------
or Improvements in the Park. No variance granted pursuant to this paragraph
shall constitute a waiver of the applicability of any provision of the
Declaration except with respect to the specific Site and circumstance for
which such variance is granted, and no such variance shall have the effect
of varying the provisions of any applicable zoning ordinance or other
applicable statute, code ordinance.
11.03. Modification. The Declaration and any provisions hereof may
------------
be modified upon the concurrence of the Site Owners who collectively own at
least seventy-five (75%) percent of the total area of the Sites; provided,
--------
however, that so long as Declarant owns any interest in the Park, no such
-------
modification shall be effective without the prior written consent of
-24-
<PAGE> 25
Declarant. Such a modification shall be effect by the execution of a
modification agreement by the Site Owners who collectively own at least
seventy-five (75%) percent of the total area of the Sites, and by Declarant
if required as provided above in this Paragraph, and the recording of such
agreement in the Office of the Clerk of the Superior Court of Gwinnett
County, Georgia. The foregoing provisions of this Paragraph 11.03 to the
contrary notwithstanding, no modification may be made to this Declaration
without the unanimous consent of the Site Owners (the definition of which
term includes Declarant) if such modification would materially affect any
of the Sites or Improvements in the Park.
ARTICLE XII
ACCEPTANCE COVENANTS RUNNING WITH LAND
--------------------------------------
12.01. Acceptance. By accepting title to or possession of its Site,
----------
each Site Owner and each Occupant shall be deemed to have taken title to
its respective Site and all portions thereof subject to this Declaration
and every provision hereof, and to have covenanted and agreed with
Declarant, the Association, and every other Site Owner, to keep, observe
and comply with all provisions of the Declaration, whether or not any
reference to the Declaration is contained in the instrument conveying such
title of creating such interest. Every person or entity who now or
hereafter owns or acquires any right, title, or interest in or to any
portion of the Park is and shall be conclusively deemed to have consented
and agreed to the Declaration whether or not any reference to the
Declaration is contained in the instrument by which such person or entity
acquired an interest in the Park. Site Owners and Occupants hereby agree
nevertheless to refer to the Declaration in deeds, leases and licenses made
or granted by such Site Owners or Occupants and covering any Site or
portion thereof and to make the Declaration binding upon all Site Owners
and Occupants.
12.02. Covenants Running with Land. The provisions of the
---------------------------
Declaration as originally recorded and as amended of record from time to
time shall operate as covenants running with the land for the benefit of
all portions of the Park and shall be binding upon and inure to the benefit
of Declarant, Site Owners, Occupants and their respective successors and
assigns.
ARTICLE XIII
REFERENCES TO DECLARANT
-----------------------
13.01. All references in this Declaration to Wachovia Bank and Trust
Company, N.A., as Trustee, shall be deemed to refer to Wachovia Bank and
Trust Company, N.A., only in its fiduciary capacity acting as trustee for
R. J. Reynolds Industries, Inc., and certain affiliated companies as set
forth in Master Trust Agreement made as of January 1, 1972, amended and
restated as of January 1, 1976, as amended. In no event shall Wachovia Bank
and Trust Company, N.A., have any personal liability under this
Declaration, as acknowledged in this Article XIII and in Paragraph 9.10
hereinabove.
IN WITNESS WHEREOF, Declarant has caused this Declaration to be
executed by duly authorized officers thereof and its seal to be affixed
hereunto, the day and year first above written. UNDER SEAL.
DECLARANT:
WACHOVIA BANK AND TRUST COMPANY,
N.A., AS TRUSTEE for R.J. Reynolds
Industries, Inc., and certain affiliated
companies as set forth in Master Trust
Agreement made as of January 1, 1972,
amended and restated as of January 1,
1976, as amended
-25-
<PAGE> 26
Signed, sealed and delivered
in the presence of: By:/s/ N. L. Bartmess (SEAL)
-----------------------------
N. L. Bartmess, Vice President
/s/ Carolyn A. Richardson
- - ----------------------------
Unofficial Witness
/s/ Diane Jester
- - ----------------------------
Notary Public (Affix Seal
and date of expiration of
commission)
[ STAMP ]
-26-
<PAGE> 27
ADDENDUM TO LEASE
This Addendum to Lease is made as of the 1st day of September, 1995 between St.
Paul Properties, Inc. ("Landlord") and Simmons Company ("Tenant").
RECITALS:
A. Landlord and Tenant are parties to a Lease ("the Lease") dated October
19, 1994 by which Landlord leased to Tenant and Tenant hired from
Landlord certain office/warehouse space containing 38,000 square feet
known as No. 1900 Beaver Ridge Circle, Gwinnett County, Georgia.
B. Section 2.1 of the Lease provides that the Commencement Date of
the Lease will be setforth in an Addendum to Lease to be executed
by Landlord and Tenant.
C. Landlord and Tenant desire to establish the Commencement Date of the
Lease, and the date upon which the Lease will expire.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. The Commencement Date of the Lease is September 1, 1995.
2. The Lease shall expire on August 31, 2005.
3. Except as provided herein, all terms and conditions of the Lease shall
remain unchanged.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum as
of the date first written.
LANDLORD: TENANT:
St. Paul Properties, Inc., a Simmon Company
Delaware Corporation a Delaware Corporation
/s/ R. William Inserra /s/ Roger W. Franklin
- ---------------------------- -------------------------
R. William Inserra Roger W. Franklin
Vice President - Asset Management Vice President - Finance, Treasurer
(SEAL) (CORPORATE SEAL)
- --------------------------------
<PAGE> 1
Exhibit 10.21
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> 2
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
<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS--Cont' d.
<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS--Cont'd. ARTICLE VIII
Prepayment of the Loan
<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>
iii.
<PAGE> 5
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> 6
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> 7
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> 8
"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> 9
"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> 10
"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> 11
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 include the plural
as well as the singular number, "person" shall mean any individual,
corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency
or political subdivision thereof, and "holder" and "Bondholder" when used
herein with respect 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> 12
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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(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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(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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(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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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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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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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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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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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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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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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
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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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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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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
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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> 27
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 rerecorded
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> 28
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> 29
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> 30
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> 31
(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
foregoing.
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> 32
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> 33
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> 34
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> 35
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> 36
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> 37
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
communication 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> 38
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> 39
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> 40
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
<PAGE> 1
EXHIBIT 10.22
- --------------------------------------------------------------------------------
CITY OF SHAWNEE, KANSAS
AND
STATE STREET BANK AND TRUST COMPANY OF MISSOURI, N.A.
AS TRUSTEE
--------------------
INDENTURE OF TRUST
--------------------
DATED AS OF DECEMBER 1, 1996
RELATING TO
$5,000,000
PRIVATE ACTIVITY REVENUE BONDS
SERIES 1996
(SIMMONS COMPANY PROJECT)
OF THE CITY OF SHAWNEE, KANSAS
- --------------------------------------------------------------------------------
This instrument was prepared by:
McDowell, Rice, Smith & Gaar
a Professional Corporation
7101 College Boulevard, Suite 200
Overland Park, Kansas 66210
Telephone: (913) 338-5400
<PAGE> 2
TABLE OF CONTENTS
(This Table of Contents is not a part of the Indenture of Trust and is only for
convenience of reference.)
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 101. Definitions ................................................................................4
Section 102. Rules of Interpretation ....................................................................4
ARTICLE II
THE BONDS
Section 2.01. Authorized Amount of Bonds..................................................................5
Section 2.02. Issuance of Bonds...........................................................................5
Section 2.03. Execution; Limited Obligations..............................................................9
Section 2.04. Officers, Directors, etc. Exempt from Individual Liability.................................10
Section 2.05. Authentication.............................................................................10
Section 2.06. Form of Bonds..............................................................................11
Section 2.07. Delivery of Bonds..........................................................................11
Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds.................................................11
Section 2.09. Transfer of Bonds; Persons Treated as Owners...............................................12
Section 2.10. Destruction of Bonds.......................................................................13
Section 2.11. Temporary Bonds............................................................................13
Section 2.12. Book-Entry System..........................................................................13
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 3.01. Extraordinary and Mandatory Redemption.....................................................15
Section 3.02. Optional Redemption by the Company.........................................................17
Section 3.03. Sinking Fund Redemption....................................................................17
Section 3.04. Notice of Redemption.......................................................................18
Section 3.05. Redemption Payments........................................................................19
Section 3.06. Cancellation...............................................................................19
Section 3.07. Partial Redemption of Bonds................................................................19
Section 3.08. Sinking Fund...............................................................................20
</TABLE>
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<TABLE>
ARTICLE IV
CONVERSION OF INTEREST RATE; DEMAND PURCHASE OPTION
<S> <C> <C>
Section 4.01. Conversion of Interest Rate on Conversion Date.............................................22
Section 4.02. Mandatory Tender of Bonds Upon Termination of Letter of Credit.............................23
Section 4.03. Condition to Conversion; Additional Notices................................................24
Section 4.04. Demand Purchase Option.....................................................................24
Section 4.05. Funds for Purchase of Bonds................................................................25
Section 4.06. Delivery of Purchased Bonds................................................................25
Section 4.07. Delivery of Proceeds of Sale of Purchased Bonds............................................26
Section 4.08. Duties of Trustee and Tender Agent with Respect to Purchase of Bonds.......................26
Section 4.09. Remarketing of Bonds.......................................................................27
ARTICLE V
GENERAL COVENANTS
Section 5.01. Payment of Principal, Premium, if any, and Interest....................................... 27
Section 5.02. Performance of Covenants...................................................................28
Section 5.03. Instruments of Further Assurance...........................................................28
Section 5.04. Recording and Filing.......................................................................28
Section 5.05. Inspection of Books........................................................................28
Section 5.06. List of Owners of Bonds....................................................................29
Section 5.07. Rights Under Agreement.....................................................................29
Section 5.08. Issuer's Election to Issue Bonds Pursuant to Section 144(a)(4).............................29
Section 5.09. Payments of Taxes, Charges, Etc............................................................29
Section 5.10. Obligations to Maintain, Repair and Insure.................................................29
Section 5.11. Agreement References; Lien of Indenture; Subordinate to
Agreement; Enforcement, Obligations and Rights.............................................29
Section 5.12. Covenant Not to Sell or Dispose of Interest in Trust
Estate and Not to Encumber Except in Accordance with
Agreement and Indenture....................................................................30
ARTICLE VI
REVENUES AND FUNDS
Section 6.01. Creation of the Bond Fund..................................................................30
Section 6.02. Payments into the Bond Fund................................................................31
Section 6.03. Use of Moneys in the Bond Fund.............................................................31
Section 6.04. Payment of Bonds with Proceeds of Refunding Bonds..........................................32
Section 6.05. Construction Fund..........................................................................32
Section 6.06. Payments into the Construction Fund; Disbursements........................................ 32
Section 6.07. Use of Money in the Construction Fund Upon Default.........................................32
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 6.08. Completion of the Project..................................................................32
Section 6.09. Nonpresentment of Bonds....................................................................33
Section 6.10. Moneys to be Held in Trust.................................................................33
Section 6.11. Repayment to the Bank and the Company from the Bond Fund
or the Construction Fund...................................................................33
Section 6.12. Letter of Credit ..........................................................................33
Section 6.13. Creation of Rebate Fund; Duties of Trustee;
Amounts Held in Rebate Fund................................................................34
Section 6.14. Creation of Cost of Issuance Fund;
Amounts Held in Cost of Issuance Fund......................................................35
ARTICLE VII
INVESTMENT OF MONEYS
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01. Discharge of Indenture.....................................................................38
Section 8.02. Defeasance of Bonds........................................................................39
ARTICLE IX
DEFAULTS AND REMEDIES
Section 9.01. Defaults...................................................................................40
Section 9.02. Acceleration...............................................................................41
Section 9.03. Other Remedies; Rights of Owners of Bonds..................................................41
Section 9.04. Right of Owners of Bonds to Direct Proceedings.............................................42
Section 9.05. Appointment of Receivers...................................................................42
Section 9.06. Waiver.....................................................................................42
Section 9.07. Application of Moneys......................................................................43
Section 9.08. Remedies Vested in Trustee.................................................................45
Section 9.09. Rights and Remedies of Owners of Bonds.....................................................45
Section 9.10. Termination of Proceedings.................................................................46
Section 9.11. Waivers of Defaults........................................................................46
Section 9.12. Notice of Defaults under Section 9.01(g);
Opportunity to Cure Such Defaults..........................................................46
Section 9.13. Subrogation Rights of Bank.................................................................47
Section 9.14. Sale of Issuer's Interest in the Project in Event of Default...............................47
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE X
TRUSTEE AND TENDER AGENT
<S> <C> <C>
Section 10.01. Acceptance of Trusts.......................................................................48
Section 10.02. Fees, Charges and Expenses of the Trustee..................................................51
Section 10.03. Notice to Owners of Bonds If Default Occurs................................................51
Section 10.04. Intervention by the Trustee................................................................51
Section 10.05. Successor Trustee..........................................................................51
Section 10.06. Resignation by the Trustee.................................................................52
Section 10.07. Removal of the Trustee.....................................................................52
Section 10.08. Appointment of Successor Trustee by Owners of Bonds........................................52
Section 10.09. Acceptance by Successor Trustee............................................................53
Section 10.10. Appointment of Co-Trustee..................................................................53
Section 10.11. Successor Tender Agent; Appointment of Co-Tender Agent.....................................54
Section 10.12. Successor Remarketing Agent................................................................55
Section 10.13. Notice to Rating Agencies..................................................................57
Section 10.14. Notice to Bondowners.......................................................................57
ARTICLE XI
SUPPLEMENTAL INDENTURES
Section 11.01. Supplemental Indentures Not Requiring Consent of Owners of Bonds...........................57
Section 11.02. Supplemental Indentures Requiring Consent of Owners of Bonds...............................59
ARTICLE XII
AMENDMENT OF AGREEMENT
Section 12.01. Amendments to Agreement Not Requiring Consent of
Owners of Bonds............................................................................60
Section 12.02. Amendments to Agreement Requiring Consent of
Owners of Bonds............................................................................61
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Consents of Owners of Bonds................................................................61
Section 13.02. Limitation of Rights.......................................................................62
Section 13.03. Severability...............................................................................62
Section 13.04. Notices....................................................................................62
Section 13.05. Payments Due on Saturdays, Sundays and Holidays............................................64
Section 13.06. Counterparts...............................................................................64
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 13.07. Applicable Provisions of Law...............................................................64
Section 13.08. Rules of Interpretation....................................................................65
Section 13.09. Captions...................................................................................65
Section 13.10. No Personal Liability......................................................................65
Section 13.11. Certain References Ineffective After Letter
of Credit Termination Date.........................................................65
EXHIBIT A - PROJECT SITE
EXHIBIT B - PROJECT BUILDING
EXHIBIT C - PROJECT EQUIPMENT
EXHIBIT D - DEFINITIONS
EXHIBIT E - FORM OF NOTICE FROM TRUSTEE TO OWNER
REGARDING CHANGE IN DURATION OF INTEREST
PERIOD
EXHIBIT F - ADJUSTABLE RATE FORM OF BOND
EXHIBIT G - FIXED RATE FORM OF BOND
EXHIBIT H - NOTICE OF CONVERSION
EXHIBIT I - NOTICE OF MANDATORY TENDER DATE
</TABLE>
<PAGE> 7
INDENTURE OF TRUST
THIS INDENTURE OF TRUST, dated as of December 1, 1996, by and between
the CITY OF SHAWNEE, KANSAS, a municipal corporation duly organized and existing
under the laws of the State of Kansas (the "Issuer") and State Street Bank and
Trust Company of Missouri, N.A., a national banking association duly organized
and existing under the laws of the United States of America (the "Trustee");
W I T N E S S E T H:
WHEREAS, the Issuer is authorized and empowered pursuant to the
provisions of K.S.A. 12-1740 to 12-1749d, inclusive, as amended (the "Act"), to
acquire, purchase and construct certain facilities (as defined in the Act) for
the stated statutory purposes, with any person, firm or corporation for said
projects, and to issue revenue bonds for the purpose of paying the cost of such
facilities; and
WHEREAS, Simmons Company, a Delaware corporation, duly authorized and
qualified to do business in the State of Kansas (the "Company"), has requested
the Issuer to finance the acquisition, construction, furnishing and equipping of
a facility, consisting of an approximately 140,000 square foot manufacturing
facility, including real estate (the "Project Site" as more fully described on
EXHIBIT A attached hereto), buildings and fixtures (collectively, the "Project
Building" as more fully described on EXHIBIT B attached hereto), and equipment
(the "Project Equipment" as more fully described on EXHIBIT C attached hereto)
to be located at 7910 Hedge Lane Terrace, K-7 Industrial Park, within the
corporate limits of the Issuer, in an amount not to exceed $5,000,000;
WHEREAS, the Project Site, the Project Building and the Project
Equipment are herein collectively referred to as the "Project;" and
WHEREAS, the City Council of the Issuer has heretofore adopted
Resolution No. 1023 on January 22, 1996, expressing the Issuer's intention to
authorize private activity revenue bonds in a principal amount not to exceed
$5,500,000 for the purpose of financing the Project;
WHEREAS, pursuant to the Act, the City Council of the Issuer passed
Ordinance No. 2292 on December 12, 1996 (the "Ordinance"), authorizing the
issuance of $5,000,000 Private Activity Revenue Bonds, Series 1996 (Simmons
Company Project), of the Issuer, authorizing the Issuer to enter into a Lease
Agreement dated as of December 1, 1996 (the "Agreement"), with the Company and
to provide the terms and conditions under which the Issuer will lease the
Project to the Company; and
<PAGE> 8
WHEREAS, pursuant to the Ordinance, the Issuer is authorized (a) to
execute and deliver this Indenture for the purpose of issuing and securing the
Bonds, and (b) to enter into the Agreement, under which the Issuer will cause
the proceeds of the Bonds to be used to finance the cost of the Project and
paying a portion of the Costs of Issuance of the Bonds and will lease the
Project to the Company, in consideration of rentals which will be sufficient to
pay the principal of, premium, if any, and interest on the Bonds as the same
become due; and
WHEREAS, all things necessary to make the Bonds, when authenticated by
the Trustee and issued as in this Indenture provided, the valid and binding
limited obligations of the Issuer according to the import thereof, and to
constitute this Indenture a valid assignment and pledge of the payments under
the Agreement (except for amounts payable under SECTIONS 4.2(b), 7.2 AND 8.4 of
the Agreement) for the payment of the principal or Purchase Price of, premium,
if any, and interest on the Bonds, and to constitute the Indenture a valid
assignment of certain of the rights of the Issuer under the Agreement have been
done and performed, and the creation, execution and delivery of this Indenture
and the issuance of the Bonds subject to the terms thereof, have in all respects
been duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
GRANTING CLAUSES
GRANTING CLAUSE FIRST
That the Issuer, in consideration of the premises and the acceptance by
the Trustee of the trusts hereby created and of the purchase and acceptance of
the Bonds by the Owners thereof, and of the sum of one dollar, lawful money of
the United States of America, to it duly paid by the Trustee at or before the
execution and delivery of these presents, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, in order to secure
the payment of the principal of, premium, if any, and interest on the Bonds
according to their tenor and effect and to secure the performance and observance
by the Issuer of all the covenants expressed herein and in the Bonds, does
hereby assign and grant a security interest in the following to the Trustee, and
its successors in trust and assigns forever, for the securing of the performance
of the obligations of the Issuer hereinafter set forth:
All right, title and interest of the Issuer in and to the real estate
described in EXHIBIT A attached hereto and all buildings, additions,
improvements, machinery and equipment now or hereafter located thereon and
constituting a part of the Project and with the tenements, hereditament,
appurtenances, rights, privileges and immunities thereunto belonging or
appertaining.
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<PAGE> 9
GRANTING CLAUSE SECOND
All right, title and interest of the Issuer in and to the Agreement,
including, but not limited to, the present and continuing right to make claim
for, collect, receive and receipt for any of the sums, amounts, income,
revenues, issues and profits and any other sums of money payable or receivable
under the Agreement (except for amounts payable to the Issuer under SECTIONS
4.2(b), 7.2 AND 8.4 of the Agreement), to bring actions and proceedings
thereunder or for the enforcement thereof, and to do any and all things which
the Issuer is or may become entitled to do under the Agreement.
GRANTING CLAUSE THIRD
All right, title and interest of the Issuer in and to all moneys and
securities from time to time held by the Trustee under the terms of this
Indenture, other than moneys and securities from time to time held by the
Trustee in the Remarketing Account of the Bond Fund or in the Rebate Fund.
GRANTING CLAUSE FOURTH
Any and all other property rights and interests of every kind and
nature from time to time hereafter by delivery or by writing of any kind
granted, bargained, sold, alienated, demised, released, conveyed, assigned,
transferred, mortgaged, pledged, hypothecated or otherwise subjected hereto, as
and for additional security herewith, by the Company or any other person on its
behalf or with its written consent or by the Issuer or any other person on its
behalf or with its written consent, and the Trustee is hereby authorized to
receive any and all such property at any and all times and to hold and apply the
same subject to the terms hereof.
TO HAVE AND TO HOLD all and singular the Trust Estate, whether now
owned or hereafter acquired, unto the Trustee and its respective successors in
said trust and assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for
the equal and proportionate benefit, security and protection of all present and
future Owners of the Bonds, from time to time, issued under and secured by this
Indenture without privilege, priority or distinction as to the lien or otherwise
of any of the Bonds over any of the other Bonds except in the case of funds held
hereunder for the benefit of particular Owners of Bonds, and for the benefit of
the Bank to the extent provided herein;
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns shall
well and truly pay, or cause to be paid, the principal of, premium, if any, and
interest on the Bonds due or to become due thereon, at the times and in the
manner set forth in the Bonds according to the true intent and meaning thereof,
and shall cause the payments to be made on the Bonds as required hereunder, or
shall provide, as permitted hereby, for
-3-
<PAGE> 10
the payment thereof by depositing with the Trustee the entire amount due or to
become due thereon, and shall well and truly cause to be kept, performed and
observed all of its covenants and conditions pursuant to the terms of this
Indenture, and shall pay or cause to be paid to the Trustee all sums of money
due or to become due to it in accordance with the terms and provisions hereof,
then upon the final payment thereof this Indenture and the rights hereby granted
shall cease, determine and be void, except to the extent specifically provided
in ARTICLE VIII hereof; otherwise this Indenture shall remain in full force and
effect.
THIS INDENTURE FURTHER WITNESSETH, and it is declared, that all Bonds
issued and secured hereunder are to be issued, authenticated and delivered and
all said property, rights and interests, including, without limitation, the
amounts payable under the Agreement and any other amounts hereby assigned and
pledged are to be dealt with and disposed of under, upon and subject to the
terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes as herein expressed, and the Issuer has agreed and covenanted, and does
hereby agree and covenant with the Trustee and with the respective Owners of the
Bonds as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. In addition to the words and terms defined
elsewhere in this Indenture, the words and terms as used in this Indenture shall
have the meanings set forth in EXHIBIT D attached hereto.
SECTION 102. RULES OF INTERPRETATION.
(a) Unless the context shall otherwise indicate, the words
importing the singular number shall include the plural and
vice versa, and words importing persons shall include firms,
associations, partnerships, limited liability companies and
corporations, including public bodies, as well as natural
persons.
(b) Wherever in this Indenture it is provided that either party
shall or will make any payment or perform or refrain from
performing any act or obligation, each such provision shall,
even though not so expressed, be construed as an express
covenant to make such payment or to perform, or not to
perform, as the case may be, such act or obligation.
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<PAGE> 11
(c) All references in this instrument to designated "Articles,"
"Sections" and other subdivisions are, unless otherwise
specified, to the designated Articles, Sections and
subdivisions of this instrument as originally executed. The
words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to
any particular Article, Section or subdivision.
(d) The Table of Contents and the Article and Section headings of
this Indenture shall not be treated as a part of this
Indenture or as affecting the true meaning of the provisions
hereof.
ARTICLE II
THE BONDS
SECTION 2.01. AUTHORIZED AMOUNT OF BONDS. The total principal amount of
Bonds that may be issued hereunder is hereby expressly limited to $5,000,000.
SECTION 2.02. ISSUANCE OF BONDS.
(a) The Bonds shall be designated "Private Activity Revenue Bonds,
Series 1996 (Simmons Company Project)," in the principal
amount of $5,000,000. Prior to the Conversion Date, the Bonds
shall be issuable as fully registered Bonds without coupons in
the denomination of $100,000, or any integral multiple of
$5,000 in excess thereof. From and after the Conversion Date,
the Bonds shall be issuable as fully registered Bonds without
coupons in the denomination of $5,000 or any integral multiple
thereof. Unless the Issuer shall otherwise direct, the Bonds
shall be lettered "R" and shall be numbered consecutively from
1 upward.
(b) The Bonds shall be dated the date of initial authentication
and delivery, and shall bear interest from such date, and
thereafter from the Interest Payment Date next preceding the
date of authentication thereof to which interest has been paid
or duly provided for, unless the date of authentication
thereof is an Interest Payment Date to which interest has been
paid or duly provided for, in which case from the date of
authentication thereof, or unless no interest has been paid or
duly provided for on the Bonds, then from the date of the
Bonds, at the rates per annum and on the dates set forth in
this Indenture. Notwithstanding the foregoing, if any Bond is
dated after any Record Date and before the following Interest
Payment Date, such Bond shall bear interest from such
following Interest Payment Date; provided, however, that if
the Issuer
-5-
<PAGE> 12
shall default in the payment of interest due on such Interest
Payment Date, then such Bond shall bear interest from the next
preceding Interest Payment Date to which interest has been
paid or duly provided for, or, if no interest has been paid or
duly provided for on the Bonds, from the date of the Bonds.
The Bonds shall bear interest at the Adjustable Rate, as the
same shall be determined from time to time, pursuant to the
provisions of SECTION 2.02(c) hereof, calculated on the basis
of (i) actual days elapsed in a 365- or 366-day year, as the
case may be, so long as the Interest Period is one week or one
month in duration, and (ii) a 360-day year comprised of twelve
(12) 30-day months, so long as the Interest Period is three
months or six months in duration, until the earlier of the
Conversion Date or maturity. From and after the Conversion
Date, the Bonds shall bear interest at the Fixed Rate,
determined in accordance with SECTION 2.02(d) hereof, on the
basis of a 360-day year comprised of twelve (12) 30-day
months.
Anything herein contained to the contrary notwithstanding, at no time
shall the interest rate borne by the Bonds exceed the Maximum Interest Rate.
The Bonds shall mature on December 1, 2016, and are subject to
mandatory sinking fund redemption prior to maturity in accordance with the
provisions of SECTION 3.08 hereof.
(c) Prior to the Conversion Date, the Bonds shall bear interest at
the Adjustable Rate, as hereinafter described. The Adjustable
Rate for each Interest Period will be determined by the
Remarketing Agent on the first day of each such Interest
Period, as follows: the interest rate for each Interest Period
shall be established at a rate equal to the interest rate per
annum that, in the sole judgment of the Remarketing Agent,
taking into account prevailing financial market conditions,
would be the minimum interest rate required to sell the Bonds
at a price of Par on the date of such determination. Upon
determining the Adjustable Rate for each Interest Period, the
Remarketing Agent shall notify the Trustee and, if the
Book-Entry System is then in effect, the Securities
Depository, of such rate by telephone or such other manner as
may be appropriate by not later than 2:00 P.M. New York City
time on the date of such determination, which notice shall be
promptly confirmed in writing. Notwithstanding the foregoing,
no adjustment shall be made to the Adjustable Rate for an
Interest Period commencing after the second (2nd) Business Day
prior to any Interest Payment Date or a date fixed for
redemption, and the Bonds shall bear interest during such
Interest Period at the rate in effect during the immediately
preceding Interest Period.
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<PAGE> 13
The Company is authorized to adjust the duration of the Interest Period
prior to the Conversion Date and, in that connection, shall instruct the
Remarketing Agent, not later than the tenth (10th) day prior to the Rate
Determination Date, to compute the Adjustable Rate on the basis of an Interest
Period of one week, one month, three months or six months. In the event the
Company elects to adjust the duration of the Interest Period, the Company shall
provide telephonic notice to the Trustee, and, if the Book-Entry System is then
in effect, the Securities Depository, promptly confirmed in writing, on the date
such instruction is provided to the Remarketing Agent, of such an election with
respect to the Interest Period and of the Rate Determination Date on which such
new Interest Period shall commence, and shall furnish with such written
confirmation an opinion of Bond Counsel to the effect that such change in
duration will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds pursuant to the Code by reason of
such change in duration.
Following receipt of instructions from the Company regarding the
computation of the Adjustable Rate based upon a change in the duration of the
Interest Period, the Trustee shall mail notice to the Owners of such Bonds in
the form attached hereto as EXHIBIT E, not more than two (2) Business Days
following the date on which such instructions are received, stating (a) that the
duration of the Interest Period will be adjusted as of the first (1st) day of
the next succeeding Interest Period; (b) that the date of commencement of such
Interest Period is a Tender Date, and that the Owners of such Bonds must tender
their Bonds to the Tender Agent for purchase on such Tender Date, and (c) that
any Bonds not so tendered shall be deemed to have been tendered on such Tender
Date, and the Owners of such Bonds shall not be entitled to receive any interest
that accrues on the Bonds subsequent to the Tender Date.
The delivery by the Company to the Trustee of a letter from Bond
Counsel confirming the opinion accompanying the Company notification described
above on such Tender Date is a condition precedent to the change in duration of
the Interest Period. In the event that the Company fails to deliver to the
Trustee the letter of Bond Counsel referred to in the preceding sentence, such
change in the duration of the Interest Period shall not take effect; provided,
however, that the Owners of the Bonds shall nonetheless be required to tender
their Bonds for purchase on the Tender Date and the Bonds, as remarketed to the
new Owners, shall continue to bear interest calculated by the method applicable
prior to the proposed change. Any Bonds not so tendered shall be deemed to have
been tendered on such Tender Date, and the Owners of such Bonds shall not be
entitled to receive any interest that accrues on the Bonds subsequent to the
Tender Date.
As described above, Owners of Bonds shall be required to tender their
Bonds on the Rate Determination Date to the Tender Agent for purchase at the
Purchase Price, and any such Bonds not so tendered on the Rate Determination
Date ("Untendered Bonds") for which there has been irrevocably deposited in
trust with the Trustee an amount of moneys sufficient to pay the Purchase Price
of the Untendered Bonds, shall be deemed to have been purchased pursuant to this
SECTION 2.02(c). IN THE EVENT OF A
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<PAGE> 14
FAILURE BY AN OWNER OF BONDS TO TENDER SUCH OWNER'S BONDS ON OR PRIOR TO THE
RATE DETERMINATION DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT
(INCLUDING ANY INTEREST TO ACCRUE SUBSEQUENT TO THE RATE DETERMINATION DATE)
OTHER THAN THE PURCHASE PRICE FOR SUCH UNTENDERED BONDS, AND ANY UNTENDERED
BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS INDENTURE, EXCEPT FOR
THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
On the Rate Determination Date, the Remarketing Agent shall establish
the Adjustable Rate for the Bonds for the Interest Period commencing on the Rate
Determination Date, and shall notify the Trustee and the Company and, if the
Book-Entry System is then in effect, the Securities Depository, thereof by
telephone or such other manner as may be appropriate by not later than 2:00
P.M., New York City time on the date of such determination, which notice shall
be promptly confirmed in writing. The Adjustable Rate on the Bonds for such
Interest Period shall be established at a rate equal to the interest rate per
annum that, in the sole judgment of the Remarketing Agent, taking into account
prevailing financial market conditions, would be the minimum interest rate
required to sell the Bonds at a price of Par on the Rate Determination Date. The
Adjustable Rate determined by the Remarketing Agent for the Bonds will take
effect on the first day of the Interest Period for which such rate was
determined. The determination of the Adjustable Rate (absent manifest error)
shall be conclusive and binding upon the Issuer, the Company, the Trustee, the
Bank, the Tender Agent and the Owners of the Bonds. If for any reason the
Remarketing Agent shall fail to establish the Adjustable Rate for any Interest
Period, the Bonds shall bear interest during such Interest Period at the
Adjustable Rate in effect during the immediately preceding Interest Period.
(d) On and after the Conversion Date, the interest rate shall be
the Fixed Rate, determined as follows: commencing on the
Conversion Date and thereafter through and including the
maturity or prior redemption of the Bonds, the Fixed Rate
shall be the interest rate per annum which, in the sole
judgment of the Remarketing Agent, taking into account
prevailing financial market conditions, would be the minimum
interest rate required to sell such Bonds on the Conversion
Date at a price equal to Par. The Fixed Rate shall be
determined by the Remarketing Agent on or before the
Conversion Date, and the Remarketing Agent shall notify the
Trustee and the Company thereof by telephone or such other
manner as may be appropriate by not later than 2:00 P.M., New
York City time on such date, which notice shall be promptly
confirmed in writing. If the Book-Entry System is in effect,
such notice shall be provided to the Securities Depository in
accordance with the requirements of the Securities Depository
for the delivery of notices. The determination of the Fixed
-8-
<PAGE> 15
Rate by the Remarketing Agent in accordance with the
provisions of this Section (absent manifest error) shall be
conclusive and binding upon the Issuer, the Company, the
Trustee, the Bank, the Tender Agent and the Owners of all the
Bonds.
(e) Subject to the provisions of SECTION 2.11 hereof relating to
Bonds held in the Book-Entry System, the principal of and
premium, if any, on the Bonds shall be payable in lawful money
of the United States of America at the Payment Office of the
Trustee, or of its successor in trust. The Purchase Price of
the Bonds shall be payable in lawful money of the United
States of America by the Trustee to the Owner of Bonds
entitled to receive such Purchase Price at such Owner's
address shown on the registration books maintained by the
Trustee, unless otherwise instructed by such Owner in writing
at least twenty-four (24) hours prior to the time such
Purchase Price is due. Payment of interest on the Bonds shall
be made to the Owner thereof on the applicable Record Date by
check mailed by the Trustee to such Owner at such Owner's
address as it appears on the registration books maintained by
the Trustee or at such other address as is furnished to the
Trustee in writing by such Owner, or in such other manner as
may be mutually acceptable to the Trustee and the Owner of any
Bond. Interest, premium, if any, and principal due to any
person holding Bonds in an aggregate principal amount of
$1,000,000 or more will be paid, upon the written request of
any such holder, by wire transfer of immediately available
funds to an account designated by such holder in the
continental United States. Said written request shall be made
to the Trustee at least fifteen (15) days prior to an Interest
Payment Date and shall include the appropriate ABA number.
SECTION 2.03. EXECUTION; LIMITED OBLIGATIONS. The Bonds shall be
executed on behalf of the Issuer with the manual or facsimile signature of the
Mayor of the Issuer and the Issuer's corporate seal shall be affixed thereto or
printed or otherwise reproduced thereon and attested by the manual or facsimile
signature of its Clerk. All authorized facsimile signatures shall have the same
force and effect as if manually signed. The Bonds shall not be general
obligations of the Issuer but limited and special obligations payable solely
from the rental amounts payable under the Agreement and other amounts
specifically pledged therefor under this Indenture, and shall be a valid claim
of the respective Owners thereof only against the designated accounts of the
Bond Fund and other moneys held by the Trustee and the rental amounts payable
under the Agreement or otherwise pledged therefor, which amounts are hereby
pledged, assigned and otherwise secured for the equal and ratable payment of the
Bonds and shall be used for no other purpose than to pay the principal of,
premium, if any, and interest on the Bonds, except as may be otherwise expressly
authorized in this Indenture. No Owner of any Bonds has
-9-
<PAGE> 16
the right to compel any exercise of taxing power of the Issuer to pay the Bonds
or the interest thereon, and the Bonds do not constitute an indebtedness of the
Issuer or a loan of credit thereof within the meaning of any constitutional or
statutory debt limitation or restriction.
SECTION 204. OFFICERS, DIRECTORS, ETC. EXEMPT FROM INDIVIDUAL
LIABILITY. No recourse under or upon any covenant or agreement of this
Indenture, or of the Bonds, or for any claim based thereon or otherwise in
respect thereof, shall be had against any past, present or future elected or
appointed official, officer or agent of the Issuer or the Trustee, or of any
successor, either directly or through the Issuer or the Trustee, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Bonds issued hereunder are limited and special obligations,
and that no personal liability whatever shall attach to, or is or shall be
incurred by, any elected or appointed official, officer or agent of the Issuer
or the Trustee or any successor of either, or any of them, because of the
issuance of the Bonds, or under or by reason of the covenants or agreements
contained in this Indenture or in the Bonds or implied therefrom.
SECTION 2.05. AUTHENTICATION.
(a) State Street Bank and Trust Company of Missouri, N.A., has
been designated to serve as Tender Agent pursuant to the terms
and conditions set forth in the Tender Agent Agreement. The
Issuer hereby appoints the Tender Agent as an authenticating
agent for the Bonds.
(b) No Bond shall be valid or obligatory for any purpose or
entitled to any security or benefit under this Indenture
unless and until a certificate of authentication on such Bond
substantially in the form set forth in EXHIBITS F AND G
attached hereto shall have been duly executed by the Trustee
or by the Tender Agent, and such executed certificate of
authentication upon any such Bond shall be conclusive evidence
that such Bond has been authenticated and delivered under this
Indenture. The certificate of authentication on any Bond shall
be deemed to have been executed by the Trustee or the Tender
Agent if signed by an authorized signatory of the Trustee or
the Tender Agent, as the case may be, but it shall not be
necessary that the same signatory execute the certificate of
authentication on all of the Bonds.
(c) In the event any Bond is deemed tendered to the Tender Agent
as provided in SECTION 2.02(c), 4.01 OR 4.02 hereof but is not
physically so tendered, the Issuer shall execute and the
Trustee or the Tender Agent shall authenticate a new Bond of
like denomination as that deemed tendered.
-10-
<PAGE> 17
SECTION 2.06. FORM OF BONDS. The Bonds and the certificate of
authentication to be endorsed thereon prior to the Conversion Date are to be in
substantially the form set forth in EXHIBIT F attached hereto, with appropriate
variations, omissions and insertions as permitted or required by this Indenture.
The Bonds which bear interest at the Fixed Rate and the certificate of
authentication to be endorsed thereon are to be in substantially the form set
forth in EXHIBIT G attached hereto, with appropriate variations, omissions and
insertions as permitted or required by this Indenture.
SECTION 2.07. DELIVERY OF BONDS. Upon the execution and delivery of
this Indenture, the Issuer shall execute and deliver to the Trustee and the
Trustee shall authenticate the Bonds and deliver them as directed by the Issuer
as hereinafter in this Section provided.
Prior to the delivery by the Trustee of the Bonds there shall be filed
with the Trustee the Letter of Credit, an executed copy of this Indenture, the
Agreement, an opinion of Bond Counsel to the effect that the Bonds constitute
valid and binding special, limited obligations of the Issuer and that the
interest on the Bonds is exempt from federal income taxation and Kansas income
taxation and a request and authorization to the Trustee on behalf of the Issuer
and signed by an authorized officer of the Issuer to authenticate and deliver
the Bonds to the purchasers thereof and for the purchase price therein
identified. Upon payment of the proceeds to the Trustee, the Trustee shall
deposit the proceeds pursuant to ARTICLE VI hereof.
SECTION 2.08. MUTILATED, LOST, STOLEN OR DESTROYED BONDS. Except when
the Bonds are held in the Book-Entry System, in the event any Bond is mutilated,
lost, stolen, or destroyed, the Issuer shall execute and the Trustee shall
authenticate a new Bond of like date and denomination as that mutilated, lost,
stolen or destroyed, provided that, in the case of any mutilated Bond, such
mutilated Bond shall first be surrendered to the Issuer or the Trustee, and in
the case of any lost, stolen, or destroyed Bond, there first shall be furnished
to the Issuer and the Trustee evidence of such loss, theft or destruction
satisfactory to the Issuer and the Trustee, together with an indemnity
satisfactory to them which indemnity shall, in any event, name the Tender Agent
as a beneficiary. In the event any such Bond shall have matured, the Trustee,
instead of issuing a duplicate Bond, may pay the same without surrender thereof,
making such requirements as it deems fit for its protection, in addition to the
lost instrument bond required by State law. The Issuer and the Trustee may
charge the Owner of such Bond with their reasonable fees and expenses for such
service. In executing a new Bond, the Issuer may rely conclusively upon a
representation by the Trustee that the Trustee is satisfied with the adequacy of
the evidence presented concerning the mutilation, loss, theft or destruction of
any Bond.
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<PAGE> 18
SECTION 2.09. TRANSFER OF BONDS; PERSONS TREATED AS OWNERS. The Trustee
shall keep books for the transfer of the Bonds as provided in this Indenture,
and the Trustee is hereby constituted and appointed the Bond Registrar of the
Issuer. The Tender Agent is hereby constituted and appointed the Co-Bond
Registrar of the Issuer. Upon surrender for transfer of any Bond at the Payment
Office of the Trustee, or at the Payment Office of the Tender Agent, duly
endorsed for transfer or accompanied by an assignment duly executed by the Owner
or such Owner's agent duly authorized in writing, the Issuer shall execute and
the Trustee or the Tender Agent, as the case may be, shall authenticate and
deliver in the name of the transferee or transferees a new Bond or Bonds in
authorized denominations for a like aggregate principal amount. Subject to the
provisions of SECTION 2.11 hereof relating to the transfer of ownership of Bonds
held in the Book-Entry System, any Bond, upon surrender thereof at the Payment
Office of the Trustee or at the Payment Office of the Tender Agent, duly
endorsed for transfer or accompanied by an assignment duly executed by the Owner
or such Owner's agent duly authorized in writing, may, at the option of the
Owner thereof, be exchanged for an equal aggregate principal amount of Bonds of
any denominations authorized by this Indenture in an aggregate principal amount
equal to the principal amount of such Bond. In each case, the Trustee or the
Tender Agent, as the case may be, may require the payment by the Owner of the
Bond requesting exchange or transfer of any tax or other governmental charge
required to be paid with respect to such exchange or transfer.
The Trustee and the Tender Agent shall not be required to exchange or
register a transfer of (a) any Bonds during the fifteen (15) day period next
preceding the selection of Bonds to be redeemed and thereafter until the date of
the mailing of a notice of redemption of Bonds selected for redemption, or (b)
any Bonds selected, called or being called for redemption in whole or in part
except, in the case of any Bond to be redeemed in part, the portion thereof not
so to be redeemed; PROVIDED that the foregoing shall not apply to the
registration or transfer of any Bond which has been tendered to the Tender Agent
pursuant to SECTION 4.04 hereof, and in any such case, for purposes of selection
for redemption, the Bond so tendered and the Bond issued to the transferee
thereof pursuant to SECTION 4.06 hereof shall be deemed and treated as the same
Bond. If any Bond shall be transferred and delivered pursuant to SECTION 4.06(a)
hereof after such Bond has been (i) called for redemption, (ii) accelerated
pursuant to SECTION 9.02, or (iii) tendered pursuant to SECTIONS 2.02(c), 4.01
OR 4.02, the Tender Agent shall deliver to such transferee a copy of the
applicable redemption notice, acceleration notice, or tender notice indicating
that the Bond delivered to such transferee has previously been called for
redemption, acceleration or tender, and such Bonds shall not be delivered by the
Trustee or the Tender Agent to the transferee until the transferee shall
acknowledge receipt of such notice in writing.
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<PAGE> 19
The Trustee, the Tender Agent and the Issuer may treat the person in
whose name a Bond is registered as the absolute Owner thereof for all purposes,
and neither the Issuer, the Tender Agent nor the Trustee shall be bound by any
notice or knowledge to the contrary, but such registration may be changed as
hereinabove provided. All payments made to the Owner shall be valid and
effectual to satisfy and discharge the liability upon such Bond to the extent of
the sum or sums so paid.
SECTION 2.10. DESTRUCTION OF BONDS. Subject to the provisions of
SECTION 2.11 hereof relating to Bonds held in the Book-Entry System, whenever
any Outstanding Bond shall be delivered to the Trustee for cancellation pursuant
to this Indenture, or for replacement pursuant to SECTION 2.07 hereof, such Bond
shall be promptly cancelled and periodically cremated or otherwise destroyed by
the Trustee, and, upon the request of the Company and the Issuer, counterparts
of a certificate of destruction evidencing such cremation or other destruction
shall be furnished by the Trustee to the Issuer and the Company.
SECTION 2.11. TEMPORARY BONDS. Until Bonds in definitive form are ready
for delivery, the Issuer may execute, and upon the request of the Issuer, the
Trustee shall authenticate and deliver, subject to the provisions, limitations
and conditions set forth above, one or more Bonds in temporary form, whether
printed, typewritten, lithographed or otherwise produced, substantially in the
form of the definitive Bonds, with appropriate omissions, variations and
insertions, and in authorized denominations. Until exchanged for Bonds in
definitive form, such Bonds in temporary form shall be entitled to the liens and
benefits of this Indenture.
Upon presentation and surrender of any Bond or Bonds in temporary form,
the Issuer shall, at the request of the Trustee, execute and deliver to the
Trustee, and the Trustee shall authenticate and deliver, in exchange therefor, a
Bond or Bonds in definitive form. Such exchange shall be made by the Trustee
without making any charge therefor to the Owner of such Bond in temporary form.
Notwithstanding the foregoing, Bonds in definitive form may be issued hereunder
in typewritten form.
SECTION 2.12. BOOK-ENTRY SYSTEM. Upon the initial issuance and delivery
of the Bonds, the Bonds shall be issued in the name of the Securities Depository
or its nominee, as registered owner of the Bonds, and held in the custody of the
Securities Depository or its designee. A single certificate (or such number of
certificates required by the procedures of the Securities Depository) will be
issued and delivered to the Securities Depository (or its designee) for the
Bonds, and the Beneficial Owners will not receive physical delivery of Bond
certificates except as provided herein. For so long as the Securities Depository
shall continue to serve as securities depository for the Bonds as provided
herein, all transfers of beneficial ownership interests will be made by
book-entry only, and no investor or other party purchasing, selling or otherwise
transferring beneficial ownership of Bonds is to receive, hold or deliver any
Bond certificate. The Issuer, the Company, the Registrar, the Tender Agent and
the Trustee
-13-
<PAGE> 20
will recognize the Securities Depository or its nominee as the Owner for all
purposes, including notices, except that, for purposes of a mandatory redemption
upon a Determination of Taxability as provided in SECTION 3.01 hereof or voting,
a Beneficial Owner may establish beneficial ownership of any of the Bonds to the
Trustee or to the Company in form satisfactory to the Trustee or to the Company,
as the case may be.
The Issuer, the Company, the Trustee, the Registrar, the Tender Agent
and the Remarketing Agent may rely conclusively upon (a) a certificate of the
Securities Depository as to the identity of the Participants in the Book-Entry
System with respect to the Bonds and (b) a certificate of any such Participant
as to the identity of, and the respective principal amount of Bonds beneficially
owned by, the Beneficial Owners.
Whenever, during the term of the Bonds, the beneficial ownership
thereof is determined by a book-entry at the Securities Depository, the
requirements in this Indenture of holding, delivering or transferring Bonds
shall be deemed modified to require the appropriate person to meet the
requirements of the Securities Depository as to registering or transferring the
book-entry to produce the same effect. Any provision hereof permitting or
requiring delivery of Bonds shall, while the Bonds are in the Book-Entry System,
be satisfied by the notation on the books of the Securities Depository in
accordance with applicable state law.
Except as otherwise specifically provided in this Indenture and the
Bonds with respect to the rights of Participants and Beneficial Owners, when a
Book-Entry System is in effect, the Issuer, the Trustee, the Registrar, the
Tender Agent, the Remarketing Agent and the Company may treat the Securities
Depository (or its nominee) as the sole and exclusive owner of the Bonds
registered in its name for the purposes of payment of the principal of, premium,
if any, and interest on the Bonds or portion thereof to be redeemed or
purchased, and of giving any notice permitted or required to be given to
Bondholders under this Indenture and none of the Issuer, the Trustee, the
Registrar, the Tender Agent, the Remarketing Agent nor the Company shall be
affected by any notice to the contrary. Neither the Issuer, the Company, the
Trustee, the Registrar, the Tender Agent, nor the Remarketing Agent will have
any responsibility or obligations to the Securities Depository, any Participant,
any Beneficial Owner or any other person which is not shown on the Bond
Register, with respect to (a) the accuracy of any records maintained by the
Securities Depository or any Participant; (b) the payment by the Securities
Depository or by any Participant of any amount due to any Beneficial Owner in
respect of the principal amount or redemption or Purchase Price of, or interest
on, any Bonds; (c) the delivery of any notice by the Securities Depository or
any Participant; (d) the selection of the Beneficial Owners to receive payment
in the event of any partial redemption of the Bonds; or (e) any other action
taken by the Securities Depository or any Participant. The Trustee shall pay all
principal of, premium, if any, and interest on the Bonds registered in the name
of Cede & Co. only to or "upon the order of" the
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<PAGE> 21
Securities Depository (as that term is used in the Uniform Commercial Code as
adopted in the State of Kansas), and all such payments shall be valid and
effective to fully satisfy and discharge the Issuer's obligations with respect
to the principal of, premium, if any, and interest on such Bonds to the extent
of the sum or sums so paid.
The Book-Entry System may be discontinued by the Trustee and the
Issuer, at the direction and expense of the Company, and the Issuer and the
Trustee will cause the delivery of Bond certificates to such Beneficial Owners
of the Bonds and registered in the names of such Beneficial Owners as shall be
specified to the Registrar by the Securities Depository in writing, under the
following circumstances:
(a) The Securities Depository determines to discontinue providing
its service with respect to the Bonds and no successor
Securities Depository is appointed as described above. Such a
determination may be made at any time by giving thirty (30)
days' notice to the Issuer, the Company, the Registrar, the
Tender Agent and the Trustee and discharging its
responsibilities with respect thereto under applicable law.
(b) The Company determines not to continue the Book-Entry System
through a Securities Depository.
When the Book-Entry System is not in effect, all references herein to
the Securities Depository shall be of no further force or effect.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
SECTION 3.01. EXTRAORDINARY AND MANDATORY REDEMPTION.
(a) Following the Conversion Date, the Bonds are subject to
extraordinary optional redemption in whole by the Issuer at a
redemption price equal to 100% of the Outstanding principal
amount thereof plus accrued interest to the redemption date,
if either of the following events shall have occurred:
(i) The Project shall have been damaged or destroyed to
such extent that it cannot, in the Company's
judgment, be reasonably restored within a period of
six (6) months to the condition thereof immediately
preceding such damage or destruction, or to such
extent that the Company is thereby prevented, in the
Company's judgment, from carrying on its normal
operations at the Project for a period of six (6)
months or more; or
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<PAGE> 22
(ii) Title to, or the temporary use for a period of six
(6) months or more of, all or substantially all of
the Project, or such part thereof as shall materially
interfere, in the Company's judgment, with the
operation of the Project for the purpose for which
the Project is designed, shall have been taken under
the exercise of the power of eminent domain by any
governmental body or by any person, firm or
corporation acting under governmental authority
(including such a taking or takings as results in the
Company being thereby prevented from carrying on its
normal operations at the Project for a period of six
(6) months or more).
(iii) if as a result of changes in the Constitution of the
State, or of legislative or administrative action by
the State or any political subdivision thereof, or by
the United States, or by reason of any action
instituted in any court, the Agreement shall become
void or unenforceable, or impossible of performance
without unreasonable delay, or in any other way, by
reason of such change of circumstances, unreasonable
burdens or excessive liabilities are imposed on the
Company or the Issuer.
(b) The Bonds are required to be redeemed in whole on the earliest
practicable Interest Payment Date, at a redemption price of
100% of the Outstanding principal amount thereof plus accrued
interest to the redemption date, upon the occurrence of a
Determination of Taxability. A "Determination of Taxability"
shall be deemed to have occurred if a final decree or judgment
of any Federal court or a final action of the Internal Revenue
Service determines that interest paid or payable on any Bond
is or was includable in the gross income of an Owner of the
Bonds for federal income purposes under the Code (other than
an Owner who is a substantial user or related person within
the meaning of Section 144(a) of the Code). No such decree,
judgment or action will be considered final for this purpose,
however, unless the Company has been given written notice and,
if it is so desired and is legally allowed, has been afforded
the opportunity to contest the same, either directly or in the
name of any Owner of a Bond and until conclusion of any
appellate review, if sought. If the Trustee receives written
notice from any Owner of Bonds stating that (i) the Owner of
Bonds has been notified in writing by the Internal Revenue
Service that it proposes to include the interest on any Bond
in the gross income of such Owner of Bonds for the reasons
described herein or any other proceeding has been instituted
against such Owner of Bonds which may lead to a final decree,
judgment or action as described herein, and (ii) such Owner of
Bonds will afford the Company the opportunity to contest the
same, either directly or in the name of the Owner of Bonds,
until a conclusion of any appellate review, if sought, then
the Trustee shall
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<PAGE> 23
promptly give notice thereof to the Company, the Issuer, the
Bank and the Owner of each Bond Outstanding. The Trustee shall
thereafter coordinate any similar requests or notices it may
have received from other Owners of Bonds and shall keep them
informed of the progress of any administrative proceedings or
litigation.
SECTION 3.02. OPTIONAL REDEMPTION BY THE COMPANY. On or prior to the
Conversion Date, the Bonds are subject to redemption by the Issuer, at the
option of the Company, on or after July 1, 1997, in whole or in part on any
Interest Payment Date, less than all of such Bonds to be selected by lot or in
such other manner as the Trustee shall determine (except as otherwise provided
in SECTION 3.07 hereof), at the redemption price of 100% of the principal amount
thereof plus accrued interest to the redemption date.
After the Conversion Date, the Bonds are subject to redemption by the
Issuer, at the option of the Company, on or after the First Optional Redemption
Date, in whole at any time or in part on any Interest Payment Date, while a
Book-Entry System is not in effect less than all of such Bonds to be selected by
lot or in such other manner as the Trustee shall determine (except as otherwise
provided in SECTION 3.07 hereof), at the redemption prices (expressed as
percentages of principal amount) set forth in the following table plus accrued
interest to the redemption date:
<TABLE>
<CAPTION>
Redemption
Redemption Dates Prices
---------------- ------
<S> <C>
First Optional Redemption Date through
the following November 30 102%
First Anniversary of the First Optional
Redemption Date through the following
November 30 101%
Second Anniversary of the First Optional
Redemption Date and thereafter 100%
</TABLE>
SECTION 3.03. SINKING FUND REDEMPTION. The Bonds are also subject to
redemption by the Issuer, pursuant to the terms of the mandatory sinking fund
provided in SECTION 3.08 of this Indenture, on December 1, 1999, and on each
December 1 thereafter to and including December 1, 2016 (the final amount to be
paid rather than redeemed), in part, less than all of such Bonds to be selected
by lot or in such other manner as the Trustee may determine (except as otherwise
provided in SECTION 3.07 hereof), at a redemption price equal to the principal
amount thereof plus accrued interest to the redemption date.
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<PAGE> 24
SECTION 3.04. NOTICE OF REDEMPTION.
(a) Notice of the call for redemption, identifying the Bonds or
portions thereof to be redeemed, shall be given by the Trustee
by mailing a copy of the redemption notice by first class mail
at least fifteen (15) days but not more than sixty (60) days
(following the Conversion Date, at least thirty (30) days but
not more than sixty (60) days) prior to the date fixed for
redemption to the Owner of each Bond (or, if the Book-Entry
System is in effect, to the Securities Depository, in
accordance with its rules and procedures) to be redeemed in
whole or in part at the address shown on the registration
books. Any notice mailed as provided in this Section shall be
conclusively presumed to have been duly given, whether or not
the Owner receives the notice.
Failure to mail any such notice, or the mailing of defective
notice, to any Owner, shall not affect the proceeding for
redemption as to any Owner to whom proper notice is mailed.
The Trustee shall deliver a copy of any such redemption notice
to the Tender Agent. Notwithstanding the foregoing provisions
of this SECTION 3.04, delivery by the Tender Agent of a copy
of a redemption notice to a transferee of a Bond which has
been called for redemption, pursuant to the requirements of
SECTION 2.08, shall be deemed to satisfy the requirements of
the first sentence of this SECTION 3.04 with respect to any
such transferee.
(b) In addition to the foregoing notice, further notice shall be
given by the Trustee as set out below, but no defect in said
further notice nor any failure to give all or any portion of
such further notice shall in any manner defeat the
effectiveness of a call for redemption if notice thereof is
given as prescribed in (a) above. Each further notice of
redemption given hereunder shall contain the information
required in (a) above for an official notice of redemption
plus (i) the CUSIP numbers of all Bonds being redeemed
provided, however, such notice may contain a disclaimer as to
the accuracy of such CUSIP numbers; (ii) the date of issue of
the Bonds as originally issued; (iii) after the Conversion
Date, the rate of interest borne by each Bond being redeemed;
(iv) the maturity date of each Bond being redeemed; and (v)
any other descriptive information needed to identify
accurately the Bonds being redeemed. Each further notice of
redemption shall be sent at least thirty (30) days before the
redemption date (fifteen (15) days as to redemption of Bonds
prior to the Conversion Date) by registered or certified mail
or overnight delivery service (such overnight delivery service
at the expense of the addressee), or by facsimile to all of
the following registered securities depositories then in the
business of holding substantial amounts of bonds of the type
comprising the Bonds (such depositories now being Depository
Trust Company of New York,
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<PAGE> 25
New York; and Philadelphia Depository Trust Company of
Philadelphia, Pennsylvania) and by facsimile to one or more
national information services that disseminate notices of
redemption of bonds such as the Bonds (such as The Bond Buyer,
Bloomberg Municipal Repositories, Financial Information Inc.'s
Financial Daily Called Bond Service; Interactive Data
Corporation's Bond Service; Kenny Information Service's Called
Bond Service; and Standard & Poor's Called Bond Record). Upon
the payment of the redemption price of Bonds being redeemed,
each check issued for such purpose shall bear the CUSIP number
identifying, by issue and maturity, the Bonds being redeemed
with the proceeds of such check or other transfer. The Trustee
shall use its best efforts to include the CUSIP number when
payments of principal of premium, if any, and interest on the
Bonds are made by wire transfer of funds.
SECTION 3.05. REDEMPTION PAYMENTS. Pursuant to SECTION 6.12 hereof, on
or prior to the Letter of Credit Termination Date, the Trustee is authorized and
directed to draw upon the Letter of Credit in order to provide for the payment
of the redemption price of the Bonds called for redemption, and is hereby
authorized and directed to apply such funds to the payment of the principal of
the Bonds or portions thereof called, together with accrued interest thereon to
the redemption date. Following the Letter of Credit Termination Date, if on or
prior to any date fixed for redemption, sufficient moneys shall be on deposit
with the Trustee to pay the redemption price of the Bonds called for redemption,
the Trustee is hereby authorized and directed to apply such funds to the payment
of the principal of the Bonds or portions thereof called, together with accrued
interest thereon to the redemption date, and any required premium. Upon the
giving of notice and the deposit of moneys for redemption at the required times
on or prior to the date fixed for redemption, as provided in this Article,
interest on the Bonds or portions thereof thus called shall no longer accrue
after the date fixed for redemption.
SECTION 3.06. CANCELLATION. All Bonds which have been redeemed shall
not be reissued but shall be cancelled and periodically cremated or otherwise
destroyed by the Trustee in accordance with SECTION 2.09 hereof.
SECTION 3.07. PARTIAL REDEMPTION OF BONDS.
(a) Upon surrender of any Bond for redemption in part only, the
Issuer shall execute and the Trustee shall authenticate and
deliver to the Owner thereof a new Bond or Bonds of authorized
denominations, in an aggregate principal amount equal to the
unredeemed portion of the Bond surrendered.
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<PAGE> 26
(b) In case a Bond is of a denomination larger than $5,000, a
portion of such Bond ($5,000 or any integral multiple thereof)
may be redeemed, but Bonds shall be redeemed only in the
principal amount of $5,000 or any integral multiple thereof.
(c) Notwithstanding anything to the contrary contained in this
Indenture, whenever the Bonds are to be redeemed in part,
Bonds which are Pledged Bonds at the time of selection of
Bonds for redemption shall be selected for redemption prior to
the selection of any other Bonds. If the aggregate principal
amount of Bonds to be redeemed exceeds the aggregate principal
amount of Pledged Bonds at the time of selection, the Trustee
or, if the Book-Entry System is in effect, the Securities
Depository, may select for redemption Bonds in an aggregate
principal amount equal to such excess by lot or in such other
manner as the Trustee may determine. If the Book-Entry System
is in effect, upon a redemption of less than the entire amount
of the Bonds outstanding, the Trustee shall (i) either
exchange the Bond or Bonds held by the Securities Depository
for a new Bond or Bonds in the appropriate principal amount,
if such Bond is presented to the Trustee by the Securities
Depository, or (ii) obtain from the Securities Depository a
written confirmation of the reduction in the principal amount
of the Bonds held by such Securities Depository.
(d) No Bond may be redeemed in part if the principal amount
thereof to remain Outstanding following such redemption is not
itself an Authorized Denomination.
SECTION 3.08. SINKING FUND. As and for a sinking fund for the
redemption of the Bonds, the Issuer shall cause to be deposited in the Bond Fund
on or before December 1, 1999, and on or before each December 1 thereafter to
and including December 1, 2016, proceeds from a drawing under the Letter of
Credit or, following the Letter of Credit Termination Date, other moneys which
are sufficient to redeem the following principal amounts (after credit as
provided below) of the Bonds (the final amount to be paid rather than redeemed):
-20-
<PAGE> 27
<TABLE>
<CAPTION>
DATE PRINCIPAL
---- ---------
<S> <C>
December 1, 1997
December 1, 1998
December 1, 1999 $ 200,000.00
December 1, 2000 200,000.00
December 1, 2001 200,000.00
December 1, 2002 200,000.00
December 1, 2003 200,000.00
December 1, 2004 200,000.00
December 1, 2005 200,000.00
December 1, 2006 200,000.00
December 1, 2007 300,000.00
December 1, 2008 300,000.00
December 1, 2009 300,000.00
December 1, 2010 300,000.00
December 1, 2011 300,000.00
December 1, 2012 300,000.00
December 1, 2013 400,000.00
December 1, 2014 400,000.00
December 1, 2015 400,000.00
December 1, 2016 400,000.00
---------------- ----------
$ 5,000,000.00
</TABLE>
On or before the fifteenth (15th) day (or, subsequent to the Conversion
Date, the thirtieth (30th) day) prior to each such sinking fund payment date,
the Trustee shall proceed to call the principal amount of the Bonds indicated
above for redemption on the next December 1, and give notice of such call. At
its option, to be exercised with written notice to the Trustee on or before the
forty-fifth (45th) day next preceding any such sinking fund redemption date, the
Issuer, with the consent of the Company, may (a) deliver to the Trustee for
cancellation the Bonds subject to redemption pursuant to the terms of the
mandatory sinking fund provided in this SECTION 3.08 in an aggregate principal
amount desired, or (b) receive credit in respect of its sinking fund redemption
obligation for any Bonds subject to redemption pursuant to the terms of the
mandatory sinking fund provided in this Section, which prior to said date have
been redeemed (otherwise than through the operation of the sinking fund) and
cancelled by the Trustee and not theretofore applied as a credit against any
sinking fund redemption obligation. Each Bond so delivered or previously
redeemed shall be credited by the Trustee at the principal amount thereof on the
obligation of the Issuer on such sinking fund redemption date and the principal
amount of Bonds to be redeemed by operation of such sinking fund on such date
shall be accordingly reduced, and any excess over the principal amount of
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Bonds to be redeemed by operation of the sinking fund on any sinking fund
payment date shall be credited against future sinking fund payments in
chronological order and the principal amount of Bonds required to be redeemed by
operation of the sinking fund on subsequent sinking fund payment dates shall be
correspondingly reduced.
ARTICLE IV
CONVERSION OF INTEREST RATE; MANDATORY TENDER;
DEMAND PURCHASE OPTION
SECTION 4.01. CONVERSION OF INTEREST RATE. The interest rate on the
Bonds shall be converted from the Adjustable Rate to the Fixed Rate upon the
exercise by the Company of the Conversion Option, and the Bonds shall be subject
to mandatory tender for purchase by the Owners thereof on the Conversion Date.
To exercise the Conversion Option, the Company shall deliver or mail by first
class mail a notice to the Trustee at its Principal Office with respect to the
determination of the Company to convert the interest rate on the Bonds from the
Adjustable Rate to the Fixed Rate, which notice shall be delivered to the
Trustee at least thirty (30) but not more than forty-five (45) days prior to the
Conversion Date. The Trustee shall then deliver or mail by first class mail a
notice in substantially the form attached hereto as EXHIBIT H at least twenty
(20) days but not more than thirty (30) days prior to the Conversion Date to the
Owner of each Bond at the address shown on the registration books of the Issuer.
If the Bonds are held in the Book-Entry System, such notice shall be provided by
the Securities Depository in accordance with the requirements of the Securities
Depository for the delivery of notices. Any notice given by the Trustee as
provided in this Section shall be conclusively presumed to have been duly given,
whether or not the Owner receives the notice. Failure to mail any such notice,
or the mailing of defective notice, to any Owner, shall not affect the
proceeding for redemption as to any Owner to whom proper notice is mailed. Said
notice shall state (a) the Conversion Date, and (b) that all Owners of Bonds
must tender their Bonds to the Tender Agent for purchase on the Conversion Date,
and that any Bonds not so tendered shall be deemed to have been tendered for
purchase on the Conversion Date.
As described above, Owners of Bonds shall be required to tender their
Bonds on the Conversion Date to the Tender Agent for purchase at the Purchase
Price, and any such Bonds not so tendered on the Conversion Date ("Untendered
Bonds"), for which there has been irrevocably deposited in trust with the
Trustee an amount of moneys sufficient to pay the Purchase Price of the
Untendered Bonds, shall be deemed to have been purchased pursuant to this
SECTION 4.01. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO TENDER SUCH
OWNER'S BONDS ON OR PRIOR TO THE CONVERSION DATE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY
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PAYMENT (INCLUDING ANY INTEREST TO ACCRUE SUBSEQUENT TO THE CONVERSION DATE)
OTHER THAN THE PURCHASE PRICE FOR SUCH UNTENDERED BONDS, AND ANY UNTENDERED
BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS INDENTURE, EXCEPT FOR
THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
SECTION 4.02. MANDATORY TENDER OF BONDS UPON TERMINATION OF LETTER OF
CREDIT. If a Substitute Letter of Credit has not been delivered to the Trustee
at least sixty (60) days prior to the expiration of the Letter of Credit, in
accordance with SECTION 4.4 of the Agreement, the Bonds shall be subject to
mandatory tender by the Owners thereof for purchase on the Mandatory Tender
Date. The Trustee shall deliver or mail by first class mail a notice in
substantially the form attached hereto as EXHIBIT I, stating that the Letter of
Credit will expire fifteen (15) days after the Mandatory Tender Date, and that,
if the Book-Entry System is not in effect, all Owners of Bonds must tender their
Bonds to the Tender Agent for purchase on the Mandatory Tender Date, and that
any Bonds not so tendered shall be deemed to have been tendered for purchase on
the Mandatory Tender Date. Such notice shall be delivered at least twenty (20)
days but not more than thirty (30) days prior to the Mandatory Tender Date to
the Owner of each Bond at the address shown on the registration books of the
Issuer. Any notice given as provided in this Section shall be conclusively
presumed to have been duly given, whether or not the Owner receives the notice.
Failure to mail any such notice, or the mailing of defective notice, to any
Owner, shall not affect the proceeding for redemption as to any Owner to whom
proper notice is mailed.
As described above, Owners of Bonds shall be required to tender their
Bonds on the Mandatory Tender Date to the Tender Agent for purchase at the
Purchase Price, and any such Bonds not so tendered on the Mandatory Tender Date
("Untendered Bonds"), for which there have been irrevocably deposited in trust
with the Trustee an amount of moneys sufficient to pay the Purchase Price of the
Untendered Bonds, shall be deemed to have been purchased pursuant to this
SECTION 4.02. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO TENDER SAID
OWNER'S BONDS ON OR PRIOR TO THE MANDATORY TENDER DATE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE SUBSEQUENT TO THE
MANDATORY TENDER DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNTENDERED BONDS,
AND ANY UNTENDERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
The Bonds shall not be remarketed unless and until a Substitute Letter
of Credit is provided to the Trustee pursuant to the terms of the Agreement.
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SECTION 4.03. CONDITION TO CONVERSION; ADDITIONAL NOTICES.
(a) As a condition to the giving of notice as provided in SECTION
4.01 above, the Company shall provide the Trustee with an
opinion of Bond Counsel to the effect that the proposed
conversion of the interest rate on the Bonds will not
adversely affect the exclusion of the interest on the Bonds
from gross income for federal income tax purposes.
(b) The delivery by the Company to the Trustee of a letter from
Bond Counsel confirming the opinion required prior to the
notification described above on such Conversion Date is a
condition precedent to any such Conversion. In the event that
the Company fails to deliver to the Trustee the letter of Bond
Counsel referred to in the preceding sentence, such Conversion
shall not take effect, and the Bonds shall continue to bear
interest calculated by the method applicable prior to the
proposed Conversion Date.
(c) The Trustee shall provide the Tender Agent with a copy of any
notice delivered to the Owners of the Bonds pursuant to
SECTION 4.01 OR 4.02 hereof.
SECTION 4.04. DEMAND PURCHASE OPTION. Any Bond bearing interest at the
Adjustable Rate shall be purchased at the Purchase Price from the Owner thereof
upon:
(a) delivery to the Tender Agent at its Principal Office and to
the Remarketing Agent at its Principal Office of a written
notice (said notice to be irrevocable and effective upon
receipt) which (1) states the aggregate principal amount and
Bond numbers of the Bonds to be purchased; and (2) states the
date on which such Bonds are to be purchased, which date shall
be a Tender Date not prior to the seventh (7th) day next
succeeding the date of delivery of such notice; and
(b) delivery to the Tender Agent at its Payment Office at or prior
to 10:00 A.M., New York City time, on the date designated for
purchase in the notice described in (a) above of such Bonds to
be purchased, with an appropriate endorsement for transfer or
accompanied by a bond power endorsed in blank, and if such
Bonds are to be purchased prior to the next succeeding
Interest Payment Date and after the Record Date in respect
thereof, a due bill, payable to bearer, for interest due on
such Interest Payment Date.
If the Book-Entry System is in effect, the notice described in SECTION
4.04(i), above, may be delivered by the Participant on behalf of the Beneficial
Owner of the Bond.
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SECTION 4.05. FUNDS FOR PURCHASE OF BONDS. On the date Bonds are to be
purchased pursuant to SECTION 2.02(c), 4.01, 4.02 OR 4.04 hereof, such Bonds
shall be purchased at the Purchase Price only from the funds listed below.
Subject to the provisions of SECTION 6.12(b), funds for the payment of the
Purchase Price shall be derived from the following sources in the order of
priority indicated:
(a) the proceeds of the sale of such Bonds which have been
remarketed by the Remarketing Agent, and which proceeds are on
deposit with the Trustee prior to 12:00 Noon, New York City
time, on the Business Day preceding the date such Bonds are to
be purchased by any entity other than the Company or the
Issuer, or any affiliate of the foregoing;
(b) moneys drawn by the Trustee under the Letter of Credit; and
(c) any other moneys furnished to the Trustee and available for
such purpose.
SECTION 4.06. DELIVERY OF PURCHASED BONDS.
(a) Bonds purchased with moneys described in SECTION 4.05(a)
hereof shall be delivered by the Tender Agent, at its Delivery
Office, to or upon the order of the purchasers thereof.
(b) Bonds purchased with moneys described in SECTION 4.05(b)
hereof shall be held by the Tender Agent in trust for the
benefit of the Bank pursuant to the Pledge Agreement or, upon
receipt of written instructions from the Bank, such Bonds
shall be delivered by the Tender Agent to the Bank. If the
Bonds are held in the Book-Entry System, such Bonds shall be
recorded in the books of the Securities Depository for the
account of the Tender Agent, as custodian for the Bank, as
pledgee. The Bank's security interest in such Bonds shall be
released only after the Tender Agent has been notified in
writing by the Bank that the Letter of Credit has been fully
reinstated.
(c) Bonds purchased with moneys described in SECTION 4.05(c)
shall, at the direction of the Company, be (A) delivered as
instructed by the Company or (B) delivered to the Trustee for
cancellation; provided, however, that any Bonds so purchased
after the selection thereof by the Trustee for redemption
shall be delivered to the Trustee for cancellation.
(d) The Tender Agent shall deliver to the person to whom the
Tender Agent is to deliver such Bonds the due bills, if any,
delivered to the Tender Agent with such Bonds in accordance
with SECTION 4.04 hereof.
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Bonds delivered as provided in this Section shall be registered in the
manner directed by the recipient thereof.
SECTION 4.07. DELIVERY OF PROCEEDS OF SALE OF PURCHASED BONDS.
(a) Except in the case of the sale of any Pledged Bonds, the
proceeds of the sale of any Bonds delivered to the Tender
Agent pursuant to SECTION 2.02(c), 4.01, 4.02 OR 4.04 hereof,
to the extent not required to pay the Purchase Price thereof
in accordance with SECTION 4.05 hereof, shall be paid to or
upon the order of the Bank, to the extent required to satisfy
the obligations of the Company under the Credit Agreement, and
the balance, if any, shall be paid to or upon the order of the
Company; provided, however, in the case of Pledged Bonds that
are subsequently remarketed prior to an Interest Payment Date,
the accrued interest paid by such new purchaser shall be
deposited into the Remarketing Account of the Bond Fund and
used to pay interest on the next Interest Payment Date.
(b) In the event the Remarketing Agent shall have remarketed any
Pledged Bonds and the Company shall have directed the Bank to
deliver such Pledged Bonds (to the extent the Bank shall hold
such Pledged Bonds) to the Tender Agent pursuant to Paragraph
2B of the Credit Agreement, such Bonds shall be delivered by
the Tender Agent in accordance with SECTION 4.06(b) hereof and
the proceeds of sale of such Bonds shall be delivered to the
Bank; provided that any (i) premium or (ii) accrued interest
in excess of amounts then due to the Bank pursuant to
Paragraph 2A of the Credit Agreement received upon the sale of
such Bonds shall be delivered by the Bank to or upon the order
of the Company.
SECTION 4.08. DUTIES OF TRUSTEE AND TENDER AGENT WITH RESPECT TO
PURCHASE OF BONDS.
(a) The Tender Agent shall hold all Bonds delivered to it pursuant
to SECTION 2.02(c), 4.01, 4.02 OR 4.04 hereof in trust for the
benefit of the respective Owners of Bonds which shall have so
delivered such Bonds until moneys representing the Purchase
Price of such Bonds shall have been delivered to or for the
account of or to the order of such Owners of Bonds;
(b) The Trustee shall hold all moneys delivered to it pursuant to
this Indenture for the purchase of Bonds in a separate
account, in trust for the benefit of the person or entity
which shall have so delivered such moneys until the Bonds
purchased with such moneys shall have been delivered to or for
the account of such person or entity;
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(c) The Tender Agent shall deliver to the Trustee, the Company,
the Bank and the Remarketing Agent a copy of each notice
delivered to it in accordance with SECTION 4.04 hereof and,
immediately upon the delivery to it of Bonds in accordance
with said SECTION 4.04, give telephonic or telegraphic notice
to the Company, the Trustee and the Bank specifying the
principal amount of the Bonds so delivered; and
(d) The Trustee shall draw moneys under the Letter of Credit in
accordance with the terms thereof to the extent required by
SECTIONS 4.05 AND 6.12 hereof to provide for timely payment of
the Purchase Price of Bonds.
SECTION 4.09. REMARKETING OF BONDS. Pursuant to the Remarketing
Agreement, the Remarketing Agent will use its best efforts to remarket the Bonds
at a price of par plus accrued interest, if any, and shall give notice by
telephone or telex, promptly confirmed in writing, at or prior to 12:00 noon,
New York City time, on the Business Day preceding the date any Bonds are to be
purchased, to the Company, the Trustee and the Tender Agent, specifying the
principal amount of such Bonds, if any, remarketed and the registration
information of the purchasers, and shall deliver the proceeds of such sale to
the Trustee.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST. The
Issuer covenants that it will promptly pay or cause to be paid the principal of,
premium, if any, and interest on every Bond issued under this Indenture at the
place, on the dates, and in the manner provided herein and in said Bonds
according to the true intent and meaning thereof, but solely from the amounts
pledged therefor which are from time to time held by the Trustee in the various
accounts of the Bond Fund. The principal of, premium, if any, and interest on
the Bonds are payable from the rental amounts to be paid under the Agreement and
otherwise as provided herein and in the Agreement, which amounts are hereby
specifically pledged to the payment thereof in the manner and to the extent
herein specified, and nothing in the Bonds or in this Indenture shall be
construed as pledging any other funds or assets of the Issuer. Neither the
Issuer, the State, nor any political subdivision of the State shall in any event
be liable for the payment of the principal of, premium, if any, or interest on
any of the Bonds or for the performance of any pledge, obligation or agreement
undertaken by the Issuer except to the extent that the moneys pledged herein are
sufficient therefor.
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No Owner of any Bonds has the right to compel any exercise of taxing
power of the Issuer to pay the Bonds or the interest thereon, and the Bonds do
not constitute an indebtedness of the Issuer or a loan of credit thereof within
the meaning of any constitutional or statutory debt limitation or restriction.
SECTION 5.02. PERFORMANCE OF COVENANTS. The Issuer covenants that it
will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture and in the Agreement, in
any and every Bond executed, authenticated and delivered hereunder and in all of
its proceedings pertaining hereto. The Issuer covenants that it is duly
authorized under the Constitution and laws of the State, including particularly
and without limitation the Act, to issue the Bonds authorized hereby and to
execute this Indenture, to assign the Agreement, and to pledge the rental
amounts to be paid under the Agreement and other amounts hereby pledged in the
manner and to the extent herein set forth, that all action on its part for the
issuance of the Bonds and the execution and delivery of this Indenture has been
duly and effectively taken, and that the Bonds in the hands of the Owners
thereof are and will be valid and enforceable obligations of the Issuer
according to the terms thereof and hereof.
SECTION 5.03. INSTRUMENTS OF FURTHER ASSURANCE. The Issuer will do,
execute, acknowledge and deliver or cause to be done, executed, acknowledged and
delivered, such indentures supplemental hereto and such further acts,
instruments and transfers as the Trustee may reasonably require for the better
assuring, transferring, conveying, pledging, assigning and confirming unto the
Trustee all and singular the amounts pledged hereby to the payment of the
principal of, premium, if any, and interest on the Bonds. The Issuer, except as
herein and in the Agreement provided, will not sell, convey, mortgage, encumber
or otherwise dispose of any part of the amounts, revenues and receipts payable
under the Agreement or its rights under the Agreement.
SECTION 5.04. RECORDING AND FILING. The Company has agreed pursuant to
the Agreement that it will cause all financing statements related to this
Indenture and all supplements hereto to be recorded and filed in such manner and
in such places as may from time to time be required by law in order to preserve
and protect fully the security of the Owners of the Bonds and the rights of the
Trustee hereunder, and to take or cause to be taken any and all other action
necessary to perfect the security interest created by this Indenture.
SECTION 5.05. INSPECTION OF BOOKS. All books and records, if any, in
the Issuer's possession relating to the Project and the amounts derived from the
Project shall at all reasonable times be open to inspection by such accountants
or other agents as the Trustee may from time to time designate.
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SECTION 5.06. LIST OF OWNERS OF BONDS. The Trustee will keep on file a
list of names and addresses of the Owners of all Bonds as from time to time
registered on the registration books maintained by the Trustee as Bond
Registrar, together with the principal amount and numbers of such Bonds owned by
each such Owner. At reasonable times and under reasonable regulations
established by the Trustee, said list may be inspected and copied for any
purpose by the Company or by the Owners (or a designated representative thereof)
of fifteen percent (15%) or more in aggregate principal amount of Outstanding
Bonds, such possession or ownership and the authority of such designated
representative to be evidenced to the satisfaction of the Trustee. The Trustee
shall furnish to the Issuer a list of Owners of Bonds then Outstanding within
ten (10) days of a written request for said list from the Issuer.
SECTION 5.07. RIGHTS UNDER AGREEMENT. The Agreement, a duly executed
counterpart of which has been filed with the Trustee, sets forth the covenants
and obligations of the Issuer and the Company, and reference is hereby made to
the Agreement for a detailed statement of said covenants and obligations of the
Company thereunder, and the Issuer agrees that the Trustee in its name or in the
name of the Issuer may enforce all rights of the Issuer and all obligations of
the Company under and pursuant to the Agreement for and on behalf of the Owners
of Bonds, whether or not the Issuer is in default hereunder.
SECTION 5.08. ISSUER'S ELECTION TO ISSUE BONDS PURSUANT TO SECTION
144(a)(4). The Issuer hereby elects to have the $10,000,000 limitation set forth
in Section 144(a)(4) of the Code apply to the Bonds and agrees to take all
actions necessary to assure compliance with the provisions of said Section.
SECTION 5.09. PAYMENTS OF TAXES, CHARGES, ETC. The Issuer represents
that pursuant to the provisions in the Agreement, the Company has agreed at its
own expense to pay, as the same respectively come due, all taxes, assessments
and other governmental charges at any time lawfully levied or assessed upon or
against the Project or any part thereof.
SECTION 5.10. OBLIGATIONS TO MAINTAIN, REPAIR AND INSURE. The Issuer
represents that pursuant to the provisions in the Agreement, the Company has
agreed to cause the Project to be maintained, preserved and kept in good
condition, repair and working order and to keep the Project insured to the
extent provided therein.
SECTION 5.11. AGREEMENT REFERENCES; LIEN OF INDENTURE SUBORDINATE TO
AGREEMENT; ENFORCEMENT, OBLIGATIONS AND RIGHTS. It is understood and agreed that
the Project has been leased to the Company under the Agreement. The Agreement,
or memorandum thereof, is recorded in the Office of the Register of Deeds,
Johnson County, Kansas, and an executed copy is on file in the office of the
Trustee. Reference is hereby made to the Agreement for a detailed statement of
the terms and conditions thereof and for a statement of the rights and
obligations of the parties thereunder. The
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Issuer agrees, upon the request of the Trustee, to enforce all covenants and
obligations of the Company (at the expense of the Company) under the Agreement
to the extent necessary to preserve the Project in good order and repair, and to
protect the rights of the Trustee and the Bondowners hereunder with respect to
the pledge and assignment of the rents, revenues and receipts coming due under
the Agreement. The Issuer agrees that the Trustee, in its own name or in the
name of the Issuer, may and is hereby granted the right to enforce all rights of
the Issuer and all obligations of the Company under and pursuant to the
Agreement, whether or not the Issuer is in default in its covenant to enforce
such rights and obligations.
SECTION 5.12. COVENANT NOT TO SELL OR DISPOSE OF INTEREST IN TRUST
ESTATE AND NOT TO ENCUMBER EXCEPT IN ACCORDANCE WITH AGREEMENT AND INDENTURE.
The Issuer covenants that so long as any Bonds authorized by and issued under
this Indenture are Outstanding, it will not sell or otherwise dispose of its
interest in the Project, except in accordance with the provisions of the
Agreement, and that it will not encumber the same, or any part thereof, or its
interest therein, or create or permit to be created any charge or lien on the
payments to be derived pursuant to the Agreement except as provided in this
Indenture.
ARTICLE VI
REVENUES AND FUNDS
SECTION 6.01. CREATION OF THE BOND FUND. There is hereby created and
established with the Trustee a trust fund to be designated "Private Activity
Revenue Bonds, Series 1996 (Simmons Company Project), of the City of Shawnee,
Kansas - Bond Fund," which shall be used to pay when due the principal and
Purchase Price of, premium, if any, and interest on the Bonds. Within the Bond
Fund there is hereby created and established certain trust accounts, to be
designated the "General Account," the "Letter of Credit Account," and the
"Remarketing Account." Moneys drawn under the Letter of Credit shall be
deposited in the Letter of Credit Account and shall be held separate and apart
from moneys derived from any other source. Moneys received from the Remarketing
Agent shall be deposited in the Remarketing Account and shall be held separate
and apart from moneys derived from any other source. Unless otherwise specified,
all moneys received by the Trustee for deposit into the Bond Fund shall be
credited to the General Account. Any reference herein to the "Bond Fund" without
further qualification or explanation shall, unless the context indicates
otherwise, constitute a reference to the General Account.
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SECTION 6.02. PAYMENTS INTO THE BOND FUND. There shall be deposited
into the Bond Fund from time to time the following:
(a) any amount in the Construction Fund directed to be paid into
the Bond Fund in accordance with the provisions of SECTION
6.07 OR 6.08 hereof, for deposit in the General Account;
(b) all payments specified in SECTION 4.2 of the Agreement, for
deposit in the General Account;
(c) any moneys drawn under the Letter of Credit, for deposit in
the Letter of Credit Account, and such moneys shall not be
commingled with any other moneys on deposit with the Trustee;
(d) amounts held by the Trustee pursuant to SECTION 4.08(b)
hereof, for deposit in the Remarketing Account; and
(e) all other moneys received by the Trustee under and pursuant to
any of the provisions of the Agreement which are required to
be or which are accompanied by directions that such moneys are
to be paid into the Bond Fund, for deposit in the General
Account.
SECTION 6.03. USE OF MONEYS IN THE BOND FUND. Except as provided in
this SECTION 6.03 and in SECTIONS 4.05, 4.08 AND 6.11 hereof, moneys in the
various accounts of the Bond Fund shall be used solely for the payment of the
principal of, premium, if any, and interest on the Bonds and for the redemption
of the Bonds prior to maturity. Subject to the provisions of SECTION 6.12
hereof, funds for such payments of the principal of and premium, if any, and
interest on the Bonds shall be derived from the following sources in the order
of priority indicated:
(a) moneys drawn by the Trustee under the Letter of Credit; and
(b) any other moneys furnished to the Trustee and available for
such purpose.
Notwithstanding the foregoing, amounts deposited into the General
Account of the Bond Fund in accordance with SECTION 6.02(a) OR (b) hereof shall
be paid by the Trustee to the Bank in order to reimburse the Bank to the extent
of a corresponding drawing upon the Letter of Credit to pay the redemption price
of any Bond called for redemption pursuant to SECTION 3.01 hereof.
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SECTION 6.04. PAYMENT OF BONDS WITH PROCEEDS OF REFUNDING BONDS. The
principal of and interest on the Bonds may be paid from the proceeds of the sale
of refunding obligations if, in the opinion of counsel experienced in bankruptcy
matters, which opinion shall be satisfactory to the rating agency (if any) then
providing the rating borne by the Bonds, the application of such refunding
proceeds will not constitute a voidable preference in the event of the
occurrence of an Act of Bankruptcy.
SECTION 6.05. CONSTRUCTION FUND. There is hereby created and
established with the Trustee a trust fund to be designated "Private Activity
Revenue Bonds, Series 1996 (Simmons Company Project), of the City of Shawnee,
Kansas - Construction Fund," which shall be expended in accordance with the
provisions of the Agreement.
SECTION 6.06. PAYMENTS INTO THE CONSTRUCTION FUND; DISBURSEMENTS. The
net proceeds of the issuance and delivery of the Bonds shall be deposited in the
Construction Fund and shall not be commingled with any other funds. The Trustee
is hereby authorized and directed to make each disbursement from the
Construction Fund required by the provisions of the Agreement. The Trustee shall
keep and maintain adequate records pertaining to the Construction Fund and all
disbursements therefrom, including records of all Requisitions made pursuant to
the Agreement, and after the Project has been completed and a completion
certificate has been filed as provided in SECTION 6.08 hereof, the Trustee
shall, upon request of the Company, file an accounting thereof with the Issuer
and the Company.
SECTION 6.07. USE OF MONEY IN THE CONSTRUCTION FUND UPON DEFAULT. If
the principal of the Bonds shall have become due and payable pursuant to ARTICLE
IX hereof, any balance remaining in the Construction Fund shall without further
authorization be transferred into the General Account of the Bond Fund.
SECTION 6.08. COMPLETION OF THE PROJECT. The completion of the Project
and payment or provision for payment of all Costs of the Project shall be
evidenced by the filing with the Trustee of the certificate required by SECTION
3.5 of the Agreement. As soon as practicable and in any event not more than
sixty (60) days from the date of the certificate referred to in the preceding
sentence, any balance remaining in the Construction Fund (except amounts the
Company shall have directed the Trustee to retain for any Cost of the Project
not then due and payable) shall without further authorization be transferred
into the General Account of the Bond Fund and thereafter applied in the manner
provided in SECTION 3.5 of the Agreement; provided, that prior to the Letter of
Credit Termination Date, in the event that a portion of the Bonds is to be
redeemed with any balance remaining in the Construction Fund and transferred to
the General Account of the Bond Fund, the Trustee is authorized and directed to
draw upon the Letter of Credit to the extent of the redemption price of the
Bonds so called for redemption, and promptly thereafter to transfer any amounts
on deposit in the General Account of the Bond Fund to the Bank, to the extent
necessary to reimburse the Bank for such drawing upon the Letter of Credit.
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SECTION 6.09. NONPRESENTMENT OF BONDS. In the event any Bond shall not
be presented for payment when the principal thereof becomes due, either at
maturity, or at the date fixed for redemption thereof, or otherwise, if moneys
sufficient to pay any such Bond shall have been deposited with the Trustee for
the benefit of the Owner thereof, all liability of the Issuer to the Owner
thereof for the payment of such Bond shall forthwith cease, determine and be
completely discharged, and thereupon it shall be the duty of the Trustee to hold
such funds, uninvested or invested in Government Obligations maturing overnight,
but in any event without liability for interest thereon, for the benefit of the
Owner of such Bond which shall thereafter be restricted exclusively to such
funds for any claim of whatever nature on its part under this Indenture with
respect to such Bond.
Subject to the provisions of SECTION 6.11, any moneys so deposited with
and held by the Trustee not so applied to the payment of Bonds within two (2)
years after the date on which the same shall have become due shall be repaid by
the Trustee to the Company upon written direction of a Company Representative,
and thereafter Owners of Bonds shall be entitled to look only to the Company for
payment, and then to the extent of the amount so repaid, and all liability of
the Trustee with respect to such money shall thereupon cease, and the Company
shall not be liable for any interest thereon and shall not be regarded as a
trustee of such money.
SECTION 6.10. MONEYS TO BE HELD IN TRUST. All moneys required to be
deposited with or paid to the Trustee for the account of any fund or account
referred to in any provision of this Indenture or the Agreement shall be held by
the Trustee in trust, and shall, while held by the Trustee, constitute part of
the Trust Estate and be subject to the lien and security interest created
hereby.
SECTION 6.11. REPAYMENT TO THE BANK AND THE COMPANY FROM THE BOND FUND
OR THE CONSTRUCTION FUND. Any amounts remaining in any account of the Bond Fund,
the Construction Fund, or any other fund or account created hereunder (other
than the Rebate Fund) after payment in full of the principal of, premium, if
any, and interest on the Bonds, the fees, charges and expenses of the Trustee
and all other amounts required to be paid hereunder, shall be paid immediately
to the Bank to the extent of any indebtedness of the Company to the Bank under
the Credit Agreement, and, after repayment of all such indebtedness, to the
Company.
SECTION 6.12. LETTER OF CREDIT.
(a) During the term of the Letter of Credit, the Trustee shall
draw moneys under the Letter of Credit in accordance with the
terms thereof to pay when due (whether by reason of maturity,
the occurrence of an Interest Payment Date, redemption,
acceleration or otherwise) the principal of and interest on
the Bonds; and to the extent moneys described in SECTION
4.05(a) hereof are not available therefor, to pay when due the
Purchase Price of Bonds. Without limiting the generality of
the foregoing,
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at such time as the duration of the Interest Period is either
three months or six months in duration, the Trustee is hereby
instructed to draw upon the Letter of Credit on the first day
of each month during such Interest Period, commencing with the
first day of the second month of such Interest Period (or on
the Business Day preceding the first day of each such month,
in the event such day is not a Business Day), an amount equal
to the interest on the Bonds that has accrued or will accrue
during the month for which the drawing is being submitted,
less, with respect to the final drawing of the Interest
Period, investment earnings (if any) on any previous amounts
drawn under the Letter of Credit, which investments earnings
are on deposit in the Letter of Credit Account of the Bond
Fund.
(b) Notwithstanding any provision to the contrary which may be
contained in this Indenture, including, without limitation,
SECTION 6.12(a), (i) in computing the amount to be drawn under
the Letter of Credit on account of the payment of the
principal or Purchase Price of, or interest on the Bonds, the
Trustee shall exclude any such amounts in respect of any Bonds
which are Pledged Bonds on the date such payment is due, and
(ii) amounts drawn by the Trustee under the Letter of Credit
shall not be applied to the payment of the principal or
Purchase Price of, or premium, if any, or interest on, any
Bonds which are Pledged Bonds on the date such payment is due.
(c) If for any reason the Trustee is unable to determine the rate
of interest that will accrue on the Bonds, the Trustee shall
assume a rate equal to the Maximum Rate for the drawing being
submitted and will credit the difference in the Maximum Rate
and the actual rate determined and shall apply such difference
to the next payment of interest when due.
SECTION 6.13 CREATION OF REBATE FUND; DUTIES OF TRUSTEE; AMOUNTS HELD
IN REBATE FUND.
(a) There is hereby created and established with the Trustee a
trust fund to be held in trust to be designated "Private
Activity Revenue Bonds, Series 1996 (Simmons Company Project,
of the City of Shawnee, Kansas Rebate Fund."
(b) In the manner and at the times required by the Code and
consistent with the Tax Agreement or an opinion of Bond
Counsel, the Trustee shall at the direction and expense of the
Company, employ a Consultant to determine or cause to be
determined, the Excess Investment Earnings on each fund or
account held by the Trustee pursuant to this Indenture and
shall deposit, from moneys held on deposit in such fund or
account or from any lawfully
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available source, into the Rebate Fund an amount equal to such
Excess Investment Earnings, plus such additional moneys, if
any, which are necessary or required to be set aside for
rebate to the United States under the Code, as determined by
the Consultant.
(c) All income or interest on the investment of moneys on deposit
in the Rebate Fund shall remain in the Rebate Fund unless and
until required to be rebated to the United States. Any funds
remaining in the Rebate Fund after redemption and payment of
all of the Bonds and payment in full of all amounts required
to be rebated to the United States of America shall be
withdrawn and paid to the Company.
(d) The provisions in paragraphs (b) and (c) above shall not be
applied if an exemption from rebate is provided by the Code as
evidenced by an opinion of Bond Counsel.
(e) Within sixty (60) days after December 1 of the years 2001,
2006, 2011 and within sixty (60) days after the retirement of
all of the Outstanding Bonds, the Trustee shall pay to the
United States from the Rebate Fund then from the Bond Fund,
and if insufficient therefor, from amounts paid by the Company
pursuant to SECTION 4.2 of the Agreement, the rebatable
arbitrage calculated in accordance with the Code, as
determined by the Consultant.
SECTION 6.14. CREATION OF COSTS OF ISSUANCE FUND; AMOUNTS HELD IN COSTS
OF ISSUANCE FUND.
(a) There is hereby created and established with the Trustee a
trust fund to be held in trust to be designated "Private
Activity Revenue Bonds, Series 1996 (Simmons Company Project),
of the City of Shawnee, Kansas - Costs of Issuance Fund."
(b) Moneys in the Costs of Issuance Fund shall be disbursed from
time to time by the Trustee for the payment of the Costs of
Issuance upon the direction of the Company as evidenced by a
requisition certificate in the form of EXHIBIT E to the
Agreement executed by the Company and approved by the Issuer,
or as approved by the Company on the Bond Closing Date.
Expenditures from the Costs of Issuance Fund shall be made
first from Bond proceeds and second from moneys provided by
the Company. Moneys in the Costs of Issuance Fund shall be
expended no later than 180 days after the Bond Closing Date.
Any moneys remaining therein on such date or on such earlier
date as the Issuer and Company shall certify
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that all Costs of Issuance have been paid shall be transferred
to the Company to the extent such moneys constitute moneys
provided by the Company, or to the Construction Fund to the
extent such moneys constitute Bond proceeds, and the Costs of
Issuance Fund shall be closed.
ARTICLE VII
INVESTMENT OF MONEYS
Any moneys held as a part of the Construction Fund, the Cost of
Issuance Fund or any fund other than the Bond Fund or the Rebate Fund shall be
invested or reinvested by the Trustee, to the extent permitted by law, at the
written request of and as directed by a Company Representative, in any of the
following qualified investments:
(a) Bonds or obligations of counties, municipal corporations,
school districts, political subdivisions, authorities, or
bodies of the State;
(b) Bonds or other obligations of the United States or of
subsidiary corporations of the United States Government which
are fully guaranteed by such government;
(c) Obligations of agencies of the United States Government issued
by the Federal Land Bank, the Federal Home Loan Bank, the
Federal Intermediate Credit Bank, and the Central Bank for
Cooperatives;
(d) Bonds or other obligations issued by any Public Housing Agency
or Municipal Corporation in the United States, which such
bonds or obligations are fully secured as to the payment of
both principal and interest by a pledge of annual
contributions under an annual contributions contract or
contracts with the United States Government, or project notes
issued by any public housing agency, urban renewal agency, or
municipal corporation in the United States which are fully
secured as to payment of both principal and interest by a
requisition, loan, or payment agreement with the United States
Government;
(e) Certificates of deposit of national or state banks located
within the State which have deposits insured by the Federal
Deposit Insurance Corporation. The portion of such
certificates of deposit in excess of the amount insured by the
Federal Deposit Insurance Corporation, if any, shall be
secured by deposit, with the Federal Reserve Bank, or with any
national or state bank or federal savings and loan association
or state building and loan or savings and loan association
located within the State, of one or more the following
securities in an aggregate principal amount equal at least to
the
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amount of such excess; direct and general obligations of this
state or of any county or municipal corporation in this state,
obligations of the United States or subsidiary corporations
included in paragraph (b) hereof, obligations of the agencies
of the United States Government included in paragraph (c)
hereof, or bonds, obligations, or project notes of public
housing agencies, urban renewal agencies, or municipalities
included in paragraph (d) hereof;
(f) Repurchase agreements with respect to obligations included in
(a), (b), (c), (d) or (e) above and any other investments to
the extent at the time permitted by then applicable law for
the investment of public funds; and
(g) Securities of or other interests in any no-load, open-end
management type investment company or investment trust
registered under the Investment Company Act of 1940, as from
time to time amended, or any common trust fund maintained by
any bank or trust company which holds such proceeds as trustee
or by an affiliate thereof so long as:
(i) the portfolio of such investment company or
investment trust or common trust fund is limited to
the obligations referenced in paragraph (b) hereof
and repurchase agreements fully collateralized by any
such obligations;
(ii) such investment company or investment trust or common
trust fund takes delivery of such collateral either
directly or through an authorized custodian;
(iii) such investment company or investment trust or common
trust fund is managed so as to maintain its shares at
a constant net asset value; and
(iv) securities of or other interests in such investment
company or investment trust or common trust fund are
purchased and redeemed only through the use of
national or state banks having corporate trust powers
and located within this State.
Any moneys held as a part of any account of the Bond Fund or the Rebate
Fund shall be invested or reinvested by the Trustee, at the direction of the
Company, to the extent permitted by law, in Government Obligations with such
maturities as shall be required in order to assure full and timely payment of
amounts required to be paid from the Bond Fund or the Rebate Fund, which
maturities shall (in the case of the Bond
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Fund), in any event, extend no more than thirty (30) days from the date of
acquisition thereof; provided, that any moneys held pursuant to the provisions
of SECTION 6.09 either shall be held uninvested or shall be invested in
Government Obligations maturing on the next Business Day.
The Trustee may make any and all such investments through its own bond
or investment department or the bond or investment department of any bank or
trust company under common control with the Trustee. All such investments shall
at all times be a part of the fund or account from which the moneys used to
acquire such investments shall have come and all income and profits on such
investments shall be credited to, and losses thereon shall be charged against,
such fund. All investments hereunder shall be registered in the name of the
Trustee, as Trustee under the Indenture. All investments hereunder shall be held
by or under the control of the Trustee. The Trustee shall sell and reduce to
cash a sufficient amount of investments of funds in any account of the Bond Fund
whenever the cash balance in such account of the Bond Fund is insufficient,
together with any other funds available therefor, to pay the principal or
Purchase Price of, premium, if any, and interest on the Bonds when due.
The Issuer covenants and agrees that it will use the proceeds of the
Bonds as soon as practicable and with all reasonable dispatch for the purpose
for which the Bonds are issued, and the Issuer covenants and agrees that no part
of the proceeds of the Bonds shall be invested in any securities or obligations
except for the temporary period pending such use, nor used at any time, directly
or indirectly, in a manner which will cause the Bonds to be classified as
"arbitrage bonds" within the meaning of Section 148 of the Code.
ARTICLE VIII
DISCHARGE OF INDENTURE
SECTION 8.01. DISCHARGE OF INDENTURE. When the principal of, premium,
if any, and interest due on all the Bonds shall have been paid in accordance
with their terms or provision has been made for such payment, as provided in
SECTION 8.02 hereof, and provision shall also be made for paying all other sums
payable hereunder, including the fees and expenses of the Trustee, then these
presents and the estate and rights hereby granted shall cease, determine and be
void, whereupon the Trustee shall cancel and discharge the lien of this
Indenture, and execute and deliver to the Issuer such instruments in writing as
shall be requisite to release the lien hereof and reconvey, release, assign and
deliver unto the Issuer any and all of the estate, right, title and interest in
and to any and all rights or property conveyed, assigned or pledged to the
Trustee or otherwise subject to the lien of this Indenture, except (i) amounts
in any
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account of the Bond Fund or Construction Fund required to be paid to the Bank or
the Company under the terms of this Indenture, (ii) amounts held by the Trustee
for the payment of the principal or Purchase Price of, premium, if any, or
interest on particular Bonds, and (iii) amounts held in the Rebate Fund required
to be paid to the United States.
SECTION 8.02. DEFEASANCE OF BONDS. The following provisions of this
SECTION 8.02 shall apply only from and after the Conversion Date:
Any Bond shall be deemed to be paid within the meaning of this Article
and for all purposes of this Indenture when (a) payment of the principal of and
premium, if any, on such Bond, plus interest thereon to the due date thereof
(whether such due date is by reason of maturity or upon redemption as provided
herein) either (i) shall have been made or caused to be made in accordance with
the terms thereof, or (ii) shall have been provided for by irrevocably
depositing with the Trustee or a bank located in the State of Kansas and having
full trust powers, in trust and irrevocably set aside exclusively for such
payment, (i) moneys sufficient to make such payment or (ii) Government
Obligations maturing as to principal and interest in such amounts and at such
times as will insure, without further investment or reinvestment thereof, in the
opinion of an independent certified public accounting firm of national
reputation (a copy of which opinion shall be furnished to the rating agency then
providing the rating borne by the Bonds), the availability of sufficient moneys
to make such payment, (b) all necessary and proper fees, compensation and
expenses of the Trustee and the Issuer pertaining to the Bonds with respect to
which such deposit is made, including any payments required to be made to the
Rebate Fund, shall have been paid or the payment thereof provided for to the
satisfaction of the Trustee, and (c) the Issuer, at the expense of the Company,
shall have given to the Trustee in form satisfactory to the Trustee an opinion
of counsel experienced in bankruptcy matters, which opinion shall be
satisfactory to the rating agency (if any) then providing the rating borne by
the Bonds, to the effect that the application of such moneys will not constitute
a voidable preference in the event of the occurrence of an Act of Bankruptcy. At
such time as a Bond shall be deemed to be paid hereunder, as aforesaid, such
Bond shall no longer be secured by or entitled to the benefits of this
Indenture, except for the purposes of any such payment from such moneys or
Government Obligations.
Notwithstanding the foregoing, no deposit under clause (a)(ii) of the
immediately preceding paragraph shall be deemed payment of such Bonds as
aforesaid until (a) proper notice of redemption of such Bonds shall have been
previously given in accordance with Article III of this Indenture, or in the
event said Bonds are not by their terms subject to redemption within the next
succeeding sixty (60) days, until the Company shall have given the Trustee, in
form satisfactory to the Trustee, irrevocable instructions to notify, as soon as
practicable, the Owners of the Bonds, that the deposit required by (a)(ii) above
has been made with the Trustee and that said Bonds are deemed to have been paid
in accordance with this SECTION 8.02 and stating the maturity or redemption date
upon which
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moneys are to be available for the payment of the principal of and the
applicable redemption premium, if any, on said Bonds, plus interest thereon to
the due date thereof; or (b) the maturity of such Bonds and (c) an opinion of
Bond Counsel shall be delivered to the Trustee and the Issuer that the
defeasance of the Bonds will not adversely affect the tax-exempt status of the
Bonds.
All moneys so deposited with the Trustee as provided in this SECTION
8.02 may also be invested and reinvested, at the direction of the Company, in
noncallable Government Obligations, maturing in the amounts and times as
hereinbefore set forth, and all income from all Government Obligations in the
hands of the Trustee pursuant to this SECTION 8.02 which is not required for the
payment of the Bonds and interest and premium, if any, thereon with respect to
which such moneys shall have been so deposited shall be deposited in the General
Account of the Bond Fund as and when realized and collected for use and
application as are other moneys deposited in the General Account of the Bond
Fund.
The Issuer and the Trustee hereby covenant that no deposit will
knowingly be made or accepted and no use knowingly made of any such deposit
which would cause the Bonds to be treated as arbitrage bonds within the meaning
of Section 148 of the Code.
Notwithstanding any provision of any other article of this Indenture
which may be contrary to the provisions of this SECTION 8.02, all moneys or
Government Obligations set aside and held in trust pursuant to the provisions of
this SECTION 8.02 for the payment of Bonds (including interest and premium
thereon, if any) shall be applied to and used solely for the payment of the
particular Bonds (including the interest and premium thereon, if any) with
respect to which such moneys or Government Obligations have been so set aside in
trust.
ARTICLE IX
DEFAULTS AND REMEDIES
SECTION 9.01. DEFAULTS. If any of the following events occur, it is
hereby declared to constitute a "Default":
(a) Default in the due and punctual payment of interest on any
Bond;
(b) Default in the due and punctual payment of the principal of or
premium, if any, on any Bond, whether at the stated maturity
thereof, or upon proceedings for redemption thereof, or upon
the maturity thereof by declaration;
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(c) Default in the due and punctual payment of the Purchase Price
of any Bond at the time required by SECTION 2.02(C), 4.01,
4.02 OR 4.04 hereof;
(d) At any time prior to the Letter of Credit Termination Date,
receipt by the Trustee, within ten (10) Business Days
following a drawing under the Letter of Credit to pay interest
or the portion of the Purchase Price corresponding to interest
on the Bonds, of written notice from the Bank that the Letter
of Credit will not be reinstated (in respect of interest) to
an amount equal to at least fifty (50) days' interest on all
Outstanding Bonds;
(e) At any time prior to the Letter of Credit Termination Date,
receipt by the Trustee of written notice from the Bank that an
Event of Default has occurred under the Credit Agreement and
instructing the Trustee to accelerate the Bonds;
(f) The occurrence of a Default under the Agreement;
(g) Default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Issuer
in this Indenture or in the Bonds contained and failure to
remedy the same after notice thereof pursuant to SECTION 9.12
hereof.
SECTION 9.02. ACCELERATION. Upon the occurrence of (i) any Default
under subsection (a), (b), (c), (f) or (g) of SECTION 9.01, the Trustee may, and
at the written request of the Owners of not less than twenty-five percent (25%)
in aggregate principal amount of Outstanding Bonds shall, or (ii) any Default
under subsection (d) or (e) of SECTION 9.01, the Trustee shall, by notice in
writing delivered to the Issuer and the Company (and, if the Book-Entry System
is in effect, the Securities Depository), declare the principal of all Bonds and
the interest accrued thereon to the date of such acceleration immediately due
and payable. Upon any declaration of acceleration hereunder, the Trustee shall
immediately declare the payments required to be made by the Company under
SECTION 4.2 of the Agreement to be immediately due and payable and, prior to the
Letter of Credit Termination Date, shall draw moneys under the Letter of Credit
to pay the principal of all Outstanding Bonds and the accrued interest thereon
to the date of acceleration to the extent required by SECTION 6.12(A) hereof.
Interest shall cease to accrue on the Bonds on the date of declaration of
acceleration under this SECTION 9.02.
SECTION 9.03. OTHER REMEDIES; RIGHTS OF OWNERS OF BONDS. Subject to the
provisions of SECTION 9.02 hereof, upon the occurrence of a Default, the Trustee
may pursue any available remedy at law or in equity to enforce the payment of
the principal of, premium, if any, and interest on the Outstanding Bonds.
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Subject to the provisions of SECTION 9.02 hereof, if a Default shall
have occurred and be continuing and if requested so to do by the Owners of
twenty-five percent (25%) in aggregate principal amount of Outstanding Bonds and
provided the Trustee is indemnified as provided in SECTION 10.01(l) hereof, the
Trustee shall be obligated to exercise such one or more of the rights and powers
conferred by this Section and by SECTION 9.02 hereof, as the Trustee, being
advised by counsel, shall deem most expedient in the interests of the Owners of
Bonds.
Subject to the provisions of SECTION 9.02 hereof, no remedy by the
terms of this Indenture conferred upon or reserved to the Trustee (or to the
Owners of Bonds) is intended to be exclusive of any other remedy, but each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given to the Trustee or to the Owners of Bonds hereunder or now or
hereafter existing at law or in equity.
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 of any such Default or acquiescence therein; such right or power may be
exercised from time to time as often as may be deemed expedient.
No waiver of any Default hereunder, whether by the Trustee or by the
Owners of Bonds, shall extend to or shall affect any subsequent Default or shall
impair any rights or remedies consequent thereon.
SECTION 9.04. RIGHT OF OWNERS OF BONDS TO DIRECT PROCEEDINGS. Subject
to the provisions of SECTION 9.02 hereof, anything in this Indenture to the
contrary notwithstanding, the Owners of a majority in aggregate principal amount
of the Outstanding Bonds shall have the right, at any time, by an instrument or
instruments in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken in connection with
the enforcement of the terms and conditions of this Indenture, or for the
appointment of a receiver or any other proceedings hereunder provided that such
direction shall not be otherwise than in accordance with the provisions of law
and of this Indenture.
SECTION 9.05. APPOINTMENT OF RECEIVERS. Upon the occurrence of a
Default, and upon the filing of a suit or other commencement of judicial
proceedings to enforce the rights of the Trustee and of the Owners of Bonds
under this Indenture, the Trustee shall be entitled, as a matter of right, to
the appointment of a receiver or receivers of the Trust Estate and of the
revenues, earnings, income, products and profits thereof, pending such
proceedings, with such powers as the court making such appointment shall confer.
SECTION 9.06. WAIVER. To the extent permitted by law, the Issuer will
not at any time insist upon, plead claim or seek to take advantage of any
appraisement, valuation, stay, extension or redemption law now or hereafter in
force solely for the purpose of preventing or hindering the enforcement of this
Indenture, and the Issuer, for itself and
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all who may claim through or under it, so far as it or they now or hereafter may
lawfully do so, hereby waives the benefit of all such laws. The Issuer, for
itself and all who may claim under it waives, to the extent that it lawfully may
do so, all right to have the property in the Trust Estate marshalled upon any
enforcement hereof.
SECTION 9.07. APPLICATION OF MONEYS. All moneys received by the Trustee
pursuant to any right given or action taken under the provisions of this Article
(other than moneys drawn under the Letter of Credit, which shall be deposited
directly into the Letter of Credit Account of the Bond Fund) shall, after
payment of the costs and expenses of the proceedings resulting in the collection
of such moneys and of the expenses, liabilities and advances owing to or
incurred or made by the Trustee, be deposited in the General Account of the Bond
Fund and the moneys in each account of the Bond Fund shall be applied as
follows:
(a) Unless the principal of all the Bonds shall have become or
shall have been declared due and payable, all such moneys
shall be applied:
FIRST - To the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, in the order
of the maturity of the installments of such interest (with
interest on overdue installments of such interest, to the
extent permitted by law, at the rate of interest borne by the
Bonds) and, if the amount available shall not be sufficient to
pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to
the persons entitled thereto, without any discrimination or
privilege; and
SECOND - To the payment to the persons entitled thereto of the
unpaid principal of and premium, if any, on any of the Bonds
which shall have become due (other than Bonds matured or
called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), (with interest
on overdue installments of principal and premium, if any, to
the extent permitted by law, at the rate of interest borne by
the Bonds) and, if the amount available shall not be
sufficient to pay in full all Bonds due on any particular
date, then to the payment ratably according to the amount of
principal due on such date, to the persons entitled thereto
without any discrimination or privilege; and
THIRD - To the payment to the persons entitled thereto as the
same shall become due of the principal of and premium, if any,
and interest on the Bonds which may thereafter become due and,
if the amount available shall not be sufficient to pay in full
Bonds due on any particular date, together
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with interest and premium, if any, then due and owing thereon,
payment shall be made ratably according to the amount of
interest, principal and premium, if any, due on such date to
the persons entitled thereto without any discrimination or
privilege.
(b) If the principal of all the Bonds shall have become due or
shall have been declared due and payable, all such moneys
shall be applied to the payment of the principal and interest
then due and unpaid upon the Bonds, without preference or
priority of principal over interest or of interest over
principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond,
ratably, according to the amounts due, respectively, for
principal and interest, to the persons entitled thereto
without any discrimination or privilege, with interest on
overdue installments of interest or principal, to the extent
permitted by law, at the rate of interest borne by the Bonds.
(c) If the principal of all the Bonds shall have been declared due
and payable and if such declaration shall thereafter have been
rescinded and annulled under the provisions of this Article,
then, subject to the provisions of SECTION 9.07(b) hereof, in
the event that the principal of all the Bonds shall later
become due or be declared due and payable, the moneys shall be
applied in accordance with the provisions of SECTION 9.07(a)
hereof.
Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times, and from time to time, as
the Trustee shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys becoming
available for such application in the future. Whenever the Trustee shall apply
such funds, it shall fix the date (which shall be an Interest Payment Date
unless it shall deem another date more suitable) upon which such application is
to be made and upon such date interest on the amounts of principal to be paid on
such dates shall cease to accrue; provided, that upon an acceleration of Bonds
pursuant to SECTION 9.02, interest shall cease to accrue on the Bonds on and
after the date of such acceleration. The Trustee shall give such notice as it
may deem appropriate of the deposit with it of any such moneys and of the fixing
of any such date, and shall not be required to make payment to the Owner of any
Bond until such Bond shall be presented to the Trustee for appropriate
endorsement or for cancellation if fully paid.
Whenever the principal of, premium, if any, and interest on all Bonds
have been paid under the provisions of this Section and all expenses and charges
of the Trustee have been paid, any balance remaining in any account of the Bond
Fund shall be paid to the Company or the Bank as provided in SECTION 6.11
hereof.
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Notwithstanding anything to the contrary herein or otherwise, moneys
drawn under the Letter of Credit shall be applied only to the payment of
principal or Purchase Price of and accrued interest on the Bonds.
SECTION 9.08. REMEDIES VESTED IN TRUSTEE. All rights of action
(including the right to file proof of claims) under this Indenture or under any
of the Bonds may be enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any trial or other proceeding relating
thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee without the necessity of joining as plaintiffs or
defendants any Owners of the Bonds, and any recovery of judgment shall be for
the equal and ratable benefit of the Owners of the Outstanding Bonds.
SECTION 9.09. RIGHTS AND REMEDIES OF OWNERS OF BONDS. No Owner of any
Bond shall have any right to institute any suit, action or proceeding at law or
in equity for the enforcement of this Indenture or for the execution of any
trust hereof or for the appointment of a receiver or any other remedy hereunder,
unless (subject to the provisions of SECTION 9.02 hereof) (i) a Default has
occurred of which the Trustee has been notified as provided in SECTION 10.01(h)
hereof, or of which by said subsection it is deemed to have notice, (ii) the
Owners of twenty-five percent (25%) in aggregate principal amount of Outstanding
Bonds shall have made written request to the Trustee and shall have offered it
reasonable opportunity either to proceed to exercise the powers hereinbefore
granted or to institute such action, suit or proceeding and shall have offered
to the Trustee indemnity as provided in SECTION 10.01(l), and (iii) the Trustee
shall thereafter fail or refuse to exercise the powers hereinbefore granted, or
to institute such action, suit or proceeding. Such notification, request and
offer of indemnity are hereby declared in every case at the option of the
Trustee to be conditions precedent to the execution of the powers and trusts of
this Indenture, and to any action or cause of action for the enforcement of this
Indenture, or for the appointment of a receiver or for any other remedy
hereunder; it being understood and intended that no one or more Owners of the
Bonds shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien of this Indenture by their action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or equity shall be instituted, had and maintained in the manner herein provided
and for the equal and ratable benefit of the Owners of all Outstanding Bonds.
However, nothing contained in this Indenture shall affect or impair the right of
any Owner of Bonds to enforce the payment of the principal or Purchase Price of,
premium, if any, and interest on any Bond at and after the maturity thereof, or
the obligation of the Issuer to pay the principal of, premium, if any, and
interest on each of the Bonds issued hereunder to the respective Owners thereof
at the time and place, from the source and in the manner in the Bonds expressed.
No Owner of any Bond shall have any right to institute any suit, action or
proceeding at equity or at law to enforce a drawing under the Letter of Credit.
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SECTION 9.10. TERMINATION OF PROCEEDINGS. In case the Trustee shall
have proceeded to enforce any right under this Indenture by the appointment of a
receiver or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case, the Issuer, the Trustee and the Owners of Bonds shall be
restored to their former positions and rights hereunder, respectively, with
regard to the property subject to this Indenture, and all rights, remedies and
powers of the Trustee shall continue as if no such proceedings had been taken.
SECTION 9.11. WAIVERS OF DEFAULT. The Trustee shall waive any Default
hereunder and its consequences and rescind any declaration of acceleration of
principal upon the written request of the Owners of (a) more than two-thirds
(2/3) in aggregate principal amount of all Outstanding Bonds in respect of which
default in the payment of principal or interest, or both, exists or (b) more
than two-thirds (2/3) in aggregate principal amount of Outstanding Bonds in the
case of any other Default; PROVIDED, HOWEVER, that there shall not be waived any
Default hereunder unless and until the Trustee shall have received written
notice from the Bank that the Letter of Credit has been reinstated in full; and
PROVIDED FURTHER that any Default under subsection (e) of SECTION 9.01 hereof
may only be waived upon the written request of the Bank (and in such case the
consent of the Owners of the Bonds shall not be required); and PROVIDED FURTHER
that there shall not be waived any Default specified in subsection (a) or (b) of
SECTION 9.01 hereof unless prior to such waiver or rescission, the Company shall
have caused to be paid to the Trustee (i) all arrears of principal and interest
(other than principal of or interest on the Bonds which became due and payable
by declaration of acceleration), with interest at the rate then borne by the
Bonds on overdue installments, to the extent permitted by law, and (ii) all
expenses of the Trustee in connection with such Default. In case of any waiver
or rescission described above, or in case any proceeding taken by the Trustee on
account of any such Default shall have been discontinued or concluded or
determined adversely, then and in every such case the Issuer, the Trustee and
the Owners of Bonds shall be restored to their former positions and rights
hereunder, respectively, but no such waiver or rescission shall extend to any
subsequent or other Default, or impair any right consequent thereon.
Notwithstanding the foregoing, no waiver, rescission or annulment of a
Default hereunder shall be made without the Bank's consent if the Bank shall
theretofore have honored in full a drawing under the Letter of Credit in respect
of such Default.
SECTION 9.12. NOTICE OF DEFAULTS UNDER SECTION 9.01(g); OPPORTUNITY TO
CURE SUCH DEFAULTS. Anything herein to the contrary notwithstanding, no Default
under SECTION 9.01(g) hereof shall be deemed a Default until notice of such
Default shall be given to the Issuer and the Company by the Trustee or by the
Owners of not less than twenty-five percent (25%) in aggregate principal amount
of all Outstanding Bonds, and the Issuer and the Company shall have had thirty
(30) days after receipt of such notice to correct said Default or to cause said
Default to be corrected and shall not have
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corrected said Default or caused said Default to be corrected within the
applicable period; provided, however, if said Default be such that it cannot be
corrected within the applicable period, it shall not constitute a Default if
corrective action is instituted by the Issuer or the Company within the
applicable period and diligently pursued until the Default is corrected.
With regard to any Default concerning which notice is given to the
Issuer and the Company under the provisions of this Section, the Issuer hereby
grants the Company full authority for the account of the Issuer to perform any
covenant or obligation alleged in said notice to constitute a Default, in the
name and stead of the Issuer with full power to do any and all things and acts
to the same extent that the Issuer could do and perform any such things and acts
and with power of substitution.
SECTION 9.13. SUBROGATION RIGHTS OF BANK. The Bank shall be subrogated
to the rights possessed under this Indenture by the Owners of the Bonds, to the
extent the Letter of Credit is drawn upon and the amount of such drawing is not
subsequently reimbursed to the Bank. For purposes of the subrogation rights of
the Bank hereunder, (a) any reference herein to the Owners of the Bonds shall
mean the Bank, (b) any principal of or interest on the Bonds paid with moneys
collected pursuant to the Letter of Credit shall be deemed to be unpaid
hereunder, and (c) the Bank may exercise any rights it would have hereunder as
the Owner of the Bonds. The subrogation rights granted to the Bank in this
Indenture are not intended to be exclusive of any other remedy or remedies
available to the Bank and such subrogation rights shall be cumulative and shall
be in addition to every other remedy given hereunder, under the Credit Agreement
or under any other instrument or agreement with respect to the reimbursement of
moneys paid by the Bank under the Letter of Credit or with respect to the
security for the obligations of the Company under the Credit Agreement, and
every other remedy now or hereafter existing at law or in equity or by statute.
SECTION 9.14. SALE OF ISSUER'S INTEREST IN THE PROJECT IN EVENT OF
DEFAULT. If an Event of Default shall have occurred, and subject to the rights
of the Company under the Agreement, the Issuer shall, upon the request and at
the written direction of the Trustee (given at the written direction of the
Owners of twenty-five percent (25%) of the Bonds Outstanding), sell its interest
in the Project or any part or parts thereof (which sale may be to the Bondowners
for cash or in consideration for the forgiveness of all or any portion of the
amounts owed in respect of the Bonds or otherwise under this Indenture or both),
and shall cooperate with the Trustee in the offering for sale and sale of its
interest in the Project, including the employing of such brokers or agents, the
making of such repairs and improvements to the Project, and the taking of such
other actions as shall, in the judgment of the Trustee, be necessary or
appropriate in connection therewith. The net proceeds of such sale, after
deducting all of the Issuer's and Trustee's reasonable fees, charges, costs,
advances and expenses in or in connection therewith, including without
limitation, all repossession costs, brokerage commissions, legal
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expenses and expenses of preparation for sale, shall be deposited in the Bond
Fund and applied as provided in SECTION 9.07 hereof. The Issuer shall not be
required to incur any costs in connection with such offer for sale or sale,
other than those to be paid out of the proceeds of sale or out of funds advanced
by the Bondowners for such purposes.
ARTICLE X
TRUSTEE AND TENDER AGENT
SECTION 10.01. ACCEPTANCE OF TRUSTS. The Trustee hereby accepts the
trusts imposed upon it by this Indenture, and agrees to perform said trusts, but
only upon and subject to the following express terms and conditions:
(a) The Trustee, prior to the occurrence of a Default and after
the curing of all Defaults which may have occurred, undertakes
to perform such duties and only such duties as are
specifically set forth in this Indenture and the Agreement. In
case a Default has occurred (which has not been cured or
waived), the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree
of care and skill in the exercise of such rights and powers as
an ordinary, prudent person would exercise or use in the
conduct of such person's own affairs.
(b) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents,
receivers or employees, but shall not be answerable for the
conduct of the same if appointed with due care, and shall be
entitled to advice of counsel concerning its duties hereunder,
and may in all cases pay such reasonable compensation to all
such attorneys, agents, receivers and employees as may
reasonably be employed in connection with the trusts hereof.
The Trustee may act upon the opinion or advice of any attorney
(who may be the attorney or attorneys for the Issuer or the
Company) selected by the Trustee in the exercise of reasonable
care. The Trustee shall not be responsible for any loss or
damage resulting from any action or inaction taken or not
taken, as the case may be, in good faith in reliance upon such
opinion or advice.
(c) The Trustee shall not be responsible for any recital herein or
in the Bonds (except with respect to the certificate of
authentication endorsed on the Bonds), or for insuring the
Project, or for collecting any insurance moneys, or for the
validity of the execution by the Issuer of this Indenture or
of any supplements hereto or instruments of further assurance,
or for the sufficiency of the security for the Bonds issued
hereunder or intended to be secured hereby, or for the value
or title of the Project or any lien waivers with respect to
the Project, and the Trustee shall not be bound to
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ascertain or inquire as to the performance or observance of
any covenants, conditions or agreements on the part of the
Company under the Agreement except as hereinafter set forth;
but the Trustee may require of the Issuer and the Company full
information and advice as to the performance of the aforesaid
covenants, conditions and agreements.
(d) The Trustee shall not be accountable for the use of any Bonds
authenticated or delivered hereunder. The Trustee may become
the Owner of Bonds secured hereby with the same rights which
it would have if not the Trustee hereunder.
(e) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter,
telegram or other paper or document believed to be genuine and
correct and to have been signed or sent by the proper person
or persons. Any action taken by the Trustee pursuant to this
Indenture upon the request or authority or consent of any
person who at the time of making such request or giving such
authority or consent is the Owner of any Bond shall be
conclusive and binding upon all future owners of the same Bond
and upon Bonds issued in exchange therefor or in place
thereof.
(f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or
proceeding, the Trustee shall be entitled to rely upon a
certificate signed by an Issuer Representative or a Company
Representative as sufficient evidence of the facts therein
contained and prior to the occurrence of a Default of which
the Trustee has been notified as provided in SECTION 10.01(h)
hereof, or of which by said subsection the Trustee is deemed
to have notice, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing,
transaction or action is necessary or expedient, but may at
its discretion secure such further evidence deemed by it to be
necessary or advisable, but shall in no case be bound to
secure the same. The Trustee may accept a certificate of such
officials of the Issuer who executed the Bonds (or their
successors in office) to the effect that a resolution in the
form therein set forth has been adopted by the Issuer as
conclusive evidence that such resolution has been duly adopted
and is in full force and effect.
(g) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence
or willful default.
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(h) The Trustee shall not be required to take notice or be deemed
to have notice of any Default hereunder except for Defaults
specified in subsections (a), (b), (c), (d) or (e) of SECTION
9.01 hereof, unless the Trustee shall be specifically notified
in writing of such Default by the Issuer, the Bank or by the
Owners of at least twenty-five percent (25%) in aggregate
principal amount of Outstanding Bonds, and all notices or
other instruments required by this Indenture to be delivered
to the Trustee, must, in order to be effective, be delivered
at the Principal Office of the Trustee, and in the absence of
such notice so delivered the Trustee may conclusively assume
there is no Default except as aforesaid.
(i) At any and all reasonable times the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants
and representatives, shall have the right fully to inspect all
books and records of the Issuer pertaining to the Project and
the Bonds, and to make such copies and memoranda from and with
regard thereto as may be desired.
(j) The Trustee shall not be required to give any bond or surety
in respect of the execution of this Indenture or otherwise in
respect of the premises.
(k) Notwithstanding anything elsewhere in this Indenture with
respect to the authentication of any Bonds, the withdrawal of
any cash, the release of any property or any action whatsoever
within the purview of this Indenture, the Trustee shall have
the right, but shall not be required, to demand any showings,
certificates, opinions, appraisals or other information, or
corporate action or evidence thereof, in addition to that by
the terms hereof required as a condition of such action,
deemed desirable by the Trustee for the purpose of
establishing the right of the Issuer to the authentication of
any Bonds, the withdrawal of any cash or the taking of any
other action.
(l) Before taking any action under this Indenture or under the
Agreement (other than (i) paying the principal or Purchase
Price of, redemption premium (if any) and interest on the
Bonds as the same shall become due and payable, (ii) drawing
upon the Letter of Credit, and (iii) declaring an acceleration
under SECTION 9.02 as a result of a Default under SECTION
9.01(d) OR (e)), the Trustee may require that a satisfactory
indemnity bond be furnished for the reimbursement of any
expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have
resulted from its negligence or willful default in connection
with any such action.
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(m) All moneys received by the Trustee shall, until used or
applied or invested as herein provided, be held in trust for
the purposes for which they were received but need not be
segregated from other funds except to the extent otherwise
required herein or required by law.
SECTION 10.02. FEES, CHARGES AND EXPENSES OF THE TRUSTEE. The Trustee
shall be entitled to payment of reasonable fees for its services rendered
hereunder and reimbursement of all advances, counsel fees and other expenses
reasonably made or incurred by the Trustee in connection with such services.
Upon the occurrence of a Default, but only upon the occurrence of a Default, the
Trustee shall have a first lien with right of payment prior to payment on
account of principal of, premium, if any, and interest on any Bond upon the
Trust Estate (exclusive of the proceeds of any drawing under the Letter of
Credit, proceeds of the remarketing of the Bonds and funds held by the Trustee
for matured and unpresented Bonds) for the foregoing fees, charges and expenses
of the Trustee. When the Trustee incurs expenses or renders services after the
occurrence of an Act of Bankruptcy with respect to the Company, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any federal or state bankruptcy, insolvency, arrangement,
moratorium, reorganization or other debtor relief law. The Issuer shall have no
liability to pay any fees, charges or other expenses of the Trustee hereinabove
mentioned except from the amounts pledged under this Indenture.
SECTION 10.03. NOTICE TO OWNERS OF BONDS IF DEFAULT OCCURS. If a
Default occurs of which the Trustee has been notified as provided in SECTION
10.01(h) hereof, or of which by said subsection it is deemed to have notice,
then the Trustee shall promptly give notice thereof to the Bank and to the Owner
of each Bond.
SECTION 10.04. INTERVENTION BY THE TRUSTEE. In any judicial proceeding
which in the opinion of the Trustee and its counsel has a substantial bearing on
the interests of the Owners of the Bonds, the Trustee may intervene on behalf of
the Owners of the Bonds and shall do so if requested in writing by the Bank or
the Owners of at least twenty-five percent (25%) of the aggregate principal
amount of Outstanding Bonds.
SECTION 10.05. SUCCESSOR TRUSTEE. Any corporation or association into
which the Trustee may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, shall be and become successor Trustee hereunder and vested
with all of the title to the Trust Estate and all the trusts, powers,
discretions, immunities, privileges and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
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SECTION 10.06. RESIGNATION BY THE TRUSTEE. The Trustee and any
successor Trustee may at any time resign from the trusts hereby created by
giving thirty (30) days' notice to the Issuer, the Bank, the Tender Agent, the
Remarketing Agent, the Company, and the Owner of each Bond. Such resignation
shall not take effect until the appointment of a successor Trustee or temporary
Trustee.
SECTION 10.07. REMOVAL OF THE TRUSTEE. The Trustee may be removed at
any time by an instrument in writing signed by the Issuer delivered to the
Trustee or by an instrument or concurrent instruments in writing delivered to
the Trustee and to the Issuer and signed by the Owners of a majority in
aggregate principal amount of Outstanding Bonds. Such removal shall not take
effect until the appointment of a successor Trustee or temporary Trustee.
SECTION 10.08. APPOINTMENT OF SUCCESSOR TRUSTEE BY OWNERS OF BONDS. In
case the Trustee hereunder shall resign or be removed, or be dissolved, or shall
be in the course of dissolution or liquidation, or otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers, or of a receiver appointed by a court, a successor may be
appointed by the Owners of a majority in aggregate principal amount of
Outstanding Bonds by an instrument or concurrent instruments in writing signed
by such Owners, or by their attorneys-in-fact duly authorized, a copy of which
shall be delivered personally or sent by registered mail to the Issuer, the
Company, the Tender Agent and the Bank. In case of any such vacancy, the Issuer,
by an instrument executed by its official who executed the Bonds or said
official's successor in office, may appoint a temporary successor Trustee to
fill such vacancy until a successor Trustee shall be appointed by the Owners of
Bonds in the manner above provided; and such temporary successor Trustee so
appointed by the Issuer shall immediately and without further act be superseded
by the Trustee appointed by the Owners of Bonds. If no successor Trustee has
accepted appointment in the manner provided in SECTION 10.09 hereof within sixty
(60) days after the Trustee has given notice of resignation to the Issuer and
the Owner of each Bond, the Trustee may petition any court of competent
jurisdiction for the appointment of a temporary successor Trustee; provided that
any Trustee so appointed shall immediately and without further act be superseded
by a Trustee appointed by the Issuer or the Owners of Bonds as provided above.
Every successor Trustee appointed pursuant to the provisions of this Section
shall be, if there be such an institution willing, qualified and able to accept
the trust upon customary terms, a bank or trust company within or without the
State, in good standing and having or be wholly owned by an entity having
reported capital and surplus of not less than $50,000,000 and rated Baa3/Prime-3
or better by Moody's (or a substantially equivalent rating by such other rating
agency then providing the rating borne by the Bonds).
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SECTION 10.09. ACCEPTANCE BY SUCCESSOR TRUSTEE. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and also to the Issuer and the Company an instrument in writing accepting such
appointment hereunder and thereupon such successor, without any further act,
deed or conveyance, shall become fully vested with all the estates, properties,
rights, powers, trusts, duties and obligations of its predecessor; but its
predecessor shall, nevertheless, on the written request of the Issuer, or of its
successor, execute and deliver an instrument transferring to such successor all
the estates, properties, rights, powers and trusts of such predecessor
hereunder; and every predecessor Trustee shall deliver all securities and moneys
held by it as Trustee hereunder to its successor. Should any instrument in
writing from the Issuer be required by any successor Trustee for more fully and
certainly vesting in such successor the estate, rights, powers and duties hereby
vested or intended to be vested in the predecessor, any and all such instruments
in writing shall, on request, be executed, acknowledged and delivered by the
Issuer.
SECTION 10.10. APPOINTMENT OF CO-TRUSTEE. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
(including particularly the laws of the State) denying or restricting the right
of banking corporations or associations to transact business as Trustee in such
jurisdiction. It is recognized that in case of litigation under this Indenture
or the Agreement, and in particular in case of the enforcement thereof on
Default, or in case the Trustee deems that by reason of any present or future
law of any jurisdiction it may not exercise any of the powers, rights or
remedies herein or therein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any other action which may be
desirable or necessary in connection therewith, the Trustee may appoint an
additional individual or institution as a separate or Co-Trustee, in which event
each and every remedy, power, right, claim, demand, cause of action, immunity,
estate, title, interest and lien expressed or intended by this Indenture or the
Agreement to be exercised by or vested in or conveyed to the Trustee with
respect thereto shall be exercisable by and vest in such separate or Co-Trustee,
but only to the extent necessary to enable such separate or Co-Trustee to
exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such separate or Co-Trustee shall run to
and be enforceable by either of them.
Should any deed, conveyance or instrument in writing from the Issuer be
required by the separate or Co-Trustee so appointed by the Trustee for more
fully and certainly vesting in and confirming to it such properties, rights,
powers, trusts, duties and obligations, any and all such deeds, conveyances and
instruments in writing shall, on request, be executed, acknowledged and
delivered by the Issuer. In case any separate or Co-Trustee, or a successor,
shall die, become incapable of acting, resign or be removed, all the estates,
properties, rights, powers, trusts, duties and obligations of such separate or
Co-Trustee, so far as permitted by law, shall vest in and be exercised by the
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Trustee until the appointment of a successor to such separate or Co-Trustee. Any
Co-Trustee appointed by the Trustee pursuant to this Section may be removed by
the Trustee, in which case all powers, rights and remedies vested in the
Co-Trustee shall again vest in the Trustee as if no such appointment of a
Co-Trustee had been made.
SECTION 10.11. SUCCESSOR TENDER AGENT; APPOINTMENT OF CO-TENDER AGENT.
(a) Any corporation or association into which the Tender Agent may
be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer its trust business and
assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which it is a
party, shall be and become the successor Tender Agent
hereunder, without the execution or filing of any instrument
or any further act, deed or conveyance on the part of any of
the parties hereto, anything herein to the contrary
notwithstanding.
(b) The Tender Agent may at any time resign by giving thirty (30)
days' notice to the Issuer, the Trustee, the Company and the
Remarketing Agent. Such resignation shall not take effect
until the appointment of a successor Tender Agent.
(c) The Tender Agent may be removed at any time by an instrument
in writing delivered to the Trustee and the Tender Agent by
the Issuer or the Company, with the prior written approval of
the Bank. In no event, however, shall any removal of the
Tender Agent take effect until a successor Tender Agent shall
have been appointed.
(d) In case the Tender Agent shall resign or be removed, or be
dissolved, or shall be in the course of dissolution or
liquidation, or otherwise become incapable of acting as Tender
Agent, or in case it shall be taken under the control of any
public officer or officers, or of a receiver appointed by a
court, a successor may be appointed by the Company with the
prior written approval of the Issuer and the Bank. Every
successor Tender Agent appointed pursuant to the provisions of
this Section shall be, if there be such an institution
willing, qualified and able to accept the duties of the Tender
Agent upon customary terms, a bank or trust company within or
without the State, in good standing and having reported
capital and surplus of not less than $50,000,000 and rated
Baa3/Prime-3 or better by Moody's (or a substantially
equivalent rating by such other rating agency then providing
the rating borne by the Bonds). Any such successor shall be
acceptable to the Issuer and the Trustee. Written notice of
such appointment shall immediately be given by the Company to
the Trustee and the Trustee shall cause written notice of such
appointment to be given
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to the Owners of the Bonds. Any successor Tender Agent shall
execute and deliver an instrument accepting such appointment
and thereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all rights, powers,
duties and obligations of its predecessor, with like effect as
if originally named as Tender Agent, but such predecessor
shall nevertheless, on the written request of the Company, the
Trustee or the Issuer, or of the successor, execute and
deliver such instruments and do such other things as may
reasonably be required to more fully and certainly vest and
confirm in such successor all rights, powers, duties and
obligations of such predecessor. If no successor Tender Agent
has accepted appointment in the manner provided above within
90 days after the Tender Agent has given notice of its
resignation as provided above, the Tender Agent may petition
any court of competent jurisdiction for the appointment of a
temporary successor Tender Agent; provided that any Tender
Agent so appointed shall immediately and without further act
be superseded by a Tender Agent appointed by the Company as
provided above.
(e) In the event the Tender Agent shall determine at any time that
the duties and obligations of the Tender Agent described
herein and in the Tender Agent Agreement require the
appointment of a Co-Tender Agent, the Tender Agent may appoint
an additional institution as a separate or Co-Tender Agent, in
which event each and every remedy, power, right, claim,
demand, cause of action, immunity and interest expressed or
intended by this Indenture and by the Tender Agent Agreement
to be exercised by or conveyed to the Tender Agent with
respect thereto shall be exercisable by and vest in such
separate or Co-Tender Agent, but only to the extent necessary
to enable such separate or Co-Tender Agent to exercise such
powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such separate or
Co-Tender Agent shall run to and be enforceable by either of
them. Such Co-Tender Agent shall be acceptable so long as it
satisfies the requirements set forth above with respect to the
appointment of a successor Tender Agent.
SECTION 10.12. SUCCESSOR REMARKETING AGENT.
(a) Any corporation or association into which the Remarketing
Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its business
and assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which it is a
party,
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shall be and become the successor Remarketing Agent hereunder,
without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary
notwithstanding.
(b) The Remarketing Agent may at any time resign by giving thirty
(30) days' notice to the Issuer, the Trustee, the Bank, the
Company and the Tender Agent. Such resignation shall not take
effect until the appointment of a successor Remarketing Agent.
(c) The Remarketing Agent may be removed at any time by an
instrument in writing delivered to the Trustee and the Tender
Agent by the Company, with the prior written approval of the
Bank. In no event, however, shall any removal of the
Remarketing Agent take effect until a successor Remarketing
Agent shall have been appointed.
(d) In case the Remarketing Agent shall resign or be removed, or
be dissolved, or shall be in the course of dissolution or
liquidation, or otherwise become incapable of acting as
Remarketing Agent, or in case it shall be taken under the
control of any public officer or officers, or of a receiver
appointed by a court, a successor may be appointed by the
Company with the prior written approval of the Issuer and the
Bank. Every successor Remarketing Agent appointed pursuant to
the provisions of this Section shall be, if there be such an
institution willing, qualified and able to accept the duties
of the Remarketing Agent upon customary terms, a bank or trust
company or any entity rated Baa3/Prime-3 or better, within or
without the State, in good standing and having reported
capital and surplus of not less than $10,000,000 and rated
Baa3/Prime-3 or better by Moody's (or a substantially
equivalent rating by such other rating agency then providing
the rating borne by the Bonds). Any such successor shall be
acceptable to the Issuer and Trustee. Written notice of such
appointment shall immediately be given by the Company to the
Trustee and the Trustee shall cause written notice of such
appointment to be given to the Owners of the Bonds. Any
successor Remarketing Agent shall execute and deliver an
instrument accepting such appointment and thereupon such
successor, without any further act, deed or conveyance, shall
become fully vested with all rights, powers, duties and
obligations of its predecessor, with like effect as if
originally named as Remarketing Agent, but such predecessor
shall nevertheless, on the written request of the Company, the
Trustee or the Issuer, or of the successor, execute and
deliver such instruments and do such other things as may
reasonably be required to more fully and certainly vest and
confirm in such successor all rights, powers, duties and
obligations of such predecessor. If no successor Remarketing
Agent has accepted appointment in the manner provided
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above within 90 days after the Remarketing Agent has given
notice of its resignation as provided above, the Remarketing
Agent may petition any court of competent jurisdiction for the
appointment of a temporary successor Remarketing Agent;
provided that any Remarketing Agent so appointed shall
immediately and without further act be superseded by a
Remarketing Agent appointed by the Company as provided above.
SECTION 10.13. NOTICE TO RATING AGENCIES. The Trustee shall provide
Moody's or S&P, as appropriate, so long as either of such rating agencies shall
provide the rating borne by the Bonds, with prompt written notice following the
effective date of such event of (a) any successor Trustee, any successor Tender
Agent, and any successor Remarketing Agent, (b) any Substitute Bank, (c) any
material amendments to this Indenture or the Agreement, (d) the expiration or
termination of any Letter of Credit, (e) the conversion of the interest rate
borne by the Bonds from the Adjustable Rate to the Fixed Rate, (f) a change in
the duration of the Interest Period (and the duration of the new Interest
Period), (g) the occurrence of a Mandatory Tender Date, or (h) the redemption in
whole of the Bonds or the payment in full of the Bonds at maturity.
SECTION 10.14 NOTICE TO BONDOWNERS. Pursuant to SECTION 4.4 of the
Agreement, the Company may provide for the delivery to the Trustee of a
Substitute Letter of Credit, in accordance with the terms set forth in the
Agreement. The Company has agreed that it will promptly notify the Trustee of
its intention to deliver a Substitute Letter of Credit. Upon receipt of such
notice, the Trustee will promptly mail a notice of the anticipated delivery of a
Substitute Letter of Credit by first-class mail to the Issuer, the Remarketing
Agent and each Bondowner at the Owner's registered address, which notice must be
mailed not later than the date of the notice of mandatory tender as described in
this Indenture.
ARTICLE XI
SUPPLEMENTAL INDENTURES
SECTION 11.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF OWNERS
OF BONDS. The Issuer and the Trustee may, with the consent of the Bank and upon
receipt of an opinion of Bond Counsel to the effect that the proposed
supplemental indenture will not adversely affect the excludability of interest
on the Bonds from gross income for federal income tax purposes and is authorized
by this Indenture, and without consent of, or notice to, any of the Owners of
Bonds, enter into an indenture or indentures supplemental to this Indenture for
any one or more of the following purposes:
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(a) To cure any ambiguity or formal defect or omission in this
Indenture;
(b) To grant to or confer upon the Trustee for the benefit of the
Owners of Bonds any additional rights, remedies, powers or
authorities that may lawfully be granted to or conferred upon
the Owners of Bonds or the Trustee;
(c) To subject to this Indenture additional revenues, properties
or collateral;
(d) To modify, amend or supplement this Indenture or any indenture
supplemental hereof in such manner as to permit the
qualification hereof and thereof under the Trust Indenture Act
of 1939, as amended, or any similar federal statute hereafter
in effect or to permit the qualification of the Bonds for sale
under the securities laws of any of the states of the United
States of America;
(e) To evidence the appointment of a separate or Co-Trustee or the
succession of a new Trustee hereunder;
(f) To correct any description of, or to reflect changes in, any
of the properties comprising the Trust Estate;
(g) To make any revisions of this Indenture that shall be required
by Moody's or S&P in order to obtain or maintain an investment
grade rating on the Bonds;
(h) To provide for an uncertificated system of registering the
Bonds or to provide for changes to or from the Book-Entry
System; or
(i) To effect any other change herein which, in the judgment of
the Issuer, is not materially prejudicial to the Trustee or
the Owners of Bonds; or
(j) To conform this Indenture to the Code or other future
applicable federal law concerning tax-exempt obligations.
In the event S&P and/or Moody's has issued a rating of any of the
Bonds, S&P and/or Moody's, as the case may be, shall receive prior written
notice from the Trustee of the proposed amendment but such notice shall not be a
condition of the effectiveness of such amendment.
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SECTION 11.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF OWNERS OF
BONDS. Exclusive of supplemental indentures permitted by SECTION 11.01 hereof
and subject to the terms and provisions contained in this Section, and not
otherwise, the Bank and the Owners of not less than two-thirds (2/3) in
aggregate principal amount of the Outstanding Bonds shall have the right, from
time to time, anything contained in this Indenture to the contrary
notwithstanding, to consent to and approve the execution by the Issuer and the
Trustee of such other indenture or indentures supplemental hereto as shall be
deemed necessary and desirable for the purpose of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions
contained in this Indenture or in any supplemental indenture; provided, however,
that nothing in this Section or in SECTION 11.01 hereof contained shall permit,
or be construed as permitting, without the consent of the Bank and the Owners of
all Bonds Outstanding, (a) an extension of the maturity of the principal of, or
the interest on, any bond issued hereunder, or (b) a reduction in the principal
amount or Purchase Price of, or redemption premium on, any Bond or the rate of
interest thereon, or (c) a privilege or priority of any Bond or Bonds over any
other Bond or Bonds, or (d) a reduction in the aggregate principal amount of the
Bonds required for consent to such supplemental indentures or any modifications
or waivers of the provisions of this Indenture or the Agreement, or (e) the
creation of any lien ranking prior to or on a parity with the lien of this
Indenture on the Trust Estate or any part thereof, except as hereinbefore
expressly permitted, or (f) the deprivation of the Owner of any Outstanding Bond
of the lien hereby created on the Trust Estate.
If at any time the Issuer shall request the Trustee to enter into any
such supplemental indenture for any of the purposes of this Section, the Trustee
shall, upon being satisfactorily indemnified with respect to expenses, cause
notice of the proposed execution of such supplemental indenture to be given to
the Bank and to the Owners of the Bonds as provided in SECTION 3.04 of this
Indenture; provided, that prior to the delivery of such notice, the Trustee may
require that an opinion of Bond Counsel be furnished to the effect that the
supplemental indenture complies with the provisions of this Indenture and will
not adversely affect the excludability of interest on the Bonds from gross
income for federal income tax purposes. Such notice shall briefly set forth the
nature of the proposed supplemental indenture and shall state that copies
thereof are on file at the Principal Office of the Trustee for inspection by all
Owners of Bonds. If, within sixty (60) days or such longer period as shall be
prescribed by the Issuer following such notice, the Bank and the Owners of not
less than two-thirds (2/3) in aggregate principal amount of the Bonds
Outstanding at the time of the execution of any such supplemental indenture
shall have consented to and approved the execution thereof as herein provided,
no Owner of any Bond shall have any right to object to any of the terms and
provisions contained therein, or the operation thereof, or in any manner to
question the propriety of the execution thereof, or to enjoin or restrain the
Trustee or the
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Issuer from executing the same or from taking any action pursuant to the
provisions thereof. Upon the execution of any such supplemental indenture as in
this Section permitted and provided, this Indenture shall be and be deemed to be
modified and amended in accordance therewith.
Anything herein to the contrary notwithstanding, a supplemental
indenture under this Article which affects any rights of the Company shall not
become effective unless and until the Company shall have consented to the
execution and delivery of such supplemental indenture. In this regard, the
Trustee shall cause notice of the proposed execution of any such supplemental
indenture together with a copy of the proposed supplemental indenture to be
mailed to the Company at least fifteen (15) Business Days prior to the proposed
date of execution and delivery of any such supplemental indenture.
In the event S&P and/or Moody's has issued a rating of any of the
Bonds, S&P and/or Moody's, as the case may be, shall receive prior written
notice from the Trustee of the proposed amendment but such notice shall not be a
condition of the effectiveness of such amendment.
ARTICLE XII
AMENDMENT OF AGREEMENT
SECTION 12.01. AMENDMENTS TO AGREEMENT NOT REQUIRING CONSENT OF OWNERS
OF BONDS. The Issuer and the Trustee may, with the consent of the Bank and upon
receipt of an opinion of Bond Counsel to the effect that the proposed amendment
will not adversely affect the excludability of interest on the Bonds from gross
income for federal income tax purposes and is authorized by this Indenture, and
without the consent of or notice to the Owners of Bonds, consent to any
amendment, change or modification of the Agreement as may be required (a) by the
provisions of the Agreement, (b) for the purpose of curing any ambiguity or
formal defect or omission in the Agreement, (c) so as to more precisely identify
the Project, or to substitute or add additional improvements or equipment to the
Project or additional rights or interests in property acquired in accordance
with the provisions of the Agreement, (d) to enter into an indenture or
indentures supplemental hereto as provided in SECTION 11.01 hereof, (e) to make
any revisions that shall be required by Moody's and/or S&P in order to obtain or
maintain an investment grade rating on the Bonds, (f) in connection with any
other change therein which, in the judgment of the Trustee, is not materially
prejudicial the Trustee or the Owners of Bonds, or (g) to conform the Agreement
to the Code or other future applicable federal law concerning tax-exempt
obligations.
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SECTION 12.02. AMENDMENTS TO AGREEMENT REQUIRING CONSENT OF OWNERS OF
BONDS. Except for the amendments, changes or modifications as provided in
SECTION 12.01 hereof, neither the Issuer nor the Trustee shall consent to any
other amendment, change or modification of the Agreement without mailing of
notice and the written approval or consent of the Bank and the Owners of at
least two-thirds (2/3) in aggregate principal amount of the Outstanding Bonds,
provided that the consent of the Bank and the Owners of all Bonds Outstanding is
required for any amendment, change or modification of the Agreement that would
permit the termination or cancellation of the Agreement or a reduction in or
postponement of the payments under the Agreement or any change in the provisions
relating to payment thereunder. If at any time the Issuer and the Company shall
request the consent of the Trustee to any such proposed amendment, change or
modification of the Agreement, the Trustee shall, upon being satisfactorily
indemnified by the Company with respect to expenses, cause notice of such
proposed amendment, change or modification to be given in the same manner as
provided by SECTION 11.02 hereof with respect to supplemental indentures;
provided, that prior to the delivery of such notice or request, the Trustee and
the Issuer may require that an opinion of Bond Counsel be furnished to the
effect that such amendment, change or modification complies with the provisions
of this Indenture and will not adversely affect the excludability of interest on
the Bonds from gross income for federal income tax purposes. Such notice shall
briefly set forth the nature of such proposed amendment, change or modification
and shall state that copies of the instrument embodying the same are on file at
the Principal Office of the Trustee for inspection by all Owners of Bonds.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. CONSENTS OF OWNERS OF BONDS. Any consent, request,
direction, approval, objection or other instrument required by this Indenture to
be signed and executed by the Owners of Bonds may be in any number of concurrent
documents and may be executed by such Owners of Bonds in person or by agent
appointed in writing. Proof of the execution of any such consent, request,
direction, approval, objection or other instrument or of the written appointment
of any such agent or of the ownership of Bonds, if made in the following manner,
shall be sufficient for any of the purposes of this Indenture, and shall be
conclusive in favor of the Trustee with regard to any action taken by it under
such request or other instrument. The fact and date of the execution by any
person of any such instrument or writing may be proved by the affidavit of a
witness of such execution or by an officer authorized by law to take
acknowledgments of deeds certifying that the person signing such instrument or
writing acknowledged to him the execution thereof. The fact of ownership of
Bonds and the amount or amounts, numbers and other identification of such Bonds,
and the date of owning the same shall be proved by the registration books of the
Issuer maintained by the Trustee pursuant to SECTION 2.08 hereof.
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SECTION 13.02. LIMITATION OF RIGHTS. With the exception of any rights
herein expressly conferred, nothing expressed or mentioned in or to be implied
from this Indenture or the Bonds is intended or shall be construed to give to
any person or company other than the parties hereto, the Tender Agent, the Bank
and the Owners of the Bonds, any legal or equitable right, remedy or claim under
or with respect to this Indenture or any covenants, conditions and provisions
herein contained; this Indenture and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto, the Tender Agent, the Bank and the Owners of the
Bonds as herein provided.
SECTION 13.03. SEVERABILITY. If any provision of this Indenture shall
be held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatever.
SECTION 13.04. NOTICES. Any notice, request, complaint, demand,
communication or other paper shall be sufficiently given and shall be deemed
given when delivered or mailed by registered or certified mail, postage prepaid
or sent by telegram, addressed as follows:
If to the Issuer:
City of Shawnee, Kansas
Shawnee City Hall
11110 Johnson Drive
Shawnee, Kansas 66203
Attention: Finance Director
If to the Trustee:
State Street Bank and Trust
Company of Missouri, N.A.
One Mercantile Center
17th Floor
7th & Washington
P.O. Box 321 (Zip 63166-0321)
St. Louis, Missouri 63101
Attention: Corporate Trust Department
Payment Office (to surrender Bonds for payment or for exchange and
registration):
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102
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or
State Street Bank and Trust Company
Two International Place, 4th Floor
Corporate Trust Window
Boston, Massachusetts 02110
If to the Company:
Simmons Company
One Concourse Parkway,
Suite 600
Atlanta, Georgia 30328-5346
Attention: Vice President-Finance, Treasurer
If to the Bank:
SunTrust Bank, Atlanta
25 Park Place, 10th Floor
Atlanta, Georgia 30303
Attention: Letter of Credit Department
If to the issuer of a Substitute Letter of Credit:
Its address designated in
writing to the Trustee
If to the Remarketing Agent:
Its Principal Office
If to the Tender Agent:
State Street Bank and Trust
Company of Missouri, N.A.
One Mercantile Center
17th Floor
7th & Washington
P.O. Box 321 (Zip 63166-0321)
St. Louis, Missouri 63101
Attention: Corporate Trust Department
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Payment Office (to surrender Bonds for payment or for exchange and
registration):
State Street Bank and Trust Company
Corporate Trust Department
P.O. Box 778
Boston, Massachusetts 02102
If to Moody's:
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: Corporate Department, Structured Finance Group
If to S&P:
Standard & Poor's Corporation
25 Broadway
New York, New York 10004
Attention: Corporate Finance Department
A duplicate copy of each notice required to be given hereunder by any person
listed above shall also be given to the others. The Issuer, the Company, the
Trustee, the Remarketing Agent, the Tender Agent and the Bank, and the issuer of
any Substitute Letter of Credit, may designate any further or different
addresses to which subsequent notices, certificates or other communications
shall be sent. Except for those writings requiring original signatures, any
written notice, instruction or confirmation required hereunder may be provided
by telex, telegraph or facsimile transmission.
SECTION 13.05. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. In any
case where the date of maturity of interest on or principal of the Bonds or the
date fixed for purchase or redemption of any Bonds shall not be a Business Day,
then payment of principal, Purchase Price, premium, if any, or interest need not
be made on such date but may be made on the next succeeding Business Day with
the same force and effect as if made on the date of maturity or the date fixed
for purchase or redemption.
SECTION 13.06. COUNTERPARTS. This Indenture may be simultaneously
executed in several counterparts, each of which shall be an original and all of
such shall constitute but one and the same instrument.
SECTION 13.07. APPLICABLE PROVISIONS OF LAW. This Indenture shall be
governed by and construed in accordance with the laws of the State.
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SECTION 13.08. RULES OF INTERPRETATION. Unless expressly indicated
otherwise, references to Sections or Articles are to be construed as references
to Sections or Articles of this instrument as originally executed. Use of the
words "herein," "hereby," "hereunder," "hereof," "hereinbefore," "hereinafter"
and other equivalent words refer to this Indenture and not solely to the
particular portion in which such word is used.
SECTION 13.09. CAPTIONS. The captions and headings in this Indenture
are for convenience only and in no way define, limit or describe the scope or
intent of any provisions or Sections of this Indenture.
SECTION 13.10. NO PERSONAL LIABILITY. Notwithstanding anything to the
contrary contained herein or in any of the Bonds or the Agreement, or in any
other instrument or document executed by or on behalf of the Issuer in
connection herewith, no stipulation, covenant, agreement or obligation contained
herein or therein shall be deemed or construed to be a stipulation, covenant,
agreement or obligation of any present or future member, commissioner, director,
trustee, officer, employee or agent of the Issuer, or of any incorporator,
member, commissioner, director, trustee, officer, employee or agent of any
successor to the Issuer, in any such person's individual capacity, and no such
person, in his individual capacity, shall be liable personally for any breach or
non-observance of or for any failure to perform, fulfill or comply with any such
stipulations, covenants, agreements or obligations, nor shall any recourse be
had for the payment of the principal of, premium, if any, or interest on any of
the Bonds or for any claim based thereon or on any such stipulation, covenant,
agreement or obligation, against any such person, in his individual capacity,
either directly or through the Issuer or any successor to the Issuer, under any
rule of law or equity, statute or constitution or by the enforcement of any
assessment or penalty or otherwise, and all such liability of any such person,
in his individual capacity, is hereby expressly waived and released.
SECTION 13.11. CERTAIN REFERENCES INEFFECTIVE AFTER LETTER OF CREDIT
TERMINATION DATE. From and after the Letter of Credit Termination Date, upon
receipt by the Trustee of a certificate from the Bank stating that all amounts
payable to the Bank under the Credit Agreement have been paid in full, all
references to the Bank, the Credit Agreement or the Letter of Credit in the
Agreement, this Indenture and the Bonds shall be ineffective.
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This Trust Indenture has been executed as of the date first written
hereinabove.
CITY OF SHAWNEE, KANSAS
By:
----------------------------------
Mayor
(SEAL)
ATTEST:
City Clerk
<PAGE> 73
This Trust Indenture has been executed as of the date first written
hereinabove.
STATE STREET BANK AND TRUST
COMPANY OF MISSOURI, N.A.
By:
----------------------------------
Assistant Vice President
(SEAL)
ATTEST:
Assistant Secretary
<PAGE> 74
EXHIBIT A
---------
PROJECT SITE
Lot 1, K-7 Industrial Park, a subdivision of land in the City of Shawnee,
Johnson County, Kansas according to the plat thereof recorded in Plat Book 95,
Page 10.
<PAGE> 75
EXHIBIT B
---------
PROJECT BUILDING
All buildings, structures, improvements and fixtures located on or to
be acquired, constructed, furnished and otherwise improved on the Project Site
and paid for in whole or in part from proceeds of the Bonds.
<PAGE> 76
EXHIBIT C
---------
PROJECT EQUIPMENT
All equipment located on or to be purchased and used to equip the
Project Building located on the Project Site and paid for in whole or in part
from proceeds of the Bonds, including, without limitation, the following:
See Attached Schedule I
<PAGE> 77
SCHEDULE I
Porter 401/300 Box Spring Sewing Machine
Box Spring Frame Making Tables(2)
Gribetz 2300 Quilt Machine
Porter 1000 Overcasting Machine(2)
Pocketed Coiler Machines(2)
Cutting Table w/Feed Rail
Cloth Spreader
High Speed Double Overcaster
10 Ft. Overhead Conveyor Pocketed Coil(6)
Bechick Handle Machine Model 7000
Spuhl Anderson Bagging Machine Model MW22
Queen Size Closing Tables w/King Pull Outs(2)
300 W Sewing Machine
Air Assist Sewing Table
Conveyor
conveyor - Electrical
Material Slitter
New Hog Ring Tables (HMB Area)(3)
Auto-Label Machine
New Style Box Spring Top Off Tables
Trough Conveyors(2)
<PAGE> 78
EXHIBIT D
DEFINITIONS
"Act" means K.S.A. 12-1740 to 12-1749d, inclusive, all as amended.
"Act of Bankruptcy" means the filing of a petition in bankruptcy (or
any other commencement of a bankruptcy or similar proceeding) by or against
the Company or the Issuer or any affiliate of the foregoing under any
applicable bankruptcy, insolvency, reorganization or similar law, now or
hereafter in effect.
"Adjustable Rate" means the interest rate borne by the Bonds from the
date of issuance and delivery thereof to (but not including) the Conversion
Date, as said rate is determined in accordance with SECTION 2.02(c) of the
Indenture.
"Agreement" means the Lease Agreement dated as of December 1, 1996, by
and between the Issuer and the Company, and any amendments and supplements
thereto.
"Authorized Denominations" means (a) in the case of Bonds with an
Adjustable Rate $100,000 and any integral multiple of $5,000 in excess thereof
and (b) in the case of Bonds with a Fixed Rate $5,000 and any integral multiple
thereof.
"Bank" means (a) SunTrust Bank, Atlanta, a state banking corporation
organized and existing under the laws of the State of Georgia, and (b) any
Substitute Bank.
"Beneficial Owner" means any person who (a) has the power directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of,
any Bond (including persons holding Bonds through nominees, depositories or
other intermediaries), or (b) is treated as owner of any Bond for federal
income tax purposes.
"Bond Closing Date" means December 23, 1996.
"Bond Counsel" means McDowell, Rice, Smith & Gaar, a Professional
Corporation, or other attorney or firm of attorneys designated by the Issuer
having a national reputation for skill in connection with the authorization and
issuance of municipal obligations in Kansas and under Sections 103 and 141-150
of the Code.
"Bond Fund" means the fund created in Section 6.01 of the Indenture, in
which there is established a General Account, a Letter of Credit Account and a
Remarketing Account.
"Bondowner" or "Owner" of the Bonds means the Registered Owner of any
Bond issued under the Indenture.
D-1
<PAGE> 79
"Bond Register" means the books of the Issuer kept by the Registrar to
evidence the registration and transfer of the Bonds.
"Bonds" means $5,000,000 Private Activity Revenue Bonds, Series 1996
(Simmons Company Project), of the City of Shawnee, Kansas, issued pursuant to
SECTION 2.02 of the Indenture.
"Book-Entry System" means the system maintained by the Securities
Depository described in SECTION 2.12 of the Indenture.
"Business Day" means a day on which the Trustee, the Bank and banks
located in St. Louis, Missouri, or Boston, Massachusetts, are required or
permitted by law to be open for the purpose of conducting a banking business.
"Casualty\Condemnation Fund" means the fund created in SECTION 6.14 of
the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, including, when appropriate, the statutory predecessor of the Code, and
all applicable regulations thereunder whether proposed, temporary or final,
including regulations issued and proposed pursuant to the statutory predecessor
of the Code, and, in addition, all official rulings and judicial determinations
applicable to the Bonds under the Code and under the statutory predecessor of
the Code and any successor provisions to the relevant provisions of the Code or
regulations.
"Company" means (a) Simmons Company, a Delaware corporation, authorized
and qualified to do business in the State of Kansas and (b) any surviving,
resulting, or transferee entity as provided in the Agreement.
"Company Representative" means the person or persons at the time
designated to act on behalf of the Company by written certificate furnished to
the Issuer and the Trustee containing the specimen signatures of such person or
persons and signed on behalf of the Company by its President or any Vice
President. Such certificate may designate an alternate or alternates.
"Completion Date" means the date of completion of the Project, as that
date shall be certified as provided in SECTION 3.5 of the Agreement.
"Construction Fund" means the fund created in SECTION 6.05 of the
Indenture.
"Consultant" means a firm of recognized expertise in the area of
arbitrage rebate calculations and requirements engaged by the Company and
acceptable to the Issuer and the Trustee.
D-2
<PAGE> 80
"Conversion Date" means the date on which the interest rate on the Bonds
is converted from the Adjustable Rate to the Fixed Rate, which date shall be an
Interest Payment Date that is at least six (6) months after the Dated Date of
the Bonds.
"Conversion Option" means the option granted to the Company in SECTION
4.01 of the Indenture to convert the interest rate on the Bonds from the
Adjustable Rate to the Fixed Rate as of the Conversion Date.
"Cost" with respect to the Project shall be deemed to include all items
permitted to be financed under the provisions of the Code and the Act.
"Cost of Issuance Fund" means the fund created in SECTION 6.15 of the
Indenture.
"Credit Agreement" means (a) the Letter of Credit Agreement dated as of
December 1, 1996, by and between the Company and SunTrust Bank, Atlanta, and any
amendments and supplements thereto and (b) the letter of credit agreement or
reimbursement agreement between the Company and any Substitute Bank, and any
amendments and supplements thereto.
"Dated Date" means December 23, 1996.
"Default" means any Default under the Indenture as specified in and
defined by SECTION 9.01 of the Agreement.
"Determination of Taxability" means a final decree or judgment of any
Federal court or a final action of the Internal Revenue Service determines that
interest paid or payable on any Bond is or was includable in the gross income of
an Owner of the Bonds for federal income purposes under the Code (other than an
Owner who is a substantial user or related person within the meaning of Section
144(a) of the Code). No such decree, judgment or action will be considered final
for this purpose, however, unless the Company has been given written notice and,
if it is so desired and is legally allowed, has been afforded the opportunity to
contest the same, either directly or in the name of any Owner of a Bond and
until conclusion of any appellate review, if sought.
"Demand Purchase Option" means the option granted to Owners of Bonds,
while the Bonds bear interest at the Adjustable Rate, to require that Bonds be
purchased prior to the Conversion Date pursuant to SECTION 4.04 of the
Indenture.
"Environment" means all air, surface, water, ground water, or land,
including land surface or sub-surface, and all other natural resources.
D-3
<PAGE> 81
"Environmental Law" means any applicable federal, state or local
statutory or common law, statute, ordinance, code, rule, regulation or other
legally binding requirement, whether now in existence or established or enacted
in the future, relating to natural resources, pollution, protection of the
environment or public and employee health and safety, including without
limitation, any common law of nuisance or trespass, and any law, rule or
regulation relating to emissions, discharges, releases or threatened releases
of pollutants, contaminants or chemicals, or industrial, toxic or hazardous
substances or waste into the environment (including without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants
or chemical or industrial, toxic or hazardous substances or wastes including,
without limitation, all Hazardous Waste Laws.
"Environmental Report Audit" means the Phase I Environment Assessment
dated March 29, 1996, as updated December 19, 1996.
"First Optional Redemption Date" means the December 1 occurring in the
year which is a number of years after the Conversion Date equal to the number
of years between the December 1 immediately following the Conversion Date
(unless the Conversion Date is December 1, in which case from such December 1)
and December 1, 2016, multiplied by 1/2 and rounded up to the nearest whole
number.
"Fixed Rate" means the interest rate in effect on the Bonds from and
after the Conversion Date, as said rate is determined in accordance with
SECTION 2.02(d) of the Indenture.
"Full Insurable Value" means the actual replacement cost of the Project
less physical depreciation and exclusive of land, excavations, footings,
foundations and parking lots.
"Government Obligations" means any of the following which are
noncallable: direct general obligations of, or obligations the payment of
the principal of and interest on which are unconditionally guaranteed as to
full and timely payment by, the United States of America.
"Gross Proceeds" means the aggregate of:
(a) the net amount (after payment of all expenses of issuing the
Bonds) of Bond proceeds received by the Issuer as a result of
the sale of the Bonds;
(b) all amounts received by the Issuer as a result of the investment
of the Bond proceeds;
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(c) any amounts held in any fund to the extent that the Issuer
reasonable expects to use the fund to pay principal of or
interest on the Bonds; and
(d) any securities or obligations pledged by the Issuer or by the
Company as security for the payment of principal of or interest
on the Bonds.
"Guarantor" means the Company, its successors or assigns.
"Guaranty Agreement" means the Guaranty Agreement dated as of December
1, 1996, from the Company in favor of the Trustee.
"Hazardous Materials" means any substance, material or waste presently
or hereafter identified to be toxic, hazardous or dangerous (or words of
similar import) by any governmental or quasi-governmental authority having
jurisdiction over the Project according to any Hazardous Waste Law or other
Environmental Law, including, without limitation, any material, substance or
waste which is defined as a "hazardous waste," "hazardous material,"
"restricted hazardous waste, "contaminant," "toxic waste" or "toxic substance"
under any provision of Environmental Law, which includes, but is not limited
to, any asbestos, PCBs, radioactive substance, methane, volatile hydrocarbons,
acids, pesticides, paints, petroleum based products, urea formaldehyde lead,
cyanide, DDT, printing inks, industrial solvents or any other material or
substance which has in the past or could presently or at any time in the future
cause or constitute a health, safety or other environmental hazard to any
person or property, including, without limitation, the Project.
"Hazardous Substances" means any substance or material (a) identified
in Section 101(14) of CERCLA, 42 USC Section 9601(14) and as set forth in Title
40, Code of Federal Regulations, Part 302, as the same may be amended from time
to time, (b) determined to be toxic, a pollutant or contaminant, under federal,
state or local statute, law, ordinance, rule or regulation or judicial or
administrative order or decision, as the same may be amended from time to time,
including but not limited to petroleum and petroleum products as defined in the
State of Kansas Statutes, as the same may be amended from time to time, (c)
asbestos, (d) radon, (e) polychlorinated biphenyls and (f) such other
materials, substances or waste which are otherwise dangerous, hazardous,
harmful or deleterious to human health or the environment, including without
limitation, any Hazardous Materials or other materials which may otherwise
impair the value of the Project.
"Hazardous Waste Law" means any and all federal, state and local
statutes, rules and regulations relating to the discharge, spillage, storage,
uncontrolled loss, seepage, filtration, disposal, removal or use of Hazardous
Materials, including, but not limited to, the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. 6901 ET SEQ., the Comprehensive Environment
Response, Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C.
9601-9657, as amended by the Superfund Amendments and Reauthorization Act of
1986, the Hazardous Substances Transportation Act, 49 U.S.C. 6901 ET SEQ., the
Federal Water Pollution Control Act, 33 U.S.C., 1251 ET SEQ., the Clean Air
Act, 42
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<PAGE> 83
U.S.C. 7401 ET SEQ., the Toxic Substances Control Act, 15 U.S.C. 2601-2629,
the Safe Drinking Water Act, 42 U.S.C. 3OOf-300j, the Oil Pollution Act of 1990,
33 U.S.C. 2701 ET SEQ. and the Occupational Safety and Health Act, 29 U.S.C. 651
ET SEQ., as such laws have been amended and the regulations promulgated pursuant
thereto and all analogous state or local laws and all similar present and future
federal, state and local environmental statutes and ordinances, and all
regulations, orders, and decrees now or hereafter promulgated thereunder, as the
same may be amended at any time hereafter.
"Indenture" means the Indenture of Trust dated as of December 1, 1996,
by and between the Issuer and the Trustee pursuant to which the Bonds are
authorized to be issued, and any amendments and supplements thereto.
"Independent Counsel" means an attorney duly admitted to practice law
before the highest court of any state and who is not a full-time employee,
director, officer, or partner of the Issuer or the Company.
"Interest Payment Date" means (a) so long as the Bonds bear interest at
the Adjustable Rate, the Interest Payment Date for each Interest Period shall
be the first day of the next succeeding Interest Period; provided, that so long
as the Interest Period is one week in duration, the term Interest Payment Date
shall mean the first day of each calendar month, and (b) so long as the Bonds
bear interest at the Fixed Rate, June 1 and December 1 in each year, commencing
on the June 1 or December 1 next succeeding the Conversion Date.
"Interest Period" means the period from the date of issuance and
delivery of the Bonds to and including the next succeeding Tuesday (unless the
Bonds are issued and delivered on a Tuesday, in which case the first Interest
Period shall include only such Tuesday), and each period of one (1) week's
duration thereafter, commencing on Wednesday of each week and continuing
through Tuesday of the following week. At the option of the Company, the
duration of the Interest Period may be adjusted in accordance with the
provisions of SECTION 2.02(c) of the Indenture, in which event the term
"Interest Period" shall mean (a) for any period of time of one (1) week's
duration, the period commencing Wednesday of each week and continuing through
Tuesday of the following week, (b) for any period of time of one (1) month's
duration, the period commencing on the first (1st) day of each calendar month
and terminating on the last day of such month, (c) for any period of time of
three (3) month's duration, the period commencing on the first (1st) day of the
first (lst) calendar month and terminating on the last day of the third (3rd)
calendar month, and (iv) for any period of time of six (6) month's duration,
the period commencing on the first (lst) day of the first (lst) calendar month
and terminating on the last day of the sixth (6th) calendar month. Under no
circumstances shall the Interest Period exceed six (6) months in duration. The
duration of the Interest Period may be adjusted effective only on the day
following the last day of the preceding Interest Period; provided, however,
that an Interest Period of one week's duration may be adjusted to any other
authorized duration only on the first (lst) day of each calendar month. In the
event the duration of the Interest Period is to be adjusted from one (1) week
to another authorized duration pursuant to the provisions of
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<PAGE> 84
SECTION 2.02(c) of the Indenture, and the expiration of the last Interest Period
prior to the first (lst) calendar day of the month does not occur on the last
day of a calendar month, then in such event the duration of such Interest Period
shall be increased or decreased at the discretion of the Remarketing Agent, by
not more than six (6) days, in order to cause the expiration of such Interest
Period to occur on the last day of the calendar month.
"Issuance Costs" or "Costs of Issuance" means an costs that are treated
as costs of issuing or carrying the Bonds under existing Treasury Department
regulations and rulings, including, but not limited to, (a) underwriter's
spread (whether realized directly or derived through purchase of the Bonds at a
discount below the price at which they are expected to be sold to the public);
(b) counsel fees (including bond counsel, underwriter's counsel, Issuer's
counsel, Company counsel, as well as any other specified counsel fees incurred
in connection with the issuance of the Bonds; (c) financial adviser fees
incurred in connection with the issuance of the Bonds; (d) rating agency fees;
(e) Trustee fees incurred in connection with the issuance of the Bonds; (f)
paying agent and certifying and authenticating agent fees related to issuance
of the Bonds; (g) accountant fees related to the issuance of the Bonds; (h)
printing costs of the Bonds and of the preliminary and final offering
materials; (i) publication costs associated with the financing proceedings; and
(j) costs of engineering and feasibility studies necessary to the issuance of
the Bonds; provided, that bond insurance premiums and certain credit
enhancement fees, to the extent treated as interest expense under applicable
regulations, shall not be treated as "Issuance Costs."
"Issuer" means the City of Shawnee, Kansas, a municipal corporation
duly organized and existing under the laws of the State, and its successors and
assigns.
"Issuer Representative" means the person or persons at the time
designated to act on behalf of the Issuer by written certificate furnished to
the Company and the Trustee containing the specimen signatures of such person
or persons and signed on behalf of the Issuer by its duly authorized agent.
Such certificate may designate an alternate or alternates.
"Letter of Credit" means (a) that certain letter of credit dated the
date of issuance of the Bonds issued by the Bank and (b) any Substitute Letter
of Credit.
"Letter of Credit Termination Date" means the later of (a) that date
upon which the Letter of Credit shall expire or terminate pursuant to its
terms, or (b) that date to which the expiration or termination of the Letter of
Credit may be extended, from time to time, either by extension or renewal of
the existing Letter of Credit or the issuance of a Substitute Letter of Credit.
"Mandatory Tender Date" means the Interest Payment Date immediately
preceding the Letter of Credit Termination Date.
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<PAGE> 85
"Maximum Interest Rate" means, so long as the Bonds bear interest at
the Adjustable Rate, an interest rate per annum equal to the lesser of (a) the
maximum rate permitted by law and (b) thirteen percent (13%), and otherwise
shall mean the maximum rate permitted by law.
"Moody's" means Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and 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 Company, with the consent of the Remarketing Agent and the
Bank, by written notice to the Trustee.
"Net Proceeds" means, when used with respect to any insurance or
condemnation award with respect to the Project, the gross proceeds from the
insurance or condemnation award with respect to which that term is used
remaining after payment of all expenses (including attorneys' fees and any
ordinary or extraordinary expenses of the Issuer and the Trustee) incurred in
the collection of such gross proceeds.
"Net proceeds of the sale of the Bonds" means the proceeds of the Bonds
reduced by amounts in a reasonably required reserve or replacement fund.
"Nonpurpose Investment" means any investment property (as defined in
Section 148(b) of the Code) which is acquired with the gross proceeds of the
Bonds and which is not acquired to carry out the governmental purpose of the
Bonds.
"Ordinance" means Ordinance No. 2292 passed by the City on December 12,
1996, authorizing the issuance of the Series 1996 Bonds.
"Outstanding" or "Bonds Outstanding" means all Bonds which have been
authenticated and delivered by the Trustee or the Tender Agent under the
Indenture, except:
(a) Bonds canceled after purchase in the open market or
because of payment at or redemption prior to maturity;
(b) Bonds paid or deemed to be paid pursuant to Article
VIII of the Indenture;
(c) Bonds in lieu of which others have been authenticated
under SECTION 2.08 or SECTION 2.09 of the Indenture; and
(d) Bonds in lieu of which others have been issued pursuant
to SECTION 2.05(c) of the Indenture.
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<PAGE> 86
"Owner" means the person or persons in whose name or names a Bond shall
be registered on the books of the Issuer kept for that purpose in accordance
with provisions of this Indenture.
"Par" means 100% of the principal amount of any Bond, or of the
aggregate principal amount of the Bonds Outstanding, as the context may
require, exclusive of accrued interest.
"Participant" means one of the entities which is a member of the
Securities Depository and deposits securities, directly or indirectly, in the
Book-Entry System.
"Payment Office of the Tender Agent" means Two International Place, 4th
Floor, Corporate Trust Window, Boston, Massachusetts, 02110 or such other
office designated as such by any successor Tender Agent.
"Payment Office of the Trustee" means Two International Place, 4th
Floor, Corporate Trust Window, Boston, Massachusetts, 02110 or such other
office designated as such by any successor Trustee.
"Permitted Encumbrances" means, as of any particular time (a) liens for
ad valorem taxes and special assessments not then delinquent, (b) the
Indenture, (c) the Agreement, (d) utility, access and other easements and
rights-of-way, mineral rights, restrictions, exceptions and encumbrances that
will not materially interfere with or impair the operations being conducted on
the Project Site or easements granted to the Issuer, and (e) such minor
defects, irregularities, encumbrances, easements, mechanics' liens,
rights-of-way and clouds on title as normally exist with respect to properties
similar in character to the Project and as do not in the aggregate materially
impair the property affected thereby for the purpose for which it was acquired
or is held by the Issuer.
"Plans and Specifications" means the plans and specifications for the
Project submitted to the Bank.
"Pledge Agreement" means the Pledge and Security Agreement dated as of
December 1, 1996, made by the Company to the Bank, and any amendments or
supplements thereto.
"Pledged Bonds" means any Bonds which shall, at the time of
determination thereof, be pledged to the Bank pursuant to the Pledge Agreement.
Principal Office of the Tender Agent" means P.O. Box 321, St. Louis,
Missouri, 63166-0321, Attention Corporate Trust Department or such other office
designated as such by any successor Tender Agent.
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<PAGE> 87
"Principal Office of the Trustee" means P.O. Box 321, St. Louis,
Missouri, 63166-0321, Attention Corporate Trust Department or such other office
designated as such by any successor Trustee.
"Project" means, collectively, the Project Site, the Project Building
and the Project Equipment, as they may at any time exist.
"Project Building" means those certain buildings or improvements to
buildings and all other facilities and improvements forming a part of the
Project to be constructed on the Project Site and not constituting part of the
Project Equipment, as they may at any time exist, and which is described
generally in EXHIBIT B of the Agreement.
"Project Equipment" means the property which is described generally in
EXHIBIT C hereto, and any items of machinery, equipment, or other tangible
property acquired in substitution for, or as a renewal or replacement of or a
modification or improvement to, such property.
"Project Site" means the real estate described in EXHIBIT A of the
Agreement on which the Project Building will be situated, and any other
interests in real property, leasehold interests, easements, licenses, and
rights in real property hereafter acquired by the Company with proceeds of the
Bonds for use in connection with the Project, less such real property as may be
released pursuant to SECTION 5.8 of the Agreement or taken by the exercise of
the power of eminent domain or sold in lieu thereof as provided in SECTIONS
5.1(a) and (b) of the Agreement.
"Purchase Price" means an amount equal to 100% of the principal amount
of any Bond tendered or deemed tendered pursuant to SECTION 2.02(c), 4.01, 4.02
or 4.04 of the Indenture, plus, in the case of purchase pursuant to SECTION
4.04 of the Indenture, accrued and unpaid interest thereon to the date of
purchase.
"Qualified Project Costs" means costs and expenses of the Project which
constitute land costs or costs for property of a character subject to the
allowance for depreciation excluding specifically working capital and inventory
costs, provided, however, that (a) costs or expenses paid more than sixty (60)
days prior to the adoption by the Issuer of its resolution on January 22, 1996,
declaring its intent to reimburse Project expenditures with Bond proceeds,
shall not be deemed to be Qualified Project Costs; (b) Issuance Costs shall not
be deemed to be Qualified Project Costs; (c) interest during the Construction
Period shall be allocated between Qualified Project Costs and other costs and
expenses to be paid from the proceeds of the Bonds; (d) interest following the
Construction Period shall not constitute a Qualified Project Cost; (e) letter
of credit fees and municipal bond insurance premiums which represent a transfer
of credit risk shall be allocated between Qualified Project Costs and other
costs and expenses to be paid from the proceeds of the Bonds; and (f) letter of
credit fees and municipal bond insurance premiums which do not represent a
transfer of credit risk shall not constitute Qualified Project Costs.
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<PAGE> 88
"Rate Determination Date" means the first day of each Interest Period
that has a duration different from the preceding Interest Period, on which date
the Remarketing Agent shall establish the Adjustable Rate for such Interest
Period (or if such date is not a Business Day, then the Business Day
immediately preceding such date).
"Rebate Fund" means the trust fund so designated and created pursuant
to SECTION 6.13 of the Indenture.
"Record Date" means (a) so long as the Bonds bear interest at the
Adjustable Rate, that day which is the second (2nd) Business Day next preceding
any Interest Payment Date, and (b) so long as the Bonds bear interest at the
Fixed Rate, the fifteenth (15th) day of the month next preceding any Interest
Payment Date.
"Registered Owner" means the owner of any Bond issued under the
Indenture as shown on the bond registration books required to be kept by the
Trustee pursuant to the Indenture.
"Registrar" means the Trustee. The Registrar shall perform the duties
of Registrar and paying agent.
"Remarketing Agent" means the Remarketing Agent acting as such under
the Remarketing Agent. So long as the Bonds are held in the Book-Entry System,
the Remarketing Agent must be a Participant in the Book-Entry System with
respect to the Bonds. "Principal Office" of the Remarketing Agent means the
principal office of the Remarketing Agent designated in the Remarketing
Agreement.
"Remarketing Agreement" means the Remarketing Agreement dated as of
December 1, 1996, by and between the Company and SunTrust Bank, Atlanta or any
successor Remarketing Agent, and any amendments or supplements thereto.
"Requisition" means a written request for a disbursement from the
Construction Fund, signed by a Company Representative, substantially in the
form attached as Exhibit E to the Lease and satisfactorily completed as
contemplated by said form.
"SEC Rule 15c2-12" means Rule 15c2-12(b)(5) adopted by the Security and
Exchange Commission under the Securities Exchange Act of 1934, as the same may
be amended from time to time.
"Securities Depository" means the Depository Trust Company, New York,
New York, or its nominee, and its successors and assigns.
"Security Interest" or "Security Interests" shall refer to the security
interests created herein and shall have the meaning set forth in the U.C.C.
D-11
<PAGE> 89
"State" means the State of Kansas.
"S&P" means Standard & Poor's Ratings Services, A Division of the
McGraw-Hill Companies, Inc., a corporation organized and existing under the
laws of the State of New York, its successors and 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 Company,
with the consent of the Remarketing Agent and the Bank, by written notice to
the Trustee.
"Substitute Bank" means a commercial bank or savings and loan
association which has issued a Substitute Letter of Credit.
"Substitute Letter of Credit" means a letter of credit delivered to the
Trustee, with the written consent of the Bank, in accordance with SECTION 4.4
of the Agreement, issued by the Bank or a Substitute Bank, replacing any
existing Letter of Credit.
"Tax Regulatory Agreement" means the Tax Regulatory Agreement and
Arbitrage Certificate dated as of December 1, 1996, by and among the Issuer,
the Company and the Trustee.
"Tender Agent" means State Street Bank and Trust Company of Missouri,
N.A., a national banking association duly organized and existing under the laws
of the United States of America and its successors and any corporation
resulting from or surviving any consolidation or merger to which it or its
successors may be a party and any successor Tender Agent at the time serving as
successor Tender Agent under the Indenture.
"Tender Date" means (a) during any Interest Period of other than one
week's duration, any Interest Payment Date, (b) during any Interest Period of
one week's duration, the seventh (7th) day (unless such day is not a Business
Day, in which case the next Business Day) following receipt by the Tender Agent
of notice from the Owner that such Owner has elected to tender bonds (as more
fully described in SECTION 4.04 of the Indenture), (c) the Mandatory Tender
Date, and (d) the Conversion Date.
"Term of Agreement" means the duration of the leasehold interest
created in the Agreement effective upon its delivery and commencing as of the
date thereof and terminating on December 31, 2016, subject to sooner
termination pursuant to the terms of the Agreement.
"Trustee" means State Street Bank and Trust Company of Missouri, N.A. a
national banking association duly organized and existing under the laws of the
United States of America and its successors and any corporation resulting from
or surviving any consolidation or merger to which it or its successors may be a
party and any successor Trustee at the time serving as successor Trustee under
the Indenture.
D-12
<PAGE> 90
"Trust Estate" means the property conveyed to the Trustee pursuant to
the Granting Clauses of the Indenture.
"U.C.C." means the Uniform Commercial Code of the State as now or
hereafter amended.
"Yield" shall mean yield as defined in Section 148(h) of the Code and
any regulations promulgated thereunder.
D-13
<PAGE> 91
EXHIBIT E
FORM OF NOTICE FROM TRUSTEE TO OWNER
REGARDING CHANGE IN DURATION OF INTEREST PERIOD
Re: $5,000,000 Private Activity Revenue Bonds, Series 1996
(Simmons Company Project), of the City of Shawnee, Kansas
The undersigned officer of ______________________, as Trustee with
respect to the captioned Bonds, pursuant to the provisions of SECTION 2.02(C) of
that certain Indenture of Trust (the "Indenture"), dated as of December 1, 1996,
by and between the City of Shawnee, Kansas and the Trustee, does hereby notify
you as follows (capitalized terms used herein shall have the meanings provided
in the Indenture):
(a) The duration of the Interest Period with respect to the Bonds
will be adjusted on ____________ 1, _____ (the "Rate
Determination Date").
(b) All Owners of Bonds are required to tender their Bonds on the
Tender Date to the Tender Agent, at the address set forth
below, for purchase on the Tender Date. In the event any Owner
of Bonds shall fail to tender its Bonds for purchase on the
Tender Date, such Bonds shall be deemed to have been tendered
on such Tender Date, and the Owner of such Bonds shall not be
entitled to receive any interest that accrues on the Bonds
subsequent to the Tender Date.
(c) The address of the Tender Agent is as follows:
- ----------------------
Attention:
----------------------------
- ----------------------
- ----------------------
- ----------------------
- ----------------------
This _____ day of ____________________, _____.
, as Trustee
------------------
By:
--------------------------------
Title:
-----------------------------
<PAGE> 92
EXHIBIT F
ADJUSTABLE RATE FORM OF BOND
<PAGE> 93
EXHIBIT G
FIXED RATE FORM OF BOND
<PAGE> 94
EXHIBIT H
NOTICE OF CONVERSION
--------------------
Re: $5,000,000 Private Activity Revenue Bonds, Series 1996 (Simmons
Company Project), of the City of Shawnee, Kansas
The undersigned officer of ______________________, as Trustee with
respect to the captioned Bonds, pursuant to the provisions of SECTION 4.01 of
that certain Indenture of Trust (the "Indenture"), dated as of December 1, 1996,
by and between the City of Shawnee, Kansas and the Trustee, hereby notifies you
that the interest rate borne by the captioned Bonds shall be converted from the
Adjustable Rate to the Fixed Rate, as follows (capitalized terms used herein
shall have the meanings provided in the Indenture):
1. The Conversion Date is ____________________;
2. All Owners of Bonds are required to tender their Bonds on the
Conversion Date to the Tender Agent, at the address set forth
below, for purchase on the Conversion Date. In the event any
Owner of Bonds shall fail to tender its Bonds for purchase on
the Conversion Date, such Bonds shall be deemed to have been
tendered for purchase on the Conversion Date and the Owner of
such Bonds shall not be entitled to any payment (including any
interest to accrue subsequent to the conversion date) other
than the purchase price for such untendered Bonds.
3. The address of the Tender Agent is as follows:
-------------------------
Attention:
-----------------------
-------------------------
-------------------------
-------------------------
This day of , .
----- -------------------- -----
, as Trustee
--------------------
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 95
EXHIBIT I
NOTICE OF MANDATORY TENDER DATE
-------------------------------
Re: $5,000,000 Private Activity Revenue Bonds, Series 1996
(Simmons Company Project), of the City of Shawnee, Kansas
The undersigned officer of ______________________, as Trustee
with respect to the captioned Bonds, pursuant to the provisions of SECTION 4.02
of that certain Indenture of Trust (the "Indenture"), dated as of December 1,
1996, by and between the City of Shawnee, Kansas, and the Trustee, hereby
notifies you that the Letter of Credit securing the Bonds will expire on
___________ (the "Letter of Credit Termination Date"), and that the Bonds are
required to be tendered for purchase on the Interest Payment Date next preceding
the Letter of Credit Termination Date (the "Mandatory Tender Date").
Accordingly, the undersigned hereby notifies you as follows:
1. The Mandatory Tender Date is ____________________, and the
Letter of Credit will expire fifteen (15) days after the
Mandatory Tender Date.
2. All Owners of Bonds are required to tender their Bonds on the
Mandatory Tender Date to the Tender Agent, at the address set
forth below, for purchase on the Mandatory Tender Date. In the
event any Owner of Bonds shall fail to tender its Bonds for
purchase on the Mandatory Tender Date, such Bonds shall be
deemed to have been tendered for purchase on the Mandatory
Tender Date and the Owner of such Bonds shall not be entitled
to any payment (including any interest to accrue subsequent to
the Mandatory Tender Date) other than the purchase price for
such untendered Bonds.
3. The address of the Tender Agent is as follows:
-------------------------
Attention:
-----------------------
-------------------------
-------------------------
-------------------------
This day of , .
----- -------------------- -----
, as Trustee
--------------------
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 1
Exhibit 4.3
SECURITIES PURCHASE AGREEMENT
Dated as of October 29, 1998
Between
SIMMONS COMPANY,
as Issuer of the Company Junior Notes,
and SIMMONS HOLDINGS, INC.,
as Issuer of the Warrants and the Holdings Junior Notes,
and
THE PURCHASERS LISTED HEREIN
------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS...........................................................................................2
1.1. CERTAIN DEFINED TERMS......................................................................2
1.2. ACCOUNTING TERMS...........................................................................2
SECTION 2. PURCHASE AND SALE OF .................................................................................2
2.1. PURCHASE AND SALE OF COMPANY NOTES........................................................2
2.2. PURCHASE AND SALE OF HOLDINGS NOTES.......................................................3
2.3. ISSUANCE OF WARRANTS......................................................................3
2.4. ESCROW OF ESCROW WARRANTS. ......................................................3
2.5. PURCHASE PRICE FOR NOTES.........................................................3
2.6. ALLOCATION OF PURCHASE PRICE.....................................................3
2.7. THE CLOSING...............................................................................4
2.8. USE OF PROCEEDS...........................................................................4
SECTION 3. TERMS OF THE NOTES....................................................................................4
3.1. INTEREST ON THE NOTES.....................................................................4
3.2. VOLUNTARY PREPAYMENTS.....................................................................6
3.3. MANDATORY PREPAYMENTS.....................................................................6
3.5. NOTES PREPAID IN PART.....................................................................7
3.6. MANNER AND TIME OF PAYMENT................................................................8
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS..........................................................8
4.1. LEGAL CAPACITY; DUE AUTHORIZATION.........................................................8
4.2. RESTRICTIONS ON TRANSFER..................................................................9
4.3. ACCREDITED INVESTOR, ETC..................................................................9
4.4. BROKERAGE FEES, ETC.......................................................................9
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE ................................................................9
5.1. CORPORATE EXISTENCE AND POWER.............................................................9
5.2. CORPORATE AUTHORITY......................................................................10
5.3. BINDING EFFECT...........................................................................10
5.4. LITIGATION...............................................................................10
5.5. NO LEGAL OBSTACLE TO AGREEMENTS..........................................................10
5.6. DELIVERY OF SENIOR LOAN DOCUMENTS; INCORPORATION OF BRIDGE LOAN
AGREEMENT PROVISIONS...........................................................................11
5.7. NO DEFAULT...............................................................................11
5.8. BROKERAGE FEES, ETC......................................................................11
5.9. PRIVATE OFFERING.........................................................................11
SECTION 6. CLOSING CONDITIONS...................................................................................11
6.1. REPRESENTATIONS AND WARRANTIES; NO DEFAULT...............................................12
6.2. DOCUMENTS SATISFACTORY; TRANSACTIONS CONSUMMATED.........................................12
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6.3. CREDIT AGREEMENT AND BRIDGE LOAN AGREEMENT CONDITIONS SATISFIED..........................12
6.4. DELIVERY OF DOCUMENTS....................................................................12
6.5. CORPORATE/CAPITAL STRUCTURE..............................................................13
6.6. NO MATERIAL ADVERSE CHANGE...............................................................13
6.7. LITIGATION...............................................................................14
6.9. CERTAIN FEES.............................................................................14
6.10. NO VIOLATION OF REGULATIONS T, U OR X....................................................14
6.11. DELIVERY OF ESCROW WARRANTS..............................................................14
SECTION 7. COVENANTS APPLICABLE TO ALL NOTES....................................................................15
7.1. REPORTS..................................................................................15
7.2. TAXES....................................................................................15
7.3. STAY, EXTENSION AND USURY LAWS...........................................................15
7.4. TRANSACTIONS WITH AFFILIATES.............................................................15
7.5. LINE OF BUSINESS.........................................................................15
7.6. CORPORATE EXISTENCE......................................................................16
7.7. NOTICE OF DEFAULT........................................................................16
SECTION 8. COVENANTS APPLICABLE TO COMPANY NOTES ONLY...........................................................16
8.1. PAYMENT OF COMPANY NOTE OBLIGATIONS......................................................16
8.2. RESTRICTED PAYMENTS......................................................................16
8.3. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...........................16
8.4. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK...............................16
8.5. ASSET SALES..............................................................................17
8.6. LIENS....................................................................................17
8.7. NO SENIOR SUBORDINATED DEBT..............................................................17
8.8. MERGER, CONSOLIDATION OR SALE OF ASSETS..................................................17
SECTION 9. COVENANTS APPLICABLE TO HOLDINGS NOTES ONLY.........................................................18
9.1. PAYMENT OF NOTE OBLIGATIONS..............................................................18
9.2. RESTRICTED PAYMENTS......................................................................18
9.3. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES...........................18
9.4. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK...............................18
9.5. NO ADDITIONAL HOLDINGS INDEBTEDNESS......................................................19
9.6. .........................................................................................19
9.7. DEFAULT NOTICE...........................................................................19
SECTION 10. EVENTS OF DEFAULT...................................................................................19
10.1. DEFAULTS ON COMPANY ....................................................................20
10.1.1. PAYMENT DEFAULT..............................................................20
10.1.2. ACCELERATION OF OTHER INDEBTEDNESS...........................................20
10.1.3. CERTAIN COVENANTS............................................................20
10.1.4. OTHER TERMS..................................................................20
10.1.5. JUDGMENTS AND ATTACHMENTS....................................................20
10.1.6. INVOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.........................20
10.1.7. VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC...........................21
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10.2. DEFAULTS ON HOLDINGS NOTES..............................................................21
10.2.1. PAYMENT DEFAULT..............................................................21
10.2.2. ACCELERATION OF OTHER INDEBTEDNESS...........................................21
10.2.3. CERTAIN COVENANTS............................................................22
10.2.4. OTHER TERMS..................................................................22
10.2.5. JUDGMENTS AND ATTACHMENTS....................................................22
10.2.6. INVOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.........................22
10.2.7. VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC...........................22
SECTION 11. SUBORDINATION.......................................................................................23
11.1. OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS..........................................23
11.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION...............................................24
11.3. NO PAYMENT IN CERTAIN CIRCUMSTANCES.....................................................25
11.4. FORBEARANCE.............................................................................27
11.5. PAYMENTS OTHERWISE PERMITTED............................................................27
11.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS.................................27
11.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.............................................28
11.8. EFFECT OF FAILURE TO PAY NOTE OBLIGATIONS...............................................28
11.9. NO WAIVER OF SUBORDINATION PROVISIONS...................................................28
11.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT..........................29
11.11. REINSTATEMENT...........................................................................29
11.12. AMENDMENT...............................................................................29
11.13. REMEDIES................................................................................29
SECTION 12. RESTRICTIONS ON TRANSFER; LEGENDS...................................................................30
12.1. ASSIGNMENTS OF SECURITIES...............................................................30
12.2. RESTRICTIVE SECURITIES LEGEND...........................................................30
12.3. TERMINATION OF RESTRICTIONS.............................................................31
12.4. NOTE LEGENDS RELATING TO SUBORDINATION..................................................31
12.5. NOTE LEGEND RELATING TO ORIGINAL ISSUE DISCOUNT.........................................32
SECTION 13. MISCELLANEOUS..............................................................................32
13.1. EXPENSES................................................................................32
13.2. INDEMNITY...............................................................................32
13.3. AMENDMENTS AND WAIVERS..................................................................33
13.4. INDEPENDENCE OF COVENANTS...............................................................34
13.5. NOTICES.................................................................................34
13.6. SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS...........................................36
13.7. FAILURE OR INDULGENCE NOT WAIVER REMEDIES CUMULATIVE....................................36
13.8. SEVERABILITY............................................................................36
13.9. HEADING.................................................................................36
13.10. APPLICABLE LAW..........................................................................37
13.11. SUCCESSORS AND ASSIGNS. SUBSEQUENT HOLDERS..............................................37
13.12. CONSENT TO JURISDICTION AND SERVICE OF PROCESS..........................................37
13.13. WAIVER OF JURY TRIAL....................................................................37
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13.14. LIMITATION OF COMPANY LIABILITY........................................................38
13.15. COUNTERPARTS; EFFECTIVENESS............................................................38
13.16. ENTIRETY...............................................................................38
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SCHEDULE I Purchasers
APPENDIX I Definitions
EXHIBIT A-1 Form of Company Note
EXHIBIT A-2 Form of Holdings Note
EXHIBIT B Form of Warrant
EXHIBIT C-1 Form of Registration Rights Agreement
EXHIBIT D Form of Escrow Agreement
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT is made as of October 29, 1998 by
and among Simmons Holdings, Inc. a Delaware corporation ("HOLDINGS"), Simmons
Company, a Delaware corporation (the "COMPANY" and together with Holdings, the
"ISSUERS") and each person listed on Schedule I attached hereto (the "INITIAL
PURCHASERS" and, together with their successors and assigns, the "PURCHASERS").
RECITALS
WHEREAS, REM Acquisition, Inc., a Delaware corporation ("MERGERCO") has
been formed for the purpose of acquiring through a merger (the "MERGER") a
controlling interest in the Common Stock of Holdings, pursuant to an Agreement
and Plan of Merger, dated as of July 16, 1998 and Amendment No. 1 to the
Agreement and Plan of Merger, dated as of September 22, 1998 and Amendment No. 2
to the Agreement and Plan of Merger, dated as of October 29, 1998 (as amended,
the "MERGER AGREEMENT").
WHEREAS, in order to finance the Merger and for other purposes
described herein, pursuant to this Agreement, (i) the Company has resolved to
issue and sell to the Purchasers its Junior Subordinated Notes due 2010 (the
"COMPANY NOTES") in the aggregate principal amount of $30,000,000 in the form
attached hereto as Exhibit A-1, (ii) Holdings has resolved to issue and sell to
the Purchasers its Junior Subordinated Notes due 2011 (the "HOLDINGS NOTES" and
together with the Company Notes, the "NOTES") in the aggregate principal amount
of $10,000,000 in the form attached hereto as Exhibit A-2 and (iii) Holdings has
resolved to issue to the Escrow Agent (as defined below) and to the Initial
Purchasers warrants in the form attached hereto as Exhibit B (the "WARRANTS" and
together with the Notes, the "SECURITIES").
WHEREAS, pursuant to a Credit and Guaranty Agreement dated as of
October 29, 1998 (the "CREDIT AGREEMENT") among the Company, as borrower,
Holdings and certain subsidiaries of the Company, as guarantors, Goldman Sachs
Credit Partners L.P., as joint lead arranger and syndication agent, Warburg
Dillon Read LLC, as joint lead arranger, and UBS A.G., Stamford Branch, as
administrative agent (the "SENIOR AGENT") and the financial institutions listed
therein, as lenders (together with their successors and assigns, the "SENIOR
LENDERS"), (i) on the Closing Date, the Senior Lenders shall loan to the Company
the aggregate amount of $190,000,000 in the form of various term loans; and (ii)
on the Closing Date and thereafter, the Senior Lenders shall loan the Company on
a revolving basis up to $80,000,000 in the form of a revolving line of credit.
WHEREAS, pursuant to a Bridge Loan Agreement dated as of October 29,
1998 (the "BRIDGE LOAN AGREEMENT") among the Company, as borrower, Holdings and
certain subsidiaries of the Company, as guarantors, the lenders named therein
(together with their successors and assigns, the "BRIDGE LENDERS"), and West
Street Fund I, L.L.C., as administrative agent (the
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"BRIDGE AGENT"), (i) on the Closing Date, the Bridge Lenders shall loan to the
Company the aggregate principal amount of $75,000,000 (such loans, together with
any loans into which such loans are converted or for which they are exchanged,
in each case, pursuant to the Bridge Loan Agreement, and including any
refinanced, renewed, modified or amended such loans, the "BRIDGE LOAN").
WHEREAS, pursuant to the Documents (as defined herein), the
transactions described above, and such other transactions as are contemplated by
the Documents to occur on the Closing Date will occur substantially
contemporaneously, at the closing (the "CLOSING") to be held on October 29,
1998, at 10 a.m. (New York time), at the offices of Ropes & Gray, 885 Third
Avenue, New York, New York, or at such other date, time and/or location(s) as
may be agreed upon by the parties hereto, and Holdings and the Company will take
such other actions in connection therewith as may be necessary to consummate the
Merger and the financing thereof.
AGREEMENT
In consideration of the foregoing, and the representations, warranties,
covenants and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1. CERTAIN DEFINED TERMS. Capitalized terms used in this Agreement
shall have the meanings set forth in Appendix I hereto. Capitalized terms not
defined in Appendix I shall have the meanings provided in the Bridge Loan
Agreement as in effect on the date hereof, which definitions are Incorporated By
Reference.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered pursuant hereto
shall be prepared, in accordance with GAAP. Financial statements and other
information required to be delivered by the Company to the Purchasers pursuant
to this Agreement shall be prepared in accordance with GAAP as in effect at the
time of such preparation.
SECTION 2. PURCHASE AND SALE OF SECURITIES
2.1. PURCHASE AND SALE OF COMPANY NOTES. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, the Company hereby agrees to sell to each
Purchaser, and by its acceptance hereof such Purchaser agrees to purchase from
the Company for investment, at the Closing, the principal amount of Company
Notes set forth opposite the name of such Purchaser on Schedule I hereto.
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2.2. PURCHASE AND SALE OF HOLDINGS NOTES. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, Holdings hereby agrees to sell to each Purchaser,
and by its acceptance hereof such Purchaser agrees to purchase from Holdings for
investment, at the Closing, the principal amount of Holdings Notes set forth
opposite the name of such Purchaser on Schedule I hereto.
2.3. ISSUANCE OF WARRANTS. Subject to the terms and conditions of this
Agreement and on the basis of the representations and warranties set forth
herein, Holdings agrees to issue, at the Closing, and deliver (i) to the Escrow
Agent, all of the Escrow Warrants, to be held and distributed by the Escrow
Agent pursuant to and in accordance with the terms of the Escrow Agreement, and
(ii) to the Initial Purchasers, the Fee Warrants. The Fee Warrants and the B
Warrants shall have an initial exercise price of $6.7315 per share, and the A
Warrants shall have an initial exercise price of $.01 per share. Such initial
exercise price and the number of shares of Holdings' Common Stock issuable upon
exercise of the Warrants shall be subject to adjustment in accordance with the
terms of the Warrants.
2.4. ESCROW OF ESCROW WARRANTS. On the Closing Date, Holdings shall
deposit the Escrow Warrants with the Escrow Agent. In the event that any Notes
are assigned by the Initial Purchasers to a third party or refinanced (any such
refinancing indebtedness, the "REPLACEMENT DEBT"), each such assignee of Notes
or purchaser of Replacement Debt shall be entitled to receive such amount of the
A Warrants as is determined by the Initial Purchasers to be necessary or
desirable to enable the Notes or the Replacement Debt to be sold on terms
acceptable to the Initial Purchasers. If, on the first anniversary of the date
hereof, the Initial Purchasers continue to hold any of the Notes (it being
understood that Replacement Debt shall not be deemed to constitute "Notes" for
purposes of this Section 2.4), then the Initial Purchasers shall be entitled to
receive such percentage of the B Warrants as is equal to the percentage of the A
Warrants remaining in escrow as of such date, and all of the other Escrow
Warrants remaining in escrow as of such date shall be returned to Holdings for
cancellation. If, on the first anniversary of the date hereof, the Initial
Purchasers no longer hold any of the Notes (whether because of the assignment or
refinancing of the Notes), then the Initial Purchasers shall be entitled to
receive such percentage of the B Warrants as is equal to 50% of the percentage
of the A Warrants remaining in escrow as of such date, and all of the other
Escrow Warrants remaining in escrow as of such date shall be returned to
Holdings for cancellation; PROVIDED, that in no event shall a greater number of
Escrow Warrants be released to the Initial Purchasers or assigned in connection
with the sale of Notes or the issuance of Replacement Debt, or a lesser number
of Escrow Warrants be returned to Holdings for cancellation, than 50% of the
aggregate original Escrow Warrants; and PROVIDED FURTHER, that nothing in this
Agreement shall preclude Holdings from issuing additional Warrants in connection
with the issuance of Replacement Debt if deemed to be reasonably necessary to
the placement of such Replacement Debt.
2.5. PURCHASE PRICE FOR NOTES. The aggregate purchase price to each
Initial Purchaser for the Notes purchased by it hereunder is the amount set
forth opposite such Purchaser's name on Schedule I hereto.
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2.6. ALLOCATION OF PURCHASE PRICE. The Issuers and the Initial
Purchasers agree that, for purposes of Sections 1271 through 1275 of the Code,
the aggregate original purchase price for the Securities shall be allocated as
agreed between Holdings, the Company and the Initial Purchasers, and that such
allocation shall be appropriately used by each Issuer and each Purchaser for
financial reporting and income tax purposes.
2.7. THE CLOSING. The purchase and sale of the Securities shall be
substantially contemporaneous with the closing pursuant to the Merger Agreement.
If, prior to the Closing, the Merger Agreement shall be terminated, this
Agreement shall automatically terminate and be without further force and effect;
PROVIDED, HOWEVER, that no such termination of this Agreement shall relieve any
party from liability for breach prior to such termination. At the Closing,
against payment to the Issuers by wire transfer of immediately available funds,
the Issuers will deliver to the Initial Purchasers the Notes registered in the
names of the Initial Purchasers in accordance with Schedule I and the Fee
Warrants, and Holdings will deliver the Escrow Warrants to the Escrow Agent.
2.8. USE OF PROCEEDS. The proceeds of the sale by the Issuers of the
Securities hereunder shall be used solely to pay liabilities assumed pursuant to
the Merger Agreement, to finance in part the Merger, to pay related fees and
expenses and for general corporate purposes. No portion of the proceeds of the
sale of the Securities hereunder shall be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of any regulation, interpretation or ruling of
the Board of Governors of the Federal Reserve System, all as from time to time
in effect, refunding of any indebtedness incurred for such purpose, or making
any investment prohibited by foreign trade regulations. Without limiting the
foregoing, the Issuers agree that in no event shall any proceeds of the sale of
the Securities hereunder be used in any manner which might cause the Securities
or the application of such proceeds to violate any of Regulations T, U or X of
the Board of Governors of the Federal Reserve System or any other regulation of
the Board of Governors of the Federal Reserve System, or to violate the Exchange
Act, in each case as in effect as of the Closing and as of such use of proceeds.
SECTION 3. TERMS OF THE NOTES
3.1. INTEREST ON THE NOTES:
3.1.1. INTEREST ON THE COMPANY NOTES.
3.1.1.1. The Company Notes shall bear interest at a
rate equal to the Applicable Company Note Rate PER ANNUM on
the unpaid principal amount thereof from and including the
Closing Date until the principal amount shall become due and
payable. The Company Notes shall bear interest on any overdue
principal (including any overdue prepayment of principal, and
any principal due upon acceleration) and on any overdue
installment of interest (to the extent permitted by applicable
law), at the rate of 2% PER ANNUM in excess of the interest
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rate applicable to timely payments thereon, in each case,
without regard to whether such payment may then be made to the
Noteholders under Section 11 hereof.
3.1.1.2. Interest on the Company Notes shall be paid
in cash if, and to the extent that, the proviso to this
Section 3.1.1.2 does not prohibit such payment, and at all
other times shall be paid "in kind" by capitalizing the
portion of such interest not paid in cash (all such accrued
interest capitalized from time to time is referred to herein
as "CAPITALIZED INTEREST"); PROVIDED, THAT, the Company will
not make any payment of interest in cash on the Company Notes
on any interest payment date (i) if the Interest Coverage
Ratio for the four consecutive fiscal quarter period ending
immediately prior to such interest payment date would not
equal or exceed 2.00:1.00 or (ii) to the extent that interest
payable in cash would exceed (x) 7% so long as the Bridge
Loans remain outstanding, and (y) 12% thereafter.
3.1.2. INTEREST ON THE HOLDINGS NOTES.
3.1.2.1. The Holdings Notes shall bear interest at a
rate equal to the Applicable Holdings Note Rate PER ANNUM on
the unpaid principal amount thereof from and including the
Closing Date until the principal amount shall become due and
payable. The Holdings Notes shall bear interest on any overdue
principal (including any overdue prepayment of principal, and
any principal due upon acceleration) and on any overdue
installment of interest (to the extent permitted by applicable
law), at the rate of 2% PER ANNUM in excess of the interest
rate applicable to timely payments thereon, in each case,
without regard to whether such payment may then be made to the
Noteholders under Section 11 hereof.
3.1.2.2. Interest payable on the Holdings Notes from
the Closing Date through September, 2010 (the "CAPITALIZED
INTEREST PERIOD"), shall be paid in the form of Capitalized
Interest; PROVIDED that notwithstanding the foregoing,
interest shall be paid in cash at any time during the
Capitalized Interest Period that the payment of such cash
interest is expressly permitted under the terms of all then
outstanding Senior Indebtedness (or is permitted by consent of
the holders of such Senior Indebtedness).
3.1.3. Capitalized Interest on any Note shall be deemed for
all purposes to be principal of such Notes, whether or not such Note is marked
to indicate the addition of such Capitalized Interest, and interest shall begin
to accrue on Capitalized Interest beginning on and including the interest
payment date on which such Capitalized Interest is added to the principal amount
of the related Note, and such interest shall accrued and be paid, together with
the interest on the remaining principal amount of the Note, in accordance with
this Section 3.1.
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3.1.4. Interest shall be payable with respect to the Notes in
cash or in kind, as provided herein, on the 15th day (or, if such day is not a
Business Day, on the next succeeding Business Day) of each April, July, October
and January, commencing in January 1999 (with respect to the period from the
Closing Date through the date immediately prior to such date), and upon any
prepayment of the Notes (to the extent of accrued interest on the principal
amount of the Notes so prepaid) and at maturity of the Notes, in each case, by
wire transfer or other same day funds to the respective account designated in
writing by each holder of the Notes.
3.1.5. Interest on the Notes shall be computed on the basis of
a 360 day year of twelve 30 day months. In computing such interest, the date or
dates of the making of the Notes shall be included and the date of payment shall
be excluded.
3.2. VOLUNTARY PREPAYMENTS. The Notes may be prepaid, at the Company's
option, at any time and from time to time, in whole or in part, on two Business
Days' prior notice to the holders of the Notes at a price equal to 100% of the
principal amount thereof PLUS accrued and unpaid interest to, but not including,
the date of such prepayment on the principal amount of the Notes so prepaid.
3.3. MANDATORY PREPAYMENTS.
3.3.1. MANDATORY PREPAYMENTS OF COMPANY NOTES.
3.3.1.1. When the aggregate amount of Excess Proceeds
exceeds $10.0 million, then 100% of the Excess Proceeds shall
be applied to the prepayment of the Company Notes, together
with accrued interest on the Notes so prepaid; PROVIDED that
if any Senior Indebtedness is then outstanding, such
prepayment of the Notes shall not be required if and to the
extent that such Excess Proceeds are applied to the repayment
of Senior Indebtedness (so long as, in the case of such a
repayment of revolving loans, such repayment effects a
corresponding commitment reduction of revolving loans).
3.3.1.2. Upon any Change of Control, the Company
shall prepay the Company Notes, together with interest thereon
to but not including the date of such prepayment; PROVIDED
that the Company shall not be obligated to so prepay the Notes
unless and until all Senior Indebtedness is paid in full in
cash or consents to such prepayment of the Company Notes,
EXCEPT THAT, the holders of Senior Indebtedness shall be
required to either (x) accept such prepayment of Senior
Indebtedness or (y) consent to such prepayment of Company
Notes, one or the other of which must occur within 90 days of
the occurrence of such Change of Control.
3.3.2. MANDATORY PREPAYMENTS OF HOLDINGS NOTES.
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3.3.2.1. When the aggregate amount of Excess Proceeds
exceeds $10.0 million, then 100% of any Excess Proceeds which
have been received by Holdings or have been distributed to
Holdings, if any, shall be applied to the prepayment of the
Holdings Notes, together with accrued interest on the Notes so
prepaid; PROVIDED that if any Senior Indebtedness or Company
Notes are then outstanding, such prepayment of the Holdings
Notes shall (i) not be required if and to the extent that such
Excess Proceeds are applied to the prepayment of Senior
Indebtedness (so long as, in the case of such a prepayment of
revolving loans, such prepayment effects a corresponding
commitment reduction of revolving loans), if any, or the
Company Notes and (ii) only be required to the extent that the
holders of any Senior Indebtedness and Company Notes which
remain outstanding permit the Company to distribute any such
Excess Proceeds to Holdings which were initially received by
the Company or its Subsidiaries.
3.3.2.2. Upon any Change of Control, Holdings shall
prepay the Holdings Notes, together with interest thereon to
but not including the date of such prepayment; PROVIDED, that
such prepayment of the Holdings Notes shall be required only
if and to the extent that (i) either (x) all Senior
Indebtedness and Company Note Obligations have first been paid
in full or (y) the holders of all Senior Indebtedness and
Company Notes to remain outstanding shall have waived such
payment and (ii) Holdings has received net proceeds as a
result of such Change in Control which have not been, either
directly, or through contribution to the Company, so applied
to the satisfaction of Senior Indebtedness or Company Note
Obligations; AND PROVIDED, FURTHER that, notwithstanding the
foregoing, Holdings shall not be obligated to so prepay the
Holdings Notes unless and until all Senior Indebtedness is
paid in full in cash or consents to such prepayment of the
Holdings Notes, EXCEPT THAT, subject to the foregoing, the
holders of Senior Indebtedness shall be required to either (x)
accept such prepayment of Senior Indebtedness or (y) consent
to such prepayment of Holdings Notes, one or the other of
which must occur within 90 days of the occurrence of such
Change of Control.
3.4. PAYMENT AT MATURITY.
3.4.1. On the Company Note Maturity Date, or upon any
acceleration of the Company Notes pursuant to Section 10.1 hereof, the Company
shall pay all remaining principal of the Company Notes, together with interest
on the amounts so paid and together with any other Company Note Obligations then
outstanding.
3.4.2. On the Holdings Note Maturity Date, or upon any
acceleration of the Holdings Notes pursuant to Section 10.2 hereof, Holdings
shall pay all remaining principal of the Holdings Notes, together with interest
on the amounts so paid and together with any other Holdings Note Obligations
then outstanding.
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3.5. NOTES PREPAID IN PART.
3.5.1. If fewer than all of the Company Notes or Holdings
Notes, as the case may be, are to be prepaid, the Company shall select the
Company Notes or Holdings Notes, as applicable, to be prepaid on a PRO RATA
basis.
3.5.2. Upon surrender of a Note that is prepaid in part, the
Company shall promptly execute and deliver to the holder (at the Company's
expense) a new Note equal in principal amount to the unpaid portion of the Note
surrendered.
3.5.3. Each Purchaser agrees that before disposing of the Note
held by it, or any part thereof (other than by granting participations therein),
such Purchaser will make a notation thereon of all principal payments previously
made thereon and of the date to which interest thereon has been paid and will
notify the Company of the name and address of the transferee of that Note;
PROVIDED, that the failure to make (or any error in the making of) a notation of
the payments made under such Note or to notify the Company of the name and
address of a transferee shall not limit or otherwise affect the obligation of
the Company hereunder or under such Note.
3.6. MANNER AND TIME OF PAYMENT.
3.6.1. All payments by the Company under this Agreement or the
Notes shall be made without defense, set off or counterclaim, in same day funds
and delivered to the holders of the Notes not later than 12:00 noon (New York
time) on the date such payment is due, with such payment to be made in the same
manner as that provided for payment of interest under Section 3.1; PROVIDED that
funds received by such holders after 12:00 noon (New York time) shall be deemed
to have been paid by the Company on the next succeeding Business Day.
3.6.2. Whenever any payment to be made hereunder or under the
Notes shall be stated to be due on a day which is not a Business Day, the
payment shall be made on the next succeeding Business Day and such additional
period shall be included in the computation of the payment of interest hereunder
or under the Notes.
3.6.3. All prepayments (whether voluntary or mandatory) shall
include the payment of accrued interest and unpaid interest to, but not
including, the date of such prepayment on the principal amount of the Notes so
prepaid.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser individually (but not on behalf of any other Purchaser)
represents and warrants that:
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4.1. LEGAL CAPACITY; DUE AUTHORIZATION. Such Purchaser has full legal
capacity, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and that this Agreement has been duly executed
and delivered by such Purchaser and is the legal, valid and binding obligation
of such Purchaser enforceable against it in accordance with the terms hereof.
4.2. RESTRICTIONS ON TRANSFER. Such Purchaser has been advised that the
Securities have not been registered under the Securities Act or any state
securities laws and, therefore, cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from such registration requirements is available. Such Purchaser is
aware that the Issuers are under no obligation to effect any such registration
with respect to the Securities or to file for or comply with any exemption from
registration, except as provided in the Registration Rights Agreement. Such
Purchaser is purchasing the Securities to be acquired by such Purchaser
hereunder for its own account and not with a view to, or for resale in
connection with, the distribution thereof in violation of the Securities Act;
PROVIDED, HOWEVER, that except as provided in Section 12 of this Agreement, the
disposition of such Purchaser's property shall at all times be and remain in its
control.
4.3. ACCREDITED INVESTOR, ETC. Such Purchaser has such knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of such investment, is able to incur a complete loss of
such investment and to bear the economic risk of such investment for an
indefinite period of time. Such Purchaser is an "accredited investor" as that
term is defined in Regulation D under the Securities Act.
4.4. BROKERAGE FEES, ETC. Each Purchaser represents and warrants to
each other party to this Agreement that, except as contemplated by the
Documents, no broker's, finders's or placement fee or commission will be payable
to any Person alleged to have been retained by such representing and warranting
party with respect to any of the Transactions. Each Purchaser hereby indemnifies
each such other party against and agrees that it will hold each such party
harmless from any claim, demand or liability, including reasonable attorneys'
fees, for any broker's, finder's or placement fee or commission alleged to have
been incurred by such indemnifying party.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS.
In order to induce each Purchaser to enter into this Agreement and to
purchase the Securities to be purchased by such Purchaser hereunder, subject to
Section 13.14, as of the Closing Date, (i) Holdings hereby makes the
representations, warranties and agreements set forth in this Section 5 for the
benefit of each Purchaser of Holdings Notes and (ii) the Company hereby makes
the representations, warranties and agreements set forth in this Section 5 for
the benefit of each Purchaser of Company Notes.
5.1. CORPORATE EXISTENCE AND POWER. Each of the Issuers (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) is
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duly qualified to do business in each additional jurisdiction where the failure
to so qualify would have a Material Adverse Effect, and (iii) has all requisite
corporate power to own its Properties and to carry on its business as now being
conducted and as proposed to be conducted, and to execute, deliver and perform
its obligations under this Agreement, the Notes and the Warrants, as the case
may be.
5.2. CORPORATE AUTHORITY. The execution, delivery and performance by
the Company and by Holdings, as the case may be, of this Agreement and the
Securities are within the corporate powers of the Company and Holdings and have
been duly authorized by all necessary corporate action on the part of the Board
and stockholders of the Company and Holdings.
5.3. BINDING EFFECT. This Agreement and each of the Securities is the
legal, valid and binding obligation of the Company and of Holdings, as the case
may be, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relative to or affecting the
enforcement of creditors' rights generally in effect from time to time and by
general principles of equity.
5.4. LITIGATION. There are no actions, suits or proceedings pending or,
to the knowledge of the Issuers, threatened against or affecting the Issuers or
against any officer or director of the Issuers which are likely to have,
individually or in the aggregate, a Material Adverse Effect, or which seek to
enjoin, or otherwise prevent the consummation of, the Transactions or to recover
any damages or obtain any relief as a result of any of the Transactions in any
court or before any arbitrator of any kind or by any Governmental Body.
5.5. NO LEGAL OBSTACLE TO AGREEMENTS.
5.5.1. Neither the execution and delivery of this Agreement or
any other Note Document, nor the making of any borrowings hereunder, nor the
consummation of any transaction referred to in or contemplated by this Agreement
or any other Note Document, nor the fulfillment of the terms hereof or thereof
or of any other agreement, instrument, deed or lease referred to in this
Agreement or any other Note Document, nor the fulfillment of the terms hereof or
thereof or of any other agreement, instrument, deed or lease referred to in this
Agreement or any other Note Document, has constituted or resulted in or will
constitute or result in:
5.5.1.1. any breach or termination of the provisions
of any agreement, instrument, deed or lease to which the
Issuer is a party or by which they are bound, or of the
charter or by-laws of the Issuers;
5.5.1.2. the violation of any law, statute, judgment,
decree or governmental order, rule or regulation applicable to
the Issuers;
5.5.1.3. the creation under any agreement,
instrument, deed or lease of any Lien upon any of the assets
of the Issuers; or
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5.5.1.4. any redemption, retirement or other
repurchase obligation of the Issuers under any charter,
by-law, agreement, instrument, deed or lease.
5.5.2. No approval, authorization or other action, by or
declaration to or filing with, any governmental or administrative authority or
any other Person is required to be obtained or made by the Issuers in connection
with the execution, delivery and performance of this Agreement, the Notes or the
Warrants, the transactions contemplated hereby or thereby of the making of any
borrowing hereunder.
5.6. DELIVERY OF SENIOR LOAN DOCUMENTS; INCORPORATION OF BRIDGE LOAN
AGREEMENT PROVISIONS. The Company has delivered to each of the Initial
Purchasers true, correct and complete copies of each Senior Loan Document as in
effect on the Closing Date, together with all exhibits and schedules thereto.
Subject to Section 13.14 hereof, the representations, warranties and agreements
of the Issuers set forth in Sections 3.1, 3.6, and 3.9 of the Bridge Loan
Agreement as in effect on the date hereof are hereby Incorporated By Reference
for the benefit of each Purchaser hereunder.
5.7. NO DEFAULT. No event has occurred and is continuing which
constitutes a Default or an Event of Default hereunder.
5.8. BROKERAGE FEES, ETC. Except as contemplated by the Documents, no
broker's, finders's or placement fee or commission will be payable to any Person
alleged to have been retained by or on behalf of MergerCo, the Company or
Holdings with respect to any of the transactions contemplated by this Agreement
or any of the other Documents. Each Issuer hereby indemnifies each Purchaser
against and agrees that it will hold each such party harmless from any claim,
demand or liability, including reasonable attorneys' fees, for any such
broker's, finder's or placement fee or commission alleged to have been incurred.
5.9. PRIVATE OFFERING. Neither Issuer has (nor anyone acting on its
behalf) offered the Securities or any part thereof or any similar securities for
issue or sale to, or solicit any offer to acquire any of the same from, anyone
so as to bring the issuance and sale of any of the Securities within the
provisions of Section 5 of the Securities Act or the provisions of any
securities or blue sky law of any applicable jurisdiction.
SECTION 6. CLOSING CONDITIONS
The obligation of each Purchaser to purchase and pay for the Securities
provided for hereunder is subject to the satisfaction of the following
conditions, each as of the Closing Date:
6.1. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. All representations
and warranties of the Issuers contained in this Agreement shall be true and
correct in all material respects,
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<PAGE> 17
including, without limitation, that there shall exist no Default or Event of
Default as of the Closing Date.
6.2. DOCUMENTS SATISFACTORY; TRANSACTIONS CONSUMMATED. The Merger shall
have been consummated in accordance with the terms of the Merger Agreement and
related documents and all applicable laws, and each of the conditions precedent
to the consummation thereof (including, without limitation, the accuracy in all
material respects of the representations and warranties contained in the Merger
Agreement) shall have been satisfied and not waived except with the consent of
the Purchasers and to the satisfaction of the Purchasers. Each of the Documents
shall have been duly executed and delivered by the respective parties thereto
and shall be in full force and effect. All of the terms, conditions and
provisions of each of such documents shall be satisfactory to the Purchasers in
all respects in form and substance, and no term, condition or provision thereof
shall have been supplemented, amended, modified or waived without such
Purchasers' consent. The Purchasers shall each have received a copy of each
Other Document (including any and all amendments, modifications and supplements
thereto), certified by a duly authorized officer of Holdings and the Company as
true, correct and complete.
6.3. CREDIT AGREEMENT AND BRIDGE LOAN AGREEMENT CONDITIONS SATISFIED.
6.3.1. The conditions set forth in Section 3.1 of the Credit
Agreement shall have been satisfied or waived except for the condition that the
Issuers shall have issued and/or sold the Securities as provided herein, and the
Purchasers shall be satisfied that the initial borrowings under the Credit
Agreement shall be made contemporaneously with or immediately after the purchase
of the Notes hereunder.
6.3.2. The conditions set forth in Article 6 of the Bridge
Loan Agreement shall have been satisfied or waived except for the condition that
the Issuers shall have issued and/or sold the Securities as provided herein, and
the Purchasers shall be satisfied that the borrowings under the Bridge Loan
Agreement shall be made contemporaneously with or immediately after the purchase
of the Notes hereunder.
6.4. DELIVERY OF DOCUMENTS. The Initial Purchasers shall have received
the following items, each of which shall be in form and substance reasonably
satisfactory to the Initial Purchasers and, unless otherwise noted, dated the
Closing Date:
6.4.1. Executed copies of this Agreement, the Registration
Rights Agreements, the Escrow Agreement, the Fee Warrants and the Notes issued
in the names of the respective Initial Purchasers as set forth on Schedule I.
6.4.2. Resolutions of the Boards of MergerCo, the Company and
Holdings approving the Transactions, and approving and authorizing the
execution, delivery and performance of this Agreement and each other Document to
which it is a party and approving and authorizing the issuance and sale of the
Notes and the execution, delivery and payment of the
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<PAGE> 18
Securities, in each case, certified as of the Closing Date by the secretary or
an assistant secretary of such Person as being in full force and effect without
modification or amendment.
6.4.3. For each Issuer and MergerCo, a copy of a certificate
of the secretary of the State of Delaware, dated a recent date prior to the
Closing Date, listing the charter of such Person and any amendment thereto on
file in his office and certifying that (A) such charter is a true and correct
copy thereof, (B) such amendments are the only amendments to such charter on
file in his office, (C) such Person has paid all franchise taxes to the date of
such certificate and (D) such Issuer is duly incorporated and in good standing
under the laws of such state.
6.4.4. A certificate of MergerCo and each Issuer, signed on
its behalf by an officer duly authorized, dated the Closing Date (the statements
made in which certificate shall be true on and as of such date) certifying as to
(A) the absence of any amendment to the charter of the such Person since the
date of the secretary of state's certificate referred to in Section 6.4.3
above), (B) a true and correct copy of the bylaws of such Person as in effect on
the Closing Date, (C) the due incorporation and good standing of such Person as
a corporation organized under the laws of the jurisdiction of its incorporation
and the absence of any proceeding for the dissolution or liquidation of such
Issuer, and (D) the completeness and accuracy of the representations and
warranties contained in this Agreement as of the Closing Date, including the
absence of any event occurring and continuing, or resulting from the
Transactions, that constitutes a Default.
6.4.5. Certificates of the secretaries of MergerCo and each
Issuer certifying the names and true signatures of the officers of such entities
executing the Documents.
6.4.6. True and correct copies of all of the Documents.
6.5. CORPORATE/CAPITAL STRUCTURE. The Initial Purchasers shall be
satisfied with the ownership, corporate and legal structure and capitalization
of the Issuers including, without limitation, the terms and conditions of their
respective charters and bylaws, the terms of the any capital stock and of the
capital stock, options, warrants or other securities issued by either Issuer and
any agreements related thereto and the management of the Issuers shall be
acceptable to the Initial Purchasers.
6.6. NO MATERIAL ADVERSE CHANGE. Nothing shall have occurred (and the
Initial Purchasers shall not be aware of any facts or conditions not previously
known) which the Purchasers shall determine has or reasonably could be expected
to have, a material adverse effect on the rights or remedies of the Purchasers
hereunder, or on the ability of Holdings or the Company to perform their
respective obligations with respect to this Agreement or the Notes or has, or
reasonably could be expected to have, a Material Adverse Effect.
6.7. LITIGATION. There shall exist no action, suit, investigation,
litigation or proceeding affecting the Issuers or any of their Subsidiaries or
any of their respective properties pending or threatened before any court,
governmental agency or arbitrator that (i) could have a Material
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<PAGE> 19
Adverse Effect or (ii) purports to affect the legality, validity or
enforceability of the Merger, this Agreement, any Note, any other Document or
the consummation of the transactions contemplated hereby and thereby. No order,
judgment or decree of any court, arbitrator or governmental authority shall
enjoin or restrain the Initial Purchasers from acquiring the Securities or
making the loans evidenced by the Notes.
6.8. INCORPORATION OF BRIDGE LOAN AGREEMENT PROVISIONS. The conditions
to Closing set forth in Sections 6.14, 6.16, 6.17, 6.18 (first sentence only),
6.19 and 6.20 of the Bridge Loan Agreement as in effect on the date hereof are
hereby Incorporated By Reference for the benefit of each Purchaser hereunder
except that:
6.8.1. the references to the "Administrative Agent" in
Sections 6.14 and 6.16 shall be to the Initial Purchasers; and
6.8.2. the references to the "Lenders" in Sections 6.17 and
6.18 shall be to the Initial Purchasers.
6.9. CERTAIN FEES. On the Closing Date, all expenses of the Initial
Purchasers (including, without limitation, legal fees and expenses) incurred in
connection with the negotiation and execution of this Agreement and the other
Documents shall have been paid by the Company to the extent due and the
Financing Fee shall have been paid to the Initial Purchasers in accordance with
their percentage interests in the Notes as reflected on Schedule I.
6.10. NO VIOLATION OF REGULATIONS T, U OR X. The issuance of the Notes
shall not violate Regulations T, U or X of the Board of Governors of the Federal
Reserve Board.
6.11. DELIVERY OF ESCROW WARRANTS. The Escrow Warrants shall have been
issued by Holdings in the name of the Escrow Agent, and shall have been
delivered to the Escrow Agent.
SECTION 7. COVENANTS APPLICABLE TO ALL NOTES
Subject to Section 13.14, (i) Holdings covenants and agrees for the
benefit of Purchasers of Holdings Notes, that so long as any Holdings Notes are
outstanding and (ii) the Company covenants and agrees for the benefit of
Purchasers of Company Notes, that so long as any Company Notes are outstanding:
7.1. REPORTS. Section 4.03 of the Indenture as in effect on the date
hereof is hereby Incorporated By Reference, except that
7.1.1. any reference to the "Notes" shall be to the Notes as
defined herein;
7.1.2. the reference to the "Holders of Notes" shall be to the
Purchasers; and
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<PAGE> 20
7.1.3. the last sentence of clause (a) shall be deleted.
7.2.TAXES. Section 4.05 of the Indenture as in effect on the date
hereof is hereby Incorporated by Reference, except that the reference to the
"Holders of the Notes" shall be to the Purchasers.
7.3. STAY, EXTENSION AND USURY LAWS. Section 4.06 of the Indenture as
in effect on the date hereof is hereby Incorporated By Reference, except that
7.3.1. any reference to "each of the Guarantors" shall be to
Holdings;
7.3.2. the reference to the "Trustee" shall be to the
Purchasers; and
7.3.3. the reference to the "Indenture" shall be to this
Agreement and the Notes.
7.4. TRANSACTIONS WITH AFFILIATES. Section 4.11 of the Indenture as in
effect on the date hereof is hereby Incorporated By Reference, except that
7.4.1. any reference to the "Company" shall be to Holdings;
7.4.2. any reference to "Restricted Subsidiaries" shall be to
"the Company and any Restricted Subsidiaries"; and
7.4.3. clause (ii) of the first sentence shall not be so
incorporated.
7.5. LINE OF BUSINESS. Section 4.13 of the Indenture as in effect on
the date hereof is hereby Incorporated By Reference, except that
7.5.1. the reference to the "Indenture" shall be to this
Agreement; and
7.5.2. the following sentence shall be added to the beginning
of such Section: "Holdings shall engage in no business other than holding the
capital stock of the Company and its Subsidiaries."
7.6. CORPORATE EXISTENCE. Section 4.14 of the Indenture as in effect on
the date hereof is hereby Incorporated By Reference, except that the reference
to the "Company" shall be to Holdings and the reference to the "Holders of the
Notes" shall be to the Purchasers.
7.7. NOTICE OF DEFAULT. The Issuers will provide to the Purchasers,
immediately upon receipt thereof, any notice of default received by either of
them under any Senior Loan Document.
SECTION 8. COVENANTS APPLICABLE TO COMPANY NOTES ONLY
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The Company covenants and agrees, for the benefit of the holders of
Company Notes from time to time, that so long as any Company Notes or Company
Note Obligations remain outstanding:
8.1. PAYMENT OF COMPANY NOTE OBLIGATIONS. The Company will duly and
punctually pay the principal of, interest and any other amounts owing under this
Agreement in respect of the Company Notes when due under the terms of this
Agreement and the Company Notes.
8.2. RESTRICTED PAYMENTS. Section 4.07 of the Indenture as in effect
on the date hereof is hereby Incorporated By Reference, except that
8.2.1. any references to a "Default" or an "Event of Default"
shall be to a "Company Note Default" or "Company Note Event of Default",
respectively;
8.2.2. any reference to the "Indenture" shall be to this
Agreement; and
8.2.3. any reference to the "Notes" shall be to the Company
Notes.
8.3. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
Section 4.08 of the Indenture as in effect on the date hereof is hereby
Incorporated By Reference, except that the reference to the "Indenture" in
clause (a) shall be to this Agreement.
8.4. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
Section 4.09 of the Indenture as in effect on the date hereof is hereby
Incorporated By Reference, except that
8.4.1. the following phrase shall be added before the word
"collectively" in the parenthetical which defines "Permitted Debt": "together
with any Indebtedness which constitutes a renewal, amendment, extension,
modification, replacement or refinancing of any such Indebtedness,");
8.4.2. the reference to the "Indenture" in clause (i) shall be
to the Bridge Loan Agreement and the Notes; and
8.4.3. the dollar amount "270.0 million" in clause (ii) shall
be replaced with $325.0 million;
8.4.4. the following additional clause (xvii) shall be added:
"(xvii) Indebtedness in addition to the foregoing not to exceed $25.0 million in
aggregate principal amount at any time outstanding."
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<PAGE> 22
8.5. ASSET SALES. The first and third paragraph and the first sentence
of the second paragraph of Section 4.10 of the Indenture as in effect on the
date hereof is hereby Incorporated By Reference, except that
8.5.1. any reference to the "Notes" shall be to the Company
Notes; and
8.5.2. the term "Senior Debt" in clause (a) of the second
paragraph shall be replaced with Senior Indebtedness.
8.6. LIENS. Section 4.12 of the Indenture as in effect on the date
hereof is hereby Incorporated By Reference.
8.7. NO SENIOR SUBORDINATED DEBT. The Company shall not incur, create
assume, guaranty or otherwise become directly or indirectly liable for any
Indebtedness that is (i) subordinated or junior in right of payment to the
Bridge Loan or any Indebtedness which refinances or replaces the Bridge Loan and
(ii) senior in any respect in right of payment to the Company Notes.
8.8. MERGER, CONSOLIDATION OR SALE OF ASSETS. Section 5.01 of the
Indenture as in effect on the date hereof is hereby Incorporated By Reference,
except that
8.8.1. clause (ii) shall be amended by replacing "the Debt
Registration Rights Agreement, the Notes and this Indenture in form reasonably
satisfactory to the Trustee" with the "Note Documents and the Registration
Rights Agreement in form reasonably satisfactory to the holders of the Company
Notes"; and
8.8.2. the reference to a "Default" or an "Event of Default"
in clause (iii) shall be to a Company Note Default or Company Note Event of
Default, respectively.
8.9. SUCCESSOR CORPORATION SUBSTITUTED. Section 5.02 of the Indenture
as in effect on the date hereof is hereby Incorporated By Reference, except that
8.9.1. the reference to the "Indenture" shall be to this
Agreement; and
8.9.2. the reference to the "Notes" shall be to the Company
Notes.
SECTION 9. COVENANTS APPLICABLE TO HOLDINGS NOTES ONLY
Holdings covenants and agrees, for the benefit of the holders of
Holdings Notes from time to time, that so long as any Holdings Notes or Holdings
Note Obligations remain outstanding:
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<PAGE> 23
9.1. PAYMENT OF NOTE OBLIGATIONS. Holdings will duly and punctually pay
the principal of, interest and any other amounts owing under this Agreement in
respect of the Holdings Notes when due under the terms of this Agreement and the
Holdings Notes.
9.2. RESTRICTED PAYMENTS. Section 4.07 of the Indenture as in effect on
the date hereof is hereby Incorporated By Reference, except that
9.2.1. any references to a "Default" or an "Event of Default"
shall be to a "Holdings Note Default" or "Holdings Note Event of Default",
respectively;
9.2.2. any reference to the "Indenture" shall be to this
Agreement; and
9.2.3. any reference to the "Notes" shall be to the Holdings
Notes.
9.3. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
Section 4.08 of the Indenture as in effect on the date hereof is hereby
Incorporated By Reference, except that
9.3.1. the reference to the "Indenture" in clause (a) shall be
to this Agreement;
9.3.2. any reference to the "Company" shall be to Holdings;
and
9.3.3. clause (b) shall be replaced in its entirety with the
following: "(b) the Senior Loan Documents as from time to time in effect,"; and
9.3.4. clause (c) shall be replaced in its entirety with the
following: "this Agreement and the Company Notes or the terms of any Refinancing
Debt;".
9.4. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
Section 4.09 of the Indenture as in effect on the date hereof is hereby
Incorporated By Reference, except that
9.4.1. the following phrase shall be added before the word
"collectively" in the parenthetical which defines "Permitted Debt": "together
with any Indebtedness which constitutes a renewal, amendment, extension,
modification, replacement or refinancing of any such Indebtedness,");
9.4.2. the ratio "2.0 to 1" in the first paragraph of such
Section 4.09 shall be replaced with 1.25 to 1";
9.4.3. clause (i) shall be amended in its entirety to read:
"(i) the Bridge Loan (including any modification, amendment, refinancing or
replacement thereof) and the Company Notes;"
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<PAGE> 24
9.4.4. clause (ii) shall be amended by deleting all of the
text following the first reference to "Credit Facilities"; and
9.4.5. the following additional clause (xvii) shall be added:
"(xvii) Indebtedness in addition to the foregoing not to exceed $25.0 million in
aggregate principal amount at any time outstanding."
9.5. NO ADDITIONAL HOLDINGS INDEBTEDNESS. Holdings shall not incur,
create, assume, guaranty or otherwise become directly or indirectly liable for
any Indebtedness other than (i) guaranteeing Senior Indebtedness, as from time
to time in existence, and (ii) the Holdings Notes.
9.6. MERGER, CONSOLIDATION OR SALE OF ASSETS. Holdings shall not,
directly or indirectly, consolidate or merge with or into (whether or not
Holdings is the surviving corporation), or sell, assign, transfer, convey or
other wise dispose of all or substantially all of its assets, in one or more
related transactions, to another Person unless either (i) Holdings is the
surviving corporation or (ii) the Person formed by or surviving any such
consolidation or merger (if other than Holdings) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all of Holdings' obligations under the Holdings Notes and under the
Registration Rights Agreement and this Agreement, in each case, solely in
respect of the Holdings Notes, and in such event, subject to Holdings'
obligations to prepay the Holdings Notes pursuant to Section 3.3 hereof, which
shall not be released, provisions of the Holdings Notes, the Registration Rights
Agreement and this Agreement which refer to Holdings shall instead be deemed to
refer to such other Person.
9.7. DEFAULT NOTICE. Holdings and the Company shall, so long as any
Securities are outstanding, deliver to the Purchasers upon becoming aware of any
Default or event of Default, a notice of such Default or Event of Default and
what action the Issuers are taking or propose to take with respect thereto.
SECTION 10. EVENTS OF DEFAULT
10.1. DEFAULTS ON COMPANY NOTES. If one or more of the following events
shall occur and be continuing (each, a "COMPANY NOTE EVENT OF DEFAULT"):
10.1.1. PAYMENT DEFAULT. The Company shall fail to pay (i) any
principal of the Company Notes when the same becomes due and payable, whether
upon maturity, prepayment, acceleration or otherwise or (ii) any interest on the
Company Notes, for a period of thirty days after the same shall become due and
payable; or
10.1.2. ACCELERATION OF OTHER INDEBTEDNESS; PRINCIPAL PAYMENT
DEFAULT. Any event of default shall have occurred under any Indebtedness of the
Company or any of its Subsidiaries in excess of $10 million in the aggregate for
the Company and its Subsidiaries which default either (i) constitutes the
failure to make any payments of principal at final maturity
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<PAGE> 25
of such Indebtedness or (ii) results in the acceleration of such Indebtedness,
whether by having become due and payable by its terms or by having been declared
due and payable prior to its stated maturity; or
10.1.3. CERTAIN COVENANTS. The Company shall default in the
performance or observance of any covenant described in Sections 8.2, 8.4 and 8.5
hereof and the continuance of such default for a period of 30 days after the
receipt of written notice of such default by the Company from the holders of at
least 25% of the principal amount of the Company Notes.
10.1.4. OTHER TERMS. The Company shall default in the
performance or observance of any covenant, agreement or condition of this
Agreement (other than those described or referred to in any other paragraph of
this Section 10.1) and such default shall continue for more than 60 days after
the receipt of written notice of such default by the Company from the holders of
at least 25% of the principal amount of the Company Notes.
10.1.5. JUDGMENTS AND ATTACHMENTS. One or more judgments or
decrees shall be entered against the Company or any of its Subsidiaries
involving a liability (to the extent not paid or fully covered by insurance) in
excess of $10 million for all such judgments and decrees and all such judgments
or decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof; or
10.1.6. INVOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
(a) A court having jurisdiction in the premises shall enter a decree or order
for relief in respect of the Company or any Significant Subsidiary, in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or any other similar relief shall be granted and remain
unstayed under any applicable federal or state law; or (b) an involuntary case
is commenced against the Company or any Significant Subsidiary, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Company or any of its Subsidiaries
or over all or a substantial part of any of their respective properties, shall
have been entered, or an interim receiver, trustee or other custodian of the
Company or any of its Significant Subsidiaries for all or a substantial part of
their respective properties is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any substantial part
of the property of the Company or any of its Significant Subsidiaries and the
continuance of any such events in this clause (b) for 60 days unless dismissed,
bonded, stayed, vacated or discharged; or
10.1.7. VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
The Company or any of its Significant Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any
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such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the making by the Company or any of its Significant Subsidiaries of
any assignment for the benefit of creditors; or the board of directors of the
Company or any of its Significant Subsidiaries (or any committee thereof) adopts
any resolution or otherwise authorizes any action to approve any of the
foregoing;
THEN, (i) upon the occurrence of any Company Note Event of Default
described in the foregoing Section 10.1.6 or 10.1.7 with respect to the Company,
the unpaid principal amount of all Notes, together with accrued interest
thereon, shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company, and (ii) upon the occurrence of any
other Company Note Event of Default, the holders of a majority in principal
amount of the Company Notes may, subject to Section 11 hereof, upon written
notice to the Senior Agent, the Bridge Agent and the Company, declare the
Company Notes to be due and payable, whereupon the principal amount of all
Company Notes, together with accrued interest thereon, shall automatically
become immediately due and payable, such without any other notice of any kind,
and without presentment, demand, protest or other requirements of any kind, all
of which are hereby expressly waived by the Company.
10.2. DEFAULTS ON HOLDINGS NOTES. If one or more of the following
events shall occur and be continuing (each, a "HOLDINGS NOTE EVENT OF DEFAULT"):
10.2.1. PAYMENT DEFAULT. Holdings shall fail to pay (i) any
principal of the Holdings Notes when the same becomes due and payable, whether
upon maturity, prepayment, acceleration or otherwise or (ii) any interest on the
Holdings Notes, for a period of sixty days after the same shall become due and
payable; or
10.2.2. ACCELERATION OF OTHER INDEBTEDNESS; PRINCIPAL PAYMENT
DEFAULT. Any event of default shall have occurred under any Indebtedness of
Holdings or any of its Subsidiaries in excess of $50 million in the aggregate
for Holdings and its Subsidiaries which default either (i) constitutes the
failure to make any payments of principal at final maturity of such Indebtedness
or (ii) results in the acceleration of such Indebtedness, whether by having
become due and payable by its terms or by having been declared due and payable
prior to its stated maturity; or
10.2.3. CERTAIN COVENANTS. Holdings shall default in the
performance or observance of any covenant described in Sections 9.2 and 9.4
hereof and the continuance of such default for a period of 60 days after the
receipt of written notice of such default by Holdings from the holders of at
least 25% of the principal amount of the Holdings Notes.
10.2.4. OTHER TERMS. The Company shall default in the
performance or observance of any covenant, agreement or condition of this
Agreement (other than those described or referred to in any other paragraph of
this Section 10.1) and such default shall
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continue for more than 90 days after the receipt of written notice of such
default by Holdings from the holders of at least 25% of the principal amount of
the Holdings Notes.
10.2.5. JUDGMENTS AND ATTACHMENTS. One or more judgments or
decrees shall be entered against the Holdings or any of its Subsidiaries
involving a liability (to the extent not paid or fully covered by insurance) in
excess of $50 million for all such judgments and decrees and all such judgments
or decrees shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof; or
10.2.6. INVOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
(a) A court having jurisdiction in the premises shall enter a decree or order
for relief in respect of the Holdings or any Significant Subsidiary, in an
involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or any other similar relief shall be granted and remain
unstayed under any applicable federal or state law; or (b) an involuntary case
is commenced against the Holdings or any Significant Subsidiary, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the Holdings or any of its Subsidiaries
or over all or a substantial part of any of their respective properties, shall
have been entered, or an interim receiver, trustee or other custodian of the
Holdings or any of its Significant Subsidiaries for all or a substantial part of
their respective properties is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any substantial part
of the property of the Holdings or any of its Significant Subsidiaries and the
continuance of any such events in this clause (b) for 60 days unless dismissed,
bonded, stayed, vacated or discharged; or
10.2.7. VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC.
The Holdings or any of its Significant Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary case to a
voluntary case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; the making by the Holdings or any of its
Significant Subsidiaries of any assignment for the benefit of creditors; or the
board of directors of the Holdings or any of its Significant Subsidiaries (or
any committee thereof) adopts any resolution or otherwise authorizes any action
to approve any of the foregoing;
THEN, (i) upon the occurrence of any Holdings Note Event of Default
described in the foregoing Section 10.2.6 or 10.2.7 with respect to Holdings,
the unpaid principal amount of all Notes, together with accrued interest
thereon, shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by Holdings, and (ii) upon the occurrence of any other
Holdings Event of Default, the holders of a majority in principal amount of the
Holdings Notes may, subject to
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Section 11 hereof, upon written notice to the Senior Agent, the Bridge Agent and
Holdings, declare the Holdings Notes to be due and payable, whereupon the
principal amount of all Holdings Notes, together with accrued interest thereon,
shall automatically become immediately due and payable, such without any other
notice of any kind, and without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Holdings.
SECTION 11. SUBORDINATION
11.1. OBLIGATIONS SUBORDINATE TO SENIOR INDEBTEDNESS. Holdings and the
Company each covenant and agree, and the Purchasers by their acceptance of
Notes, likewise covenant and agree, that all Notes shall be issued and all Note
Obligations incurred hereunder subject to the provisions of this Section 11; and
each Purchaser and each Person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that the
payment of all Note Obligations shall, to the extent and in the manner
hereinafter set forth, be subordinated and junior in right of payment to the
prior payment in full in cash of all Senior Indebtedness from time to time
outstanding (and the holders of the Holdings Notes accept and agree that the
payment of all Holdings Note Obligations shall, to the extent and in the manner
hereinafter set forth, also be subordinated and junior in right of payment to
the prior payment of all Company Note Obligations from time to time
outstanding); that the subordination is for the benefit of, and shall be
enforceable directly by, each holder of such Senior Indebtedness (and, with
respect to the subordination of the Holdings Notes, by each holder of Company
Notes), and that each holder of such Senior Indebtedness (or Company Notes, as
applicable), whether now outstanding or hereafter created, assumed or
guaranteed, shall be deemed to have acquired its Senior Indebtedness (or Company
Notes) in reliance upon the covenants and provisions contained in this
Agreement.
11.2. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION. In the event of (i)
any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization, adjustment, composition or other similar case or
proceeding in connection therewith, relative to Holdings or the Company or to
their respective creditors, as such, or to either such Person's assets, or (ii)
any liquidation, dissolution or other winding up of Holdings or the Company
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (iii) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of Holdings or the Company (collectively,
"BANKRUPTCY EVENTS"), then and in any such event:
11.2.1. (i) All obligations due or to become due under or with
respect to all Senior Indebtedness in such proceeding shall be paid in full, in
cash, before the holders of the Notes are entitled to receive any payment or
distribution, whether in cash, securities or other property, on account of the
Note Obligations; and (ii) all Company Note Obligations due or to become due
under shall be paid in full, in cash, or payment thereof in a form and manner
satisfactory to the holders of a majority in principal amount of the Company
Notes then outstanding shall have been provided for before the holders of the
Holdings Notes are entitled to
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receive any payment or distribution, whether in cash, securities or other
property, on account of the Holdings Note Obligations.
11.2.2. Any payment or distribution of assets of Holdings or
the Company of any kind or character, whether in cash, property or securities,
by set-off or otherwise, to which the holders of the Notes would be entitled but
for the provisions of this Section 11, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other Indebtedness of Holdings or the Company being subordinated to the payment
of the Note Obligations (including by reason of the subordination of the
Holdings Note Obligations to the Company Note Obligations) shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee
or otherwise, directly to the holders of such Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of, and interest on, such Senior Indebtedness
held or represented by each, to the extent necessary to make payment of all such
Senior Indebtedness remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Indebtedness, and,
following the payment in full in cash of all Senior Indebtedness, to the holders
of the Company Notes, and
11.2.3. In the event that, notwithstanding the foregoing
provisions of this Section 11.2, the holders of the Notes shall have received
any such payment or distribution of assets of Holdings or the Company of any
kind or character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason of any
other Indebtedness being subordinated to the payment of the Note Obligations
before all such Senior Indebtedness is paid in full in cash, or, in the case of
payments received by holders of Holdings Notes, before all Company Note
Obligations are paid in full in cash or payment thereof provided for, then and
in such event such payment or distribution shall be held in trust by such
Noteholder for the benefit of the holders of Senior Indebtedness, and shall
forthwith be paid over and delivered forthwith to the Applicable Agent, for
application to the Senior Indebtedness to the extent necessary to pay all such
Senior Indebtedness in full after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness and, after all
Senior Indebtedness is paid in full, shall be paid over to the holders of the
Company Notes for application to the Company Note Obligations to the extent
necessary to pay all such Company Note Obligations in full after giving effect
to any concurrent payment or distribution to or for the holders of such Company
Note.
11.2.4. The Applicable Agent shall have the right to request
the holders of the Notes to file and, in the event a Noteholder fails to do so
within 10 days prior to any deadline fixed in such proceeding for the filing of
such a claim, is hereby authorized to file a proof of claim in the form required
in any Bankruptcy Event for and on behalf of that holder, to accept and receive
any payment or distribution which may be payable or deliverable at any time upon
or in respect of the Note Obligations (other than any payment or distribution
which the Noteholders
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are entitled to retain pursuant to the parenthetical clause in the foregoing
paragraph 11.2.2) in an amount not in excess of the Senior Indebtedness then
outstanding and to take such other action as may be reasonably necessary to
effectuate the foregoing. Each Noteholder shall provide to the Applicable Agent
all information and documents reasonably necessary to present claims or seek
enforcement as aforesaid; PROVIDED, that after the payment in full of all Senior
Indebtedness, the holders of the Company Notes shall have the same rights as are
specified in this Section 11.2.4 relative to the holders of the Holdings Notes
as the Applicable Agent relative to the Noteholders.
11.2.5. If, notwithstanding the provisions of this Agreement,
there shall occur any consolidation of Holdings or the Company with, or any
merger of Holdings or the Company into, another corporation or the liquidation
or dissolution of Holdings or the Company following any conveyance, transfer or
lease of its properties and assets substantially as an entirety to another
corporation, such consolidation, merger or liquidation, to the extent permitted
under the terms of any outstanding Senior Indebtedness (or the terms of the
Company Notes, if the Senior Indebtedness has been repaid), or permitted by the
holders thereof, shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of assets
and liabilities of Holdings or the Company for the purposes of this Section
11.2.
11.3. NO PAYMENT IN CERTAIN CIRCUMSTANCES.
11.3.1. In the event that (i) Holdings or the Company shall
fail to pay when due, upon acceleration or otherwise, any principal or interest
or other Obligation with respect to Senior Indebtedness or, with respect to the
Holdings Notes, if Holdings shall fail to pay when due, upon acceleration or
otherwise, any principal or interest with respect to the Company Notes (a
"PAYMENT DEFAULT") which Payment Default shall not have been cured or waived, or
(ii) Holdings or the Company shall fail to comply with any of the other
covenants contained in any Senior Loan Document (or, following the payment of
all Senior Indebtedness and the termination of all commitments to lend
thereunder, in this Agreement or the Company Notes), which default shall not
have been cured or waived (a "COVENANT DEFAULT"), and Holdings or the Company
receive written notice of such Covenant Default from the Applicable Agent (or,
following the payment of all Senior Indebtedness and the termination of any
commitments to lend thereunder, from the holders of a majority in principal
amount of the Company Notes) (a "BLOCKAGE NOTICE"), then no payment shall be
made by, or on behalf of, Holdings or the Company on account of any Note
Obligations (or, following the payment of all Senior Indebtedness and the
termination of all commitments to lend thereunder, on account of any Holdings
Note Obligations) (x) in the case of any Payment Default, unless and until such
Senior Indebtedness (or, in the case of payments on the Holdings Notes, the
Company Notes) shall have been paid in full in cash or until such Payment
Default shall have been cured or waived, or (y) in the case of any such Covenant
Default, from the date Holdings and the Company shall have received such
Blockage Notice until the earlier of (1) (x) with respect to payments due on the
Company Notes, 270 days after such date, and (y) with respect to payments due on
the Holdings Notes, 365 days
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after such date and (2) the date, if any, on which the Senior Indebtedness to
which such Covenant Default relates is paid in full in cash or such Covenant
Default is waived by the required percentage of holders of such Senior
Indebtedness or otherwise cured or the Applicable Agent which delivered the
Blockage Notice withdraws the same (each such period, a "BLOCKAGE PERIOD"); and,
upon the termination of such Blockage Period, any amounts which have become due
and payable under the Notes or under this Agreement with respect to the Note
Obligations before or during such Blockage Period (including, if applicable,
interest at a default rate from and after the date on which any payment of
principal or interest would have been payable if not for operation of this
Section 11) shall be immediately due and payable (subject to the provisions of
this Section 11); PROVIDED, that (A) only one Blockage Notice may be given in
any 360-day period, and (B) no Covenant Default that previously served as the
basis for a Blockage Notice or that was in existence as of the date of delivery
of such prior Blockage Notice may serve as the basis for a Blockage Notice
unless such Covenant Default was subsequently cured or waived for a period of at
least 90 consecutive days (it being acknowledged that any subsequent action, or
any breach of any financial covenants for a period commencing after the date of
commencement of such Blockage Period that, in either case, would give rise to
any event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
11.3.2. In the event that any payment shall be received by any
Noteholder which is prohibited by the foregoing provisions of this Section 11.3,
then and in such event such payment shall be held in trust by such Noteholder
for the benefit of the holders of Senior Indebtedness, and shall forthwith be
paid over and delivered forthwith to the Applicable Agent (or, following the
payment of all Senior Indebtedness and the termination of all commitments to
lend thereunder, to the holders of the Company Notes) for application to the
Senior Indebtedness (or, following the payment of all Senior Indebtedness and
the termination of all commitments to lend thereunder, to the Company Note
Obligations). The provisions of this Section 11.3 shall not apply to any payment
with respect to which Section 11.2 would be applicable.
11.4. FORBEARANCE. Until all Senior Indebtedness has been paid in full
in cash (and, with respect to the Holdings Notes, until the Company Note
Obligations have been paid in full in cash), for the duration of any Blockage
Period applicable to such Notes, as provided in Section 11.3, no holder of
Holdings Notes or Company Notes shall, without the prior written consent of the
Applicable Agent (or, following the payment of all Senior Indebtedness and the
termination of all commitments to lend thereunder, of the Required Company
Noteholders) accelerate the maturity of such Notes (other than by reason of an
Event of Default specified in any of Sections 10.1.1(i), 10.1.6, 10.1.7,
10.2.1(i), 10.2.6 or 10.2.7) or commence any action, suit or proceeding or
pursue any remedies of any kind, whether to enforce any claims, rights, demands,
causes of action, liabilities, or suits, or any kind whatsoever, whether known
or unknown, that have been, could have been, or in the future might be asserted
by the holders of such Notes based upon, arising out of, or in any way relating
to, such Notes (other than by reason of an Event of Default specified in any of
Sections 10.1.1(i), 10.1.6, 10.1.7, 10.2.1(i), 10.2.6 or 10.2.7).
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11.5. PAYMENTS OTHERWISE PERMITTED. Nothing contained in this Section
11 or elsewhere in this Agreement or in the Notes shall prevent Holdings or the
Company, at any time except during a Bankruptcy Event as set forth in Section
11.2 or under the conditions described in Section 11.3 from making payments at
any time of principal of (and any applicable premium) and interest on the Notes
or any other amount payable by Holdings or the Company under the Notes or this
Agreement with respect to any Note Obligations.
11.6. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS. Subject
to the prior payment in full of all Senior Indebtedness, and, with respect to
the Holdings Notes, the prior payment in full of all Company Note Obligations,
the Noteholders shall be subrogated to the rights of the holders of such Senior
Indebtedness (and the Company Notes, as applicable) to receive payments and
distributions of cash, property and securities applicable to such Senior
Indebtedness (and the Company Notes, as applicable) until the principal of and
interest on such Notes shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of such Senior Indebtedness (or,
with respect to amounts owing on the Holdings Notes, to the holders of the
Company Notes) of any cash, property or securities to which such Noteholders
would be entitled except for the provisions of this Section 11, and no payments
over pursuant to the provisions of this Section 11 to the holders of such Senior
Indebtedness (or Company Notes) by the Noteholders shall, as among Holdings, the
Company, its creditors (other than holders of such Senior Indebtedness or
Company Notes) and the Noteholders be deemed to be a payment or distribution by
Holdings or the Company to or on account of such Senior Indebtedness or Company
Notes.
11.7. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. The provisions of
this Section 11 are and are intended solely for the purpose of defining the
relative rights of the holders of the Notes on the one hand and the holders of
Senior Indebtedness on the other hand and of defining the relative rights of the
holders of the Holdings Notes on the one hand and the holders of Company Notes
on the other hand. Nothing contained in this Section 11 or elsewhere in this
Agreement or in the Notes is intended to or shall (i) impair, as among Holdings,
the Company, its creditors (other than holders of Senior Indebtedness) and the
Noteholders, the obligation of Holdings, which is absolute and unconditional, to
pay to the holders of the Holdings Notes, the principal of, and interest on, and
any other amount payable by Holdings under, the Holdings Notes or this Agreement
as and when the same shall become due and payable in accordance with its terms;
or (ii) impair, as among Holdings, the Company, its creditors (other than
holders of Senior Indebtedness) and the Noteholders, the obligation of the
Company, which is absolute and unconditional, to pay to the holders of the
Company Notes, the principal of, and interest on, and any other amount payable
by the Company under, the Company Notes or this Agreement as and when the same
shall become due and payable in accordance with its terms, (iii) affect the
relative rights against Holdings or the Company of the Noteholders and their
creditors (other than the holders of Senior Indebtedness); or (iii) prevent the
Noteholders from accelerating the Notes and exercising all other remedies
otherwise permitted by applicable law upon default under this Agreement, in each
case subject Section 11.4 hereof and to the rights, if any, under this Section
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11 of the holders of Senior Indebtedness with respect to the turnover of assets
(whether in the form of cash, Property or securities) received upon the exercise
of any such remedy.
11.8. EFFECT OF FAILURE TO PAY NOTE OBLIGATIONS. Subject to the
limitations imposed under Section 11.4 on the exercise of remedies by the
Noteholders, the fact that failure to make any payment on account of the Note
Obligations is by reason of the operation of any provision of this Section 11
shall not be construed as preventing the occurrence of an Event of Default under
this Agreement.
11.9. NO WAIVER OF SUBORDINATION PROVISIONS. No right of any present or
future holder of any Senior Indebtedness or holder of Company Notes to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Holdings or the Company or
by any act or failure to act, in good faith, by any such holder or any
representative or agent therefor, or by any noncompliance by Holdings or the
Company with the terms, provisions and covenants of this Agreement, regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing, the holders of
Senior Indebtedness may at any time and from time to time, without the consent
of or notice to the Noteholders, and the holders of the Company Notes may at any
time and from time to time, without the consent of or notice to the holders of
the Holdings Notes, without incurring responsibility to the Noteholders and
without impairing or releasing the subordination provided in this Section 11 or
the obligations hereunder of the Noteholders to the holders of Senior
Indebtedness or of the holders of the Holdings Notes to the holders of the
Company Notes, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness or Company Notes or any instrument evidencing the same or
any agreement under which such Senior Indebtedness or Company Notes is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebtedness or Company
Notes; (iii) release any Person liable in any manner for the collection of such
Senior Indebtedness or Company Notes; and (iv) exercise or refrain from
exercising or waiving any rights, powers or remedies against Holdings, the
Company or any other Person. Nothing in this Section 11 shall be deemed to, or
shall create, any responsibility, liability or claim among the holders of Senior
Indebtedness or between such holders and the holders of Company Notes,
including, without limitation, in regard to the exercise of the rights of such
Persons hereunder.
11.10. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of Holdings or the Company referred
to in this Section 11, the Noteholders shall be entitled to rely upon any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Noteholders for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of Holdings or the Company, the
amount thereof or
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payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Section 11.
11.11. REINSTATEMENT. The provisions of this Section 11 shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Senior Indebtedness or Company Note Obligations is rescinded or
must otherwise be returned by any holder of Senior Indebtedness or Company Notes
upon the occurrence of a Bankruptcy Event or otherwise, all as though such
payment had not been made.
11.12. AMENDMENT. The subordination provisions of this Section 11 are
solely for the benefit of the holders of the Senior Indebtedness and, with
respect to the subordination of the Holdings Notes, of the holders of the
Company Notes, and may not be rescinded, canceled, amended or modified in any
way without the prior written consent of the holders of 100% of the Senior
Indebtedness or Company Notes to be affected by such rescission, cancellation,
amendment or modification.
11.13. REMEDIES. The holders of Senior Indebtedness and the holders of
the Company Notes shall be entitled to enforce their respective rights under
this Section 11 specifically, to recover damages by reason of any breach of any
provision of this Section 11 and to exercise all other rights existing in their
favor. The Noteholders acknowledge and agree that money damages may not be an
adequate remedy for any breach of the provisions of this Section 11 and that
holders of Senior Indebtedness or Company Notes may apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting bond or other security) in order to enforce or prevent
any violation of the provisions of this Section 11.
SECTION 12. RESTRICTIONS ON TRANSFER; LEGENDS.
12.1. ASSIGNMENTS OF SECURITIES.
12.1.1. Subject, with respect to the Warrants to the terms of
the Warrant and the Stockholders Agreements, the Purchasers shall have the right
at any time, to sell, assign, transfer or negotiate all or any part of the
Purchaser Securities to one or more Persons, and may grant participations in all
or any part of the Notes or the loans evidenced thereby to one or more Persons.
In the case of such sale, assignment, transfer or negotiation, the assignee,
transferee or recipient shall have, to the extent of such sale, assignment,
transfer or negotiation, the same rights, benefits and obligations as it would
if it were a Purchaser with respect to such Securities.
12.1.2. The Purchaser may grant participations in all or any
part of the Notes or loans evidenced hereby to one or more Persons.
12.1.3. The applicable Issuer shall keep at its principal
office a register in which such Issuer shall provide for the registration of the
Securities and for the transfer of the same. Upon surrender for registration of
transfer of any such Purchaser Security at the principal office
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of such Issuer, the Issuer shall, at its expense, promptly execute and deliver
one or more new Warrants or Notes, as applicable, of like tenor and of a like
aggregate number principal amount, registered in the name of such transferee or
transferees.
12.1.4. In connection with any sales, assignments or transfers
of any Purchaser Security, the transferor shall give notice to the Company and
the Agent of the identity of such parties and obtain agreements from the
transferees that all nonpublic information given to such parties pursuant to
this Agreement will be held in strict confidence pursuant to a confidentiality
agreement reasonably satisfactory to the Company.
12.2. RESTRICTIVE SECURITIES LEGEND.
12.2.1. THE NOTES. Each Note shall bear a legend in
substantially the following form:
"THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION
UNDER THE ACT IS NOT REQUIRED. THIS NOTE IS SUBJECT TO THE PROVISIONS
OF A LOCK-UP AGREEMENT DATED AS OF OCTOBER 29, 1998, AND MAY BE SOLD OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE LOCK-UP AGREEMENT."
12.2.2. THE WARRANTS. Each Warrant shall bear a legend in
substantially the following form:
"THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SAID ACT OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION."
12.3. TERMINATION OF RESTRICTIONS. The restrictions imposed by Section
12.2 hereof upon the transferability of the Securities shall cease and terminate
as to any particular Securities, (x) with respect to restrictions on account of
the Securities Act, (i) when, in the opinion of Ropes & Gray or other counsel
reasonably acceptable to applicable Issuer, such restrictions are no longer
required in order to assure compliance with the Securities Act or (ii) when such
Securities shall have been registered under the Securities Act or transferred
pursuant to Rule 144 thereunder and (y) with respect to restrictions on account
of the Lock-Up Agreement referenced in the restrictive legend set forth in
Section 12.2.1, pursuant to the terms of such Lock-up Agreement. Whenever such
restrictions shall cease and terminate as to any Securities or, in the case of
Securities Act restrictions, when such Securities shall be transferable under
paragraph (k) of Rule 144, the
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<PAGE> 36
holder thereof shall be entitled to receive from the applicable Issuer, without
expense, new certificates not bearing the legend set forth in Section 12.2
hereof.
12.4. NOTE LEGENDS RELATING TO SUBORDINATION.
12.4.1. Each Company Note shall bear a legend in substantially
the following form:
"THIS NOTE IS SUBORDINATED TO THE PRIOR PAYMENT AND
SATISFACTION IN CASH OF ALL SENIOR INDEBTEDNESS, AS DEFINED IN
THE SECURITIES PURCHASE AGREEMENT DATED AS OF OCTOBER 29, 1998
AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED OR SUPPLEMENTED
FROM TIME TO TIME (THE "AGREEMENT"). TO THE EXTENT, AND IN THE
MANNER PROVIDED IN THE AGREEMENT."
12.4.2. Each Holdings Note shall bear a legend in
substantially the following form:
"THIS NOTE IS SUBORDINATED TO THE PRIOR PAYMENT AND
SATISFACTION IN CASH OF ALL SENIOR INDEBTEDNESS AND ALL
COMPANY NOTE OBLIGATIONS, EACH AS DEFINED IN THE SECURITIES
PURCHASE AGREEMENT DATED AS OF OCTOBER 29, 1998 AS THE SAME
MAY BE AMENDED, MODIFIED, RESTATED OR SUPPLEMENTED FROM TIME
TO TIME (THE "AGREEMENT"). TO THE EXTENT, AND IN THE MANNER
PROVIDED IN THE AGREEMENT."
12.5. NOTE LEGEND RELATING TO ORIGINAL ISSUE DISCOUNT. Each Note shall
bear a legend in substantially the following form:
"THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN
REQUEST TO THE VICE PRESIDENT, SIMMONS COMPANY, ONE
CONCOURSE PARKWAY SUITE 600, ATLANTA, GA 30328. INFORMATION
REGARDING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT,
ISSUE DATE AND YIELD TO MATURITY WILL BE MADE AVAILABLE."
SECTION 13. MISCELLANEOUS
13.1. EXPENSES. Whether or not the transactions contemplated hereby
shall be consummated, the Issuers agree to promptly pay (i) all the actual and
reasonable costs and expenses of preparation of this Agreement and related
documents and all costs of furnishing all opinions by counsel for the Issuers
(including, without limitation, any opinions requested by the Purchasers as to
any legal matters arising hereunder), and of the Issuers' respective performance
of and compliance with all agreements and conditions contained herein on its
part to be performed or complied with; (ii) the reasonable fees, expenses and
disbursements of counsel to
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the Purchasers in connection with the negotiation, preparation, and execution of
the Documents and with the review of other documents related to the
Transactions, and any amendments and waivers hereto or thereto, and (iii) after
the occurrence of an Event of Default, all costs and expenses (including
reasonable attorneys' fees) incurred by the Purchasers in enforcing any
obligations of or in collecting any payments due hereunder or under the Notes by
reason of such Event of Default or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a workout, or any insolvency or bankruptcy proceedings.
13.2. INDEMNITY. In addition to the payment of expenses pursuant to
Section 13.1, whether or not the transactions contemplated hereby shall be
consummated, the Issuers (as "INDEMNITORS") agree to indemnify, pay and hold the
Purchasers, and the officers, directors, employees, agents, and Affiliates of
the Purchasers (collectively called the "INDEMNITEES") harmless from and against
any and all other liabilities, costs, expenses liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements of one counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement, the Notes or the other documents
related to the Transactions, the Purchasers' agreement to purchase the
Securities or the use or intended use of the proceeds of any of the proceeds
thereof to such Issuers (the "INDEMNIFIED LIABILITIES"); PROVIDED, that the
Indemnitors shall not have any obligation to an Indemnitee hereunder with
respect to an Indemnified Liability to the extent that such Indemnified
Liability arises from the gross negligence or willful misconduct of that
Indemnitee. Each Indemnitee shall give the Indemnitors prompt written notice of
any claim that might give rise to Indemnified Liabilities setting forth a
description of those elements of such claim of which such Indemnitee has
knowledge; PROVIDED, that any failure to give such notice shall not affect the
obligations of any Indemnitor unless (and then solely to the extent) such
Indemnitor is prejudiced. The Indemnitor shall have the right at any time during
which such claim is pending to select counsel to defend and control the defense
thereof and settle any claims for which they are responsible for indemnification
hereunder (provided that no Indemnitor will settle any such claim without (i)
the appropriate Indemnitee's prior written consent which consent shall not be
unreasonably withheld or (ii) obtaining an unconditional release of the
appropriate Indemnitee from all claims arising out of or in any way relating to
the circumstances involving such claim) so long as in any such event the
Indemnitor shall have stated in a writing delivered to the Indemnitee that, as
between the Indemnitor and the Indemnitee, the Indemnitor is responsible to the
Indemnitee with respect to such claim to the extent and subject to the
limitations set forth herein; PROVIDED, that the Indemnitors shall not be
entitled to control the defense of any claim in the event that in the reasonable
opinion of counsel for the Indemnitee there are one or more material defenses
available to the Indemnitee which are not available to the Indemnitors; PROVIDED
FURTHER, that with respect to any claim as to which the Indemnitee is
controlling the defense, the Indemnitors will not be liable to any Indemnitee
for any settlement of any claim pursuant to this Section 13.2 that
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<PAGE> 38
is effected without its prior written consent. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Issuers shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnities or any of them.
13.3. AMENDMENTS AND WAIVERS. No amendment, modification, termination
or waiver of any provision of this Agreement, shall in any event be effective
without the written consent of the holders of a majority in principal amount of
the Holdings Notes or the Company Notes, as applicable, affected thereby,
Holdings and the Company; PROVIDED that no amendment, modification, waiver or
consent shall, unless in writing and signed by each affected holder of Notes, do
any of the following: (a) reduce the principal of, or interest on, any Notes or
any fees or other amounts payable hereunder; or (b) postpone any date fixed for
any payment of principal of, or interest on, any Notes or any fees or other
amounts payable hereunder (other than as a result of waiving a prepayment
required under Section 3.3 or a Default or Event of Default giving rise to a
right of acceleration, which shall each be by written consent of the holders of
a majority in principal amount of the Company Notes or Holdings Notes, as
applicable, to which such Default or Event of Default relates, or (c) amend this
Section 13.3. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Holdings or the Company in any case shall entitle Holdings or the
Company to any further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 13.3 shall be binding upon each holder of the Company Notes or
Holdings Notes, as the case may be, at the time outstanding and each future
holder thereof.
13.4. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
13.5. NOTICES. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and delivered personally, mailed by certified or registered mail, return
receipt requested and postage prepaid, sent via a nationally recognized
overnight courier, or via facsimile. Such notices, demands and other
communications will be sent to the address indicated below:
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<PAGE> 39
If to the Company:
Simmons Company
One Concourse Parkway Suite 600
Atlanta, GA 30328
Attention: Zenon S. Nie
If to Holdings:
Simmons Holdings, Inc.
One Concourse Parkway Suite 600
Atlanta, GA 30328
Attention: Zenon S. Nie
In either case, with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Alyson B.G. Allen, Esq.
Telecopier No.: (617) 951-7050
If to Purchasers, to the address
set forth in Schedule I
In the case of the Initial Purchasers, with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Alyson B.G. Allen, Esq.
Telecopier No.: (617) 951-7050
PROVIDED, that copies of any notices given hereunder shall also be provided to:
the Bridge Agent:
West Street Fund I, L.L.C.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Matthew Leavitt
Telecopier No.: (212) 902-3000
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<PAGE> 40
and its counsel:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Kirk Davenport
Telecopier No.: (212) 751-4864
and the Senior Agent:
UBS A.G., Stamford Branch
677 Washington Boulevard, 8th Floor
Stamford, Connecticut 06912
Attention: Lara Kavanagh
Telecopier No.: (203) 719-4176
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<PAGE> 41
and its counsel:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Attention: Marc Hanrahan
Telecopier No. (212) 735-2000
or such successor entity, other address or to the attention of such other Person
as the recipient party shall have specified by prior written notice to the
sending party; PROVIDED that the failure to deliver copies of notices as
indicated above shall not affect the validity of any notice. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered, or sent by nationally recognized overnight courier or sent
via facsimile or (ii) on the third Business Day following the date on which the
piece of mail containing such communication is posted if sent by certified or
registered mail.
13.6. SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS.
13.6.1. All agreements, representations and warranties made
herein shall survive the execution and delivery of this Agreement, the sale and
delivery of the Securities hereunder, including the execution and delivery of
the Notes, and shall continue (but, with respect to representations and
warranties, such representations and warranties are made only as of the Closing
Date) until no Securities remain outstanding and until the repayment of the
Notes and the Note Obligations in full; PROVIDED, that if all or any part of
such payment is set aside, the representations and warranties contained herein
shall continue as if no such payment had been made.
13.6.2. Notwithstanding anything in this Agreement or implied
by law to the contrary, the agreements of the Company set forth in Sections 13.1
and 13.2 shall survive the payment of the Notes, the redemption, cancellation or
exchange of the Securities and the termination of this Agreement.
13.7. FAILURE OR INDULGENCE NOT WAIVER REMEDIES CUMULATIVE. No failure
or delay on the part of any Purchaser in the exercise of any power, right or
privilege hereunder or under any Securities shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under this Agreement or the
Securities are cumulative to and not exclusive of, any rights or remedies
otherwise available.
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<PAGE> 42
13.8. SEVERABILITY. If and to the extent that any provision in this
Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions of the Agreement or obligations of the Company under such provisions,
or of such provision or obligation in any other jurisdiction, or of such
provision to the extent not invalid, illegal or unenforceable shall not in any
way be affected or impaired thereby.
13.9. HEADING. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
13.10. APPLICABLE LAW. This Agreement shall be governed by, and shall
be construed and enforced in accordance with, the laws of the State of New York
without regard to the principles of conflicts of laws.
13.11. SUCCESSORS AND ASSIGNS. SUBSEQUENT HOLDERS. This Agreement shall
be binding upon the parties hereto and their respective successors and assigns
and shall inure to the benefit of the parties hereto and the successors and
assigns of the Purchasers. The terms and provisions of this Agreement and all
certificates delivered pursuant hereto shall inure to the benefit of any
assignee or transferee of the Notes, to the extent the assignment is permitted
hereunder, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon the Purchasers shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. The Issuers' rights or any interest therein or hereunder may
not be assigned without the written consent of the holders of a majority of the
outstanding principal amount of the Company Notes, in the case of the Company,
or the holders of a majority the outstanding principal amount of the Holdings
Notes, in the case of Holdings.
13.12. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All judicial
proceedings brought against either Issuer with respect to this Agreement or any
notes may be brought in any State or Federal Court of competent jurisdiction in
the State of New York located in New York City and by execution and delivery of
this Agreement the Issuers each accepts for itself and in connection with its
properties, generally and unconditionally, the jurisdiction of the aforesaid
courts, and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement subject, however, to rights of appeal. Each
Issuer hereby agrees that service upon it by mail in manner provided in Section
13.5 shall constitute sufficient notice, such service being hereby acknowledged
by the Issuers to be effective and binding service in every respect. Nothing
herein shall affect the right to serve process in any other manner permitted by
law or shall limit the right of any Purchaser to bring proceedings against
either Issuer in the courts of any other jurisdiction.
13.13. WAIVER OF JURY TRIAL. Each Issuer hereby waives, to the full
extent permitted by applicable law, trial by jury in any litigation in any court
with respect to, in connection with, or arising out of this Agreement or any
other document or the validity, protection, interpretation,
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<PAGE> 43
collection or enforcement thereof. Notwithstanding anything contained in this
Agreement to the contrary, no claim may be made by any Issuer against any
Purchaser for any lost profits or any special, indirect or consequential damages
in respect of any breach or wrongful conduct (other than willful misconduct
constituting actual fraud) in connection with, arising out of or in any way
related to the transactions contemplated hereunder or under the other documents,
or any act, omission or event occurring in connection therewith; each Issuer
hereby waives, releases and agrees not to sue upon any such claim for any such
damages. Each Issuer agrees that this Section 13.13 is a specific and material
aspect of this Agreement and acknowledges that the Purchasers would not extend
to the Issuers any monies hereunder if this Section 13.13 were not part of this
Agreement.
13.14. LIMITATION OF COMPANY LIABILITY. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY OF SECTIONS 5, 7,
9 OR 10 HEREOF, NOTHING IN THIS AGREEMENT OR THE NOTES SHALL CREATE ANY
LIABILITY ON THE PART OF THE COMPANY IN RESPECT OF THE HOLDINGS NOTES, OR CREATE
ANY RIGHT OF ACTION OR CLAIM AGAINST THE COMPANY ARISING OUT OF ANY HOLDINGS
NOTE, INCLUDING, WITHOUT LIMITATION, ON ACCOUNT OF ANY BREACH OF REPRESENTATION,
WARRANTY, COVENANT OR AGREEMENT OR CLAIM TO RESCISSION OR DAMAGES, AND THE
COMPANY HAS NO LIABILITY TO PURCHASERS OF HOLDINGS NOTES, FOR ANY REASON, IN
CONTRACT, UNDER LAW, OR OTHERWISE.
13.15. COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. This Agreement shall
become effective upon the execution of a counterpart hereof by each of the
parties hereto, and written or telephonic notification of such execution and
authorization of delivery thereof has been received by each of the Issuers and
the Purchasers.
13.16. ENTIRETY. This Agreement and the other Documents embody the
entire agreement among the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the respective duly authorized officers of the undersigned and by
the undersigned as of the date first written above.
THE COMPANY:
SIMMONS COMPANY
By:/s/Zenon S. Nie
----------------------------
Name:
Title:
HOLDINGS:
SIMMONS HOLDINGS, INC.
By:/s/Zenon S. Nie
----------------------------
Name:
Title:
INITIAL PURCHASERS:
SIMMONS HOLDINGS, LLC
By:/s/Richard C. Dresdale
----------------------------
Name:
An Authorized Person
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<PAGE> 45
SCHEDULE I
- ----------
PURCHASERS
----------
<TABLE>
<CAPTION>
Aggregate Principal
-------------------
Purchaser of Company Notes Amount of Company Notes Purchase Price
- -------------------------- ----------------------- --------------
<S> <C> <C>
Simmons Holdings, LLC $30,000,000 $30,000,000
c/o Fenway Partners, Inc.
152 West 57th Street,
59th Floor
New York, New York 10019
</TABLE>
<TABLE>
<CAPTION>
Aggregate Principal
-------------------
Purchaser of Company Notes Amount of Company Notes Purchase Price
- -------------------------- ----------------------- --------------
<S> <C> <C>
Simmons Holdings, LLC $10,000,000 $10,000,000
c/o Fenway Partners, Inc.
152 West 57th Street,
59th Floor
New York, New York 10019
</TABLE>
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<PAGE> 46
APPENDIX I
TO SECURITIES PURCHASE AGREEMENT
"AGREEMENT" means the Securities Purchase Agreement dated as of October
29, 1998 between the Company, Holdings and the Purchasers party thereto, as from
time to time in effect, of which this Appendix is a part.
"APPLICABLE AGENT" means (x) until such time as the Company's
obligations under the Credit Documents have terminated and there are no further
commitments to lend under the Credit Agreement, the Senior Agent, and (y)
thereafter, the Bridge Agent.
"APPLICABLE COMPANY NOTE RATE" means the percentage rate in the table
below set opposite to the applicable period:
Closing Date through but not including
December 31, 1998 13.0%
December 31, 1998 through but not including
March 31, 1999 13.5%
March 31, 1999 through but not including
June 30, 1999 14.0%
June 30, 1999 through but not including
September 30, 1999 14.5%
September 30, 1999 through but not including
December 31, 1999 15.0%
December 31, 1999 through but not including 15.5%
March 31, 2000
March 31, 2000 through the Company Maturity Date 16.0%
"APPLICABLE HOLDINGS NOTE RATE" means the percentage rate in the table below set
opposite to the applicable period:
Closing Date through but not including
December 31, 1998 15.0%
December 31, 1998 through but not including
March 31, 1999 15.5%
March 31, 1999 through but not including
June 30, 1999 16.0%
June 30, 1999 through but not including
September 30, 1999 16.5%
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<PAGE> 47
September 30, 1999 through but not including
December 31, 1999 17.0%
December 31, 1999 through the Holdings Maturity Date 17.5%
"A WARRANTS" has the meaning set forth in the Escrow Agreement.
"BANKRUPTCY EVENTS" has the meaning set forth in Section 11.2 of the
Agreement.
"BRIDGE AGENT" has the meaning set forth in the recitals to the
Agreement, and shall include any successor in such capacity.
"BRIDGE LENDERS" has the meaning set forth in the recitals to the
Agreement.
"BRIDGE LOAN" has the meaning set forth in the recitals to the
Agreement, as such loan may be amended, restated, extended, renewed,
supplemented, refinanced, replaced or otherwise modified from time to time.
"BRIDGE LOAN AGREEMENT" has the meaning set forth in the recitals to
the Agreement, together with any schedules, exhibits, appendices or other
attachments thereto, as such agreement may be amended, restated, extended,
renewed, supplemented, refinanced, replaced or otherwise modified from time to
time (including, without limitation, by adding any direct or indirect
Subsidiaries of Holdings or the Company as additional guarantors thereunder) and
whether by the same or any other agent, lender or group of lenders.
"BRIDGE LOAN DOCUMENTS" means, collectively, the Bridge Loan Agreement,
the related, guarantees, notes and the other documents executed in connection
therewith, and each other document or instrument executed by Holdings, the
Company, any other Subsidiary of Holdings or any other obligor under any such
documents, including any schedules, exhibits, appendices or other attachments
thereto.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in New York, New York are authorized or
required by law or other governmental action to close.
"B WARRANTS" has the meaning set forth in the Escrow Agreement.
"CAPITALIZED INTEREST" has the meaning set forth in Section 3.1.2 of
the Agreement.
"CLOSING" has the meaning set forth in the recitals to the Agreement.
"CLOSING DATE" means the date upon which the conditions precedent to
the purchase and sale of the Securities from the Company shall have been
satisfied and the Notes have been purchased by the Purchasers in accordance with
the Agreement.
"COMPANY" has the meaning set forth in the preamble to the Agreement.
"COMPANY NOTE DEFAULT" means any event, act or condition which with
notice or lapse of time, or both, would constitute a Company Note Event of
Default.
"COMPANY NOTE EVENT OF DEFAULT" has the meaning set forth in Section
10.1
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<PAGE> 48
"COMPANY NOTE OBLIGATIONS" means any and all Obligations of the Company
under the Company Notes or the Agreement, including, without limitation, the
obligation to pay principal, interest (including interest accruing after the
filing of a bankruptcy or other insolvency proceeding, whether or not an allowed
claim in such proceeding), expenses, attorneys' fees and disbursements,
indemnities and other amounts payable thereunder or in connection therewith or
related thereto.
"COMPANY NOTE MATURITY DATE" means October 29, 2010.
"COMPANY NOTES" has the meaning set forth in the recitals to the
Agreement.
"CONSOLIDATED ADJUSTED EBITDA" has the meaning set forth in the Credit
Agreement as in effect on the date hereof.
"CONSOLIDATED CASH INTEREST EXPENSE" has the meaning set forth in the
Credit Agreement as in effect on the date hereof.
"CREDIT AGREEMENT" has the meaning set forth in the recitals to the
Agreement, together with any schedules, exhibits, appendices or other
attachments thereto, as such agreement may be amended, restated, extended,
renewed, supplemented, refinanced, refunded, restructure, replaced or otherwise
modified from time to time (including, without limitation, by increasing the
amount of available borrowings thereunder or adding any direct or indirect
Subsidiaries of Holdings or the Company as additional borrowers or guarantors
thereunder) and whether by the same or any other agent, lender or group of
lenders.
"CREDIT DOCUMENTS" means, collectively, the Credit Agreement, the
guaranties thereunder, the related security agreements, guarantees, pledge
agreements, mortgages, notes and the other documents executed in connection
therewith, and each other document or instrument executed by Holdings, the
Company, any other Subsidiary of Holdings or any other obligor under any such
documents, including any schedules, exhibits, appendices or other attachments
thereto as each of the foregoing may be amended, restated, extended, renewed,
supplemented, refinanced, refunded, restructure, replaced or otherwise modified
from time to time (including, without limitation, by increasing the amount of
available borrowings thereunder or adding any direct or indirect Subsidiaries of
Holdings or the Company as additional borrowers or guarantors thereunder) and
whether by the same or any other agent, lender or group of lenders.
"DEFAULT" means any event, act or condition which with notice or lapse
of time, or both, would constitute either a Company Note Event of Default or a
Holdings Note Event of Default.
"DOCUMENTS" means the Credit Documents, the Bridge Loan Documents, this
Agreement, the Securities, the Registration Rights Agreement, the Merger
Documents, the Escrow Agreement, the Stockholders Agreements, and all documents,
certificates and agreements delivered with respect thereto, in each case,
together with any schedules, exhibits, appendices or other attachments thereto.
"ESCROW AGENT" means Ropes & Gray, in its capacity as escrow agent
pursuant to the Escrow Agreement, and any successor escrow agent.
"ESCROW AGREEMENT" means the Escrow Agreement, dated as of the date
hereof, among Holdings, the Company, the Purchasers and the Escrow Agent in the
form of Exhibit D hereto.
"ESCROW WARRANTS" has the meaning set forth in the Escrow Agreement.
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"EVENT OF DEFAULT" means any Company Note Event of Default or any
Holdings Note Event of Default.
"EXCESS PROCEEDS" has the meaning provided in the Indenture.
"EXERCISE SHARES" means the shares of Holdings' Common Stock (or other
securities, as applicable) issuable upon exercise of the Warrants.
"FEE WARRANTS" means the warrants provided to be delivered to the
Initial Purchasers at Closing, in accordance with the term sheet for the Notes.
"FINANCING FEE" shall mean the fee provided to be paid to the Initial
Purchasers at Closing, in accordance with the term sheet for the Notes.
"HOLDINGS" has the meaning set forth in the recitals to the Agreement.
"HOLDINGS NOTE DEFAULT" means any event, act or condition which with
notice or lapse of time, or both, would constitute a Holdings Note Event of
Default.
"HOLDINGS NOTE EVENT OF DEFAULT" has the meaning set forth in Section
10.2
"HOLDINGS NOTE MATURITY DATE" means October 29, 2011
"HOLDINGS NOTE OBLIGATIONS" means any and all Obligations of Holdings
under the Holdings Notes or the Agreement, including, without limitation, the
obligation to pay principal, interest, expenses, attorneys' fees and
disbursements, indemnities and other amounts payable thereunder or in connection
therewith or related thereto.
"HOLDINGS NOTES" has the meaning set forth in the recitals to the
Agreement.
"INCORPORATED BY REFERENCE" means, with respect to any referenced
provision of the Bridge Loan Agreement or the Indenture, as the case may be, the
incorporation of that provision, to the Agreement with the same effect and for
all purposes as if set forth in full in the Agreement, together with any
referenced definitions or schedules and any cross referenced provisions included
in such referenced provision, except that, where any such included cross
referenced provision has been likewise Incorporated By Reference and as so
incorporated has been modified or supplemented, such cross reference shall be
deemed to be to the cross referenced provision as so Incorporated By Reference,
as so modified or supplemented.
"INDEMNIFIED LIABILITIES" has the meaning set forth in Section 13.2 of
the Agreement.
"INDEMNITEES" has the meaning set forth in Section 13.2 of the
Agreement.
"INDEMNITORS" has the meaning set forth in Section 13.2 of the
Agreement.
"INDENTURE" means the Indenture, in the form attached to the Bridge
Loan Agreement as of the Closing Date as Exhibit H thereto, between the Company,
the guarantors listed therein, and Sun Trust Bank, as trustee.
"INTEREST COVERAGE RATIO" means the ratio of Consolidated Adjusted
EBITDA to Consolidated Cash Interest Expense; PROVIDED that for purposes of any
calculation of the Interest Coverage Ratio
-44-
<PAGE> 50
pursuant to Section 3.1.1.2 or Section 3.1.2 of the Agreement, (x) for periods
prior to the Closing Date PRO FORMA effect shall be given to the Transactions as
if completed as of the commencement of such period and (y) the level of Cash
Interest Expense for the most recent fiscal quarter shall be determined on the
basis of the cash interest to be paid on the Company Notes on the interest
payment date immediately following the end of such fiscal quarter. In the event
that the referent Person or any of its consolidated Subsidiaries incurs,
assumes, Guarantee or redeems, repays, repurchases, defeases or otherwise
discharges any Indebtedness (other than revolving credit borrowings) or issues
or redeems preferred stock subsequent to the commencement of the period for
which the Interest Coverage Ratio is made (the "Calculation Date"), then the
Interest Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption, repayment, repurchase,
defeasance or other discharge of Indebtedness, or such issuance or redemption of
preferred stock , as if the same had occurred at the beginning of the applicable
four-quarter reference period. In addition, for purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its consolidated Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Adjusted EBITDA for such
reference period shall be calculated (including any pro forma expense and cost
reductions and related adjustments to the extent that the same are consistent
with Regulation S-X under the Securities Act,) and (ii) the Consolidated
Adjusted EBITDA attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Consolidated Cash Interest
Expense attributable to revolving loans incurred in connection with such
discontinued operations, or operations or businesses disposed of prior to the
Calculation Date, shall be excluded. For purposes of this definition, whenever
pro forma effect is to be given to any acquisition, the amount of Consolidated
Adjusted EBITDA relating thereto and the Consolidated Cash Interest Expense
associated with any Indebtedness incurred in connection therewith shall be
determined in good faith by a responsible financial or accounting officer of the
Company in a manner consistent with this definition.
"MATERIAL ADVERSE EFFECT" has the meaning provided in the Bridge Loan
Agreement as in effect on the date hereof, except that the reference to the
"Obligations" shall be to the Note Obligations.
"MERGER" has the meaning set forth in the recitals to the Agreement.
"MERGER AGREEMENT" has the meaning set forth in the recitals to the
Agreement.
"NOTE" and "NOTES" has the meaning set forth in the recitals to this
Agreement and shall mean and include any Notes issued pursuant to Section 12.1
of the Agreement.
"NOTE DOCUMENTS" shall mean, collectively, the Agreement and the Notes.
"NOTEHOLDERS" means the holders of the Notes from time to time pursuant
to the Agreement.
"NOTE OBLIGATIONS" means any and all Obligations of the Company and
Holdings, as the case may be, under the Agreement or the Notes, including,
without limitation, the obligation to pay principal, interest, expenses,
attorneys' fees and disbursements, indemnities and other amounts payable
thereunder or in connection therewith or related thereto.
"OTHER DOCUMENTS" means the Documents other than the Note Documents.
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<PAGE> 51
"PURCHASERS" has the meaning set forth in the preamble to the
Agreement, and shall mean and include the Purchasers and any assignees of the
Notes pursuant to Section 12 of the Agreement. "PURCHASER" shall mean any of the
Purchasers, individually.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the Closing Date, by and among Holdings, the Company and
the Purchasers in the form attached as Exhibit C hereto.
"REPLACEMENT DEBT" shall have the meaning set forth in Section 2.3 of
the Agreement.
"REQUIRED NOTEHOLDERS" means the holders of more than 50% of the
aggregate principal amount of the Notes then outstanding.
"SECURITIES" has the meaning set forth in the recitals to the
Agreement.
"SENIOR AGENT" has the meaning set forth in the recitals to the
Agreement, and shall include any successor in such capacity.
"SENIOR INDEBTEDNESS" means (i) all Indebtedness of Holdings or the
Company outstanding on the date of this Agreement or incurred after the date of
this Agreement pursuant to any of the Credit Documents, including any Hedging
Obligations with respect thereto, or the Bridge Loan Documents, including, in
each case, any refinancings, renewals, refundings, amendments, reinstatements,
supplements, modifications, extensions, replacements or restructurings of the
foregoing, (ii) any other Indebtedness of Holdings or the Company permitted to
be incurred under this Agreement, unless the instrument governing such
Indebtedness expressly provides that it is on a parity with or subordinated in
right of payment to the applicable Notes, and (iii) all Obligations with respect
to the foregoing, in the case of each of the foregoing clauses (i) through
(iii), whether for principal, premium (if any), interest (including interest
accruing after the filing of a bankruptcy or similar proceeding, whether or not
an allowed claim in such proceeding. Notwithstanding anything to the contrary in
the foregoing, Senior Indebtedness shall not include ((t) any Indebtedness
represented by Capital Stock (as defined in the Indenture), (u) any liability
for federal, state, local or other taxes owed or owing by Holdings or the
Company, (v) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates, in the case of the Company Notes, and any Indebtedness of Holdings
to any of its Subsidiaries or other Affiliates, in the case of the Holdings
Notes, (w) any trade payables including any Guarantees thereof or instruments
evidencing such liabilities, (x) any Indebtedness that is incurred in violation
of this Agreement (PROVIDED, that such determination shall be made separately
for the Holdings Notes and the Company Notes, such that Indebtedness which is
not permitted by covenants running in favor of holders of Company Notes may be
Senior Indebtedness as to Holdings Notes if permitted by covenants running in
favor of holders of Holdings Notes), (y) the Existing Notes or (z) the
Industrial Revenue Bonds.
"SENIOR LENDER" has the meaning set forth in the recitals to the
Agreement.
"SENIOR LOAN DOCUMENTS" shall mean, collectively, the Credit Documents
and the Bridge Loan Documents.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act of 1933, as such regulation is in
effect on the date hereof.
-46-
<PAGE> 52
"WARRANTS" has the meaning set forth in the recitals to the Agreement.
-47-
<PAGE> 53
EXHIBIT A-1
-----------
FORM OF COMPANY NOTE
--------------------
-48-
<PAGE> 54
EXHIBIT A-2
-----------
FORM OF HOLDINGS NOTE
---------------------
-49-
<PAGE> 55
EXHIBIT B
FORM OF WARRANT
---------------
-50-
<PAGE> 56
EXHIBIT C
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
-51-
<PAGE> 57
EXHIBIT D
---------
FORM OF ESCROW AGREEMENT
------------------------
-52-
<PAGE> 58
Exhibit A-1
JUNIOR SUBORDINATED NOTE
SIMMONS COMPANY
THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN REQUEST TO
THE VICE PRESIDENT, SIMMONS COMPANY, ONE CONCOURSE PARKWAY, SUITE 600,
ATLANTA, GA 30328, INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF
ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY WILL BE MADE
AVAILABLE.
THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION
UNDER THE ACT IS NOT REQUIRED. THIS NOTE IS SUBJECT TO THE PROVISIONS
OF A LOCK-UP AGREEMENT DATED AS OF OCTOBER 28, 1998, AND MAY BE SOLD OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE LOCK-UP AGREEMENT.
THIS NOTE IS SUBORDINATED TO THE PRIOR PAYMENT AND SATISFACTION IN CASH
OF ALL SENIOR INDEBTEDNESS, AS DEFINED IN THE SECURITIES PURCHASE
AGREEMENT DATED AS OF OCTOBER 28, 1998 AS THE SAME MAY BE AMENDED,
MODIFIED, RESTATED OR SUPPLEMENTED FROM TIME TO TIME (THE "AGREEMENT").
TO THE EXTENT, AND IN THE MANNER PROVIDED IN THE AGREEMENT.
$____________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, the undersigned, Simmons Company, a Delaware
corporation (the "Company"), hereby promises to pay to
__________________________ or its registered assigns (the "Payee"), at 12:00
p.m.(New York time) on October 29, 2010, the principal sum of
______________________________ ($____________) or such lesser principal amount
thereof as may remain outstanding in lawful money of the United States of
America in immediately available funds, and to pay interest from the date hereof
on the principal amount hereof from time to time outstanding, in like funds, at
said office, at a rate or rates per annum and payable on such dates and in the
manner (including the capitalization of interest under certain circumstances) as
determined pursuant to the terms of the Agreement.
<PAGE> 59
The Company promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, on any overdue interest from
their due dates at a rate or rates determined as set forth in the Agreement.
The Company hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever, other than as expressly required by the
Agreement. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
The date, amount and interest are applicable to all borrowings
evidenced by this Note and all payments and prepayments of the principal hereof
and interest hereon and the respective records and, prior to any transfer of
this Note, endorsed by the holder on the schedule attached hereto or any
continuation thereof; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligations of the Company to make payments of principal and interest
in accordance with the terms of this Note and the Agreement.
This Note and all obligations of the Company hereunder are subordinated
to the prior payment in full in cash of all Senior Indebtedness (as defined in
the Agreement) on the terms and subject to the provisions set forth in the
Agreement.
This Note is one of the Company Notes referred to in the Agreement,
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Agreement, all upon the terms
and conditions therein specified. This Note shall be construed in accordance
with and governed by the laws of the State of New York without giving effect to
principles of conflicts of laws.
SIMMONS COMPANY
By:_______________________________
Name:
Title:
-2-
<PAGE> 60
Exhibit A-2
JUNIOR SUBORDINATED NOTE
SIMMONS HOLDINGS, INC.
THIS SECURITY BEARS ORIGINAL ISSUE DISCOUNT. UPON WRITTEN REQUEST TO
THE VICE PRESIDENT, SIMMONS COMPANY, ONE CONCOURSE PARKWAY, SUITE 600,
ATLANTA, GA 30328, INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF
ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY WILL BE MADE
AVAILABLE.
THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THE TRANSFER OR
AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH REGISTRATION
UNDER THE ACT IS NOT REQUIRED. THIS NOTE IS SUBJECT TO THE PROVISIONS
OF A LOCK-UP AGREEMENT DATED AS OF OCTOBER 28, 1998, AND MAY BE SOLD OR
OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE LOCK-UP AGREEMENT.
THIS NOTE IS SUBORDINATED TO THE PRIOR PAYMENT AND SATISFACTION IN CASH
OF ALL SENIOR INDEBTEDNESS AND ALL COMPANY NOTE OBLIGATIONS, EACH AS
DEFINED IN THE SECURITIES PURCHASE AGREEMENT DATED AS OF OCTOBER 28,
1998 AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED OR SUPPLEMENTED
FROM TIME TO TIME (THE "AGREEMENT"). TO THE EXTENT, AND IN THE MANNER
PROVIDED IN THE AGREEMENT.
$_________ New York, New York
October 29, 1998
FOR VALUE RECEIVED, the undersigned, Simmons Holdings, Inc., a Delaware
corporation ("Holdings"), hereby promises to pay to _____________________ or its
registered assigns (the "Payee"), at 12:00 p.m.(New York time) on October 29,
2011 the principal sum of ______________________ Dollars ($______________) or
such lesser principal amount thereof as may remain outstanding in lawful money
of the United States of America in immediately available funds, and to pay
interest from the date hereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at a rate or rates per annum and
payable on such dates and in the manner as determined pursuant to the terms of
the Agreement.
<PAGE> 61
Holdings promises to pay interest, on demand, on any overdue principal
and, to the extent permitted by law, on any overdue interest from their due
dates at a rate or rates determined as set forth in the Agreement.
Holdings hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever, other than as expressly required by the
Agreement. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
The date, amount and interest are applicable to all borrowings
evidenced by this Note and all payments and prepayments of the principal hereof
and interest hereon and the respective records and, prior to any transfer of
this Note, endorsed by the holder on the schedule attached hereto or any
continuation thereof; provided, however, that the failure of the holder hereof
to make such a notation or any error in such a notation shall not in any manner
affect the obligations of Holdings to make payments of principal and interest in
accordance with the terms of this Note and the Agreement.
This Note and all obligations of Holdings hereunder are subordinated to
the prior payment in full in cash of all Senior Indebtedness and all Company
Note Obligations (as defined in the Agreement) on the terms and subject to the
provisions set forth in the Agreement.
This Note is one of the Holdings Notes referred to in the Agreement,
which, among other things, contains provisions for the acceleration of the
maturity hereof upon the happening of certain events, for optional and mandatory
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Agreement, all upon the terms
and conditions therein specified. This Note shall be construed in accordance
with and governed by the laws of the State of New York without giving effect to
principles of conflicts of laws.
SIMMONS HOLDINGS, INC.
By:_______________________________
Name:
Title:
-2-
<PAGE> 62
Exhibit B
Form of Warrant
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
No. W-__ ____Shares
WARRANT TO PURCHASE
October 29, 1998
SHARES OF COMMON STOCK
OF
SIMMONS HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
THIS CERTIFIES THAT, for value received, and subject to the provisions
hereinafter set forth, ___________, or its registered assigns is entitled to
purchase from Simmons Holdings, Inc., a Delaware corporation ("Holdings"),
during the period specified in this Warrant, ___________ shares (subject to
adjustment as hereinafter provided) of the duly authorized, validly issued,
fully paid and non-assessable Common Stock, par value $0.01 per share, of
Holdings (the "Common Stock") at an initial exercise price of $____ per share
(the "Initial Exercise Price"). Certain capitalized terms used in this Warrant
are defined in Section 9.
1. DURATION. The right to subscribe for and purchase shares of Common Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 P.M., Eastern Time, on October 29, 2005 (the "Expiration
Date").
2. METHOD OF EXERCISE OR CONVERSION; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
2.1. METHOD OF EXERCISE.
2.1.1. EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any
business day on or prior to the Expiration Date, by surrender of this
Warrant to Holdings at its principal office, accompanied by a
subscription substantially in the form attached to this Warrant duly
executed by such holder and accompanied by (a) wire transfer of
immediately available funds, (b) certified
<PAGE> 63
or official bank check payable to the order of Holdings or (c) delivery
to Holdings of a principal amount of Company Notes or Holdings Notes
(provided that any Capitalized Interest shall be included in principal
for purposes of determining such amount), in each case in the amount
obtained by multiplying (i) the number of shares of Common Stock
(without giving effect to any adjustment thereof pursuant to the
provisions hereof) for which this Warrant is then being exercised, as
designated in such subscription, by (ii) the Initial Exercise Price,
and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) determined as provided in Sections 4
and 5.
2.1.2. CONVERSION. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Common Stock (or Other
Securities), during normal business hours on any business day on or
prior to the Expiration Date, by surrender of this Warrant to Holdings
at its principal office, accompanied by a conversion notice
substantially in the form attached to this Warrant duly executed by
such holder, and such holder shall thereupon be entitled to receive a
number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) equal to:
(a) the excess of
(i) (x) the number of shares of Common Stock
(or Other Securities) determined as provided in
Sections 4 and 5 hereof which such holder would be
entitled to receive upon exercise of this Warrant for
the number of shares of Common Stock designated in
such conversion notice multiplied by (y) the Current
Market Price of each such share of Common Stock (or
such Other Securities) so receivable upon such
exercise
over
(ii) (x) the number of shares of Common
Stock (without giving effect to any adjustment
thereof pursuant to the provisions hereof) for which
this Warrant may be exercised, as designated in such
conversion notice, multiplied by (y) the Initial
Exercise Price
divided by
(b) such Current Market Price of each such share of Common
Stock (or Other Securities).
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this Warrant into Common Stock
(or Other Securities) in accordance with the terms of this Section
2.1.2.
-2-
<PAGE> 64
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to Holdings as
provided in Section 2.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the holder or holders of record
thereof.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, Holdings at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to the
provisions of the Stockholders Agreement, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the current Market Price per share on the
business day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock equal (without giving effect to any adjustment thereof
pursuant to the terms hereof) to the number of such shares called for
on the face of this Warrant minus the number of such shares designated
by the holder upon such exercise as provided in Section 2.1 hereof.
2.4. EXCHANGE OF WARRANT. This Warrant is exchangeable at the aforesaid
principal office of Holdings for Warrants for the purchase of the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares of Common Stock as the holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Common Stock issuable pursuant
hereto.
2.5. COMPANY TO REAFFIRM OBLIGATIONS. Holdings will, at the time of or
at any time after each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights to which such holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
holder shall fail to make any such request, the failure shall not affect the
continuing obligation of Holdings to afford such rights to such holder.
3. STOCK FULLY PAID; RESERVATION OF SHARES. Holdings represents, warrants,
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights
-3-
<PAGE> 65
represented by this Warrant will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable. Holdings further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, Holdings will at all times have authorized and reserved solely for
the purpose of the issuance upon exercise of this Warrant a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented by
this Warrant.
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, Holdings will in good faith and as expeditiously as reasonably
possible use reasonable efforts to cause such shares to be duly registered or
qualified.
Holdings will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Holdings to perform its obligations under this Warrant.
4. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE UPON EXERCISE; EXERCISE PRICE. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 2.1 hereof, by
a fraction (a) the numerator of which shall be the Initial Exercise Price and
(b) the denominator of which shall be the Exercise Price in effect on the date
of such exercise. The "Exercise Price" shall initially be the Initial Exercise
Price and shall be adjusted and readjusted from time to time as provided in this
Section 4 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 4.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If Holdings, at any time
while this Warrant is outstanding, shall subdivide (by stock split or otherwise)
or combine (by consolidation or otherwise) any outstanding shares of Common
Stock, the Exercise Price shall be (a) proportionately decreased, to the nearest
one hundredth of one cent, in the case of a subdivision of shares, to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision or (b) proportionately increased, to the nearest one
hundredth of one cent, in the case of a combination of shares, to reflect the
decrease in the total number of shares of Common Stock outstanding as a result
of such combination, as of the effective date of such subdivision or
combination, or if Holdings shall take a record of holders of
-4-
<PAGE> 66
Common Stock for the purpose of so subdividing or combining, as of the
applicable record date, whichever is earlier.
4.2. CERTAIN DIVIDENDS. If Holdings, at any time while this Warrant is
outstanding, shall pay any stock dividend on the Common Stock, the Exercise
Price shall be adjusted, as of the date Holdings shall take a record of the
holders of the Common Stock, for the purpose of receiving such dividend (or if
no such record is taken, as of the date of such dividend), to the nearest one
hundredth of one cent, to the product obtained by multiplying the Exercise Price
in effect immediately prior to such subdivision or combination by a fraction (a)
the numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend (plus in the event that Holdings
paid cash for fractional shares, the number of additional shares which would
have been outstanding had Holdings issued fractional shares in connection with
said dividends) and (b) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend.
4.3. OTHER EVENTS. If any event occurs as to which the foregoing
provisions of Sections 4.1 and 4.2 are applicable or, if strictly applicable,
would not, in the good faith judgment of the Board, fairly and adequately
protect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.4. ADJUSTMENT OF EXERCISE PRICE. If at any time, as a result of any
adjustments hereunder, the sum of the Exercise Price plus a proportionate
portion of the consideration paid by the holder for this Warrant shall be less
than the par value per share of Common Stock, then the price payable per share
of Common Stock by the holder hereunder in the event of an exercise of this
Warrant, in whole or in part, shall be an amount equal to the par value per
share of the Common Stock; PROVIDED that for purposes of any calculation of the
number of shares issuable upon exercise of this Warrant, any adjustment to the
price payable per share of Common Stock pursuant to this Section 4.4 shall be
disregarded.
5. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.
In case Holdings after the date hereof (a) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation of
such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into Holdings and Holdings shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities, then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at
-5-
<PAGE> 67
any time after the consummation of such transaction, shall be entitled to
receive (at the aggregate Exercise Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock or
Other Securities issuable upon such exercise prior to such consummation, the
greatest amount of securities, cash or other property to which such holder would
actually have been entitled as a shareholder upon such consummation if such
holder had exercised the rights represented by this Warrant immediately prior
thereto.
6. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is adjusted pursuant to
Section 4 hereof, Holdings will promptly deliver to the holder of this Warrant
at its address set forth on Schedule I a certificate setting forth, in
reasonable detail, the event that triggered the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Exercise Price after giving effect to such adjustment.
7. DIVIDENDS/DISTRIBUTIONS. Holdings shall give the holder of this Warrant not
less than 15 days prior written notice of its intent to pay a dividend or make
any other distribution on any shares of its capital stock, and shall set forth
in such notice the amount and type of such dividend or distribution and the
share of capital stock on which such dividend or distribution will be paid. If
the holder of this Warrant does not elect to exercise this Warrant prior to such
dividend or distribution, an amount equal to the cash which the holder would
have received on the Common Stock had the holder exercised this Warrant
immediately prior to such dividend or distribution shall at the option of the
holder (a) be used as a credit against the Exercise Price or (b) be retained by
Holdings and paid to such holder upon the exercise of this Warrant.
8. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of Holdings or as imposing any obligation on such holder to purchase
any Securities or as imposing any liabilities on such holder as a stockholder of
Holdings, whether such obligation or liabilities are asserted by Holdings or by
creditors of Holdings.
9. DEFINITIONS. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" shall mean the Board of Directors of Holdings.
"Common Stock" shall have the meaning as defined in the
introduction to this Warrant, such term to include any stock into which
such Common Stock shall have been changed or any stock resulting from
any reclassification of such Common Stock, and all other stock of any
class or classes (however designated) of Holdings the holders of which
have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled
to preference.
-6-
<PAGE> 68
"Company Notes" shall mean the Junior Subordinated Notes due
2010 of Simmons Company, a Delaware corporation, in the aggregate
original principal amount of $30,000,000, issued October 29, 1998.
"Current Market Price" shall mean on any date specified
herein, the average daily Market Price during the period of the most
recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no Common Sock is then
listed or admitted to trading on any national securities exchange or
quoted in the over-the-counter market, the Current Market Price shall
be the Market Price on such date.
"Escrow Warrants" shall have the meaning provided in the
Securities Purchase Agreement.
"Expiration Date" shall have the meaning set forth in Section
1.
"Holdings" shall have the meaning provided in the introduction
to this Warrant, such term to include any corporation which shall
succeed to or assume the obligations of Holdings hereunder in
compliance with Section 5 hereof.
"Holding Notes" shall mean the Junior Subordinated Notes due
2011 of Holdings, in the aggregate original principal amount of
$10,000,000, issued October 29, 1998.
"Initial Exercise Price" shall have the meaning set forth in
the first paragraph hereof.
"Majority Holders" shall mean at any time holders of Warrants
exercisable for more than 50% of the shares of Common Stock issuable
under the Warrants at such time outstanding; PROVIDED that, for
purposes of Section 10 hereof, Simmons Holdings, LLC shall be deemed to
be the holder of any Escrow Warrants until such time as such Warrants
have been released from escrow.
"Market Price" shall mean on any date specified herein, the
amount per share of Common Stock equal to (a) the last sale price of
Common Stock, regular way, on such date or, if no such sale takes place
on such date, the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the principal
national securities exchange on which Common Stock is then listed or
admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is
designated as a national market system security by the NASD, the last
trading price of Common Stock on such date, or (c) if there shall have
been no trading on such date or if Common Stock is not so designated,
the average of the closing bid and asked prices of Common Stock on such
date as shown by the NASD automated quotation system, or (d) if the
Common Stock is not then listed or admitted to trading on any
-7-
<PAGE> 69
national exchange or quoted in the over-the-counter market, the fair
market value thereof determined in good faith by the Board.
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise
of the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section
5 hereof or otherwise.
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Securities" shall mean any debt or equity securities of
Holdings, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security.
"Security" shall mean one of the Securities.
"Securities Act" shall mean as of any date of the Securities
Act of 1933, as amended, or any similar Federal statute then in effect.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of October 28, 1998 among Simmons Company,
Inc., Holdings and the Purchasers listed therein.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, the capital
stock of a corporation of any class.
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement. The term "Warrants" shall include,
without limitation, this Warrant and any Warrants issued in
substitution or exchange for any thereof.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Company and the
Majority Holders; PROVIDED, HOWEVER, that no such amendment or waiver shall
increase the Exercise Price, shorten the period during which the Warrants may be
exercised or modify any provision of this Section 10 without consent of the
holders of all Warrants then outstanding affected by such amendment or waiver.
-8-
<PAGE> 70
11. GOVERNING LAW. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without giving effect to the
choice of law principles of such state).
Simmons Holdings, Inc.
By:
------------------------
Name:
Title:
-9-
<PAGE> 71
Schedule I
to Warrant
-10-
<PAGE> 72
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, ______________
(1) shares of the Common Stock and herewith makes payment of $______________
therefor, and requests that the certificates for such shares be issued in the
name of, and deliver to ______________, whose address is
Dated:
---------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
- --------
(1) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-11-
<PAGE> 73
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _______________ the right
represented by such Warrant to purchase _______________ (2) shares of Common
Stock of Simmons Holdings, Inc. to which such Warrant relates, and appoints
_______________ Attorney to make such transfer on the books of Simmons Holdings,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
--------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------
(2) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-12-
<PAGE> 74
FORM OF CONVERSION NOTICE
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to _______________ (3) shares of
the Common Stock which such holder would be entitled to receive upon the
exercise hereof, and requests that the certificates for such shares be issued in
the name of, and delivered to _______________, whose address is
Dated:
--------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
- --------
(3) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
conversion, a new Warrant or Warrants will be issued and delivered, representing
the unconverted portion of the Warrant, to the holder surrendering the Warrant.
-13-
<PAGE> 75
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT"), dated as of October __, 1998
(the "CLOSING DATE"), is by and among Simmons Company, a Delaware corporation
(the "BORROWER"), the Guarantors listed on the signature pages hereto as
guarantors (the "GUARANTORS"), West Street Fund I, L.L.C., as the Administrative
Agent under the Bridge Loan Agreement referred to below (the "ADMINISTRATIVE
AGENT"), and ___________, a national banking association acting by and through
its corporate trust department (in its capacity as escrow agent, the "ESCROW
AGENT"). Capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Bridge Loan Agreement referred to below.
RECITALS
WHEREAS, the Administrative Agent, the Borrower, the Guarantors, the
Arranger and the Lenders referred to therein have entered into a Bridge Loan
Agreement dated as of October __, 1998 (as amended, restated or otherwise
modified from time to time, the "BRIDGE LOAN AGREEMENT") providing for certain
bridge loans to be made by the Lenders thereunder to the Borrower (the "BRIDGE
LOANS"), which Bridge Loans will be evidenced by certain promissory notes of the
Borrower (the "BRIDGE NOTES");
WHEREAS, the Borrower and the Guarantors have agreed to place in escrow
various Senior Subordinated Exchange Notes due 2008 in the form of Exhibit A to
the Exchange Note Indenture dated as of the date hereof (the "EXCHANGE NOTE
INDENTURE") duly executed by the Borrower, each of the Guarantors and ________,
as trustee (the "EXCHANGE NOTE INDENTURE TRUSTEE"), including the guarantee of
each such Exchange Note in the form of Exhibit E to the Exchange Note Indenture
(collectively, the "EXCHANGE NOTES"); and
WHEREAS, it is a condition to the making of Bridge Loans under the
Bridge Loan Agreement that the Exchange Notes be delivered into escrow pursuant
to this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. DEPOSIT OF ESCROWED NOTES BY THE BORROWER AND THE GUARANTORS.
On the Closing Date, concurrently with the execution and
delivery of this Agreement, the Borrower and the Guarantors are delivering to
the Escrow Agent 25 undated Exchange Notes, duly executed by the Borrower and
each of the Guarantors and authenticated by the Exchange Note Indenture Trustee,
with the payee, interest rate and aggregate principal amount in blank (the
"ESCROWED NOTES").
2. RELEASE OF ESCROWED NOTES.
<PAGE> 76
The Escrow Agent shall hold the Escrowed Notes in escrow
pursuant to this Agreement, until authorized hereunder to deliver them as
follows:
(a) RELEASE TO HOLDER OR ITS DESIGNEES. If, on any Business
Day on or after the Extension Date, the Escrow Agent receives one or
more Bridge Notes from the Administrative Agent accompanied by a
properly completed and executed written notice from the Administrative
Agent in the form of ANNEX A hereto (each, an "EXCHANGE NOTICE"), the
Escrow Agent shall on or within three Business Days after the Escrow
Agent's receipt of such Exchange Notice, (i) date, complete and deliver
one or more Exchange Notes in accordance with such Exchange Notice, and
(ii) return the Bridge Note(s) so surrendered to the Borrower for
cancellation upon receipt of evidence that all cash interest thereon
required to be paid pursuant to this Section 2(a) and in accordance
with the Bridge Loan Agreement has been paid. If less than all of the
surrendered Bridge Note(s) are to be exchanged for Exchange Notes, the
Borrower shall deliver to the Person specified in the Exchange Notice
on or within three Business Days after the Escrow Agent's receipt of
the Exchange Notice, a replacement Bridge Note dated the date specified
in the Exchange Notice as the Exchange Date, equal to the amount of any
principal not so exchanged, all as specified in Section 6 of the
Exchange Notice and in accordance with the Bridge Loan Agreement. Upon
delivery of any Exchange Notes pursuant to this clause (a), the
Borrower shall within three Business Days after the Escrow Agent's
receipt of the Exchange Notice make payment in cash in accordance with
Section 2.5(e) of the Bridge Loan Agreement of all accrued and unpaid
interest up to but not including the date specified in the Exchange
Notice as the Exchange Date, other than any accrued and unpaid interest
that is payable pursuant to Section 2.5(e) of the Bridge Loan Agreement
by capitalization to principal and that is to be exchanged for Exchange
Notes.
(b) RELEASE TO THE BORROWER. On or within one Business Day
after receipt by the Escrow Agent of certificates from the
Administrative Agent certifying that all Obligations with respect to
the Bridge Loans have been paid in full, the Escrow Agent shall deliver
to the Borrower all Escrowed Notes then remaining in escrow.
3. CERTAIN ADDITIONAL AGREEMENTS. The Borrower, the Guarantors and the
Administrative Agent shall, upon request by the Escrow Agent, execute and
deliver to the Escrow Agent such additional written instructions and
certificates hereunder as may be reasonably required by the Escrow Agent to give
effect to the provisions of Sections 1 and 2 hereof.
4. ESCROW AGENT.
(a) The Escrow Agent shall have no duties or responsibilities,
including, without limitation, a duty to review or interpret the Bridge
Loan Agreement, except those expressly set forth herein. Except for
this Agreement, the Escrow Agent, in its capacity as such, is not a
party to, or bound by, any agreement that may be required under,
evidenced by, or arise out of the Bridge Loan Agreement.
(b) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or
<PAGE> 77
shall receive instructions from any of the undersigned with respect to
the Escrowed Notes, which, in its opinion, are in conflict with any of
the provisions of this Agreement, it shall be entitled to refrain from
taking any action until it shall be directed otherwise in writing by
the Borrower, the Guarantors or the Administrative Agent or by order of
a court of competent jurisdiction. The Escrow Agent shall be protected
in acting upon any notice, request, waiver, consent, receipt or other
document reasonably believed by the Escrow Agent to be signed by the
proper party or parties.
(c) The Escrow Agent shall not be liable for any error or
judgment or for any act done or step taken or omitted by it in good
faith or for any mistake of fact or law, or for anything that it may do
or refrain from doing in connection herewith, except for its own gross
negligence or willful misconduct, and the Escrow Agent shall have no
duties to anyone except the Borrower, the Guarantors or the
Administrative Agent and their respective successors and permitted
assigns.
(d) The Escrow Agent may consult legal counsel in the event of
any dispute or question as to the construction of this Agreement, or
the Escrow Agent's duties hereunder, and the Escrow Agent shall incur
no liability and shall be fully protected with respect to any action
taken or omitted in good faith in accordance with the opinion and
instructions of counsel.
(e) In the event of any disagreement between the undersigned
or any of them, and/or any other person, resulting in adverse claims
and demands being made in connection with or for the Escrowed Notes,
the Escrow Agent shall be entitled at its option to refuse to comply
with any such claim or demand, so long as such disagreement shall
continue, and in so doing the Escrow Agent shall not be or become
liable for damages or interest to the undersigned or any of them or to
any person named herein for its failure or refusal to comply with such
conflicting or adverse demands. The Escrow Agent shall be entitled to
continue to so refrain and refuse to so act until all differences shall
have been resolved by agreement and the Escrow Agent shall have been
notified thereof in writing signed by the Borrower, the Guarantors and
the Administrative Agent. In the event of such disagreement which
continues for 90 days or more, the Escrow Agent in its discretion may,
but shall be under no obligation to, file a suit in interpleader for
the purpose of having the respective rights of the claimants
adjudicated and may deposit with the court all documents and property
held hereunder. The Borrower and the Guarantors agree to pay all
reasonable out-of-pocket costs and expenses incurred by the Escrow
Agent in such action, including reasonable attorney's fees and
disbursements.
(f) The Escrow Agent is hereby indemnified by the Borrower and
the Guarantors from all losses, costs and expenses of any nature
incurred by the Escrow Agent arising out of or in connection with this
Agreement or with the administration of its duties hereunder, unless
such losses, costs or expenses shall have been caused by the Escrow
Agent's willful misconduct or gross negligence. Such indemnification
shall survive termination of this Agreement until extinguished by any
applicable statute of limitations.
<PAGE> 78
(g) The Escrow Agent does not have any interest in the
Escrowed Notes deposited hereunder but is serving as escrow holder only
and having only possession thereof. This paragraph shall survive
notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(h) The Escrow Agent (and any successor Escrow Agent) may at
any time resign as such by giving written notice of its resignation to
the parties hereto at least 30 days prior to the date specified for
such resignation to take effect. Upon the effective date of such
resignation, the Escrowed Notes shall be delivered by it to such
successor escrow agent or as otherwise shall be instructed in writing
by the Borrower and the Administrative Agent; whereupon the Escrow
Agent shall be discharged of and from any and all further obligations
arising in connection with this Agreement. If at that time the Escrow
Agent has not received such instruction, the Escrow Agent's sole
responsibility after that time shall be to safekeep the Escrowed Notes
until receipt of a designation of successor Escrow Agent, or a joint
written instruction as to disposition of the Escrowed Notes by the
Borrower, the Guarantors and the Administrative Agent or a final order
of a court of competent jurisdiction mandating disposition of the
Escrowed Notes.
(i) The Escrow Agent hereby accepts its appointment and agrees
to act as escrow agent under the terms and conditions of this Agreement
and acknowledges receipt of the Escrowed Notes. The Borrower and the
Guarantors agree to pay to the Escrow Agent as payment in full for its
services hereunder the Escrow Agent's compensation set forth in
SCHEDULE I hereto. The Borrower and the Guarantors further agree to
reimburse the Escrow Agent for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Escrow Agent in the
performance of its duties hereunder (including reasonable fees, and
out-of-pocket expenses and disbursements, of its counsel).
5. NOTICES. Any notices or other communications required or permitted
hereunder shall be effective if in writing and delivered personally or sent by
telecopier, overnight courier, Federal Express, United Parcel Service,
registered or certified mail, postage prepaid, addressed as follows:
IF TO THE ADMINISTRATIVE AGENT OR THE ARRANGER, TO IT AT:
West Street Fund I, L.L.C.
c/o Goldman Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Matthew Leavitt
Facsimile No.: (212) 902-3000
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022
<PAGE> 79
Attention: Kirk A. Davenport
Facsimile No.: (212) 751-4864
IF TO THE BORROWER OR ANY GUARANTOR, TO IT AT:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Facsimile No.: (770) 392-2565
with a copy to:
Ropes & Gray
1 International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Facsimile No.: (617) 951-7050
IF TO THE ESCROW AGENT, TO IT AT:
[Name of Escrow Agent]
[Address]
Attention: [ ]
Facsimile No.: [ ]
IF TO THE EXCHANGE NOTE INDENTURE TRUSTEE, TO IT AT:
[Name of Exchange Note Indenture Trustee]
[Address]
Attention: [ ]
Facsimile No.: [ ]
Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally, (b) one
Business Day after being delivered, if delivered by telecopier with confirmation
of good transmission, (c) one Business Day after being sent by overnight
courier, if sent by overnight courier, (d) two Business Days after being sent by
Federal Express or United Parcel Service, if sent by Federal Express or United
Parcel Service, or (e) three Business Days after being sent, if sent by
registered or certified mail. Each of the parties hereto shall be entitled to
specify a different address by giving notice as aforesaid to each of the other
parties hereto.
6. TERMINATION. This Agreement shall automatically terminate upon the
final distribution of the Escrowed Notes in accordance with the terms hereof.
<PAGE> 80
7. GOVERNING LAW; JURISDICTION.
7.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to conflict of law rules thereof.
7.2. CONSENT TO JURISDICTION. Each of the parties agrees that
all actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof may be brought and maintained in
the federal district court in the Southern District of New York and of
any New York state court sitting in New York City (each, a "NEW YORK
COURT"). Each of the parties hereby by execution hereof (i) hereby
irrevocably submits to the jurisdiction of such court in New York, New
York, for the purpose of any action, suit or proceeding arising out of
or based upon this Agreement or the subject matter hereof and (ii)
hereby waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in
any such action, suit or proceeding, any claim that it is not subject
personally to the jurisdiction of one of the above-named courts, that
it is immune from extraterritorial injunctive relief or other
injunctive relief, that its property is exempt or immune from
attachment or execution, that any such action, suit or proceeding may
not be brought or maintained in one of the above-named courts should be
dismissed on the grounds of forum non conveniens, should be transferred
to any court other than one of the above-named courts, should be stayed
by virtue of the pendency of any other action, suit or proceeding in
any court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by the
above-named courts. Each of the parties hereto hereby consents to
service of process in any such suit, action or proceeding in any manner
permitted by the laws of the State of New York, agrees that service of
process by registered or certified mail, return receipt requested, at
the address specified in or pursuant to Section 5 hereof is reasonably
calculated to give actual notice and waives and agrees not to assert by
way of motion, as a defense or otherwise, in any such action, suit or
proceeding any claim that service of process made in accordance with
Section 5 hereof does not constitute good and sufficient service of
process. The provisions of this Section 7.2 shall not restrict the
ability of any party to enforce in any court any judgment obtained in
the federal district court in the Southern District of New York or any
New York Court.
7.3. WAIVER OF JURY TRIAL. To the extent not prohibited by any
applicable law that cannot be waived, each of the parties hereto hereby
waives, and covenants that it will not assert (whether as plaintiff,
defendant, or otherwise), any right to trial by jury in any forum in
any respect of any issue, claim, demand, cause of action, action, suit
or proceeding arising out of or based upon this Agreement or the
subject matter hereof, in each case whether now existing or hereafter
arising and whether in contract or tort or otherwise. Any of the
parties hereto may file an original counterpart or a copy of this
Section 7.3 with any court as written evidence of the consent of each
of the parties hereto to the waiver of his or its right to trial by
jury.
<PAGE> 81
7.4. RELIANCE. Each of the parties hereto acknowledges that it
has been informed by each other party that the provisions of this
Section 7 constitute a material inducement upon which such party is
relying and will rely in entering into this Agreement and the
transactions contemplated hereby.
8. MISCELLANEOUS.
8.1. ENTIRE AGREEMENT; WAIVERS. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written,
of the parties with respect to such subject matter. No waiver of any
provision of this Agreement (a) shall be deemed to or shall constitute
a waiver of any other provision hereof (whether or not similar), (b)
shall constitute a continuing waiver unless otherwise expressly
provided therein or (c) shall be effective unless in writing and
executed by each party against whom it is to be enforced.
8.2. AMENDMENT OR MODIFICATION, ETC. The parties hereto may
not amend or modify this Agreement except in such manner as may be
agreed upon by a written instrument executed by all of the parties
hereto and that is consented to in writing by the Majority Lenders. Any
written amendment, modification or waiver executed by all of the
parties hereto shall be binding upon all such parties and their
respective successors and assigns.
8.3. HEADINGS, ETC. Section and subsection headings are not to
be considered part of this Agreement, are included solely for
convenience, are not intended to be full or accurate descriptions of
the content thereof and shall not affect the construction hereof. This
Agreement shall be deemed to express the mutual intent of the parties,
and no rule of strict construction shall be applied against any party.
8.4. SEVERABILITY. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any
respect, such provision shall (to the extent permitted by applicable
law) be construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent compatible with, and possible under,
applicable law. The provisions hereof are severable, and in the event
any provision hereof should be held invalid or unenforceable in any
respect, it shall not invalidate, render unenforceable or otherwise
affect any other provision hereof.
8.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same instrument.
8.6. SUCCESSORS AND ASSIGNS. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective permitted transferees,
successors and assigns (each of which shall be deemed to be a party
<PAGE> 82
hereto for all purposes hereof). Except as expressly provided herein,
this Agreement shall not confer any right or remedy upon any person
other than the parties and their respective transferees, successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SIMMONS COMPANY
By:__________________________
Name:
Title:
GUARANTORS:
SIMMONS HOLDINGS, INC.
By:__________________________
Name:
Title:
[OTHER GUARANTORS]
By:__________________________
Name:
Title:
West Street Fund I, L.L.C.,
as Administrative Agent
By:__________________________
Name:
Title:
________________________________, as Escrow Agent
By:_______________________
Name:
<PAGE> 83
Title:
<PAGE> 84
SCHEDULE I TO ESCROW AGREEMENT
ESCROW AGENT'S FEES
ESCROW AGENT'S FEES
Annual Fee $____________
<PAGE> 85
ANNEX A TO ESCROW AGREEMENT
FORM OF EXCHANGE NOTICE
WEST STREET FUND I, L.L.C.
C/O GOLDMAN SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
EXCHANGE NOTICE
Date: __________
[Name of Escrow Agent]
[Address]
Attention: ________________
Re: Simmons Company Escrow Agreement
Ladies and Gentlemen:
Reference is hereby made to the Escrow Agreement dated as of October
__, 1998 (the "ESCROW AGREEMENT"), by and among Simmons Company, a Delaware
corporation (the "BORROWER"), the Guarantors listed on the signature pages
thereto, as guarantors (the "GUARANTORS"), West Street Fund I, L.L.C., as the
Administrative Agent under the Bridge Loan Agreement referred to below (the
"ADMINISTRATIVE AGENT"), and _________________, a national banking association
acting by and through its corporate trust department (in its capacity as escrow
agent, the "ESCROW AGENT"). Capitalized terms used herein and not otherwise
defined in this Exchange Notice have the meanings assigned to them in the Escrow
Agreement.
1. SURRENDER OF BRIDGE NOTE(S). Enclosed herewith [is an/are] original
Bridge Note[s] issued to the order of the Lender specified in Section 4 below in
the aggregate principal amount of $_____________ (the "SURRENDERED NOTE(S)").
2. ACCRUED AND UNPAID INTEREST. The [aggregate] amount of accrued and
unpaid interest on the Surrendered Note(s) as of the date hereof (the "EXCHANGE
DATE") is $______, of which (i) $______ is required by Section 2.5(e) of the
Bridge Loan Agreement to be paid in cash and (ii) $______ is required by Section
2.5(e) of the Bridge Loan Agreement to be capitalized to principal on the
Surrendered Note(s).
<PAGE> 86
3. INTEREST RATE. The undersigned hereby certifies that the interest
rate on the Surrendered Note(s) on the Exchange Date will equal ___% per annum.
Pursuant to Section 2.4 of the Bridge Loan Agreement, the Exchange Notes to be
issued pursuant to this Exchange Notice will bear interest at the rate of __%
per annum equal to [select (A) or (B), as applicable: (A) the sum of (i) the
then applicable Refinancing Spread, plus (ii) the greatest of the following:
(expressed as a percentage per annum), calculated as of such date: (a) the sum
of (1) the Adjusted Eurodollar Rate as of such date plus (2) 700 basis points;
(b) the sum of (1) the yield (expressed as a percentage per annum) in effect on
such date for United States Treasury Notes with a remaining maturity closest to
the remaining term of the Term Loans (provided, however, that if the remaining
term of the Term Loans is not equal to the constant maturity of a United States
Treasury Note for which a weekly average yield is given, such yield on United
States Treasury Notes shall be obtained by linear interpolation (calculated to
the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury Notes for which such yields are given), plus (2) 600 basis
points; and (c) the sum of (1) the Single B Goldman Sachs High Yield Index as of
such date plus (2) 200 basis points, or (B) if the Exchange Note is to be issued
to a Person other than a Variable Rate Holder, __% per annum [insert the
interest rate then in effect on the Surrendered Note(s) as of the Exchange Date]
and shall not thereafter be subject to adjustment or change].
4. REQUEST FOR EXCHANGE. _____________ [name of Lender] wishes to
exchange [all/$_______] of the Surrendered Note(s) and all of the accrued and
unpaid interest referenced in Section 2(ii) above representing a total of $_____
to be exchanged for ____ [number] Exchange Note(s) each dated the Exchange Date,
bearing interest at the rate specified in Section 3 above and made payable to
the following payees:
<TABLE>
<CAPTION>
Amount(s) Name(s) of Payee(s) Address(es) of Variable
--------- ------------------- -------------- --------
Payee(s) Rate Holder
-------- -----------
<S> <C> <C> <C>
$____________ [Yes/No]
$____________ [Yes/No]
</TABLE>
Check the following box as appropriate:
The undersigned hereby certifies that it is a Variable Rate Holder
and has given notice to the payee(s) designated above as Variable Rate Holder(s)
of its designation of such payee(s) as a Variable Rate Holder. This Exchange
Notice shall constitute notice to the Borrower of such designation substantially
contemporaneously with the transfer of the Exchange Note(s) in accordance with
Section 2.4 of the Bridge Loan Agreement.
The payee is a non-Variable Rate Holder.
5. ISSUANCE OF EXCHANGE NOTES; CANCELLATION OF SURRENDERED NOTE(S). Not
later than three Business Days after receipt of this Exchange Notice please (a)
issue the Exchange Note(s) dated the Exchange Date, bearing interest at the rate
specified in Section 3 above from and including the Exchange Date, in the
amount(s) and to the payee(s) set forth in Section 4 above, (b) deliver such
Exchange Note(s) by hand or by overnight courier to the [respective] payee(s)
identified in Section 4 above at the address(es) specified therein and (c)
deliver the Surrendered Note(s) to the Borrower for cancellation upon receipt of
evidence that all cash interest has been paid in accordance with Section 7 below
and the terms of the Bridge Loan Agreement.
<PAGE> 87
6. ISSUANCE OF REPLACEMENT BRIDGE NOTE. Not later than three Business
Days from the date hereof, the Borrower shall (a) issue replacement Bridge
Note(s) dated the Exchange Date, bearing interest at the rate then in effect on
the Surrendered Note(s), in the aggregate amount of $_____, representing $____
of principal on the Surrendered Note(s) not so exchanged, in the respective
amount(s) and to the payee(s) set forth below and (b) deliver such replacement
Bridge Note(s) by hand or by overnight courier to the [respective] payee(s)
identified in this Section 6 at the address(es) specified below:
<TABLE>
<CAPTION>
Amount(s) Name(s) of Payee(s) Address(es) of
--------- ------------------- --------------
Payee(s)
--------
<S> <C> <C>
$____________
$____________
</TABLE>
7. PAYMENT OF ACCRUED AND UNPAID INTEREST. Not later than three
Business Days after receipt of this Exchange Notice, and in any event prior to
the cancellation of the Surrendered Notes contemplated by Section 5 above, the
Borrower shall make payment in cash in accordance with Section 2.5(e) of the
Bridge Loan Agreement of all accrued and unpaid interest specified in Section
2(i) above.
<PAGE> 88
Thank you in advance for your prompt attention to this Exchange Notice.
Very truly yours,
---------------------------------
[By:_____________________________
Name:
Title:]
cc: Simmons Company
[Exchange Note Indenture Trustee]
<PAGE> 1
Exhibit 10.24
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
No. W-1 601,346.63 Shares
WARRANT TO PURCHASE
October 29, 1998
SHARES OF COMMON STOCK
OF
SIMMONS HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
THIS CERTIFIES THAT, for value received, and subject to the provisions
hereinafter set forth, Simmons Holdings, LLC, a Delaware limited liability
company, or its registered assigns is entitled to purchase from Simmons
Holdings, Inc., a Delaware corporation ("Holdings"), during the period specified
in this Warrant, 601,346.63 shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock, par value $0.01 per share, of Holdings (the "Common Stock") at an
initial exercise price of $6.7315 per share (the "Initial Exercise Price").
Certain capitalized terms used in this Warrant are defined in Section 9.
1. DURATION. The right to subscribe for and purchase shares of Common Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 P.M., Eastern Time, on October 29, 2005 (the "Expiration
Date").
2. METHOD OF EXERCISE OR CONVERSION; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
2.1. METHOD OF EXERCISE.
2.1.1. EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any business
day on or prior to the Expiration Date, by surrender of this Warrant to
Holdings at its principal office,
<PAGE> 2
accompanied by a subscription substantially in the form attached to this Warrant
duly executed by such holder and accompanied by (a) wire transfer of immediately
available funds, (b) certified or official bank check payable to the order of
Holdings or (c) delivery to Holdings of a principal amount of Company Notes or
Holdings Notes (provided that any Capitalized Interest shall be included in
principal for purposes of determining such amount), in each case in the amount
obtained by multiplying (i) the number of shares of Common Stock (without giving
effect to any adjustment thereof pursuant to the provisions hereof) for which
this Warrant is then being exercised, as designated in such subscription, by
(ii) the Initial Exercise Price, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in Sections 4 and 5.
2.1.2. CONVERSION. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Common Stock (or Other
Securities), during normal business hours on any business day on or prior
to the Expiration Date, by surrender of this Warrant to Holdings at its
principal office, accompanied by a conversion notice substantially in the
form attached to this Warrant duly executed by such holder, and such
holder shall thereupon be entitled to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) equal to:
(a) the excess of
(i) (x) the number of shares of Common Stock (or
Other Securities) determined as provided in Sections 4 and
5 hereof which such holder would be entitled to receive
upon exercise of this Warrant for the number of shares of
Common Stock designated in such conversion notice
multiplied by (y) the Current Market Price of each such
share of Common Stock (or such Other Securities) so
receivable upon such exercise
over
(ii) (x) the number of shares of Common Stock
(without giving effect to any adjustment thereof pursuant
to the provisions hereof) for which this Warrant may be
exercised, as designated in such conversion notice,
multiplied by (y) the Initial Exercise Price
divided by
(b) such Current Market Price of each such share of Common Stock
(or Other Securities).
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this
-2-
<PAGE> 3
Warrant into Common Stock (or Other Securities) in accordance with the
terms of this Section 2.1.2.
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to Holdings as
provided in Section 2.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the holder or holders of record
thereof.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, Holdings at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to the
provisions of the Stockholders Agreement, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash in an amount equal to the same fraction
of the current Market Price per share on the business day next preceding
the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of Common
Stock equal (without giving effect to any adjustment thereof pursuant to
the terms hereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder
upon such exercise as provided in Section 2.1 hereof.
2.4. EXCHANGE OF WARRANT. This Warrant is exchangeable at the aforesaid
principal office of Holdings for Warrants for the purchase of the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares of Common Stock as the holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Common Stock issuable pursuant
hereto.
2.5. COMPANY TO REAFFIRM OBLIGATIONS. Holdings will, at the time of or at
any time after each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights to which such holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
holder shall fail to make any such request, the failure shall not affect the
continuing obligation of Holdings to afford such rights to such holder.
-3-
<PAGE> 4
3. STOCK FULLY PAID; RESERVATION OF SHARES. Holdings represents, warrants,
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and non-assessable. Holdings further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, Holdings will at all times have authorized and
reserved solely for the purpose of the issuance upon exercise of this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, Holdings will in good faith and as expeditiously as reasonably
possible use reasonable efforts to cause such shares to be duly registered or
qualified.
Holdings will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Holdings to perform its obligations under this Warrant.
4. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE UPON EXERCISE; EXERCISE PRICE. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 2.1 hereof, by
a fraction (a) the numerator of which shall be the Initial Exercise Price and
(b) the denominator of which shall be the Exercise Price in effect on the date
of such exercise. The "Exercise Price" shall initially be the Initial Exercise
Price and shall be adjusted and readjusted from time to time as provided in this
Section 4 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 4.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If Holdings, at any time while
this Warrant is outstanding, shall subdivide (by stock split or otherwise) or
combine (by consolidation or otherwise) any outstanding shares of Common Stock,
the Exercise Price shall be (a) proportionately decreased, to the nearest one
hundredth of one cent, in the case of a subdivision of shares, to reflect the
increase in the total number of shares of Common Stock outstanding as a result
of such subdivision or (b) proportionately increased, to the nearest one
hundredth of one cent, in the case of a combination of shares, to reflect the
decrease in the total
-4-
<PAGE> 5
number of shares of Common Stock outstanding as a result of such combination, as
of the effective date of such subdivision or combination, or if Holdings shall
take a record of holders of Common Stock for the purpose of so subdividing or
combining, as of the applicable record date, whichever is earlier.
4.2. CERTAIN DIVIDENDS. If Holdings, at any time while this Warrant is
outstanding, shall pay any stock dividend on the Common Stock, the Exercise
Price shall be adjusted, as of the date Holdings shall take a record of the
holders of the Common Stock, for the purpose of receiving such dividend (or if
no such record is taken, as of the date of such dividend), to the nearest one
hundredth of one cent, to the product obtained by multiplying the Exercise Price
in effect immediately prior to such subdivision or combination by a fraction (a)
the numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend (plus in the event that Holdings
paid cash for fractional shares, the number of additional shares which would
have been outstanding had Holdings issued fractional shares in connection with
said dividends) and (b) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend.
4.3. OTHER EVENTS. If any event occurs as to which the foregoing
provisions of Sections 4.1 and 4.2 are applicable or, if strictly applicable,
would not, in the good faith judgment of the Board, fairly and adequately
protect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.4. ADJUSTMENT OF EXERCISE PRICE. If at any time, as a result of any
adjustments hereunder, the sum of the Exercise Price plus a proportionate
portion of the consideration paid by the holder for this Warrant shall be less
than the par value per share of Common Stock, then the price payable per share
of Common Stock by the holder hereunder in the event of an exercise of this
Warrant, in whole or in part, shall be an amount equal to the par value per
share of the Common Stock; PROVIDED that for purposes of any calculation of the
number of shares issuable upon exercise of this Warrant, any adjustment to the
price payable per share of Common Stock pursuant to this Section 4.4 shall be
disregarded.
5. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.
In case Holdings after the date hereof (a) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation of
such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into Holdings and Holdings shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities, then, and in the case
-5-
<PAGE> 6
of each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Exercise Price in
effect at the time of such consummation for all Common Stock or Other Securities
issuable upon such exercise immediately prior to such consummation), in lieu of
the Common Stock or Other Securities issuable upon such exercise prior to such
consummation, the greatest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto.
6. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is adjusted pursuant to
Section 4 hereof, Holdings will promptly deliver to the holder of this Warrant
at its address set forth on Schedule I a certificate setting forth, in
reasonable detail, the event that triggered the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Exercise Price after giving effect to such adjustment.
7. DIVIDENDS/DISTRIBUTIONS. Holdings shall give the holder of this Warrant not
less than 15 days prior written notice of its intent to pay a dividend or make
any other distribution on any shares of its capital stock, and shall set forth
in such notice the amount and type of such dividend or distribution and the
share of capital stock on which such dividend or distribution will be paid. If
the holder of this Warrant does not elect to exercise this Warrant prior to such
dividend or distribution, an amount equal to the cash which the holder would
have received on the Common Stock had the holder exercised this Warrant
immediately prior to such dividend or distribution shall at the option of the
holder (a) be used as a credit against the Exercise Price or (b) be retained by
Holdings and paid to such holder upon the exercise of this Warrant.
8. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of Holdings or as imposing any obligation on such holder to purchase
any Securities or as imposing any liabilities on such holder as a stockholder of
Holdings, whether such obligation or liabilities are asserted by Holdings or by
creditors of Holdings.
9. DEFINITIONS. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" shall mean the Board of Directors of Holdings.
"Common Stock" shall have the meaning as defined in the
introduction to this Warrant, such term to include any stock into which
such Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class
or classes (however designated) of Holdings the holders of which have the
right, without limitation as to amount, either to all or to a share of
the balance of
-6-
<PAGE> 7
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Company Notes" shall mean the Junior Subordinated Notes due 2010
of Simmons Company, a Delaware corporation, in the aggregate original
principal amount of $30,000,000, issued October 29, 1998.
"Current Market Price" shall mean on any date specified herein,
the average daily Market Price during the period of the most recent 20
days, ending on such date, on which the national securities exchanges
were open for trading, except that if no Common Sock is then listed or
admitted to trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market
Price on such date.
"Escrow Warrants" shall have the meaning provided in the
Securities Purchase Agreement.
"Expiration Date" shall have the meaning set forth in Section 1.
"Holdings" shall have the meaning provided in the introduction to
this Warrant, such term to include any corporation which shall succeed to
or assume the obligations of Holdings hereunder in compliance with
Section 5 hereof.
"Holding Notes" shall mean the Junior Subordinated Notes due 2011
of Holdings, in the aggregate original principal amount of $10,000,000,
issued October 29, 1998.
"Initial Exercise Price" shall have the meaning set forth in the
first paragraph hereof.
"Majority Holders" shall mean at any time holders of Warrants
exercisable for more than 50% of the shares of Common Stock issuable
under the Warrants at such time outstanding; PROVIDED that, for purposes
of Section 10 hereof, Simmons Holdings, LLC shall be deemed to be the
holder of any Escrow Warrants until such time as such Warrants have been
released from escrow.
"Market Price" shall mean on any date specified herein, the amount
per share of Common Stock equal to (a) the last sale price of Common
Stock, regular way, on such date or, if no such sale takes place on such
date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national
securities exchange on which Common Stock is then listed or admitted to
trading, or (b) if Common Stock is not then listed or admitted to trading
on any national securities exchange but is designated as a national
market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on such
date or if Common Stock is not so designated, the average of the closing
bid and
-7-
<PAGE> 8
asked prices of Common Stock on such date as shown by the NASD automated
quotation system, or (d) if the Common Stock is not then listed or
admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair market value thereof determined in good
faith by the Board.
"Other Securities" shall mean any stock (other than Common Stock)
and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 5
hereof or otherwise.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government organization or an
agency or political subdivision thereof.
"Securities" shall mean any debt or equity securities of Holdings,
whether now or hereafter authorized, and any instrument convertible into
or exchangeable for Securities or a Security. "Security" shall mean one
of the Securities.
"Securities Act" shall mean as of any date of the Securities Act
of 1933, as amended, or any similar Federal statute then in effect.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of October 28, 1998 among Simmons Company, Inc.,
Holdings and the Purchasers listed therein.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, the capital
stock of a corporation of any class.
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement. The term "Warrants" shall include, without
limitation, this Warrant and any Warrants issued in substitution or
exchange for any thereof.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Company and the
Majority Holders; PROVIDED, HOWEVER, that no such amendment or waiver shall
increase the Exercise Price, shorten the period during which the Warrants may be
exercised or modify any provision of this Section 10 without consent of the
holders of all Warrants then outstanding affected by such amendment or waiver.
-8-
<PAGE> 9
11. GOVERNING LAW. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without giving effect to the
choice of law principles of such state).
-9-
<PAGE> 10
Schedule I
to Warrant
Simmons Holdings, LLC
c /o Fenway Partners, Inc.
152 West 57th Street, 59th Floor
New York, NY 10019
-10-
<PAGE> 11
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, __________ (1)
shares of the Common Stock and herewith makes payment of $___________ therefor,
and requests that the certificates for such shares be issued in the name of, and
deliver to _____________, whose address is
Dated:
----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
- --------
(1) Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-11-
<PAGE> 12
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto _____________ the right
represented by such Warrant to purchase ___________ (2) shares of Common Stock
of Simmons Holdings, Inc. to which such Warrant relates, and appoints
_______________Attorney to make such transfer on the books of Simmons Holdings,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
--------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------
(2) Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
-12-
<PAGE> 13
FORM OF CONVERSION NOTICE
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to ___________ (3) shares of the
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to ______________, whose address is
Dated:
----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
- --------
(3) Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial conversion, the portion thereof as to which this
Warrant is being converted), in either case without making any adjustment for
additional shares of Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial conversion, a new
Warrant or Warrants will be issued and delivered, representing the unconverted
portion of the Warrant, to the holder surrendering the Warrant.
-13-
<PAGE> 1
EXHIBIT 10.25
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
No. W-2 2,104,713.22 Shares
WARRANT TO PURCHASE
October 29, 1998
SHARES OF COMMON STOCK
OF
SIMMONS HOLDINGS, INC.
Incorporated Under The Laws of the State of Delaware
THIS CERTIFIES THAT, for value received, and subject to the provisions
hereinafter set forth, Ropes & Gray, in its capacity as escrow agent, or its
registered assigns is entitled to purchase from Simmons Holdings, Inc., a
Delaware corporation ("Holdings"), during the period specified in this Warrant,
2,104,713.22 shares (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Common Stock, par
value $0.01 per share, of Holdings (the "Common Stock") at an initial exercise
price of $0.01 per share (the "Initial Exercise Price"). Certain capitalized
terms used in this Warrant are defined in Section 9.
1. DURATION. The right to subscribe for and purchase shares of Common Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 P.M., Eastern Time, on October 29, 2005 (the "Expiration
Date").
2. METHOD OF EXERCISE OR CONVERSION; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
2.1. METHOD OF EXERCISE.
2.1.1. EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any business
day on or prior to the Expiration Date, by surrender of this Warrant to
Holdings at its principal office, accompanied by a subscription
substantially in the form attached to this Warrant duly
<PAGE> 2
executed by such holder and accompanied by (a) wire transfer of
immediately available funds, (b) certified or official bank check payable
to the order of Holdings or (c) delivery to Holdings of a principal
amount of Company Notes or Holdings Notes (provided that any Capitalized
Interest shall be included in principal for purposes of determining such
amount), in each case in the amount obtained by multiplying (i) the
number of shares of Common Stock (without giving effect to any adjustment
thereof pursuant to the provisions hereof) for which this Warrant is then
being exercised, as designated in such subscription, by (ii) the Initial
Exercise Price, and such holder shall thereupon be entitled to receive
the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in Sections 4 and 5.
2.1.2. CONVERSION. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Common Stock (or Other
Securities), during normal business hours on any business day on or prior
to the Expiration Date, by surrender of this Warrant to Holdings at its
principal office, accompanied by a conversion notice substantially in the
form attached to this Warrant duly executed by such holder, and such
holder shall thereupon be entitled to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) equal to:
(a) the excess of
(i) (x) the number of shares of Common Stock (or
Other Securities) determined as provided in Sections 4 and
5 hereof which such holder would be entitled to receive
upon exercise of this Warrant for the number of shares of
Common Stock designated in such conversion notice
MULTIPLIED BY (y) the Current Market Price of each such
share of Common Stock (or such Other Securities) so
receivable upon such exercise
over
(ii) (x) the number of shares of Common Stock
(without giving effect to any adjustment thereof pursuant
to the provisions hereof) for which this Warrant may be
exercised, as designated in such conversion notice,
MULTIPLIED BY (y) the Initial Exercise Price
divided by
(b) such Current Market Price of each such share of Common Stock
(or Other Securities).
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this
<PAGE> 3
Warrant into Common Stock (or Other Securities) in accordance with the
terms of this Section 2.1.2.
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to Holdings as
provided in Section 2.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the holder or holders of record
thereof.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, Holdings at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to the
provisions of the Stockholders Agreement, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash in an amount equal to the same fraction
of the current Market Price per share on the business day next preceding
the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of Common
Stock equal (without giving effect to any adjustment thereof pursuant to
the terms hereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder
upon such exercise as provided in Section 2.1 hereof.
2.4. EXCHANGE OF WARRANT. This Warrant is exchangeable at the aforesaid
principal office of Holdings for Warrants for the purchase of the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares of Common Stock as the holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Common Stock issuable pursuant
hereto.
2.5. COMPANY TO REAFFIRM OBLIGATIONS. Holdings will, at the time of or at
any time after each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights to which such holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
holder shall fail to make any such request, the failure shall not affect the
continuing obligation of Holdings to afford such rights to such holder.
<PAGE> 4
3. STOCK FULLY PAID; RESERVATION OF SHARES. Holdings represents, warrants,
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and non-assessable. Holdings further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, Holdings will at all times have authorized and
reserved solely for the purpose of the issuance upon exercise of this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, Holdings will in good faith and as expeditiously as reasonably
possible use reasonable efforts to cause such shares to be duly registered or
qualified.
Holdings will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Holdings to perform its obligations under this Warrant.
4. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE UPON EXERCISE; EXERCISE PRICE. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 2.1 hereof, by
a fraction (a) the numerator of which shall be the Initial Exercise Price and
(b) the denominator of which shall be the Exercise Price in effect on the date
of such exercise. The "Exercise Price" shall initially be the Initial Exercise
Price and shall be adjusted and readjusted from time to time as provided in this
Section 4 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 4.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If Holdings, at any
time while this Warrant is outstanding, shall subdivide (by stock split or
otherwise) or combine (by consolidation or otherwise) any outstanding shares of
Common Stock, the Exercise Price shall be (a) proportionately decreased, to the
nearest one hundredth of one cent, in the case of a subdivision of shares, to
reflect the increase in the total number of shares of Common Stock outstanding
as a result of such subdivision or (b) proportionately increased, to the nearest
one hundredth of one cent, in the case of a combination of shares, to reflect
the decrease in the total
<PAGE> 5
number of shares of Common Stock outstanding as a result of such combination, as
of the effective date of such subdivision or combination, or if Holdings shall
take a record of holders of Common Stock for the purpose of so subdividing or
combining, as of the applicable record date, whichever is earlier.
4.2. CERTAIN DIVIDENDS. If Holdings, at any time while this Warrant is
outstanding, shall pay any stock dividend on the Common Stock, the Exercise
Price shall be adjusted, as of the date Holdings shall take a record of the
holders of the Common Stock, for the purpose of receiving such dividend (or if
no such record is taken, as of the date of such dividend), to the nearest one
hundredth of one cent, to the product obtained by multiplying the Exercise Price
in effect immediately prior to such subdivision or combination by a fraction (a)
the numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend (plus in the event that Holdings
paid cash for fractional shares, the number of additional shares which would
have been outstanding had Holdings issued fractional shares in connection with
said dividends) and (b) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend.
4.3. OTHER EVENTS. If any event occurs as to which the foregoing
provisions of Sections 4.1 and 4.2 are applicable or, if strictly applicable,
would not, in the good faith judgment of the Board, fairly and adequately
protect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.4. ADJUSTMENT OF EXERCISE PRICE. If at any time, as a result of any
adjustments hereunder, the sum of the Exercise Price plus a proportionate
portion of the consideration paid by the holder for this Warrant shall be less
than the par value per share of Common Stock, then the price payable per share
of Common Stock by the holder hereunder in the event of an exercise of this
Warrant, in whole or in part, shall be an amount equal to the par value per
share of the Common Stock; PROVIDED that for purposes of any calculation of the
number of shares issuable upon exercise of this Warrant, any adjustment to the
price payable per share of Common Stock pursuant to this Section 4.4 shall be
disregarded.
5. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.
In case Holdings after the date hereof (a) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation of
such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into Holdings and Holdings shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities, then, and in the case
<PAGE> 6
of each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Exercise Price in
effect at the time of such consummation for all Common Stock or Other Securities
issuable upon such exercise immediately prior to such consummation), in lieu of
the Common Stock or Other Securities issuable upon such exercise prior to such
consummation, the greatest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto.
6. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is adjusted pursuant to
Section 4 hereof, Holdings will promptly deliver to the holder of this Warrant
at its address set forth on Schedule I a certificate setting forth, in
reasonable detail, the event that triggered the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Exercise Price after giving effect to such adjustment.
7. DIVIDENDS/DISTRIBUTIONS. Holdings shall give the holder of this Warrant not
less than 15 days prior written notice of its intent to pay a dividend or make
any other distribution on any shares of its capital stock, and shall set forth
in such notice the amount and type of such dividend or distribution and the
share of capital stock on which such dividend or distribution will be paid. If
the holder of this Warrant does not elect to exercise this Warrant prior to such
dividend or distribution, an amount equal to the cash which the holder would
have received on the Common Stock had the holder exercised this Warrant
immediately prior to such dividend or distribution shall at the option of the
holder (a) be used as a credit against the Exercise Price or (b) be retained by
Holdings and paid to such holder upon the exercise of this Warrant.
8. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of Holdings or as imposing any obligation on such holder to purchase
any Securities or as imposing any liabilities on such holder as a stockholder of
Holdings, whether such obligation or liabilities are asserted by Holdings or by
creditors of Holdings.
9. DEFINITIONS. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" shall mean the Board of Directors of Holdings.
"Common Stock" shall have the meaning as defined in the
introduction to this Warrant, such term to include any stock into which
such Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class
or classes (however designated) of Holdings the holders of which have the
right, without limitation as to amount, either to all or to a share of
the balance
<PAGE> 7
of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Company Notes" shall mean the Junior Subordinated Notes due 2010
of Simmons Company, a Delaware corporation, in the aggregate original
principal amount of $30,000,000, issued October 29, 1998.
"Current Market Price" shall mean on any date specified herein,
the average daily Market Price during the period of the most recent 20
days, ending on such date, on which the national securities exchanges
were open for trading, except that if no Common Sock is then listed or
admitted to trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market
Price on such date.
"Escrow Warrants" shall have the meaning provided in the
Securities Purchase Agreement.
"Expiration Date" shall have the meaning set forth in Section 1.
"Holdings" shall have the meaning provided in the introduction to
this Warrant, such term to include any corporation which shall succeed to
or assume the obligations of Holdings hereunder in compliance with
Section 5 hereof.
"Holding Notes" shall mean the Junior Subordinated Notes due 2011
of Holdings, in the aggregate original principal amount of $10,000,000,
issued October 29, 1998.
"Initial Exercise Price" shall have the meaning set forth in the
first paragraph hereof.
"Majority Holders" shall mean at any time holders of Warrants
exercisable for more than 50% of the shares of Common Stock issuable
under the Warrants at such time outstanding; PROVIDED that, for purposes
of Section 10 hereof, Simmons Holdings, LLC shall be deemed to be the
holder of any Escrow Warrants until such time as such Warrants have been
released from escrow.
"Market Price" shall mean on any date specified herein, the amount
per share of Common Stock equal to (a) the last sale price of Common
Stock, regular way, on such date or, if no such sale takes place on such
date, the average of the closing bid and asked prices thereof on such
date, in each case as officially reported on the principal national
securities exchange on which Common Stock is then listed or admitted to
trading, or (b) if Common Stock is not then listed or admitted to trading
on any national securities exchange but is designated as a national
market system security by the NASD, the last trading price of Common
Stock on such date, or (c) if there shall have been no trading on
<PAGE> 8
such date or if Common Stock is not so designated, the average of the
closing bid and asked prices of Common Stock on such date as shown by the
NASD automated quotation system, or (d) if the Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the fair market value thereof determined in good
faith by the Board.
"Other Securities" shall mean any stock (other than Common Stock)
and other securities of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be
entitled to receive, or shall have received, upon the exercise of the
Warrants, in lieu of or in addition to Common Stock, or which at any time
shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 5
hereof or otherwise.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government organization or an
agency or political subdivision thereof.
"Securities" shall mean any debt or equity securities of Holdings,
whether now or hereafter authorized, and any instrument convertible into
or exchangeable for Securities or a Security. "Security" shall mean one
of the Securities.
"Securities Act" shall mean as of any date of the Securities Act
of 1933, as amended, or any similar Federal statute then in effect.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of October 28, 1998 among Simmons Company, Inc.,
Holdings and the Purchasers listed therein.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, the capital
stock of a corporation of any class.
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement. The term "Warrants" shall include, without
limitation, this Warrant and any Warrants issued in substitution or
exchange for any thereof.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Company and the
Majority Holders; PROVIDED, HOWEVER, that no such amendment or waiver shall
increase the Exercise Price, shorten the period during which the Warrants may be
exercised or modify any provision of this Section 10 without consent of the
holders of all Warrants then outstanding affected by such amendment or waiver.
<PAGE> 9
11. GOVERNING LAW. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without giving effect to the
choice of law principles of such state).
<PAGE> 10
Simmons Holdings, Inc.
By:
------------------------------
Name:
Title:
<PAGE> 11
Schedule I
to Warrant
[To be completed upon release of Warrant from escrow]
<PAGE> 12
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____________
(1) shares of the Common Stock and herewith makes payment of $_________________
therefor, and requests that the certificates for such shares be issued in the
name of, and deliver to _________________, whose address is
Dated:
-----------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
- --------
(1) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 13
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _______________ the right
represented by such Warrant to purchase _______________ (2) shares of Common
Stock of Simmons Holdings, Inc. to which such Warrant relates, and appoints
_______________Attorney to make such transfer on the books of Simmons Holdings,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
--------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- --------
(2) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 14
FORM OF CONVERSION NOTICE
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to _______________(3) shares of
the Common Stock which such holder would be entitled to receive upon the
exercise hereof, and requests that the certificates for such shares be issued in
the name of, and delivered to _______________, whose address is
Dated:
---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
- --------
(3) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
conversion, a new Warrant or Warrants will be issued and delivered, representing
the unconverted portion of the Warrant, to the holder surrendering the Warrant.
<PAGE> 1
Exhibit 10.26
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT"), dated as of October 29, 1998
(the "CLOSING DATE"), is by and among Simmons Holdings, Inc., a Delaware
corporation ("HOLDINGS"), Simmons Company, a Delaware corporation (the
"COMPANY"), Simmons Holdings, LLC (the "INITIAL HOLDER"), and Ropes & Gray (in
its capacity as escrow agent, the "ESCROW AGENT"). Capitalized terms used herein
and not otherwise defined have the meanings assigned to them in the Securities
Purchase Agreement referred to below.
RECITALS
WHEREAS, the Company, Holdings and the Initial Purchaser, as the
initial purchaser of the Notes referred to therein have entered into a
Securities Purchase Agreement dated as of October 29, 1998 (as amended, restated
or otherwise modified from time to time, the "SECURITIES PURCHASE AGREEMENT")
pursuant to which (i) the Company shall issue and sell to the Initial Holder the
Company Notes and (ii) Holdings shall issue and sell to the Initial Holder the
Holdings Notes.
WHEREAS, it is a condition to the purchase of the Notes by the Initial
Holder under the Securities Purchase Agreement that the Escrow Warrants (as
defined below) be delivered into escrow pursuant to this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. DEPOSIT OF ESCROW WARRANTS.
On the Closing Date, concurrently with the execution and
delivery of this Agreement, Holdings will deliver to the Escrow Agent (i) a
Warrant in the form of Exhibit A hereto to purchase 2,104,713.22 shares of
Holdings' Common Stock, duly executed by Holdings, issued in the name of the
Escrow Agent (the "A WARRANTS") and (ii) a Warrant in the form of Exhibit B
hereto to purchase 2,104,713.22 shares of Holdings' Common Stock, duly executed
by Holdings, issued in the name of the Initial Holder (the "B WARRANTS" and,
together with the A Warrants, the "ESCROW WARRANTS").
2. RELEASE OF ESCROW WARRANTS.
-1-
<PAGE> 2
The Escrow Agent shall hold the Escrow Warrants in escrow
pursuant to this Agreement, until authorized hereunder to deliver them as
follows:
If, on any Business Day on or after the Closing Date, the
Escrow Agent receives an executed written and certified notice from the Initial
Holder in the form of ANNEX A hereto (each, an "INTERIM RELEASE NOTICE"), the
Escrow Agent will assign all or the requested amount of the A Warrants as
specified in such Interim Release Notice. If, on or after the first anniversary
of the date hereof, the Escrow Agent receives an executed written and certified
notice from the Initial Holder in the form of ANNEX B-1 or ANNEX B-2 hereto
(each a "FINAL RELEASE NOTICE"), the Escrow Agent will release to the Initial
Holder the amount of the B Warrants specified in such Final Release Notice and
shall return the balance of the Escrow Warrants to Holdings for cancellation.
Notwithstanding the foregoing provisions of this paragraph, under no
circumstances shall a greater number of Escrow Warrants be so assigned or
released (excluding Escrow Warrants which are returned to Holdings for
cancellation) than 50% of the aggregate original Escrow Warrants, and in no
event shall fewer Escrow Warrants be returned to Holdings for cancellation than
Escrow Warrants to purchase 2,104,713.22 shares of Holdings' Common Stock.
Holdings hereby consents to any assignment of Escrow Warrants in accordance with
the terms of this Escrow Agreement and agrees to cancel any Escrow Warrants
returned to it by the Escrow Agent pursuant to this Agreement.
3. CERTAIN ADDITIONAL AGREEMENTS.
3.1. The Company, Holdings and the Initial Holder shall, upon
request by the Escrow Agent, execute and deliver to the Escrow Agent
such additional written instructions and certificates hereunder as may
be reasonably required by the Escrow Agent to give effect to the
provisions of Sections 1 and 2 hereof, including certifications as to
the existence of a valid exception from any applicable securities laws
in connection with the assignment of the Escrow Warrants under Section
2.
3.2. Holdings shall, upon request of the Initial Holder if
deemed to be necessary or desirable by the Initial Holder in connection
with the sale or refinancing of the Notes, at the option of the Initial
Holder either (i) permit any purchasers of Notes or Replacement Debt to
become party to the Registration Rights Agreement, by executing of a
joinder thereof; or (ii) enter into a registration rights agreement
with such purchasers (and, if required by the Initial Holder, with the
Initial Holder) in form and substance satisfactory to the Initial
Holder and Holdings.
3.3. The Initial Holder and Holdings may, as a condition to
the release of A Warrants to any purchaser of Notes or Replacement
Debt, require such purchaser to enter into a stockholders agreement (or
to execute a joinder of an existing stockholders agreement) in a form
reasonably acceptable to Holdings.
3.4. Holdings and the Initial Holder may, in connection with
the sale or refinancing of the Notes, modify or replace any A Warrants
to be used in the placement
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<PAGE> 3
of such Notes or Replacement Debt, if deemed to be necessary or
desirable in connection with such sale or refinancing, in order to,
among other things, provide for additional antidilution and other
protections or other covenants.
4. ESCROW AGENT.
(a) The Escrow Agent shall have no duties or responsibilities,
including, without limitation, a duty to review or interpret the
Securities Purchase Agreement, except those expressly set forth herein.
Except for this Agreement, the Escrow Agent, in its capacity as such,
is not a party to, or bound by, any agreement that may be required
under, evidenced by, or arise out of the Securities Purchase Agreement.
(b) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions from any of the
undersigned with respect to the Escrow Warrants, which, in its opinion,
are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action until it shall be
directed otherwise in writing by Holdings and the Initial Holder or by
order of a court of competent jurisdiction. The Escrow Agent shall be
protected in acting upon any notice, request, waiver, consent, receipt
or other document reasonably believed by the Escrow Agent to be signed
by the proper party or parties.
(c) The Escrow Agent shall not be liable for any error or
judgment or for any act done or step taken or omitted by it in good
faith or for any mistake of fact or law, or for anything that it may do
or refrain from doing in connection herewith, except for its own gross
negligence or willful misconduct, and the Escrow Agent shall have no
duties to anyone except Holdings, the Company and the Initial Holder
and their respective successors and permitted assigns.
(d) The Escrow Agent may consult legal counsel in the event of
any dispute or question as to the construction of this Agreement, or
the Escrow Agent's duties hereunder, and the Escrow Agent shall incur
no liability and shall be fully protected with respect to any action
taken or omitted in good faith in accordance with the opinion and
instructions of counsel.
(e) In the event of any disagreement between the undersigned
or any of them, and/or any other person, resulting in adverse claims
and demands being made in connection with or for the Escrow Warrants,
the Escrow Agent shall be entitled at its option to refuse to comply
with any such claim or demand, so long as such disagreement shall
continue, and in so doing the Escrow Agent shall not be or become
liable for damages or interest to the undersigned or any of them or to
any person named herein for its failure or refusal to comply with such
conflicting or adverse demands. The Escrow Agent shall be entitled to
continue to so refrain and refuse to so act until all differences shall
have been resolved by agreement and the Escrow Agent shall have been
notified thereof in writing signed by Holdings and the Initial Holder.
In the event of such
-3-
<PAGE> 4
disagreement which continues for 90 days or more, the Escrow Agent in
its discretion may, but shall be under no obligation to, file a suit in
interpleader for the purpose of having the respective rights of the
claimants adjudicated and may deposit with the court all documents and
property held hereunder. Holdings agrees to pay all reasonable
out-of-pocket costs and expenses incurred by the Escrow Agent in such
action, including reasonable attorney's fees and disbursements.
(f) The Escrow Agent is hereby indemnified by Holdings from
all losses, costs and expenses of any nature incurred by the Escrow
Agent arising out of or in connection with this Agreement or with the
administration of its duties hereunder, unless such losses, costs or
expenses shall have been caused by the Escrow Agent's willful
misconduct or gross negligence. Such indemnification shall survive
termination of this Agreement until extinguished by any applicable
statute of limitations.
(g) The Escrow Agent does not have any interest in the Escrow
Warrants deposited hereunder but is serving as escrow holder only and
having only possession thereof. This paragraph shall survive
notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(h) The Escrow Agent (and any successor Escrow Agent) may at
any time resign as such by giving written notice of its resignation to
the parties hereto at least 30 days prior to the date specified for
such resignation to take effect. Upon the effective date of such
resignation, the Escrow Warrants shall be delivered by it to such
successor escrow agent or as otherwise shall be instructed in writing
by Holdings and the Initial Holder; whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in
connection with this Agreement. If at that time the Escrow Agent has
not received such instruction, the Escrow Agent's sole responsibility
after that time shall be to safekeep the Escrow Warrants until receipt
of a designation of successor Escrow Agent, or a joint written
instruction as to disposition of the Escrow Warrants by Holdings and
the Initial Holder or a final order of a court of competent
jurisdiction mandating disposition of the Escrow Warrants.
(i) The Escrow Agent hereby accepts its appointment and agrees
to act as escrow agent under the terms and conditions of this Agreement
and acknowledges receipt of the Escrow Warrants. Holdings agrees to pay
to the Escrow Agent as payment in full for its services hereunder the
Escrow Agent's compensation in accordance with the ordinary and usual
hourly rates for its services. Holdings further agrees to reimburse the
Escrow Agent for all reasonable out-of-pocket expenses, disbursements
and advances incurred or made by the Escrow Agent in the performance of
its duties hereunder (including reasonable fees, and out-of-pocket
expenses and disbursements, of its counsel).
5. NOTICES. Any notices or other communications required or permitted
hereunder shall be effective if in writing and delivered personally or sent by
telecopier, overnight courier,
-4-
<PAGE> 5
Federal Express, United Parcel Service, registered or certified mail, postage
prepaid, addressed as follows:
IF TO THE INITIAL HOLDER:
Simmons Holdings, LLC
c/o Fenway Partners, Inc.
New York, New York 10019
Attention: Gregory P. Meredith
Facsimile No.: (212) 581-1025
with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Facsimile No.: 617-951-7050
IF TO HOLDINGS:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Facsimile No.: 770-392-2565
with copies to
Jones, Day, Reavis & Pogue
Suite 3500
One SunTrust Plaza
Atlanta, Georgia 30308
Attention: Lizanne Thomas
Facsimile No.: 404-581-8330
and
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Facsimile No.: 617-951-7050
-5-
<PAGE> 6
IF TO THE COMPANY:
Simmons Company
One Concourse Parkway, Suite 600
Atlanta, Georgia 30328
Attention: Chief Financial Officer
Facsimile No.: 770-392-2565
with a copy to
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Facsimile No.: 617-951-7050
IF TO THE ESCROW AGENT:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Facsimile No.: 617-951-7050
Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally, (b) one
Business Day after being delivered, if delivered by telecopier with confirmation
of good transmission, (c) one Business Day after being sent by overnight
courier, if sent by overnight courier, (d) two Business Days after being sent by
Federal Express or United Parcel Service, if sent by Federal Express or United
Parcel Service, or (e) three Business Days after being sent, if sent by
registered or certified mail. Each of the parties hereto shall be entitled to
specify a different address by giving notice as aforesaid to each of the other
parties hereto.
6. TERMINATION. This Agreement shall automatically terminate upon the
final distribution of the Escrow Warrants in accordance with the terms hereof.
7. GOVERNING LAW; JURISDICTION.
7.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Massachusetts, without regard to conflict of law rules thereof.
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<PAGE> 7
7.2. CONSENT TO JURISDICTION. Each of the parties agrees that
all actions, suits or proceedings arising out of or based upon this
Agreement or the subject matter hereof may be brought and maintained in
the federal district court in Boston, Massachusetts and of any
Massachusetts state court sitting in the city of Boston (each, a
"MASSACHUSETTS COURT"). Each of the parties hereby by execution hereof
(i) hereby irrevocably submits to the jurisdiction of such court in
Boston, Massachusetts, for the purpose of any action, suit or
proceeding arising out of or based upon this Agreement or the subject
matter hereof and (ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert, by way of motion, as a
defense or otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of one of the
above-named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or
immune from attachment or execution, that any such action, suit or
proceeding may not be brought or maintained in one of the above-named
courts should be dismissed on the grounds of forum non conveniens,
should be transferred to any court other than one of the above-named
courts, should be stayed by virtue of the pendency of any other action,
suit or proceeding in any court other than one of the above-named
courts, or that this Agreement or the subject matter hereof may not be
enforced in or by the above-named courts. Each of the parties hereto
hereby consents to service of process in any such suit, action or
proceeding in any manner permitted by the laws of the Commonwealth of
Massachusetts, agrees that service of process by registered or
certified mail, return receipt requested, at the address specified in
or pursuant to Section 5 hereof is reasonably calculated to give actual
notice and waives and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, suit or proceeding any claim
that service of process made in accordance with Section 5 hereof does
not constitute good and sufficient service of process. The provisions
of this Section 7.2 shall not restrict the ability of any party to
enforce in any court any judgment obtained in the federal district
court in Boston, Massachusetts or any Massachusetts Court.
7.3. WAIVER OF JURY TRIAL. To the extent not prohibited by any
applicable law that cannot be waived, each of the parties hereto hereby
waives, and covenants that it will not assert (whether as plaintiff,
defendant, or otherwise), any right to trial by jury in any forum in
any respect of any issue, claim, demand, cause of action, action, suit
or proceeding arising out of or based upon this Agreement or the
subject matter hereof, in each case whether now existing or hereafter
arising and whether in contract or tort or otherwise. Any of the
parties hereto may file an original counterpart or a copy of this
Section 7.3 with any court as written evidence of the consent of each
of the parties hereto to the waiver of his or its right to trial by
jury.
7.4. RELIANCE. Each of the parties hereto acknowledges that it
has been informed by each other party that the provisions of this
Section 7 constitute a material inducement upon which such party is
relying and will rely in entering into this Agreement and the
transactions contemplated hereby.
8. MISCELLANEOUS.
-7-
<PAGE> 8
8.1. ENTIRE AGREEMENT; WAIVERS. This Agreement constitutes the
entire agreement among the parties hereto pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written,
of the parties with respect to such subject matter. No waiver of any
provision of this Agreement (a) shall be deemed to or shall constitute
a waiver of any other provision hereof (whether or not similar), (b)
shall constitute a continuing waiver unless otherwise expressly
provided therein or (c) shall be effective unless in writing and
executed by each party against whom it is to be enforced.
8.2. AMENDMENT OR MODIFICATION, ETC. The parties hereto may
not amend or modify this Agreement except in such manner as may be
agreed upon by a written instrument executed by all of the parties
hereto. Any written amendment, modification or waiver executed by all
of the parties hereto shall be binding upon all such parties and their
respective successors and assigns.
8.3. HEADINGS, ETC. Section and subsection headings are not to
be considered part of this Agreement, are included solely for
convenience, are not intended to be full or accurate descriptions of
the content thereof and shall not affect the construction hereof. This
Agreement shall be deemed to express the mutual intent of the parties,
and no rule of strict construction shall be applied against any party.
8.4. SEVERABILITY. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any
respect, such provision shall (to the extent permitted by applicable
law) be construed by modifying or limiting it so as to be valid and
enforceable to the maximum extent compatible with, and possible under,
applicable law. The provisions hereof are severable, and in the event
any provision hereof should be held invalid or unenforceable in any
respect, it shall not invalidate, render unenforceable or otherwise
affect any other provision hereof.
8.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but
all of which together shall constitute but one and the same instrument.
8.6. SUCCESSORS AND ASSIGNS. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective permitted transferees,
successors and assigns (each of which shall be deemed to be a party
hereto for all purposes hereof). Except as expressly provided herein,
this Agreement shall not confer any right or remedy upon any person
other than the parties and their respective transferees, successors and
assigns.
[Escrow Agreement Signature Page(s) Follow]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HOLDINGS:
SIMMONS HOLDINGS, INC.
By
-----------------------
Name:
Title:
THE COMPANY:
SIMMONS COMPANY
By
-----------------------
Name:
Title:
THE INITIAL HOLDER:
SIMMONS HOLDINGS, LLC
By:
-----------------------
Name:
Title:
ROPES & GRAY, as Escrow Agent
By:
- ------------------------------------
Name: Lauren I. Norton, Esq.
Title: A member of the Firm
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<PAGE> 10
ANNEX A TO ESCROW AGREEMENT
FORM OF INTERIM RELEASE NOTICE
SIMMONS HOLDINGS, LLC
NOTICE
Date: __________
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Re: Simmons Holdings; Warrant Escrow Agreement
Ladies and Gentlemen:
Reference is hereby made to the Escrow Agreement dated as of October
29, 1998 (the "ESCROW AGREEMENT"), by and among Simmons Company, a Delaware
corporation (the "COMPANY"), Simmons Holdings, Inc., a Delaware Corporation
("HOLDINGS"), Simmons Holdings, LLC (the "INITIAL HOLDER"), and Ropes & Gray (in
its capacity as escrow agent, the "ESCROW AGENT"). Capitalized terms used herein
and not otherwise defined in this Release Notice have the meanings assigned to
them in the Escrow Agreement.
In connection with the Initial Holder's (i) assignment of $_____ in
original principal amount of the Company Notes and/or $_____ in original
principal amount of the Holdings Notes or (ii) the sale by Holdings or the
Company of Replacement Debt, in each case to ____________ (the "ASSIGNEE"), the
Initial Holder hereby directs that the Escrow Agent assign A Warrants
constituting a right to acquire as of the date of the Escrow Agreement, and
subject to adjustment in accordance with the terms of the A Warrants, __ shares
of Holdings' Common Stock to the Assignee.
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<PAGE> 11
Thank you in advance for your prompt attention to this Interim Release
Notice. By executing this Notice, the undersigned certifies that the above
specified conditions to the release, assignment and delivery of the specified A
Warrants have been satisfied.
Very truly yours,
Simmons Holdings, LLC
By:
----------------------
Name:
Title:
cc: Simmons Holdings, Inc.
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<PAGE> 12
ANNEX B-1 TO ESCROW AGREEMENT
FORM OF FINAL RELEASE NOTICE
SIMMONS HOLDINGS, LLC
NOTICE
Date: __________
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Re: Simmons Holdings; Warrant Escrow Agreement
Ladies and Gentlemen:
Reference is hereby made to the Escrow Agreement dated as of October
29, 1998 (the "ESCROW AGREEMENT"), by and among Simmons Company, a Delaware
corporation (the "COMPANY"), Simmons Holdings, Inc., a Delaware Corporation (
"HOLDINGS"), Simmons Holdings, LLC (the "INITIAL HOLDER"), and Ropes & Gray (in
its capacity as escrow agent, the "ESCROW AGENT"). Capitalized terms used herein
and not otherwise defined in this Release Notice have the meanings assigned to
them in the Escrow Agreement.
The Initial Holder continues to hold $_______ in original principal
amount of the Company Notes and/or $_______ in original principal amount of the
Holdings Notes (it being understood that Replacement Debt shall not be deemed to
constitute "Notes" for purposes of this Release Notice). Therefore, the Initial
Holder directs that the Escrow Agent release to the Initial Holder such
percentage of the B Warrants as is equal to the percentage of the A Warrants
which remain in escrow as of the date hereof. Pursuant to the Escrow Agreement,
upon such release of B Warrants, all other Escrow Warrants remaining in escrow
as of the date hereof shall be returned to Holdings for cancellation.
Thank you in advance for your prompt attention to this Final Release
Notice. By executing this Notice, the undersigned certifies that the above
specified conditions to the release of the specified Escrow Warrants have been
satisfied.
Very truly yours,
Simmons Holdings, LLC
By:
-----------------------
Name:
Title:
cc: Simmons Holdings, Inc.
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<PAGE> 13
ANNEX B-2 TO ESCROW AGREEMENT
FORM OF FINAL RELEASE NOTICE
SIMMONS HOLDINGS, LLC
NOTICE
Date: __________
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Lauren I. Norton
Re: Simmons Holdings; Warrant Escrow Agreement
Ladies and Gentlemen:
Reference is hereby made to the Escrow Agreement dated as of October
29, 1998 (the "ESCROW AGREEMENT"), by and among Simmons Company, a Delaware
corporation (the "COMPANY"), Simmons Holdings, Inc., a Delaware Corporation
("HOLDINGS"), Simmons Holdings, LLC (the "INITIAL HOLDER"), and Ropes & Gray (in
its capacity as escrow agent, the "ESCROW AGENT"). Capitalized terms used herein
and not otherwise defined in this Release Notice have the meanings assigned to
them in the Escrow Agreement.
The Initial Holder no longer holds any Company Notes or Holdings Notes
(it being understood that Replacement Debt shall not be deemed to constitute
"Notes" for purposes of this Release Notice). Therefore, the Initial Holder
directs that the Escrow Agent release to the Initial Holder such percentage of B
Warrants which is equal to 50% of the percentage of the A Warrants which remain
in escrow. Pursuant to the Escrow Agreement, upon such release of B Warrants,
all other Escrow Warrants remaining in escrow as of the date hereof shall be
returned to Holdings for cancellation.
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<PAGE> 14
Thank you in advance for your prompt attention to this Final Release
Notice. By executing this Notice, the undersigned certifies that the above
specified condition to the release of the specified Escrow Warrants have been
satisfied.
Very truly yours,
Simmons Holdings, LLC
By:
-----------------------
Name:
Title:
cc: Simmons Holdings, Inc.
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<PAGE> 15
EXHIBIT A
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
No. W-2 2,104,713.22 Shares
WARRANT TO PURCHASE
October 29, 1998
SHARES OF COMMON STOCK
OF
SIMMONS HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
THIS CERTIFIES THAT, for value received, and subject to the provisions
hereinafter set forth, Ropes & Gray, in its capacity as escrow agent, or its
registered assigns is entitled to purchase from Simmons Holdings, Inc., a
Delaware corporation ("Holdings"), during the period specified in this Warrant,
2,104,713.22 shares (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Common Stock, par
value $0.01 per share, of Holdings (the "Common Stock") at an initial exercise
price of $0.01 per share (the "Initial Exercise Price"). Certain capitalized
terms used in this Warrant are defined in Section 9.
1. DURATION. The right to subscribe for and purchase shares of Common Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 P.M., Eastern Time, on October 29, 2005 (the "Expiration
Date").
2. METHOD OF EXERCISE OR CONVERSION; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
2.1. METHOD OF EXERCISE.
2.1.1. EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any
business day on or prior to the Expiration Date, by surrender of this
Warrant to Holdings at its principal office, accompanied by a
subscription substantially in the form attached to this Warrant duly
<PAGE> 16
executed by such holder and accompanied by (a) wire transfer of
immediately available funds, (b) certified or official bank check
payable to the order of Holdings or (c) delivery to Holdings of a
principal amount of Company Notes or Holdings Notes (provided that any
Capitalized Interest shall be included in principal for purposes of
determining such amount), in each case in the amount obtained by
multiplying (i) the number of shares of Common Stock (without giving
effect to any adjustment thereof pursuant to the provisions hereof) for
which this Warrant is then being exercised, as designated in such
subscription, by (ii) the Initial Exercise Price, and such holder shall
thereupon be entitled to receive the number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) determined as provided in Sections 4 and 5.
2.1.2. CONVERSION. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Common Stock (or Other
Securities), during normal business hours on any business day on or
prior to the Expiration Date, by surrender of this Warrant to Holdings
at its principal office, accompanied by a conversion notice
substantially in the form attached to this Warrant duly executed by
such holder, and such holder shall thereupon be entitled to receive a
number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) equal to:
(a) the excess of
(i) (x) the number of shares of Common Stock
(or Other Securities) determined as provided in
Sections 4 and 5 hereof which such holder would be
entitled to receive upon exercise of this Warrant for
the number of shares of Common Stock designated in
such conversion notice multiplied by (y) the Current
Market Price of each such share of Common Stock (or
such Other Securities) so receivable upon such
exercise
over
(ii) (x) the number of shares of Common
Stock (without giving effect to any adjustment
thereof pursuant to the provisions hereof) for which
this Warrant may be exercised, as designated in such
conversion notice, multiplied by (y) the Initial
Exercise Price
divided by
(b) such Current Market Price of each such share of Common
Stock (or Other Securities).
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this
<PAGE> 17
Warrant into Common Stock (or Other Securities) in accordance with the
terms of this Section 2.1.2.
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to Holdings as
provided in Section 2.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the holder or holders of record
thereof.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, Holdings at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to the
provisions of the Stockholders Agreement, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the current Market Price per share on the
business day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock equal (without giving effect to any adjustment thereof
pursuant to the terms hereof) to the number of such shares called for
on the face of this Warrant minus the number of such shares designated
by the holder upon such exercise as provided in Section 2.1 hereof.
2.4. EXCHANGE OF WARRANT. This Warrant is exchangeable at the aforesaid
principal office of Holdings for Warrants for the purchase of the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares of Common Stock as the holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Common Stock issuable pursuant
hereto.
2.5. COMPANY TO REAFFIRM OBLIGATIONS. Holdings will, at the time of or
at any time after each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights to which such holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
holder shall fail to make any such request, the failure shall not affect the
continuing obligation of Holdings to afford such rights to such holder.
<PAGE> 18
3. STOCK FULLY PAID; RESERVATION OF SHARES. Holdings represents, warrants,
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and non-assessable. Holdings further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, Holdings will at all times have authorized and
reserved solely for the purpose of the issuance upon exercise of this Warrant a
sufficient number of shares of Common Stock to provide for the exercise of the
rights represented by this Warrant.
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, Holdings will in good faith and as expeditiously as reasonably
possible use reasonable efforts to cause such shares to be duly registered or
qualified.
Holdings will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Holdings to perform its obligations under this Warrant.
4. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE UPON EXERCISE; EXERCISE PRICE. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 2.1 hereof, by
a fraction (a) the numerator of which shall be the Initial Exercise Price and
(b) the denominator of which shall be the Exercise Price in effect on the date
of such exercise. The "Exercise Price" shall initially be the Initial Exercise
Price and shall be adjusted and readjusted from time to time as provided in this
Section 4 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 4.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If Holdings, at any time
while this Warrant is outstanding, shall subdivide (by stock split or otherwise)
or combine (by consolidation or otherwise) any outstanding shares of Common
Stock, the Exercise Price shall be (a) proportionately decreased, to the nearest
one hundredth of one cent, in the case of a subdivision of shares, to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision or (b) proportionately increased, to the nearest one
hundredth of one cent, in the case of a combination of shares, to reflect the
decrease in the total
<PAGE> 19
number of shares of Common Stock outstanding as a result of such combination, as
of the effective date of such subdivision or combination, or if Holdings shall
take a record of holders of Common Stock for the purpose of so subdividing or
combining, as of the applicable record date, whichever is earlier.
4.2. CERTAIN DIVIDENDS. If Holdings, at any time while this Warrant is
outstanding, shall pay any stock dividend on the Common Stock, the Exercise
Price shall be adjusted, as of the date Holdings shall take a record of the
holders of the Common Stock, for the purpose of receiving such dividend (or if
no such record is taken, as of the date of such dividend), to the nearest one
hundredth of one cent, to the product obtained by multiplying the Exercise Price
in effect immediately prior to such subdivision or combination by a fraction (a)
the numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend (plus in the event that Holdings
paid cash for fractional shares, the number of additional shares which would
have been outstanding had Holdings issued fractional shares in connection with
said dividends) and (b) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend.
4.3. OTHER EVENTS. If any event occurs as to which the foregoing
provisions of Sections 4.1 and 4.2 are applicable or, if strictly applicable,
would not, in the good faith judgment of the Board, fairly and adequately
protect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.4. ADJUSTMENT OF EXERCISE PRICE. If at any time, as a result of any
adjustments hereunder, the sum of the Exercise Price plus a proportionate
portion of the consideration paid by the holder for this Warrant shall be less
than the par value per share of Common Stock, then the price payable per share
of Common Stock by the holder hereunder in the event of an exercise of this
Warrant, in whole or in part, shall be an amount equal to the par value per
share of the Common Stock; PROVIDED that for purposes of any calculation of the
number of shares issuable upon exercise of this Warrant, any adjustment to the
price payable per share of Common Stock pursuant to this Section 4.4 shall be
disregarded.
5. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.
In case Holdings after the date hereof (a) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation of
such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into Holdings and Holdings shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities, then, and in the case
<PAGE> 20
of each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Warrant, the holder of this
Warrant, upon the exercise hereof at any time after the consummation of such
transaction, shall be entitled to receive (at the aggregate Exercise Price in
effect at the time of such consummation for all Common Stock or Other Securities
issuable upon such exercise immediately prior to such consummation), in lieu of
the Common Stock or Other Securities issuable upon such exercise prior to such
consummation, the greatest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto.
6. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is adjusted pursuant to
Section 4 hereof, Holdings will promptly deliver to the holder of this Warrant
at its address set forth on Schedule I a certificate setting forth, in
reasonable detail, the event that triggered the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated (including a
description of the basis on which the Board made any determination hereunder),
and the Exercise Price after giving effect to such adjustment.
7. DIVIDENDS/DISTRIBUTIONS. Holdings shall give the holder of this Warrant not
less than 15 days prior written notice of its intent to pay a dividend or make
any other distribution on any shares of its capital stock, and shall set forth
in such notice the amount and type of such dividend or distribution and the
share of capital stock on which such dividend or distribution will be paid. If
the holder of this Warrant does not elect to exercise this Warrant prior to such
dividend or distribution, an amount equal to the cash which the holder would
have received on the Common Stock had the holder exercised this Warrant
immediately prior to such dividend or distribution shall at the option of the
holder (a) be used as a credit against the Exercise Price or (b) be retained by
Holdings and paid to such holder upon the exercise of this Warrant.
8. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of Holdings or as imposing any obligation on such holder to purchase
any Securities or as imposing any liabilities on such holder as a stockholder of
Holdings, whether such obligation or liabilities are asserted by Holdings or by
creditors of Holdings.
9. DEFINITIONS. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" shall mean the Board of Directors of Holdings.
"Common Stock" shall have the meaning as defined in the
introduction to this Warrant, such term to include any stock into which
such Common Stock shall have been changed or any stock resulting from
any reclassification of such Common Stock, and all other stock of any
class or classes (however designated) of Holdings the holders of which
have the right, without limitation as to amount, either to all or to a
share of the balance
<PAGE> 21
of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Company Notes" shall mean the Junior Subordinated Notes due
2010 of Simmons Company, a Delaware corporation, in the aggregate
original principal amount of $30,000,000, issued October 29, 1998.
"Current Market Price" shall mean on any date specified
herein, the average daily Market Price during the period of the most
recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no Common Sock is then
listed or admitted to trading on any national securities exchange or
quoted in the over-the-counter market, the Current Market Price shall
be the Market Price on such date.
"Escrow Warrants" shall have the meaning provided in the
Securities Purchase Agreement.
"Expiration Date" shall have the meaning set forth in
Section 1.
"Holdings" shall have the meaning provided in the introduction
to this Warrant, such term to include any corporation which shall
succeed to or assume the obligations of Holdings hereunder in
compliance with Section 5 hereof.
"Holding Notes" shall mean the Junior Subordinated Notes due
2011 of Holdings, in the aggregate original principal amount of
$10,000,000, issued October 29, 1998.
"Initial Exercise Price" shall have the meaning set forth in
the first paragraph hereof.
"Majority Holders" shall mean at any time holders of Warrants
exercisable for more than 50% of the shares of Common Stock issuable
under the Warrants at such time outstanding; PROVIDED that, for
purposes of Section 10 hereof, Simmons Holdings, LLC shall be deemed to
be the holder of any Escrow Warrants until such time as such Warrants
have been released from escrow.
"Market Price" shall mean on any date specified herein, the
amount per share of Common Stock equal to (a) the last sale price of
Common Stock, regular way, on such date or, if no such sale takes place
on such date, the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the principal
national securities exchange on which Common Stock is then listed or
admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is
designated as a national market system security by the NASD, the last
trading price of Common Stock on such date, or (c) if there shall have
been no trading on
<PAGE> 22
such date or if Common Stock is not so designated, the average of the
closing bid and asked prices of Common Stock on such date as shown by
the NASD automated quotation system, or (d) if the Common Stock is not
then listed or admitted to trading on any national exchange or quoted
in the over-the-counter market, the fair market value thereof
determined in good faith by the Board.
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise
of the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section
5 hereof or otherwise.
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Securities" shall mean any debt or equity securities of
Holdings, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security.
"Security" shall mean one of the Securities.
"Securities Act" shall mean as of any date of the Securities
Act of 1933, as amended, or any similar Federal statute then in effect.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of October 28, 1998 among Simmons Company,
Inc., Holdings and the Purchasers listed therein.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, the capital
stock of a corporation of any class.
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement. The term "Warrants" shall include,
without limitation, this Warrant and any Warrants issued in
substitution or exchange for any thereof.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Company and the
Majority Holders; PROVIDED, HOWEVER, that no such amendment or waiver shall
increase the Exercise Price, shorten the period during which the Warrants may be
exercised or modify any provision of this Section 10 without consent of the
holders of all Warrants then outstanding affected by such amendment or waiver.
<PAGE> 23
11. GOVERNING LAW. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without giving effect to the
choice of law principles of such state).
<PAGE> 24
Simmons Holdings, Inc.
By:
-----------------------
Name:
Title:
<PAGE> 25
Schedule I
to Warrant
[To be completed upon release of Warrant from escrow]
<PAGE> 26
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder _________,
(1) shares of the Common Stock and herewith makes payment of $____________
therefor, and requests that the certificates for such shares be issued in the
name of, and deliver to ___________, whose address is
Dated:
-------------------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-------------------------------------------------
(Street Address)
-------------------------------------------------
(City) (State) (Zip Code)
- -----------------------------
(1) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 27
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto __________ the right
represented by such Warrant to purchase ________ (2) shares of Common Stock of
Simmons Holdings, Inc. to which such Warrant relates, and appoints
_______________Attorney to make such transfer on the books of Simmons Holdings,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
--------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- -------------------------------
(2) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 28
FORM OF CONVERSION NOTICE
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to _________ (3) shares of the
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to _________, whose address is
Dated:
--------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
- ------------------------------
(3) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
conversion, a new Warrant or Warrants will be issued and delivered, representing
the unconverted portion of the Warrant, to the holder surrendering the Warrant.
<PAGE> 29
EXHIBIT B
THIS WARRANT AND ANY SHARES OF STOCK PURCHASABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION.
No. W-3 2,104,713.22 Shares
WARRANT TO PURCHASE
October 29, 1998
SHARES OF COMMON STOCK
OF
SIMMONS HOLDINGS, INC.
Incorporated Under the Laws of the State of Delaware
THIS CERTIFIES THAT, for value received, and subject to the provisions
hereinafter set forth, Simmons Holdings, LLC, or its registered assigns is
entitled to purchase from Simmons Holdings, Inc., a Delaware corporation
("Holdings"), during the period specified in this Warrant, 2,104,713.22 shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock, par value $0.01 per share,
of Holdings (the "Common Stock") at an initial exercise price of $6.7315 per
share (the "Initial Exercise Price"). Certain capitalized terms used in this
Warrant are defined in Section 9.
1. DURATION. The right to subscribe for and purchase shares of Common Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 P.M., Eastern Time, on October 29, 2005 (the "Expiration
Date").
2. METHOD OF EXERCISE OR CONVERSION; PAYMENT, ISSUANCE OF NEW WARRANT; TRANSFER
AND EXCHANGE.
2.1. METHOD OF EXERCISE.
2.1.1. EXERCISE. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any
business day on or prior to the Expiration Date, by surrender of this
Warrant to Holdings at its principal office, accompanied by a
subscription substantially in the form attached to this Warrant duly
executed by such holder and accompanied by (a) wire transfer of
immediately available funds, (b) certified or
<PAGE> 30
official bank check payable to the order of Holdings or (c) delivery to
Holdings of a principal amount of Company Notes or Holdings Notes
(provided that any Capitalized Interest shall be included in principal
for purposes of determining such amount), in each case in the amount
obtained by multiplying (i) the number of shares of Common Stock
(without giving effect to any adjustment thereof pursuant to the
provisions hereof) for which this Warrant is then being exercised, as
designated in such subscription, by (ii) the Initial Exercise Price,
and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) determined as provided in Sections 4
and 5.
2.1.2. CONVERSION. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Common Stock (or Other
Securities), during normal business hours on any business day on or
prior to the Expiration Date, by surrender of this Warrant to Holdings
at its principal office, accompanied by a conversion notice
substantially in the form attached to this Warrant duly executed by
such holder, and such holder shall thereupon be entitled to receive a
number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) equal to:
(a) the excess of
(i) (x) the number of shares of Common Stock
(or Other Securities) determined as provided in
Sections 4 and 5 hereof which such holder would be
entitled to receive upon exercise of this Warrant for
the number of shares of Common Stock designated in
such conversion notice multiplied by (y) the Current
Market Price of each such share of Common Stock (or
such Other Securities) so receivable upon such
exercise
over
(ii) (x) the number of shares of Common
Stock (without giving effect to any adjustment
thereof pursuant to the provisions hereof) for which
this Warrant may be exercised, as designated in such
conversion notice, multiplied by (y) the Initial
Exercise Price
divided by
(b) such Current Market Price of each such share of Common
Stock (or Other Securities).
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this Warrant into Common Stock
(or Other Securities) in accordance with the terms of this Section
2.1.2.
<PAGE> 31
2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
business day on which this Warrant shall have been surrendered to Holdings as
provided in Section 2.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock (or
Other Securities) shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the holder or holders of record
thereof.
2.3. DELIVERY OF STOCK CERTIFICATES, ETC. As soon as practicable after
each exercise of this Warrant, in whole or in part, Holdings at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to the
provisions of the Stockholders Agreement, as such holder (upon payment by such
holder of any applicable transfer taxes) may direct:
(a) a certificate or certificates for the number of duly
authorized, validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to
which such holder would otherwise be entitled, cash in an amount equal
to the same fraction of the current Market Price per share on the
business day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, dated the date hereof and calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock equal (without giving effect to any adjustment thereof
pursuant to the terms hereof) to the number of such shares called for
on the face of this Warrant minus the number of such shares designated
by the holder upon such exercise as provided in Section 2.1 hereof.
2.4. EXCHANGE OF WARRANT. This Warrant is exchangeable at the aforesaid
principal office of Holdings for Warrants for the purchase of the same aggregate
number of shares of Common Stock, each new Warrant to represent the right to
purchase such number of shares of Common Stock as the holder hereof shall
designate at the time of such exchange. All Warrants issued on transfers or
exchanges shall be dated the date hereof and shall be identical with this
Warrant except as to the number of shares of Common Stock issuable pursuant
hereto.
2.5. COMPANY TO REAFFIRM OBLIGATIONS. Holdings will, at the time of or
at any time after each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights to which such holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided
that if any such holder shall fail to make any such request, the failure shall
not affect the continuing obligation of Holdings to afford such rights to such
holder.
3. STOCK FULLY PAID; RESERVATION OF SHARES. Holdings represents, warrants,
covenants and agrees that all shares of Common Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and
<PAGE> 32
non-assessable. Holdings further covenants and agrees that during the period
within which the rights represented by this Warrant may be exercised, Holdings
will at all times have authorized and reserved solely for the purpose of the
issuance upon exercise of this Warrant a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
If any shares of Common Stock required to be reserved for issuance upon
exercise of this Warrant require registration or qualification with any
governmental authority under any federal or state law before such shares may be
so issued, Holdings will in good faith and as expeditiously as reasonably
possible use reasonable efforts to cause such shares to be duly registered or
qualified.
Holdings will (a) not increase the par value of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that Holdings
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (c) use its reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
Holdings to perform its obligations under this Warrant.
4. ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE UPON EXERCISE; EXERCISE PRICE. The
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be determined by multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 2.1 hereof, by
a fraction (a) the numerator of which shall be the Initial Exercise Price and
(b) the denominator of which shall be the Exercise Price in effect on the date
of such exercise. The "Exercise Price" shall initially be the Initial Exercise
Price and shall be adjusted and readjusted from time to time as provided in this
Section 4 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 4.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If Holdings, at any time
while this Warrant is outstanding, shall subdivide (by stock split or otherwise)
or combine (by consolidation or otherwise) any outstanding shares of Common
Stock, the Exercise Price shall be (a) proportionately decreased, to the nearest
one hundredth of one cent, in the case of a subdivision of shares, to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision or (b) proportionately increased, to the nearest one
hundredth of one cent, in the case of a combination of shares, to reflect the
decrease in the total number of shares of Common Stock outstanding as a result
of such combination, as of the effective date of such subdivision or
combination, or if Holdings shall take a record of holders of Common Stock for
the purpose of so subdividing or combining, as of the applicable record date,
whichever is earlier.
4.2. CERTAIN DIVIDENDS. If Holdings, at any time while this Warrant is
outstanding, shall pay any stock dividend on the Common Stock, the Exercise
Price shall be adjusted, as of the date Holdings shall take a record of the
holders of the Common Stock, for the purpose of receiving such dividend (or if
no such record is taken, as of the date of such dividend), to the nearest one
hundredth of one cent, to the product obtained by multiplying the Exercise Price
in effect
<PAGE> 33
immediately prior to such subdivision or combination by a fraction (a) the
numerator of which shall be the total number of shares of the Common Stock
outstanding immediately prior to such dividend (plus in the event that Holdings
paid cash for fractional shares, the number of additional shares which would
have been outstanding had Holdings issued fractional shares in connection with
said dividends) and (b) the denominator of which shall be the total number of
shares of the Common Stock outstanding immediately after such dividend.
4.3. OTHER EVENTS. If any event occurs as to which the foregoing
provisions of Sections 4.1 and 4.2 are applicable or, if strictly applicable,
would not, in the good faith judgment of the Board, fairly and adequately
protect the purchase rights represented by the Warrants in accordance with the
essential intent and principles of such provisions, then the Board shall make
such adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of the Board, to protect such purchase rights as aforesaid.
4.4. ADJUSTMENT OF EXERCISE PRICE. If at any time, as a result of any
adjustments hereunder, the sum of the Exercise Price plus a proportionate
portion of the consideration paid by the holder for this Warrant shall be less
than the par value per share of Common Stock, then the price payable per share
of Common Stock by the holder hereunder in the event of an exercise of this
Warrant, in whole or in part, shall be an amount equal to the par value per
share of the Common Stock; PROVIDED that for purposes of any calculation of the
number of shares issuable upon exercise of this Warrant, any adjustment to the
price payable per share of Common Stock pursuant to this Section 4.4 shall be
disregarded.
5. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS, REORGANIZATION, ETC.
In case Holdings after the date hereof (a) shall consolidate with or merge into
any other Person and shall not be the continuing or surviving corporation of
such consolidation or merger, or (b) shall permit any other Person to
consolidate with or merge into Holdings and Holdings shall be the continuing or
surviving Person but, in connection with such consolidation or merger, the
Common Stock or Other Securities shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person or (d) shall effect a capital reorganization or reclassification of the
Common Stock or Other Securities, then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Exercise Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the greatest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto.
6. NOTICE OF ADJUSTMENTS. Whenever the Exercise Price is adjusted pursuant to
Section 4 hereof, Holdings will promptly deliver to the holder of this Warrant
at its address set forth on
<PAGE> 34
Schedule I a certificate setting forth, in reasonable detail, the event that
triggered the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Exercise Price after giving
effect to such adjustment.
7. DIVIDENDS/DISTRIBUTIONS. Holdings shall give the holder of this Warrant not
less than 15 days prior written notice of its intent to pay a dividend or make
any other distribution on any shares of its capital stock, and shall set forth
in such notice the amount and type of such dividend or distribution and the
share of capital stock on which such dividend or distribution will be paid. If
the holder of this Warrant does not elect to exercise this Warrant prior to such
dividend or distribution, an amount equal to the cash which the holder would
have received on the Common Stock had the holder exercised this Warrant
immediately prior to such dividend or distribution shall at the option of the
holder (a) be used as a credit against the Exercise Price or (b) be retained by
Holdings and paid to such holder upon the exercise of this Warrant.
8. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of Holdings or as imposing any obligation on such holder to purchase
any Securities or as imposing any liabilities on such holder as a stockholder of
Holdings, whether such obligation or liabilities are asserted by Holdings or by
creditors of Holdings.
9. DEFINITIONS. For the purposes of this Warrant, the following terms have the
following meanings:
"Board" shall mean the Board of Directors of Holdings.
"Common Stock" shall have the meaning as defined in the
introduction to this Warrant, such term to include any stock into which
such Common Stock shall have been changed or any stock resulting from
any reclassification of such Common Stock, and all other stock of any
class or classes (however designated) of Holdings the holders of which
have the right, without limitation as to amount, either to all or to a
share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled
to preference.
"Company Notes" shall mean the Junior Subordinated Notes due
2010 of Simmons Company, a Delaware corporation, in the aggregate
original principal amount of $30,000,000, issued October 29, 1998.
"Current Market Price" shall mean on any date specified
herein, the average daily Market Price during the period of the most
recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no Common Sock is then
listed or admitted to trading on any national securities exchange or
quoted in the over-the-counter market, the Current Market Price shall
be the Market Price on such date.
<PAGE> 35
"Escrow Warrants" shall have the meaning provided in the
Securities Purchase Agreement.
"Expiration Date" shall have the meaning set forth in
Section 1.
"Holdings" shall have the meaning provided in the introduction
to this Warrant, such term to include any corporation which shall
succeed to or assume the obligations of Holdings hereunder in
compliance with Section 5 hereof.
"Holding Notes" shall mean the Junior Subordinated Notes due
2011 of Holdings, in the aggregate original principal amount of
$10,000,000, issued October 29, 1998.
"Initial Exercise Price" shall have the meaning set forth in
the first paragraph hereof.
"Majority Holders" shall mean at any time holders of Warrants
exercisable for more than 50% of the shares of Common Stock issuable
under the Warrants at such time outstanding; PROVIDED that, for
purposes of Section 10 hereof, Simmons Holdings, LLC shall be deemed to
be the holder of any Escrow Warrants until such time as such Warrants
have been released from escrow.
"Market Price" shall mean on any date specified herein, the
amount per share of Common Stock equal to (a) the last sale price of
Common Stock, regular way, on such date or, if no such sale takes place
on such date, the average of the closing bid and asked prices thereof
on such date, in each case as officially reported on the principal
national securities exchange on which Common Stock is then listed or
admitted to trading, or (b) if Common Stock is not then listed or
admitted to trading on any national securities exchange but is
designated as a national market system security by the NASD, the last
trading price of Common Stock on such date, or (c) if there shall have
been no trading on such date or if Common Stock is not so designated,
the average of the closing bid and asked prices of Common Stock on such
date as shown by the NASD automated quotation system, or (d) if the
Common Stock is not then listed or admitted to trading on any national
exchange or quoted in the over-the-counter market, the fair market
value thereof determined in good faith by the Board.
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holders of the Warrants at any time
shall be entitled to receive, or shall have received, upon the exercise
of the Warrants, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to Section
5 hereof or otherwise.
<PAGE> 36
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Securities" shall mean any debt or equity securities of
Holdings, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security.
"Security" shall mean one of the Securities.
"Securities Act" shall mean as of any date of the Securities
Act of 1933, as amended, or any similar Federal statute then in effect.
"Securities Purchase Agreement" shall mean the Securities
Purchase Agreement dated as of October 28, 1998 among Simmons Company,
Inc., Holdings and the Purchasers listed therein.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participants in, the capital
stock of a corporation of any class.
"Warrants" shall mean the Warrants issued pursuant to the
Securities Purchase Agreement. The term "Warrants" shall include,
without limitation, this Warrant and any Warrants issued in
substitution or exchange for any thereof.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Company and the
Majority Holders; PROVIDED, HOWEVER, that no such amendment or waiver shall
increase the Exercise Price, shorten the period during which the
Warrants may be exercised or modify any provision of this Section 10 without
consent of the holders of all Warrants then outstanding affected by such
amendment or waiver.
11. GOVERNING LAW. This Warrant shall be governed by and construed in accordance
with the internal laws of the State of Delaware (without giving effect to the
choice of law principles of such state).
<PAGE> 37
Simmons Holdings, Inc.
By:
-----------------------
Name:
Title:
<PAGE> 38
Schedule I
to Warrant
Simmons Holdings, LLC
c/o Fenway Partners, Inc.
152 West 57th Street, 59th Floor
New York, NY 10019
<PAGE> 39
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder ________, (1)
shares of the Common Stock and herewith makes payment of $________ therefor,
and requests that the certificates for such shares be issued in the name of,
and deliver to ________, whose address is
Dated:
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
- ------------------------------
(1) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 40
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _________ the right
represented by such Warrant to purchase _________ (2) shares of Common Stock of
Simmons Holdings, Inc. to which such Warrant relates, and appoints
_______________Attorney to make such transfer on the books of Simmons Holdings,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated:
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- -------------------------------------
(2) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for any stock or other securities or property or cash which, pursuant to the
adjustment provisions of this Warrant, may be delivered upon exercise. In the
case of a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
<PAGE> 41
FORM OF CONVERSION NOTICE
To Simmons Holdings, Inc.:
The undersigned registered holder of the within Warrant hereby
irrevocably converts such Warrant with respect to _________ (3) shares of the
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the
name of, and delivered to _________, whose address is
Dated:
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
- ---------------------------------
(3) Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
conversion, a new Warrant or Warrants will be issued and delivered, representing
the unconverted portion of the Warrant, to the holder surrendering the Warrant.
<PAGE> 1
Exhibit 21
SUBSIDIARIES
A. DOMESTIC SUBSIDIARIES
Jurisdiction of
Name Incorporation
- ---- ---------------
(1) Simmons International Holding Company, Inc. New York
B. FOREIGN SUBSIDIARIES
Jurisdiction of
Name Incorporation
- ---- ---------------
(1) Simmons Caribbean Bedding, Inc. Puerto Rico
(2) INFO Establishment Liechtenstein
(3) Simmons I.P., Inc. Ontario
(4) 688363 Ontario Limited Ontario
(5) 897701 Ontario Limited Ontario
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of
Simmons Company of our report dated February 24, 1999, on our audits of the
financial statements and financial statement schedules of Simmons Company. We
also consent to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Atlanta, Georgia
April 21, 1999
<PAGE> 1
EXHIBIT 24
----------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that we, the undersigned officers and
directors of Simmons Company, hereby severally constitute and appoint Zenon S.
Nie, Jonathan C. Daiker and Roger W. Franklin and each of them singly, our true
and lawful attorneys-in-fact and agents, with full power of substitution and
revocation, with full power to them and each of them to sign for us, and in our
names in the capacities indicated below, any and all amendments, including
post-effective amendments and supplements, to the registration statement on Form
S-4 of Simmons Company's 10 1/4% Senior Subordinated Notes, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
and generally to do all such things in our names and on our behalf in the
capacities indicated below to enable Simmons Company to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any substitute or substitutes
thereof, may lawfully do or cause to be done by virtue hereof, and further
ratifying and confirming our signatures as they may be signed by said
attorneys-in-fact and agents to all amendments to said registration statement.
Witness our hands and common seal on the respective dates set forth below.
<PAGE> 2
<TABLE>
<S> <C> <C>
/s/ Zenon S. Nie Chairman of the Board April 8, 1999
- ---------------------------- of Directors,
ZENON S. NIE Chief Executive Officer
and President
/s/ Jonathan C. Daiker Executive Vice President - April 8, 1999
- ---------------------------- Finance and Administration,
JONATHAN C. DAIKER Chief Financial Officer and
Director
/s/ Martin R. Passaglia Senior Executive Vice President, April 8, 1999
- ---------------------------- Secretary and Director
MARTIN R. PASSAGLIA
/s/ Peter Lamm Director April 12, 1999
- ----------------------------
PETER LAMM
/s/ Richard C. Dresdale Director April 12, 1999
- ----------------------------
RICHARD C. DRESDALE
/s/ Andrea Geisser Director April 12, 1999
- ----------------------------
ANDREA GEISSER
/s/ Gregory P. Meredith Director April 12, 1999
- ----------------------------
GREGORY P. MEREDITH
</TABLE>
-2-
<PAGE> 1
Exhibit 25
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------
FORM T-1
-------------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
---------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)
-------------------
SUNTRUST BANK, ATLANTA
(Exact name of trustee as specified in its charter)
25 PARK PLACE, N.E.
SUITE 1100
ATLANTA, GEORGIA 30303 58-0466330
(Address of principal (Zip Code) (I.R.S. employer identification
executive offices) no.)
-------------------
OLGA G. WARREN
Suntrust Bank, Atlanta
3495 Piedmont Road
Building 10, Suite 810
Atlanta, Georgia 30305
(404) 240-1942
(Name, address and telephone number of agent for service)
-------------------
THE SIMMONS COMPANY
Delaware 06-1007449
(State or other (IRS employer
jurisdiction of incorporation identification no.)
or organization)
ONE CONCOURSE PARKWAY
ATLANTA, GEORGIA 30328
(Address of principal executive offices) (Zip Code)
-------------------
10-1/4% Series B Senior Subordinated Notes
due 2009 to be Registered (Title of the
indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
333-
Registration No.
<PAGE> 2
1. General Information.
--------------------
Furnish the following information as to the trustee--
Name and address of each examining or supervising authority to
which it is subject.
DEPARTMENT OF BANKING AND FINANCE,
STATE OF GEORGIA
ATLANTA, GEORGIA
FEDERAL RESERVE BANK OF ATLANTA
104 MARIETTA STREET, N.W.
ATLANTA, GEORGIA
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.
Whether it is authorized to exercise corporate trust powers.
YES.
2. Affiliations with obligor.
--------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
NONE.
16. list of Exhibits.
-----------------
List below all exhibits filed as a part of this statement of
eligibility; exhibits identified in parentheses are filed with the
Commission and are incorporated herein by reference as exhibits hereto
pursuant to Rule 7a-29 under the Trust Indenture Act of 1939, as
amended, and Rule 24 of the Commission's Rules of Practice.
(1) A copy of the Articles of Amendment and Restated Articles of
Association of the trustee as now in effect. (Exhibit 1 to
Form T-1, Registration No. 333-25463.)
- 3 -
<PAGE> 3
(2) A copy of the certificate of authority of the trustee to
commence business. (included in Exhibit 1.)
(3) A copy of the authorization of the trustee to exercise
corporate trust powers. (included in Exhibit 1.)
(4) A copy of the existing by-laws of the trustee. (included in
Exhibit 4 to Form T-1, Registration No. 333-25463.)
(6) The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939.
(7) A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority as of the close of business
on December 31, 1998.
- 4 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Suntrust Bank, Atlanta, a banking corporation organized and existing
under the laws of the State of Georgia, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Atlanta and the State of Georgia,
on the 16th day of April, 1999.
SUNTRUST BANK, ATLANTA
By: /s/ Olga G. Warren
-----------------------------
Olga G. Warren
Vice President
- 5 -
<PAGE> 5
EXHIBIT 1 TO FORM T-1
ARTICLES OF ASSOCIATION
OF
SUNTRUST BANK, ATLANTA
<PAGE> 6
EXHIBIT 2 TO FORM T-1
CERTIFICATE OF AUTHORITY
OF
SUNTRUST BANK, ATLANTA
TO COMMENCE BUSINESS
<PAGE> 7
EXHIBIT 3 TO FORM T-1
AUTHORIZATION
OF
SUNTRUST BANK, ATLANTA
TO EXERCISE CORPORATE TRUST POWERS
<PAGE> 8
EXHIBIT 4 TO FORM T-1
BY-LAWS
OF
SUNTRUST BANK, ATLANTA
<PAGE> 9
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939 in connection with the proposed issuance of 10 1/4% Series B Senior
Subordinated Notes due 2009 of The Simmons Company, SunTrust Bank, Atlanta
hereby consents that reports of examinations by Federal, State, Territorial or
District Authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
SUNTRUST BANK, ATLANTA
By: /s/ Olga G. Warren
---------------------------
Olga G. Warren
Vice President
<PAGE> 10
EXHIBIT 7 TO FORM T-1
REPORT OF CONDITION
<PAGE> 11
<TABLE>
<CAPTION>
SUNTRUST BANK ATLANTA Call Date: 12/31/98 State #: 130330 FFIEC
031
P.O. BOX 4418 CENTER 632 Vendor ID: D Cert #: 00867 RC-1
ATLANTA, GA 30302 Transit #: 61000104
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
C400
SCHEDULE RC - BALANCE SHEET
DOLLAR AMOUNTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
----
a. Noninterest-bearing balances and currency and coin (1)_____________________________________________ 0081 1,339,046
1.a
b. Interest-bearing balances (2)______________________________________________________________________ 0071 5,142
1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)_________________________________________ 1754 0
2.a
b. Available-for-sale securities (from Schedule RC-B, column D)_______________________________________ 1773 3,225,581
2.b
3. Federal funds sold and securities purchased under agreements to resell_________________________________ 1350 1,217,838
3.
4. Loans and lease financing receivables: RCFD
----
a. Loans and leases, net of unearned income (from Schedule RC-C)_________________ 2122 13,046,097
4.a
b. LESS: Allowance for loan and lease losses_____________________________________ 3123 138,028
4.b
c. LESS: Allocated transfer risk reserve_________________________________________ 3128 0
4.c
d. Loans and leases, net of unearned income, RCFD
allowance, and reserve (item 4.a minus 4.b and 4.c)_________________________________________________ 2125 12,908,069
4.d
5. Trading assets (from Schedule RC-D)_____________________________________________________________________ 3545 37,301
5.
6. Premises and fixed assets (including capitalized leases)________________________________________________ 2145 97,749
6.
7. Other real estate owned (from Schedule RC-M)____________________________________________________________ 2150 1,624
7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)________________ 2130 12,664
8.
9. Customers' liability to this bank on acceptances outstanding____________________________________________ 2155 610,727
9.
10. Intangible assets (from Schedule RC-M)__________________________________________________________________ 2143 14,321
10.
11. Other assets (from Schedule RC-F)_______________________________________________________________________ 2160 165,262
11.
12. Total assets (sum of items 1 through 11)________________________________________________________________ 2170 19,635,324
12.
<FN>
- -------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
SUNTRUST BANK ATLANTA Call Date: 12/31/98 State #: 130330 FFIEC
031
P.O. BOX 4418 CENTER 632 Vendor ID: D Cert #: 00867 RC-2
ATLANTA, GA 30302 Transit #: 61000104
SCHEDULE RC - CONTINUED
Dollar Amounts in Thousands
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, RCON
part I)____________________________________________________________________________ RCON 2200 7,177,865
13.a
(1) Noninterest-bearing (1)________________________________________________________ 6631 3,082,972
13.a.1
(2) Interest-bearing_______________________________________________________________ 6636 4,094,893
13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, RCFN
part II)___________________________________________________________________________ RCFN 2200 3,530,204
13.b
(1) Noninterest-bearing____________________________________________________________ 6631 0
13.b.1
(2) Interest-bearing_______________________________________________________________ 6636 3,530,204 RCFD
13.b.2
14. Federal funds purchased and securities sold under agreements to repurchase_______________________________ 2800 4,245,132
14
RCON
15. a. Demand notes issued to the U.S. Treasury_____________________________________________________________ 2840 0
15.a
RCFD
b. Trading liabilities (from Schedule RC-D)_____________________________________________________________ 3548 0
15.b
Otherborrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less________________________________________________________ 2332 302,623
16.a
b. With a remaining maturity of more than one year through three years__________________________________ A547 2,559
16.b
c. With a remaining maturity of more than three years___________________________________________________ A548 1,418
16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding_________________________________________________ 2920 610,727
18
19. Subordinated notes and debentures(2)_____________________________________________________________________ 3200 250,000
19
20. Other liabilities (from Schedule RC-G)___________________________________________________________________ 2930 1,149,728
20
21. Total liabilities (sum of items 13 through 20)___________________________________________________________ 2948 17,270,268
21
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus_____________________________________________________________ 3838 0
23
24. Common stock______________________________________________________________________________________________ 3230 21,601
24
25. Surplus (exclude all surplus related to preferred stock)__________________________________________________ 3839 703,406
25
26. a. Undivided profits and capital reserves________________________________________________________________ 3632 598,887
26.a
b. Net unrealized holding gains (losses) on available-for-sale securities________________________________ 8434 1,041,174
26.b
27. Cumulative foreign currency translation adjustments_______________________________________________________ 3284 0
27
28. Total equity capital (sum of items 23 through 27)_________________________________________________________ 3210 2,365,068
28
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C>
29. Total liabilities and equity capital (sum of items 21 and 28)_____________________________________________ 3300 19,635,324
29
MEMORANDUM
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external RCFD Number
----
auditors as of any date during 1997___________________________________________________________________ 6724 N/A
M.1
<FN>
1 = Independent audit of the bank conducted in accor with generally accepted auditing
standards by a external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding c 5 = Review of the bank's
financial statements by external conducted in accordance with generally
accepted auditing auditors standards by a certified public accounting firm
which 6 = Compilation of the bank's financial statements by submits a
report on the consolidated holding company (but external auditors not on
the bank separately) 7 = Other audit procedures (excluding tax preparation
work)
3 = Directors' examination of the bank conducted in accordanc 8 = No external
audit work with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<CASH> 6,004
<SECURITIES> 0
<RECEIVABLES> 75,531
<ALLOWANCES> 4,177
<INVENTORY> 20,462
<CURRENT-ASSETS> 120,052
<PP&E> 69,729
<DEPRECIATION> 15,576
<TOTAL-ASSETS> 400,061
<CURRENT-LIABILITIES> 69,313
<BONDS> 311,637
0
0
<COMMON> 320
<OTHER-SE> (12,621)
<TOTAL-LIABILITY-AND-EQUITY> 400,061
<SALES> 600,773
<TOTAL-REVENUES> 600,773
<CGS> 348,842
<TOTAL-COSTS> 348,842
<OTHER-EXPENSES> 202,213
<LOSS-PROVISION> 75
<INTEREST-EXPENSE> 22,454
<INCOME-PRETAX> (4,362)
<INCOME-TAX> (345)
<INCOME-CONTINUING> (4,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 15,002
<CHANGES> 0
<NET-INCOME> (19,019)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
