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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
May 12, 2000 (May 2, 2000)
SLEEPMASTER L.L.C.
(Exact name of registrant as it appears in its charter)
Commission file number 333-81987
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New Jersey 333-81987 22-3341313
(State or other jurisdiction of (Commission file number) (IRS Employer ID Number)
incorporation or organization)
2001 Lower Road, Linden, New Jersey 07036-6520
(Address of principal executive offices) (Zip Code)
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(732) 381-5000
(Registrant's telephone number, including area code)
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ITEM 2. Acquisition or Disposition of Assets
On April 28, 2000, Sleepmaster L.L.C. ("Sleepmaster") acquired the
capital stock of Simon Mattress Manufacturing Company ("Simon Mattress") for
approximately $40.0 million, net of cash acquired, pursuant to a stock purchase
agreement by and among Simon Mattress, Sleepmaster and the stockholders listed
on the stockholder signature page attached thereto (the "Purchase Agreement").
In connection with the acquisition of Simon Mattress, Sleepmaster entered into a
Second Amended and Restated Credit Agreement by and among Sleepmaster, as
borrower, Sleepmaster Holdings, L.L.C. (Sleepmaster's parent), the domestic
subsidiaries of Sleepmaster, as guarantors, First Union National Bank, as lender
and as administrative agent and the lenders party thereto (the "Second Amended
Credit Agreement"). Sleepmaster financed the acquisition using proceeds from the
Second Amended Credit Agreement.
The description above of the acquisition is a summary and does not purport to be
complete. For more detail regarding the terms of the acquisition, we encourage
you to read each document attached as an exhibit to this report.
ITEM 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
It is not practical to provide the required financial
statements for Simon Mattress at this time. Such financial
statements will be filed as an amendment to this report on
Form 8-K no later than 60 days after the deadline for filing
this Form 8-K.
(b) Pro Forma Financial Information.
It is not practical to provide the required pro forma
financial statements for Simon Mattress at this time. Such
financial statements will be filed as an amendment to this
report on Form 8-K no later than 60 days after the deadline
for filing this Form 8-K.
(c) Exhibits.
2.1 Purchase Agreement, dated April 28, 2000, by and among
Sleepmaster L.L.C., Simon Mattress Manufacturing
Company and the stockholders listed on the stockholder
signature page attached thereto.
10.1 Second Amended and Restated Credit Agreement, dated as
of April 28, 2000, by and among Sleepmaster, as
borrower, Sleepmaster Holdings, L.L.C., the domestic
subsidiaries of Sleepmaster, as guarantors, First Union
National Bank, as lender and as administrative agent
and the lenders party thereto.
99.1 Press release issued by Sleepmaster L.L.C. on May 2,
2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Linden,
State of New Jersey.
SLEEPMASTER L.L.C.
By: /s/ Charles Schweitzer
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President and Chief Executive Officer
Dated: May 12, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated.
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SIGNATURE CAPACITY DATE
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/s/ Charles Schweitzer President and Chief Executive May 12, 2000
----------------------- Officer, Advisor
Charles Schweitzer
/s/ James P. Koscica Executive Vice President and Chief May 12, 2000
---------------------- Financial Officer, Advisor
James P. Koscica
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2
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Exhibit 2.1
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
SIMON MATTRESS MANUFACTURING CO.,
SLEEPMASTER L.L.C.,
AND
THE STOCKHOLDERS LISTED ON
THE STOCKHOLDER SIGNATURE
PAGE ATTACHED HERETO
================================================================================
April 28, 2000
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TABLE OF CONTENTS
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Page
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SECTION 1. PURCHASE AND SALE................................................................1
1A. Purchase and Sale of the Shares...............................................1
1B. Purchase Price................................................................1
1C. The Closing...................................................................1
1D. Target Net Worth Purchase Price Adjustment....................................2
1E. Determination of Closing Net Worth............................................2
1F. Cash on Hand Adjustment.......................................................4
SECTION 2. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE CLOSING.........................4
2A. Representations and Warranties; Covenants.....................................4
2B. Opinion of the Sellers' Counsel...............................................4
2C. Litigation....................................................................5
2D. Consents and Approvals........................................................5
2E. Escrow Agreements.............................................................5
2F. Material Adverse Change.......................................................5
2G. Due Diligence.................................................................5
2H. Employment and Noncompetition Arrangements....................................5
2I. Real Estate Matters...........................................................5
2J. Closing Documents.............................................................6
2K. Financing.....................................................................7
2L. Transfer Taxes................................................................7
2M. Resignation of Directors......................................................7
2N. Release of Liens..............................................................7
2O. Transactions with Affiliates..................................................7
2P. Financial Statements..........................................................7
2Q. Cash on Hand..................................................................7
2R. Waiver........................................................................7
SECTION 3. CONDITIONS OF THE SELLERS' OBLIGATIONS AT THE CLOSING............................8
3A. Representations and Warranties; Covenants.....................................8
3B. Escrow Agreements.............................................................8
3C. Employment Agreements.........................................................8
3D. Litigation....................................................................8
3E. Opinion of the Purchaser's Counsel............................................8
3F. Due Diligence Certificate.....................................................8
3G. Closing Documents.............................................................8
3H. Waiver........................................................................8
SECTION 4. PRE-CLOSING COVENANTS AND AGREEMENTS.............................................9
4A. Best Efforts; Further Assurances..............................................9
4B. Third Party Notices and Consents..............................................9
4C. Operation of Business.........................................................9
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4D. Full Access..................................................................10
4E. Press Release and Announcements..............................................10
4F. HSR Act......................................................................10
4G. Compliance with Agreements and Laws..........................................10
4H. Payment of Obligations.......................................................11
4I. Notice of Material Developments..............................................11
4J. Exclusivity..................................................................11
4K. Certain Pre-Closing Tax Matters..............................................12
SECTION 5. POST-CLOSING COVENANTS AND AGREEMENTS...........................................12
5A. Confidentiality..............................................................12
5B. Noncompete, Nonsolicitation..................................................12
5C. Certain Post-Closing Tax Matters.............................................13
SECTION 6. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY...........................14
6A. Organization, Corporate Power and Licenses...................................14
6B. Capital Stock and Related Matters; Subsidiaries..............................15
6C. Authorization; No Breach. ...................................................16
6D. Consents.....................................................................16
6E. Financial Statements.........................................................17
6F. Absence of Undisclosed Liabilities...........................................17
6G. Accounts Receivable..........................................................18
6H. Inventory....................................................................18
6I. Product Warranty.............................................................18
6J. Product Liability............................................................18
6K. No Material Adverse Effect...................................................18
6L. Indebtedness.................................................................19
6M. Absence of Certain Developments..............................................19
6N. Assets.......................................................................21
6O. Tax Matters..................................................................21
6P. Contracts and Commitments....................................................23
6Q. Intellectual Property Rights.................................................25
6R. Litigation, etc..............................................................26
6S. Brokerage....................................................................27
6T. Insurance....................................................................27
6U. Employees....................................................................27
6V. ERISA........................................................................28
6W. Compliance with Laws; Permits................................................30
6X. Environmental and Safety Matters.............................................30
6Y. Affiliate Transactions.......................................................31
6Z. Real Property................................................................32
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...................................33
7A. Power and Authority. ........................................................33
7B. Authorization; No Breach. ...................................................33
7C. Title to Shares..............................................................33
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7D. Brokerage....................................................................34
7E. Litigation, etc. ............................................................34
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................................34
8A. Organization, Power and Authority. ..........................................34
8B. Authorization; No Breach. ...................................................34
8C. Consents.....................................................................35
8D. Brokerage....................................................................35
8E. Investment Representations...................................................35
8F. Closing Date.................................................................35
SECTION 9. INDEMNIFICATION AND OTHER AGREEMENTS............................................35
9A. Survival of Representations and Warranties...................................35
9B. General Indemnification. ....................................................36
SECTION 10. DEFINITIONS....................................................................39
SECTION 11. TERMINATION....................................................................46
11A. Conditions of Termination....................................................46
11B. Effect of Termination........................................................47
SECTION 12. MISCELLANEOUS..................................................................47
12A. Fees and Expenses............................................................47
12B. Remedies.....................................................................47
12C. Consent to Amendments; Waivers...............................................47
12D. Successors and Assigns.......................................................47
12E. Severability.................................................................48
12F. Counterparts.................................................................48
12G. Descriptive Headings; Interpretation.........................................48
12H. Entire Agreement.............................................................48
12I. No Third-Party Beneficiaries.................................................48
12J. Cooperation on Tax Matters...................................................48
12K. Schedules and Exhibits.......................................................49
12L. Governing Law................................................................49
12M. Notices......................................................................49
12N. Jurisdiction and Venue.......................................................50
12O. Waiver of Right to Jury Trial................................................51
12P. No Strict Construction.......................................................51
12Q. Dispute Resolution...........................................................51
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EXHIBITS AND SCHEDULES
Exhibits:
Exhibit A - Adjustment Escrow Agreement
Exhibit B - Indemnity Escrow Agreement
Exhibit C - Opinion of the Sellers' Counsel
Exhibit D - Opinion of the Purchaser's Counsel
Disclosure Schedules (with Section references):
Consents Schedule - 2D, 6D, 8C
Construction Schedule - 2Q
Foreign Qualifications Schedule - 6A
Capitalization Schedule - 6B(i)
Subsidiaries Schedule - 6B(iii)
Authorization Schedule - 6C
Consents Schedule - 6D
Financial Statements Schedule - 6E
Disclosed Liabilities Schedule - 6F
Product Warranty Schedule - 6I
Indebtedness Schedule - 6L
Developments Schedule - 6M
Liens Schedule - 6N
Tax Schedule - 6O
Contracts Schedule - 6P
Intellectual Property Schedule - 6Q
Litigation Schedule - 6R
Brokerage Schedule - 6S, 7D, 8D
Insurance Schedule - 6T
Employees Schedule - 6U
Employee Benefits Schedule - 6V
Compliance Schedule - 6W
Permits Schedule - 6W
Environmental Schedule - 6X
Affiliate Transactions Schedule - 6Y
Real Property Schedule - 6Z
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
April 28, 2000, by and among Sleepmaster L.L.C., a New Jersey limited liability
company (the "Purchaser"), Simon Mattress Manufacturing Co., a California
corporation (the "Company"), and the stockholders listed on the stockholder
signature page attached hereto (collectively, the "Sellers" and individually a
"Seller"). Capitalized terms used herein and not otherwise defined herein have
the meanings given to such terms in Section 10 below.
WHEREAS, as of the date hereof, the Sellers collectively own all
of the outstanding capital stock of the Company (the "Shares");
WHEREAS, subject to the terms and conditions set forth herein,
the Purchaser desires to purchase the Shares from the Sellers, and the Sellers
desire to sell the Shares to the Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements and understandings herein contained, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:
SECTION 1. PURCHASE AND SALE
1A. Purchase and Sale of the Shares. At the Closing, subject
to the terms and conditions set forth in Sections 2 and 3 below, as applicable,
the Purchaser shall purchase from the Sellers, and the Sellers shall sell,
convey, assign, transfer, and deliver to the Purchaser, all of the Shares free
and clear of any Liens.
1B. Purchase Price. The aggregate purchase price for the
Shares (the "Purchase Price") will be $45,000,000 less (i) gross amounts paid or
payable by the Company (without regard to any reduction for withholding or
similar taxes) to Stephen Alloway pursuant to the Phantom Plan and (ii) the
aggregate amount of any payroll or employment taxes payable to federal, state,
and local taxing authorities in connection with (x) the Phantom Plan and (y) the
exercise of stock options by Donald S. Simon, Jr. that are expenses of the
Company, and the Purchase Price will be subject to adjustment as provided in
Sections 1D and 1F, payable as described in Section 1C below.
1C. The Closing. The closing of the purchase and sale of the
Shares and the transactions relating thereto (collectively, the "Closing") will
take place at the offices of Moore & Van Allen, 100 North Tryon Street, Floor
47, Charlotte, NC 28202-4006, or at such other place as the Purchaser may
specify by notice to the Sellers, commencing at 9:00 a.m. local time on April
28, 2000, or, if any of the conditions to Closing set forth in Sections 2 and 3
below have not been satisfied or waived by the Party entitled to the benefit
thereof on or prior to such date on the third business day following
satisfaction or waiver of such conditions. The date and time of the Closing are
referred to as the "Closing Date." At the Closing, subject to the satisfaction
or waiver of each of the conditions specified in Sections 2 and 3 below:
(i) The Purchaser will deliver Seven Hundred Fifty Thousand
Dollars ($750,000) (the "Adjustment Escrow Fund") to Bank One Trust Company,
N.A., escrow agent (the "Escrow
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Agent") as security for any liability of the Sellers pursuant to the purchase
price adjustment in Sections 1D and 1F below. The Adjustment Escrow Fund shall
be held by the Escrow Agent pursuant to the terms and conditions of the
Adjustment Escrow Agreement.
(ii) The Purchaser will deliver Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) (the "Indemnity Escrow Fund") to the Escrow Agent
as security for any amounts owed to the Purchaser pursuant to the
indemnification provisions set forth in Section 9B(i). The Indemnity Escrow Fund
shall be held by the Escrow Agent pursuant to the terms and conditions of the
Indemnity Escrow Agreement.
(iii) The Purchaser will deliver the balance of the Purchase
Price (reduced pursuant to Section 1C(i) and (ii) above and Section 1F(ii)
below) by wire transfer of immediately available funds to the account or
accounts specified in writing by the Company.
(iv) The Sellers will deliver to the Purchaser the stock
certificates for all of the Shares of the Company endorsed in blank or
accompanied by duly executed assignment documents.
1D. Target Net Worth Purchase Price Adjustment. If the Target
Net Worth exceeds the Closing Net Worth (defined below) by an amount greater
than $250,000, then not later than the third business day after the Closing Net
Worth is finally determined pursuant to Section 1E below, the Sellers jointly
and severally agree to pay to the Purchaser, in proportion to their prior
respective holdings in the Company, an amount equal to the amount by which the
Target Net Worth exceeds the sum of (x) Closing Net Worth plus (y) $250,000 in
immediately available funds to the account specified by the Purchaser; provided
that, together with any amount to be paid pursuant to Section 1F(ii) below, the
Sellers shall not be required to pay an amount greater than $750,000 to the
Purchaser pursuant to this adjustment. Any amount to be paid pursuant to this
Section 1D will be treated as an adjustment to the Purchase Price for all
purposes and shall first be satisfied out of the Adjustment Escrow Fund.
1E. Determination of Closing Net Worth.
(i) Definitions. The "Closing Net Worth" means the Net Worth
as of the opening of business on the Closing Date, as determined in accordance
with Sections 1E(ii), (iii) and (iv) below.
(ii) Inventory Audit; Closing Balance Sheet. On the close of
business on the day immediately preceding the Closing Date the Company will
complete a full physical inventory of the Company. The Purchaser and the
Purchaser's Accountant (as defined below) shall be entitled to be present while
the inventory review is being conducted. On or before the 60th day after the
Closing Date, the Sellers' Representative will prepare a balance sheet as of the
opening of business on the Closing Date (without giving effect to any of the
transactions contemplated hereby), which shall be audited by Stonefield
Josephson (the "Sellers' Accountant") (together with the related audit report of
such firm, the "Closing Balance Sheet"), and which shall set forth a calculation
of the Closing Net Worth, and the Sellers' Representative will promptly deliver
a copy of the Closing Balance Sheet to the Purchaser. The Sellers shall pay all
fees and expenses in connection with the preparation of the
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Closing Balance Sheet, including the fees of the Sellers' Accountant. The
Closing Balance Sheet shall (x) be prepared in accordance with GAAP consistent
with the preparation of the historical financial statements of the Company and
(y) fairly present the financial position of the Company as of the Closing Date.
During such 60-day period, the Purchaser will provide the Sellers'
Representative and the Sellers' Accountant reasonable access to the Company's
records. To facilitate the preparation of the Closing Balance Sheet and the
calculation of Closing Net Worth, during the 30-day period immediately following
the Sellers' Representative's delivery of the Closing Balance Sheet, the
Sellers' Representative will use commercially reasonable best efforts to provide
the Purchaser and PricewaterhouseCoopers LLP (the "Purchaser's Accountant")
reasonable access to the Sellers' Accountant, and the work papers related to the
preparation of the Closing Balance Sheet and the calculation of the Closing Net
Worth. On or prior to the 30th day following delivery of the Closing Balance
Sheet by the Sellers' Representative, the Purchaser may give the Sellers'
Representative a written notice stating in reasonable detail the Purchaser's
objections (an "Objection Notice") to the Closing Balance Sheet. Any Objection
Notice shall specify in reasonable detail the dollar amount of any objection and
the basis therefor. Any determination expressly set forth on the Closing Balance
Sheet which is not specifically objected to in the Objection Notice shall be
deemed final and binding upon the Parties upon delivery of the Objection Notice.
If the Purchaser does not give the Sellers' Representative an Objection Notice
within such 30-day period, then the Closing Balance Sheet will be conclusive and
binding upon the Parties and the Closing Net Worth set forth in the Closing
Balance Sheet will constitute the Closing Net Worth for purposes of Section
1E(i) above.
(iii) Dispute and Amicable Resolution. If the Purchaser gives a
timely Objection Notice as described in Section 1E(ii) above, then the Purchaser
and the Sellers' Representative shall negotiate in good faith to resolve their
disputes regarding the Closing Balance Sheet.
(iv) Resolution by Independent Accounting Firm. If the
Purchaser and the Sellers' Representative are unable to resolve all disputes
regarding the Closing Net Worth on or prior to the 45th day after the Objection
Notice is given, then the Purchaser and the Sellers' Representative will retain
a firm of certified public accountants chosen randomly by lot from among the
"big five" accounting firms other than the Sellers' accountant and the
Purchaser's Accountant (the "Independent Accounting Firm") to determine the
Closing Net Worth as soon as practicable. The Independent Accounting Firm shall
only decide the specific items under dispute by the Parties and shall be
instructed to determine the Closing Net Worth in accordance with the principles
set forth in this Agreement. The Closing Net Worth determined by the Independent
Accounting Firm will be conclusive and binding upon the Parties and will
constitute the Closing Net Worth for purposes of Section 1D above. The fees and
expenses of the Independent Accounting Firm in connection with its determination
of the Closing Net Worth will be paid one-half by the Sellers and one-half by
the Purchaser.
(v) Instructions to Escrow Agent. Upon the final determination
of the Closing Net Worth, the Purchaser and the Sellers' Representative agree to
prepare, execute and deliver joint written instructions to the Escrow Agent
(pursuant to the terms of the Adjustment Escrow Agreement) with respect to the
distribution of the entire Adjustment Escrow Fund.
1F. Cash on Hand Adjustment.
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(i) Definitions. "Closing Cash" means the amount of the
Company's cash and cash equivalents on hand as of the Closing Date (which amount
shall (x) include amounts expended by the Company in connection with the
acquisition and construction of the planned new manufacturing facility (the "New
Facility Project") and set forth on the Construction Schedule 2Q attached hereto
or, from the date hereof until the Closing, any amounts expended in connection
with the New Facility Project with the Purchaser's prior written consent, (y)
exclude amounts required to be withheld by the Company in connection with the
Phantom Plan and (z) exclude amounts required to be withheld by the Company in
connection with the exercise of stock options by Donald S. Simon, Jr. if such
amounts are funded by Donald Simon Jr. (either directly or through a reduction
in sales proceeds received by him) prior to the calculation of Closing Cash).
(ii) Adjustment. If the Target Cash exceeds Closing Cash, then
the Sellers jointly and severally agree to pay to the Purchaser, in proportion
to their prior respective holdings in the Company, an amount equal to the entire
amount by which the Target Cash exceeds the Closing Cash in immediately
available funds to the account specified by the Purchaser; provided that,
together with any amount required to be paid pursuant to Section 1D above, the
Sellers shall not be required to pay an amount greater than $750,000 to the
Purchaser pursuant to this adjustment. Any amount to be paid pursuant to this
Section 1F will be treated as an adjustment to the Purchase Price for all
purposes and shall be satisfied out of the Adjustment Escrow Fund.
SECTION 2. CONDITIONS OF THE PURCHASER'S OBLIGATIONS AT THE
CLOSING. The obligation of the Purchaser to take the actions set forth in
Section 1 above is subject to the satisfaction as of the Closing of the
following conditions:
2A. Representations and Warranties; Covenants. The
representations and warranties contained in Sections 6 and 7 hereof shall be
true and correct in all material respects at and as of the Closing as though
then made and as though the Closing Date was substituted for the date of this
Agreement throughout such representations and warranties (except for any
representations and warranties which are qualified by materiality which such
representations and warranties shall be true and correct in all respects), and
the Company and the Sellers shall have performed in all material respects all of
the covenants required to be performed by the Company and the Sellers hereunder
prior to the Closing.
2B. Opinion of the Sellers' Counsel. The Purchaser shall have
received from Hanson Bridgett Marcus Vlahos & Rudy LLP, counsel for the Company,
an opinion with respect to the matters set forth in Exhibit C attached hereto,
which shall be addressed to the Purchaser, and dated as of the Closing Date.
2C. Litigation. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated hereby
or that would reasonably be expected to have a Material Adverse Effect, and no
injunction, judgment, order, decree or ruling with respect thereto shall be in
effect.
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2D. Consents and Approvals. The Company and its Subsidiaries
shall have made all filings and shall have obtained and delivered to the
Purchaser all governmental and/or third party permits, authorizations, consents
and approvals required to be obtained by the Company and its Subsidiaries to
consummate the transactions contemplated by this Agreement (the "Consents") as
set forth on the Consents Schedule 2D, (except as otherwise set forth in
Consents Schedule 2D) and the Purchaser shall have received any governmental
and/or third party consents required to be obtained in connection with the
transactions contemplated hereby, including the consents of Serta, Inc. and its
stockholders. All applicable waiting periods under the HSR Act shall have
expired or been terminated.
2E. Escrow Agreements. Each of the Sellers' Representative,
the Purchaser and the Escrow Agent will have executed and delivered the
Adjustment Escrow Agreement and the Indemnity Escrow Agreement (together, the
"Escrow Agreements") and the Escrow Agreements shall be in full force and effect
as of the Closing and shall not have been amended or modified.
2F. Material Adverse Change. Since December 31, 1999, there
shall not have occurred any material adverse change (including any litigation in
excess of $100,000 (whether pursuant to an isolated incident or a series of
related incidents), but excluding the Washington Facility Fire) in the business,
assets, condition (financial or otherwise), results of operations, cash flows,
or prospects of the Company.
2G. Due Diligence. The Purchaser shall be satisfied in its
sole discretion with the results of its business, legal, environmental and
accounting due diligence review of the Company.
2H. Employment and Noncompetition Arrangements. The Company
shall have entered into a three year employment and noncompetition agreement
with Donald Stewart Simon, Jr. and a one year employment and noncompetition
agreement with Stephen Alloway, in each case satisfactory in form and substance
to the Purchaser, and such employment and noncompetition arrangements shall be
in full force and effect as of the Closing and shall not have been amended or
modified.
2I. Real Estate Matters. (i) A title insurance company
selected by the Purchaser (the "Title Company") shall be willing to insure at
standard rates the Company's or its applicable Subsidiary's marketable title in
and to the Owned Real Property in fee simple, the Company's or its applicable
Subsidiary's leasehold estate in any financable Leased Real Property (a
"Financable Leasehold"), and Purchaser's lender's ("Lender") mortgage lien on
the Owned Real Property and each Financable Leasehold, in each case free and
clear of all Liens except for Permitted Liens including such endorsements and
affirmative coverages as the Purchaser and Lender shall reasonably require
(including non-imputation endorsements). The Sellers shall provide all such
affidavits and indemnities as the Title Company reasonably shall require in
order to afford such coverages and the Purchaser shall bear 100% of the cost of
obtaining such title insurance.
(ii) The Purchaser shall have received a survey of each Owned
Real Property and each Leased Real Property to which the Company or a Subsidiary
of the Company holds a Financable Leasehold, in each case conforming to the
Minimum Standard Detail Requirements jointly established
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and approved in 1992 by ALTA and ACSM, certified to the Company or its
applicable Subsidiary, the Purchaser and the Title Company and showing no Liens
except for Permitted Liens. The Purchaser shall bear 100% of the cost of
obtaining such surveys.
(iii) All Real Property shall be in substantially the same
condition and repair as that on the date of this Agreement, reasonable wear and
tear excepted.
(iv) The Managing Sellers shall use commercially reasonable
best efforts to deliver to the Purchaser (i) from each landlord under a Lease,
an estoppel, and (ii) from each mortgagee and ground lessor of any Leased
Property, a nondisturbance agreement, in each case in form and substance
reasonably satisfactory to the Purchaser and the Lender. The Lender shall have
received from each landlord under a Lease designated by the Lender an agreement
regarding the subordination to Lender of such landlord's lien against personal
property on the applicable demised premises and such other matters as Lender
reasonably may require.
(v) The Sellers shall deliver to the Purchaser an affidavit
dated as of the Closing Date and in form and substance required under Section
1445 of the Internal Revenue Code so that Buyer is not required to withhold any
portion of the Purchase Price thereunder.
2J. Closing Documents. At the Closing, the Company and the
Sellers shall have delivered to the Purchaser all of the following:
(i) a certificate of an officer of the Company, dated as of
the Closing Date, stating that the conditions specified in Sections 2A, 2C, 2D,
2E, 2F, 2O and 2P have been fully satisfied;
(ii) all existing minute books, stock transfer records,
corporate seals and other materials relating to the Company's respective
corporate administration which are in the possession of the Company, the Sellers
or any Affiliate of the Sellers;
(iii) good standing certificates of the Company from its
jurisdiction of incorporation and each jurisdiction in which the Company is
qualified to do business as a foreign corporation, in each case dated within 5
days prior to the Closing Date; and
(iv) copies of all Consents.
2K. Financing. The Purchaser shall have received the cash
proceeds of the financing transactions necessary in order to consummate the
transactions contemplated hereby and to fund the ongoing working capital needs
of the Company, all on terms and conditions satisfactory to the Purchaser. No
later than five (5) days prior to the Closing Date, the Purchaser shall deliver
to the Sellers' Representative a copy of the executed bank commitment letter.
2L. Transfer Taxes. The Sellers shall timely pay any and all
real property transfer, transfer gains, documentary, sales, use, stamp,
registration and other such similar transfer taxes and fees, if any, assessed in
connection with the transactions contemplated by this Agreement and shall
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deliver to the Purchaser evidence satisfactory to Purchaser and the Title
Company of the payment of such taxes.
2M. Resignation of Directors. The Company and the Purchaser
shall have received the resignation of all of the directors of the Company.
2N. Release of Liens. The Company shall have obtained releases
of all Liens (other than any Permitted Liens) relating to the assets and
properties of the Company and shall have delivered satisfactory evidence, as
determined by the Purchaser, of such releases to the Purchaser.
2O. Transactions with Affiliates. Except as set forth on the
Affiliate Transactions Schedule 6Y, all transactions, agreements or other
arrangements between the Company and any of its Affiliates or any of the
Sellers, other than this Agreement, shall have been terminated.
2P. Financial Statements. The Purchaser shall have received
audited financial statements for the three prior fiscal years prepared by an
accounting firm, at the Sellers' cost, in accordance with Regulation S-X of the
Securities Act.
2Q. Cash on Hand. After giving effect to payments required to
be made by the Company pursuant to Section 12A, the Company shall have on hand
an amount of cash and cash equivalents (which amount shall (x) include amounts
expended by the Company in connection with the acquisition and construction of
the New Facility Project and set forth on the Construction Schedule 2Q attached
hereto or, from the date hereof until the Closing, any amounts expended in
connection with the New Facility Project with the Purchaser's prior written
consent, (y) exclude amounts required to be withheld by the Company in
connection with the Phantom Plan and (z) exclude amounts required to be withheld
by the Company in connection with the exercise of stock options by Donald S.
Simon, Jr. if such amounts are funded by Donald Simon, Jr. (either directly or
through a reduction in sales proceeds received by him) prior to the calculation
of Closing Cash) equal to at least $2,850,000 (the "Target Cash").
2R. Waiver. Any condition specified in this Section 2 may be
waived if consented to in writing by the Purchaser.
SECTION 3. CONDITIONS OF THE SELLERS' OBLIGATIONS AT THE CLOSING.
The obligation of each of the Sellers to take the actions set forth in Section 1
above is subject to the satisfaction as of the Closing of the following
conditions:
3A. Representations and Warranties; Covenants. The
representations and warranties contained in Section 8 hereof shall be true and
correct in all material respects at and as of the Closing as though then made
and as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Purchaser shall have
performed in all material respects all of the covenants required to be performed
by the Purchaser prior to the Closing.
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3B. Escrow Agreements. Each of the Purchaser, the Sellers'
Representative and the Escrow Agent will have executed and delivered the Escrow
Agreements, and the Escrow Agreements shall be in full force and effect as of
the Closing and shall not have been amended or modified.
3C. Employment Agreements. The Company shall have entered into
employment and noncompetition agreements in form and substance satisfactory to
the Purchaser with each of Donald Stewart Simon, Jr. and Stephen Alloway and
such employment and noncompetition agreements shall be in full force and effect
as of the Closing and shall not have been amended or modified.
3D. Litigation. No suit, action or other proceeding, or
injunction, order, decree or judgment relating thereto, shall be threatened or
shall be pending in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the transactions contemplated hereby
and no injunction, judgment, order, decree or ruling with respect thereto shall
be in effect.
3E. Opinion of the Purchaser's Counsel. The Sellers shall have
received from Kirkland & Ellis, special counsel to the Purchaser, an opinion
with respect to the matters set forth in Exhibit D attached hereto, which shall
be addressed to the Sellers and dated as of the Closing Date.
3F. Due Diligence Certificate. The Sellers shall have received
from the Purchaser a certificate of an officer of the Purchaser, dated as of the
Closing Date, stating that Purchaser is satisfied with the results of its
business, legal, environmental and accounting due diligence review of the
Company.
3G. Closing Documents. At the Closing, the Purchaser shall
have delivered to the Sellers a certificate of an officer of the Purchaser,
dated the Closing Date, stating that the conditions specified in Section 3A
shall have been fully satisfied.
3H. Waiver. Any condition specified in this Section 3 may be
waived if consented to in writing by the Managing Sellers.
SECTION 4. PRE-CLOSING COVENANTS AND AGREEMENTS. Each of the
Parties agrees as follows with respect to the period between the date of this
Agreement and the Closing:
4A. Best Efforts; Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto shall use its
commercially reasonable best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement and to fulfill all of the
conditions set forth in Sections 2 and 3 above and the execution and delivery of
the agreements and instruments contemplated hereby to be executed and delivered
at the Closing. In the event any claim, action, suit, investigation or other
proceeding by any Governmental Authority or other Person is commenced which
questions the validity or legality of the transactions contemplated hereby or
seeks damages in connection therewith, the Parties agree to cooperate and use
commercially reasonable best efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit
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or other proceeding, to use reasonable best efforts to have such injunction or
other order lifted, and to cooperate reasonably regarding any other impediment
to the consummation of the transactions contemplated hereby.
4B. Third Party Notices and Consents. The Managing Sellers
shall and shall cause the Company to use their respective best efforts to (i)
give required notices to third parties, (ii) obtain any required Consents
(including cooperating with the Purchaser to obtain the consents of Serta, Inc.
and its stockholders), and (iii) take any actions reasonably required by any
third party, in each case in connection with the matters contemplated by this
Agreement.
4C. Operation of Business. Each of the Company and its
Subsidiaries shall, and the Managing Sellers shall cause the Company to, operate
its business only in the usual and ordinary course of business consistent with
past custom and practice and in accordance with all Laws and will preserve the
goodwill and organization of its business and the relationships with its
customers, suppliers, employees and other Persons having business relations with
the Company. Without limiting the generality of the foregoing, prior to the
Closing, without the prior written consent of the Purchaser, the Company and
each of the Managing Sellers covenant that:
(i) the Company shall not, and each of the Managing Sellers
shall cause the Company to not, directly or indirectly, except as expressly
contemplated by this Agreement, take or omit to take any action that would
require disclosure under Section 6M below or that would otherwise result in a
breach of any of the representations, warranties or covenants made by the
Company or the Sellers in this Agreement; and
(ii) the Company will, and each of the Managing Sellers shall
cause the Company to, use its commercially reasonable best efforts to (1)
preserve intact the organization and goodwill of the Company, (2) keep available
the services of each of its officers, employees and sales representatives, and
(3) maintain satisfactory relationships with each of its material suppliers and
customers.
(iii) the Company shall not, and each of the Managing Sellers
shall cause the Company to not, sell, assign, transfer, lease, license, or
abandon any of its assets, tangible or intangible, except in the ordinary course
of business consistent with past custom and practice for a fair consideration.
4D. Full Access. Subject to the confidentiality provisions of
the Letter of Intent, the Company shall, and each of the Managing Sellers shall
cause the Company to, afford, and cause its affiliates, officers, directors,
employees, attorneys, accountants, advisors and other agents (the "Company
Personnel") to afford, to the Purchaser, its financing sources and the
Purchaser's accounting, legal and other representatives full and complete access
at all reasonable times to all premises, properties, accountants and Company
Personnel of the Company and its Subsidiaries and to all business, financial,
legal, real estate, tax, compensation and other data and information (including
all books, records, contracts, customer lists, other documents and records and
any working papers of the Company Personnel) concerning the Company, its
Subsidiaries and its affairs and operations as requested by the Purchaser or its
representatives or agents.
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4E. Press Release and Announcements. None of the Company or
the Sellers, on the one hand, or the Purchaser, on the other hand, or any of
their respective representatives shall make any public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
written consent of the other. The foregoing notwithstanding, any such public
announcement may be made if required by applicable law or a securities exchange
rule, provided that the Party required to make such public announcement shall
provide notice with the other Parties concerning the timing and content of such
public announcement before the same is made.
4F. HSR Act. In connection with the transactions contemplated
by this Agreement, the Parties shall comply promptly with the notification and
reporting requirements of the HSR Act and use all commercially reasonable best
efforts to obtain early termination of the waiting period under the HSR Act. The
Parties shall substantially comply with any additional requests for information,
including requests for production of documents and production of witnesses for
interviews or depositions, by any antitrust authority. The Purchaser shall pay
all fees and expenses associated with compliance under the HSR Act.
4G. Compliance with Agreements and Laws. The Company shall,
and each of the Managing Sellers shall cause the Company to, (i) comply with all
material obligations pursuant to any contract or agreement, whether oral or
written, express or implied and (ii) comply in all material respects with all
applicable Laws. Without limiting the generality of the foregoing, each of the
Managing Sellers shall cause the Company to comply in all material respects with
all Environmental and Safety Requirements and all permits, licenses or other
authorizations issued thereunder; respond in accordance with applicable law to
any Release or threatened Release of any hazardous material, substance or waste
in a manner which complies in all material respects with all Environmental and
Safety Requirements; and provide such documents or information, or conduct such
studies or assessments, relating to matters arising under Environmental and
Safety Requirements as the Purchaser may reasonably request.
4H. Payment of Obligations. The Company shall, and each of the
Managing Sellers shall cause the Company to, pay and discharge when payable all
Taxes, assessments and governmental charges imposed upon its properties or upon
the income or profits therefrom (in each case before the same becomes delinquent
and before penalties accrue thereon) and all claims for labor, materials or
supplies.
4I. Notice of Material Developments. Each Party shall give
prompt written notice to the other Parties of (i) any variances in any of its
representations or warranties contained in this Agreement, (ii) any material
breach of any covenant hereunder by such Party, and (iii) any other material
development which would render any of the conditions in Section 2 or 3 incapable
of being satisfied.
4J. Exclusivity. None of the Company, the Sellers or any of
their respective representatives, officers, directors, agents, stockholders or
Affiliates (all such persons and entities, the "Company Group") shall directly
or indirectly initiate, solicit, entertain, negotiate, accept or discuss any
proposal or offer (an "Acquisition Proposal") to acquire all or any significant
part of the Company, whether by merger, purchase of stock, purchase of assets,
tender offer or otherwise (a
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<PAGE> 16
"Third Party Acquisition"), or provide any nonpublic information to any third
party in connection with an Acquisition Proposal or a Third Party Acquisition,
or enter into any agreement, arrangement or understanding requiring the Company
or any Seller to abandon, terminate or fail to consummate the transactions
contemplated under this Agreement. The Company shall (i) immediately notify the
Purchaser if any member of the Company Group receives any indication of
interest, request for information or offer in respect of an Acquisition
Proposal, (ii) communicate to the Purchaser in reasonable detail the terms of
any such indication, request or proposal, and (iii) provide the Purchaser with
copies of all written communications relating to any such indication, request or
proposal. The Company and the Sellers represent that no member of the Company
Group is party to or bound by any agreement with respect to an Acquisition
Proposal or a Third Party Acquisition other than under this Agreement and the
members of the Company Group have terminated all discussions with third parties
(other than the Purchaser) regarding Acquisition Proposals or Third Party
Acquisitions. The Company and the Sellers shall use their best efforts to cause
each other member of the Company Group to comply with the provisions of this
Section 4J. In the event that any of the Company or the Sellers breaches the
provisions of this Section 4J and the transactions contemplated hereby are not
consummated for any reason (other than as a direct result of a breach of this
Agreement by the Purchaser in the absence of any breach of this Agreement by the
Company or the Sellers), the Company and/or the Sellers shall promptly reimburse
the Purchaser and its Affiliates for all out-of-pocket fees and expenses
incurred before or after the date of this Agreement by the Purchaser and its
Affiliates related to the transactions contemplated hereby, including fees and
expenses of legal counsel, accountants and other consultants and advisors
retained by the Purchaser in connection with the transactions contemplated
hereby. The foregoing provisions are in addition to, and not in derogation of,
any statutory or other remedy that the Purchaser may have for a breach of this
Section 4J.
4K. Certain Pre-Closing Tax Matters. Except as expressly
contemplated by this Agreement, without the prior written consent of the
Purchaser, neither the Sellers nor the Company shall make or change any
election, change an annual accounting period, adopt or change any accounting
method, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Company, surrender any right to
claim a refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to the Company, fail
to timely file any Tax Return, take a position on a Tax Return not in keeping
with prior practice or take any other similar action, or omit to take any action
relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action or omission could have the effect of increasing the present or
future Tax liability or decreasing any present or future Tax asset of the
Company or the Purchaser.
SECTION 5. POST-CLOSING COVENANTS AND AGREEMENTS.
5A. Confidentiality. In consideration of the mutual covenants
contained herein, each of the Sellers agrees that, for all times after the
Closing Date, except as required by law or court order, he or she shall not,
directly or indirectly, disclose to any unauthorized Person or use for his or
her own account any Confidential Information unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of such Seller's acts or omissions to act. Each of
the Sellers further agrees to use his or her commercially reasonable
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best efforts and diligence to safeguard the Confidential Information and to
protect it against disclosure, misuse, espionage, loss or theft.
5B. Noncompete, Nonsolicitation.
(i) For a period of 5 years following the Closing Date (the
"Noncompete Period"), none of the Managing Sellers shall directly or indirectly
own, operate, lease, manage, control, participate in, consult with, advise,
permit his name to be used by, provide services for, or in any manner engage in
(x) any business (including by himself or in association with any person, firm,
corporate or other business organization or through any other entity) that
manufactures any product or provides any service that may be used as a
substitute for or otherwise compete with any product or service of the Company,
its Subsidiaries or (y) any business in competition with, or potential
competition with, the businesses of the Company or its Subsidiaries, within any
geographical area in which the Company Group has obtained or is in the process
of obtaining a Serta license as of the Closing. Nothing herein shall prohibit
any of the Managing Sellers from being a passive owner of not more than 2% of
the outstanding stock of a corporation which is publicly traded, so long as such
Managing Seller has no active participation in the business of such corporation.
(ii) During the Noncompete Period, none of the Managing Sellers
shall directly or indirectly (x) induce or attempt to induce any employee of the
Company or any Subsidiary to leave the employ of the Company or such Subsidiary,
or in any way interfere with the relationship between the Company or any
Subsidiary and any employee thereof, including , inducing or attempting to
induce any union, employee or group of employees to interfere with the business
or operations of the Company or its Subsidiaries, (y) hire any person who was a
Key Employee of the Company or any Subsidiary, or (z) induce or attempt to
induce any customer, supplier, distributor, franchisee, licensee or other
business relation of the Company or any Subsidiary to cease doing business with
the Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, distributor, franchisee, licensee or
business relation and the Company or any Subsidiary.
(iii) Each of the Managing Sellers agrees and acknowledges that:
(a) the covenants set forth in this Section 5B are reasonably limited in both
time and geographical scope and in all other respects, (b) the covenants set
forth in this Section 5B are reasonably necessary for the protection of the
Company, (c) the Purchaser would not have entered into this Agreement but for
the covenants of each of the Managing Sellers contained herein, and (d) the
covenants contained herein have been made as a material incentive to the
Purchaser to enter into this Agreement.
(iv) If, at the time of enforcement of this Section 5B, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under the circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(v) Each of the Managing Sellers recognizes and affirms that in
the event of his breach of any provision of this Section 5B, money damages would
be inadequate and the Purchaser
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<PAGE> 18
and the Company would have no adequate remedy at law. Accordingly, each of the
Managing Sellers agrees that in the event of a breach or a threatened breach by
any such Managing Seller of any of the provisions of this Section 5B, the
Purchaser and the Company, in addition and supplementary to other rights and
remedies existing in their favor, may apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof
(without posting a bond or other security).
5C. Certain Post-Closing Tax Matters. The Company shall
prepare, or cause to be prepared, and file, or cause to be filed, any Tax
Returns of the Company for Tax periods which end on or before the Closing Date
and which have not been filed as of the Closing Date. The Company shall prepare,
or cause to be prepared, and file, or cause to be filed, any Tax Returns of the
Company for Tax periods which begin before the Closing Date and end after the
Closing Date. The Company shall permit the Sellers to review and comment on each
such Tax Return described in the preceding sentence prior to filing. The Sellers
shall pay to the Company within ten days following the date on which Taxes are
paid with respect to the Tax periods described in the first two sentences of
this Section 5C, an amount equal to the portion of such Taxes which relates to
the portion of such Tax periods ending on and including the Closing Date to the
extent such Taxes were not paid in full prior to the Closing Date and were not
reflected in the reserve for Taxes (rather than any reserve for deferred Taxes
established to reflect timing differences between book and tax income) shown on
the face of the Closing Balance Sheet and taken into account in determining
Closing Net Worth. For purposes of this Section 5C, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
(a) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction, the numerator of which is the number of days in the
Taxable period ending on and including the Closing Date and the denominator of
which is the number of days in the entire Taxable period, and (b) in the case of
any Tax based upon or related to income or receipts, be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date.
SECTION 6. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY.
As a material incentive to the Purchaser to enter into this Agreement and
purchase the Shares hereunder, the Company and each of the Managing Sellers,
jointly and severally, hereby represent and warrant to the Purchaser that the
following statements contained in this Section 6 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout this Section 6) as set forth in the disclosure
schedule delivered by the Sellers to the Purchasers on the date hereof:
6A. Organization, Corporate Power and Licenses. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of its state of incorporation and is duly
authorized to conduct business in every jurisdiction where such qualification is
required, which such jurisdictions are set forth on the Foreign Qualifications
Schedule 6A attached hereto. Each of the Company and its Subsidiaries possesses
all requisite corporate power and authority and all licenses, permits, and
authorizations necessary to own and
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operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the transactions
contemplated by this Agreement. The copies of the charter documents and bylaws
which have been furnished to the Purchaser reflect all amendments made thereto
at any time prior to the date of this Agreement and are correct and complete.
The minute books (containing the records of meetings of the stockholders, the
board of directors and any committees of the board of directors), the stock
certificate books and the stock record books of each of the Company and its
Subsidiaries are correct and complete.
6B. Capital Stock and Related Matters; Subsidiaries.
(i) As of immediately prior to the Closing, the authorized
capital stock of the Company consists of 10,000 shares of common stock, of which
1,970 shares shall be issued and outstanding as of the Closing Date. The Shares
constitute all of the outstanding capital stock of the Company and are held
beneficially and of record by the Sellers (free and clear of all Liens) as set
forth on the Capitalization Schedule 6B attached hereto. The Capitalization
Schedule 6B(i) attached hereto, sets forth the capitalization of each of the
Company's Subsidiaries and the name of each Person holding any equity securities
of the Company, any securities convertible or exchangeable for any equity
securities of the Company and any options or other rights to purchase equity
securities of the Company and the amount and type of such securities or options
or rights held by such Persons as of the Closing Date and immediately
thereafter. Other than pursuant to the Phantom Plan and the Stock Option Plan,
none of the Company or any of its Subsidiaries has outstanding (1) any stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, nor any rights or options to
subscribe for or to purchase its capital stock or (2) any stock or securities
convertible into or exchangeable for its capital stock or any stock appreciation
rights or phantom stock or similar plans or rights. None of the Company or any
of its Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock. As of the
Closing and immediately thereafter, all of the outstanding shares of the
Company's (and each of its Subsidiaries') capital stock shall be validly issued,
fully paid and nonassessable.
(ii) The Company has not violated any applicable federal or
state securities laws in connection with the offer, sale or issuance of any of
its capital stock or the offer, sale or issuance of any of its debt securities.
Except as set forth on the Capitalization Schedule 6B(ii), there are no voting
trusts, proxies, or other agreements or understandings among the Company's
shareholders or any other Person with respect to the voting, transfer or
registration of the Company's capital stock or with respect to any other aspect
of the Company's affairs.
(iii) The Subsidiaries Schedule 6B(iii) sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof, and the number of shares held
by each such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. Each of the Company and its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each Subsidiary of
the Company, free
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<PAGE> 20
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), Taxes, Security Interests, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Company and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that could require any Subsidiary of the Company to
issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of the Company.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of the Company.
None of the Company and its Subsidiaries controls directly or indirectly or has
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary of the Company.
6C. Authorization; No Breach. The Sellers' and the Company's
execution, delivery and performance of this Agreement and all other agreements
and instruments contemplated hereby to which such person is a party have been
duly authorized by such person. This Agreement constitutes a valid and binding
obligation of the Sellers and the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by (x) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (y) applicable equitable principles
(whether considered in a proceeding at law or in equity), and all other
agreements and instruments contemplated hereby to which the Company or any
Subsidiary of the Company is a party, when executed and delivered by the Company
in accordance with the terms hereof, shall each constitute a valid and binding
obligation of the Company or such Subsidiary, enforceable in accordance with its
terms, except as such enforceability may be limited by (a) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles
(whether considered in a proceeding at law or in equity). Except as set forth on
the attached Authorization Schedule 6C, the execution and delivery by the
Sellers and the Company of this Agreement and all other agreements and
instruments contemplated hereby to which any such person is a party, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Company or such Subsidiary do not and shall not (i) conflict with or result
in a breach of the terms, conditions or provisions of, (ii) constitute a default
under (whether with or without the passage of time, the giving of notice or
both), (iii) result in the creation of any Lien upon the Company's or any of its
Subsidiaries' capital stock or assets pursuant to, (iv) give any third party the
right to modify, terminate or accelerate any obligation under, (v) result in a
violation of, or notice or declaration to, the articles of incorporation or
bylaws of the Company, or, to the knowledge of the Company and the Managing
Sellers, any Law to which the Company or any Subsidiary of the Company is
subject, or any order, judgment or decree or any material agreement or
instrument to which the Company is subject. None of the Company or any
Subsidiary of the Company is a party to or bound by any written or oral
agreement or understanding with respect to an Acquisition Proposal or a Third
Party Acquisition other than this Agreement, and all of them have terminated all
discussions with third parties (other than the Purchaser) regarding Acquisition
Proposals or Third Party Acquisitions.
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<PAGE> 21
6D. Consents. No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Entity or other third
party is necessary for the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, except for
applicable requirements of the HSR Act or as set forth on the attached Consents
Schedule 6D.
6E. Financial Statements. The following financial statements
shall be attached hereto as the Financial Statements Schedule 6E:
(i) the audited consolidated balance sheets of the Company as
of December 31, 1997 and December 31, 1998, and the related statements of
combined income and cash flows (or the equivalent) for the respective
twelve-month periods then ended (which shall be delivered to Purchaser on or
prior to April 20, 2000);
(ii) the audited consolidated balance sheets of the Company as
of December 31, 1999, and the related statements of combined income and cash
flows (or the equivalent) for the respective twelve-month period then ended (the
"Latest Balance Sheet") (which shall be delivered to Purchaser on or prior to
April 20, 2000); and
(iii) the unaudited consolidated balance sheets of the Company
as of January 31, 2000, February 29, 2000 and March 31, 2000, and the related
statements of combined income (or the equivalent) for the respective monthly
periods then ending (which shall be delivered to Purchaser on or prior to the
Closing Date).
Except as set forth on the Financial Statements Schedule 6E as of their delivery
date to the Purchaser and as of the Closing Date all of the foregoing financial
statements (including in all cases the notes thereto, if any) are correct and
complete and are consistent with the books and records of the Company (which
books and records are correct and complete) and fairly present the financial
condition, operating results and cash flows of the Company and its Subsidiaries,
if applicable, and have been prepared in accordance with GAAP consistently
applied throughout such financial statements and the periods covered thereby,
subject in the case of the unaudited financial statements to the absence of
footnote disclosure and year end adjustment. Each of the financial statements
referenced in subsections 6E(i) and (ii) above have been prepared in accordance
with Regulation S-X of the Securities Act.
6F. Absence of Undisclosed Liabilities. Except as set forth on
the attached Disclosed Liabilities Schedule 6F, none of the Company or any of
its Subsidiaries has any obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due and
regardless of when asserted) arising out of transactions entered into at or
prior to the date hereof, or any action or inaction at or prior to the date
hereof, or any state of facts existing at or prior to the date hereof (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, or demand against the Company or any of its
subsidiaries giving rise to any liability), other than: (i) liabilities set
forth on the liabilities side of the Latest Balance Sheet (excluding any notes
thereto), (ii) liabilities and obligations which have arisen after the date of
the Latest Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit and none of which, either
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individually or in the aggregate, is material) and (iii) other liabilities and
obligations expressly disclosed on Disclosed Liabilities Schedule 6F.
6G. Accounts Receivable. All notes and accounts receivable
reflected on the Latest Balance Sheet and all notes and accounts receivable to
be reflected on the Closing Balance Sheet (net of allowances for doubtful
accounts as reflected thereon and as determined in accordance with GAAP
consistently applied with respect to each such financial statement) are or shall
be valid receivables arising in the ordinary course of business consistent with
past custom and practice, subject to no setoffs or counterclaims, and are
current and collectible.
6H. Inventory. The inventory of the Company and its
subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and none of which
is slow moving, obsolete, damaged, or defective, subject only to the reserve for
inventory shown on the Latest Balance Sheet and the reserve inventory to be
shown on the Closing Balance Sheet (as determined in accordance with GAAP
consistently applied with respect to each such financial statement), and such
inventory consists or shall consist of a quantity and quality usable and
saleable in the ordinary course of business consistent with past custom and
practice.
6I. Product Warranty. All products manufactured, sold, leased
or delivered by the Company or any of its Subsidiaries have been in conformity
with all applicable contractual commitments and all express and implied
warranties to the extent that any may exist, and, to the knowledge of the
Company and the Managing Sellers, none of the Company or any of its Subsidiaries
has any liability (and there is no reasonable basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against it giving rise to any such liability) for replacement or repair
thereof or other damages in connection therewith in excess of past custom and
practice and experience. To the knowledge of the Company and the Managing
Sellers, no products manufactured, sold, leased or delivered by the Company or
any of its Subsidiaries and no services rendered by the Company or any of its
Subsidiaries are subject to any Guarantee, warranty or other indemnity beyond
the applicable standard terms and conditions of such sale, lease or service. The
attached Product Warranty Schedule 6I includes copies of such standard terms and
conditions of sale, lease and service for the Company and any of its
Subsidiaries (containing applicable guaranty, warranty and indemnity
provisions).
6J. Product Liability. To the knowledge of the Company and the
Managing Sellers, none of the Company and its Subsidiaries has any Liability
(and there is not basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold or delivered by any of the Company or its Subsidiaries.
6K. No Material Adverse Effect. Since December 31, 1999, there
has occurred no fact, event or circumstance which has had or would reasonably be
expected to have a Material Adverse Effect other than the Washington Facility
Fire.
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<PAGE> 23
6L. Indebtedness. On December 31, 1999, all Indebtedness of
the Company and its Subsidiaries was $0 and is described on the Indebtedness
Schedule 6L. None of such Indebtedness shall exist following the Closing.
6M. Absence of Certain Developments. Except as expressly
contemplated by this Agreement or as set forth on the attached Developments
Schedule 6M, since December 31, 1999, each of the Company and its Subsidiaries
has conducted its business only in the ordinary course of business consistent
with past custom and practice, and none of the Company and its Subsidiaries has:
(i) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities or rights
convertible, exchangeable or exercisable into any capital stock or other equity
securities, other than (x) equity transfers in the ordinary course of business
by shareholders of the Company pursuant to applicable laws of descent and
distribution or among such shareholder's Family Group or (y) pursuant to the
Stock Option Plan or the Phantom Plan;
(ii) incurred any Indebtedness, other than any Indebtedness
incurred in the ordinary course of business consistent with past custom and
practice;
(iii) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid in the
ordinary course of business consistent with past custom and practice;
(iv) declared, set aside or made any payment or distribution of
cash or other property to the Sellers with respect to their capital stock or
other equity securities or purchased, redeemed or otherwise acquired any shares
of its capital stock or other equity securities (including any warrants, options
or other rights to acquire its capital stock or other equity securities);
(v) mortgaged or pledged or imposed any security interest upon
any of its properties or assets, tangible or intangible, or subjected them to
any Lien, except Permitted Liens;
(vi) sold, assigned, transferred, leased, licensed or abandoned
any of its assets, tangible or intangible (including the Intellectual Property
Rights), or other than in the ordinary course of business consistent with past
custom and practice for a fair consideration;
(vii) made or granted any bonus or any wage or salary increase
(other than wage increases made in the ordinary course of business consistent
with past custom and practice) or made any other change in employment to any
director, officer, employee or group of employees (except as required by
pre-existing contracts described on the attached Contracts Schedule 6P), or made
or granted any increase in any bonus, profit sharing, incentive, severance, or
other employee benefit plan, contract or arrangement, or amended or modified or
terminated any existing employee benefit plan or arrangement or adopted any new
employee benefit plan or arrangement;
(viii) entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any existing
such contracts or agreements;
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<PAGE> 24
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $50,000 other than in connection with the reconstruction
of the Washington Facility as set forth on the Construction Schedule 2Q attached
hereto;
(x) delayed, postponed or canceled the payment of any accounts
payable or any other liability or obligation or agreed or negotiated with any
party to extend the payment date of any accounts payable or accelerated the
collection of any accounts or notes receivable;
(xi) made any loans or advances to, Guarantees for the benefit
of, or any Investments in, any Persons or formed any Subsidiary;
(xii) suffered any damage, destruction or casualty loss
exceeding in the aggregate $50,000 (other than the damage caused by the
Washington Facility Fire), whether or not covered by insurance, or experienced
any material changes in the amount and scope of insurance coverage;
(xiii) made any change in any method of accounting or accounting
policies or its cash management processes, other than those required by GAAP
which have been disclosed in writing to the Purchaser, or made any write-down in
the value of its inventory that is other than in the ordinary course of business
consistent with past custom and practice;
(xiv) directly or indirectly engaged in any transaction, made
any loan to or entered into any arrangement with any officer, director, partner,
shareholder, employee or other Affiliate of the Company;
(xv) except as contemplated hereby, amended its articles of
incorporation, bylaws or other organizational documents;
(xvi) granted any license or sublicense of any rights under or
with respect to any Intellectual Property Rights;
(xvii) canceled, compromised, waived, or released any right or
claim (or series of related rights and claims) involving more than $25,000;
(xviii) entered into any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $25,000;
(xix) accelerated, terminated, modified, or canceled any
agreement, contract or license (or series of related agreements, contracts, or
licenses) involving more than $25,000 to which any of the Company and its
Subsidiaries is a party or by which any of them is bound;
(xx) experienced any other occurrence, event, incident, or
taken any action or omitted to take any action which would have a Material
Adverse Effect; or
(xxi) agreed, whether orally or in writing, to do any of the
foregoing.
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<PAGE> 25
6N. Assets.
(i) Except as set forth on the Liens Schedule 6N attached
hereto, each of the Company and its Subsidiaries has good and valid title to, or
a valid leasehold interest in, the properties and assets, tangible or
intangible, used by it, located on its premises or shown on the Latest Balance
Sheet or acquired thereafter, free and clear of all Liens, except for (a)
properties and assets disposed of in the ordinary course of business since the
date of the Latest Balance Sheet and (b) Permitted Liens.
(ii) Each of the Company and its Subsidiaries owns, has a valid
leasehold interest in, or has a valid license to use, all the assets, properties
and rights, whether tangible or intangible, necessary for the conduct of its
business as presently conducted and as presently proposed to be conducted.
6O. Tax Matters.
(i) Except as set forth on the attached Taxes Schedule 6O:
(a) each of the Company and its Subsidiaries has filed
all Tax Returns which it is required to file under applicable laws and
regulations, and all such Tax Returns are complete and correct and have
been prepared in compliance with all applicable laws and regulations;
(b) each of the Company and its Subsidiaries has paid
all Taxes due and owing by it (whether or not such Taxes are shown or
required to be shown on a Tax Return) and has withheld and paid over to
the appropriate taxing authority all Taxes which it is required to
withhold from amounts paid or owing to any employee, shareholder,
creditor or other third party;
(c) none of the Company or any of its Subsidiaries has
waived any statute of limitations with respect to any Taxes or agreed to
any extension of time for filing any Tax Return which has not been
filed; and none of the Company or any of its Subsidiaries has consented
to extend to a date later than the date hereof the period in which any
Tax may be assessed or collected by any Taxing Authority;
(d) the accrual for Taxes on the Latest Balance Sheet
would be adequate to pay all Tax liabilities of each of the Company and
its Subsidiaries if its current tax year were treated as ending on the
date of the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax income);
(e) no foreign, federal, state or local tax audits or
administrative or judicial proceedings are pending or being conducted
with respect to the Company or any of its Subsidiaries;
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<PAGE> 26
(f) there are no material unresolved questions or
claims concerning the Company's Tax liability (or any Tax liability of
any of its Subsidiaries);
(g) no claim has ever been made by a taxing authority
in a jurisdiction where the Company (or any Subsidiary of the Company)
does not file Tax Returns that the Company (or any such Subsidiary) so
not filing is or may be subject to Taxes assessed by such jurisdiction
or a filing requirement in that jurisdiction;
(h) none of the Company or any of its Subsidiaries has
ever been a member of an Affiliated Group or filed or been included in a
combined, consolidated or unitary income Tax Return, other than for an
Affiliated Group of which the Company is the common parent corporation;
(i) none of the Company or any of its Subsidiaries is a
party to or bound by any Tax allocation or Tax sharing agreement;
(j) there are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company or
any of its Subsidiaries; and
(k) none of the Company or any of its Subsidiaries
shall be required to (i) as a result of a change in method of accounting
for a taxable period ending on or prior to the Closing Date, include any
adjustment in taxable income for any taxable period (or portion thereof)
ending after the Closing Date, (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any similar
provision of state, local or foreign income Tax law), include any item
of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date,
(iii) as a result of any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, include any item of
income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date, or
(iv) as a result of any prepaid amount received on or prior to the
Closing Date, include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date.
(ii) None of the Company or any of its Subsidiaries:
(a) has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(b) has made an election under Section 341(f) of the
Code; or
(c) is liable for the Taxes of another Person that is
not currently a member of the Affiliated Group of which the Company is
the common parent corporation (1) under Treasury Regulation Section
1.1502-6 (or comparable provisions of state, local or foreign law), (2)
as a transferee or successor, or (3) by contract or indemnity or
otherwise; or
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<PAGE> 27
(d) has made, is obligated to make or is party to an
agreement which under certain circumstances could obligate it to make
payments which will not be deductible under Section 280G of the Code (or
any similar provision of state, local or foreign income Tax law), as a
result of any sale reported on the installment method where such sale
occurred on or prior to the Closing Date, include any item of income in,
or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date, or as a
result of any prepaid amount received on or prior to the Closing Date,
include any item of income in, or exclude any item of deduction from,
taxable income for any taxable period (or portion thereof) ending after
the Closing Date.
6P. Contracts and Commitments.
(i) Except as expressly contemplated by this Agreement or as
set forth on the attached Contracts Schedule 6P, none of the Company or any of
its Subsidiaries is a party to or bound by any written or oral:
(a) pension, profit sharing, stock option, employee
stock purchase or other plan or arrangement providing for deferred or
other compensation to its current or former directors, officers or
employees or any other employee benefit plan, arrangement or practice,
whether formal or informal;
(b) collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(c) management agreement or contract for the employment
of any officer, individual employee or other Person on a full-time,
part-time, consulting or other basis (i) providing annual cash or other
compensation in excess of $10,000, (ii) providing for the payment of any
cash or other compensation or benefits upon the consummation of the
transactions contemplated hereby or (iii) otherwise restricting its
ability to terminate the employment of any employee at anytime for any
lawful reason or for no reason without penalty or liability;
(d) contract or agreement involving any Governmental
Entity;
(e) agreement or indenture relating to borrowed money
or other Indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the Company
(or any of its Subsidiaries) or any letter of credit arrangements;
(f) Guarantee, other than endorsements made for
collection in the ordinary course of business or the Mancini Guarantee;
(g) lease or agreement under which the Company or any
of its Subsidiaries is (i) lessee of or holds or operates any personal
property, owned by any other party, except for any lease of personal
property under which the aggregate annual rental payments do not
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exceed $25,000 or (ii) lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by the
Company or any of its Subsidiaries;
(h) contract or group of related contracts with the
same party or group of affiliated parties for the purchase or sale of
raw materials, commodities, supplies, products, equipment or other
personal property or services under which the undelivered balance since
December 31, 1999 of such products and services has a selling price in
excess of $25,000;
(i) other contract or group of related contracts with
the same party or group of affiliated parties continuing over a period
of more than six months from the date or dates thereof, not terminable
by the Company or any of its Subsidiaries upon 30 days' or less notice
without penalty or involving more than $25,000;
(j) contract relating to the marketing, sale,
advertising or promotion of its products;
(k) agreements relating to the ownership of,
investments in or loans and advances to any Person, including
investments in joint ventures and minority equity investments;
(l) license, royalty, indemnification or other
agreement with respect to any intangible property (including any
Intellectual Property Rights);
(m) broker, agent, sales representative, sales or
distribution agreement;
(n) power of attorney or other similar agreement or
grant of agency;
(o) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world, including
any nondisclosure or confidentiality agreements;
(p) contract or agreement containing a change of
control provision or other provision requiring the payment of severance
other than the Phantom Plan and the Stock Option Plan; or
(q) other agreement which involves a consideration in
excess of $100,000 annually, whether or not in the ordinary course of
business.
(ii) All of the contracts, agreements and instruments set forth
or required to be set forth on the attached Contracts Schedule 6P (the "Material
Contracts") are valid, binding and enforceable in accordance with their
respective terms, except as such enforceability may be limited by (x) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (y) applicable equitable principles
(whether considered in a proceeding at law or in equity). Each of the
Material Contracts shall be in full force and effect without penalty in
accordance with its terms upon consummation of the transactions contemplated
hereby. Each of the
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<PAGE> 29
Company and its Subsidiaries has performed all obligations required to be
performed by it and is not in default under or in breach of nor in receipt of
any claim of default or breach under any Material Contract; no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of noncompliance by the Company or any of
its Subsidiaries under any Material Contract; and none of the Company or any of
its Subsidiaries has any knowledge of any breach or cancellation or anticipated
breach or cancellation by the other parties to any Material Contract to which
they are parties.
(iii) The Purchaser has been supplied with a true and correct
copy of each written Material Contract, together with all amendments, waivers or
other changes thereto (all of which amendments, waivers or other changes thereto
are described on the attached Contracts Schedule 6P).
6Q. Intellectual Property Rights.
(i) The attached Intellectual Property Schedule 6Q contains a
complete and accurate list of all (a) patented and registered Intellectual
Property Rights owned or used by the Company and any of its Subsidiaries, (b)
pending patent applications and applications for registrations of other
Intellectual Property Rights filed by the Company and any of its Subsidiaries,
(c) all computer software owned or used by the Company or any of its
Subsidiaries other than commercially available software with a license fee of
less than $1,000, and (d) material unregistered trade names, corporate names,
trademarks, service marks and copyrights owned or used by the Company and any of
its Subsidiaries. The attached Intellectual Property Schedule 6Q also contains a
complete and accurate list of all licenses or similar agreements relating to
Intellectual Property Rights to which the Company or any of its Subsidiaries is
a party, in each case identifying the subject Intellectual Property Rights.
(ii) Each of the Company and/or its Subsidiaries owns all
right, title and interest to, or has the right to use pursuant to a valid and
effective written license, all Company Intellectual Property Rights. The Company
Intellectual Property Rights comprise all of the Intellectual Property Rights
necessary and desirable for the operation of the business of the Company and its
Subsidiaries as presently conducted and as presently proposed to be conducted,
free and clear of all Liens other than Permitted Liens. No loss or expiration of
any of the Company Intellectual Property Rights is threatened, pending or
reasonably foreseeable. Each of the Company and its Subsidiaries has taken all
commercially reasonable action to maintain and protect the Company Intellectual
Property Rights. To the knowledge of the Company and its Subsidiaries, the
owners of any Intellectual Property Rights licensed to the Company or its
Subsidiaries have taken all commercially reasonable action to maintain and
protect the Intellectual Property Rights subject to such licenses.
(iii) Except as set forth on the attached Intellectual Property
Schedule 6Q, (a) there are no claims against the Company or any of its
Subsidiaries that were either made within the past five (5) years or are
presently pending asserting the invalidity, misuse or unenforceability of any of
the Company Intellectual Property Rights, and there is no basis for any such
claim, (b) the operation of the business of the Company and its Subsidiaries as
currently conducted and as proposed to be conducted has not infringed,
misappropriated or conflicted with and will not infringe, misappropriate or
conflict with any Intellectual Property Rights of other Persons and none of the
Company or its Subsidiaries has received any notice regarding any of the
foregoing (including any demands or offers
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to license any Intellectual Property Rights from any other Person) or is aware
of any facts which indicate a likelihood of any of the foregoing, (c) to the
knowledge of the Company and the Managing Sellers, no third party has infringed,
misappropriated or otherwise conflicted with any of the Company Intellectual
Property Rights. The transactions contemplated by this Agreement shall have no
Material Adverse Effect on the right, title or interest of the Company and its
Subsidiaries in and to the Company Intellectual Property Rights and all of such
Company Intellectual Property Rights shall be owned or available for use by the
Company and its Subsidiaries on substantially identical terms and conditions
immediately after the Closing.
(iv) Except as described on the attached Intellectual Property
Schedule 6Q(iv), to the knowledge of the Company and the Managing Sellers, none
of the computer software (including peoplesoft), computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by the
Company or by any of its Subsidiaries in the conduct of their respective
businesses (the "Computer Systems") has malfunctioned, ceased to function,
generated incorrect data or produced incorrect results.
6R. Litigation, etc. Except as set forth on the attached
Litigation Schedule 6R, there are no (and, during the five years preceding the
date hereof, there have not been any) actions, suits, proceedings (including any
arbitration proceedings, orders, investigations or claims pending or threatened
against the Company or, to the knowledge of the Company and the Managing
Sellers, pending or threatened against any of the officers, directors or
employees of the Company with respect to their businesses or proposed business
activities), or, to the knowledge of the Company and the Managing Sellers,
pending or threatened by the Company against any third party, at law or in
equity, or before or by any Government Entity (including any actions, suits,
proceedings or investigations with respect to the transactions contemplated by
this Agreement); none of the Company or any of its Subsidiaries is subject to
any arbitration proceedings under collective bargaining agreements or otherwise
or any governmental investigations or inquiries; and there is no basis for any
of the foregoing. Except as indicated on the attached Litigation Schedule 6R,
the Company and its Subsidiaries are fully insured with respect to each of the
matters set forth on such Litigation Schedule 6R. None of the Company or its
Subsidiaries is subject to any judgment, order or decree of any Government
Entity, and none of the Company or its Subsidiaries has received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed,
from a legal standpoint, to any liability which would reasonably be expected to
have a Material Adverse Effect.
6S. Brokerage. Except as set forth on the Brokerage Schedule
6S attached hereto (all items listed on the Brokerage Schedule 6S shall be the
responsibility of, and shall be borne by, the Sellers), there are and shall be
no claims for brokerage commissions, finders' fees or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement to which the Company or any Subsidiary of the Company
is a party or to which the Company or any Subsidiary of the Company is subject.
Neither the Company nor the Purchaser shall have any obligation for any fees or
expenses set forth on the Brokerage Schedule 6S.
6T. Insurance. The attached Insurance Schedule 6T contains a
description of each insurance policy maintained by the Company and its
Subsidiaries with respect to its properties, assets
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and business, and each such policy shall be in full force and effect as of the
Closing or a substituted policy shall have been obtained therefor. None of the
Company or any of its Subsidiaries is in default with respect to its obligations
under any insurance policy maintained by it, and none of the Company or any of
its Subsidiaries has ever been denied insurance coverage. Except as set forth on
the attached Insurance Schedule 6T, none of the Company or any of its
Subsidiaries has any self-insurance or co-insurance programs, and the reserves
set forth on the Latest Balance Sheet are (and the reserves to be set forth on
the Closing Balance Sheet will be) adequate to cover all anticipated liabilities
with respect to any such self-insurance or co-insurance programs.
6U. Employees. The Employees Schedule 6U attached hereto
contains a true and complete list as of December 31, 1999 of (i) the employees
employed by the Company and its Subsidiaries having an annual base salary in
calendar year 1999 of $50,000 or more, (ii) the rate of all current compensation
payable by the Company or its Subsidiaries to each such employee, including any
bonus, contingent or deferred compensation, and (iii) the directors of each of
the Company and the Subsidiaries. To the knowledge of the Company and the
Managing Sellers, no executive or key employee of the Company or any Subsidiary
of the Company and no group of employees of the Company or any Subsidiary of the
Company has any plans to terminate employment with the Company or any Subsidiary
of the Company. To the knowledge of the Company and the Managing Sellers, none
of the Company or any of its Subsidiaries has (a) any material labor relations
problems (including any additional union organization activities, threatened or
actual strikes or work stoppages or material grievances), (b) engaged in any
unfair labor practices, (c) during the past five years, suffered any labor
strike, lockout, work stoppage or other material labor dispute or, (d) any union
organization campaign is in progress with respect to any of the employees, nor
any question concerning representation exists respecting such employees. Neither
the Company nor any Subsidiary has engaged in any plant closing or employee
layoff activities within the last two (2) years that would violate or in any way
implicate the Worker Adjustment Retraining and Notification Act of 1988, as
amended, or any similar state or local plant closing or mass layoff statute,
rule or regulation.
6V. ERISA.
(i) The Employee Benefits Schedule 6V lists each Employee
Benefit Plan which any of the Company and its Subsidiaries maintains,
contributes to, or has an obligation to contribute to, or with respect to which
any of the Company and its Subsidiaries has any liability or potential
liability.
(a) Each Employee Benefit Plan (and each related trust,
insurance contract, or fund) materially complies in form and in
operation with its terms and with the applicable requirements of ERISA,
the Code, and other applicable laws.
(b) All required reports and descriptions (including
Form 5500 annual reports, summary annual reports, PBGC-1's, and summary
plan descriptions) have been filed or distributed appropriately with
respect to each Employee Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Section 4980B have been met
with respect to each Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
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(c) All contributions (including all employer
contributions and employee salary reduction contributions) which are due
have been paid to each Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Company and its Subsidiaries. All
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each Employee Benefit Plan
which is an Employee Welfare Benefit Plan.
(d) Each Employee Benefit Plan which is intended to be
qualified under Code Section 401(a) has received a favorable
determination letter from the Internal Revenue Service and nothing has
occurred since the date of such determination letter that could
adversely affect the qualified status of such plan.
(e) The market value of assets under each Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee Pension
Benefit Plan terminating on the date for determination.
(f) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 annual report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of the
Company, its Subsidiaries, and the Controlled Group of Corporations which
includes the Company and its Subsidiaries maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute:
(a) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a Reportable
Event as to which notices would be required to be filed with the PBGC.
No proceeding by the PBGC to terminate any such Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(b) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit, proceeding, hearing,
or investigation with respect to the administration or the investment of
the assets of any such Employee Benefit Plan (other than routine claims
for benefits) is pending or threatened. The Company has no knowledge of
any basis for any such action, suit, proceeding, hearing, or
investigation.
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(c) None of the Company and its Subsidiaries has
incurred, and the Company and its Subsidiaries have no reason to expect
that any of the Company and its Subsidiaries will incur, any Liability
to the PBGC (other than PBGC premium payments) or otherwise under Title
IV of ERISA (including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) None of the Company, its Subsidiaries, and the other
members of the Controlled Group of Corporations that includes the Company and
its Subsidiaries contributes to, ever has contributed to, or ever has been
required to contribute to any Multiemployer Plan or has any Liability (including
withdrawal liability) under any Multiemployer Plan.
(iv) None of the Company and its Subsidiaries has any
obligation to provide medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated employees, their spouses,
or their dependents (other than in accordance with Code Section 4980B).
6W. Compliance with Laws; Permits. Except as set forth on the
attached Compliance Schedule 6W:
(i) To the knowledge of the Company and the Managing Sellers,
each of the Company and its Subsidiaries has complied with all applicable Laws
relating to the operation of its respective business. No notices have been
received by and no claims have been filed against the Company or any Subsidiary
of the Company alleging a violation of any such Laws.
(ii) Except with respect to permits relating to Environmental
and Safety Regulations which are addressed in Section 6X below, each of the
Company and its Subsidiaries holds all permits, licenses, certificates,
accreditations and other authorizations of all Government Entities required for
the conduct of its business and the ownership of its properties, and the
attached Permits Schedule 6W sets forth a list of all of such permits, licenses,
certificates, accreditations and other authorizations. No notices have been
received by the Company or any Subsidiary of the Company alleging the failure to
hold any permit, license, certificate, accreditation or other authorization of
any Government Entity. Each of the Company and its Subsidiaries is in compliance
with all terms and conditions of all permits, licenses, accreditations and
authorizations which it holds. Except as disclosed on the attached Permits
Schedule 6W all of such permits, licenses, accreditations and authorizations
will be available for use by the Company and its Subsidiaries immediately after
the Closing.
6X. Environmental and Safety Matters. Except as set forth on
the attached Environmental Schedule 6X:
(i) To the knowledge of the Company and the Managing Sellers,
Each of the Company and its Subsidiaries has complied with and is currently in
compliance with all Environmental and Safety Requirements. The Company has not
received any oral or written notice, report or information regarding any
violations of or any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or corrective, investigatory or remedial obligations
arising
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under Environmental and Safety Requirements which relate to the Company (or any
of its Subsidiaries) or any of its current or former properties or facilities.
(ii) Without limiting the generality of the foregoing, each of
the Company and its Subsidiaries has obtained and complied with, and is
currently in compliance with, all permits, licenses and other authorizations
that may be required pursuant to any Environmental and Safety Requirements for
the occupancy of its properties or facilities or the operation of its business.
A list of all such permits, licenses and other authorizations is set forth on
the attached Environmental Schedule 6X.
(iii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any obligations on the
Company or any Subsidiary of the Company for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under any
Environmental and Safety Requirements (including any so called
"transaction-triggered" or "responsible property transfer" laws and
regulations).
(iv) None of the following exists at any property or facility
owned, occupied or operated by the Company or any Subsidiary of the Company:
(1) underground storage tanks;
(2) asbestos-containing materials in any form or
condition;
(3) materials or equipment containing
polychlorinated biphenyls; or
(4) landfills, surface impoundments or other
disposal areas.
(v) None of the Company or any of its Subsidiaries has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including any hazardous
substance) or owned, occupied or operated any facility or property (and no such
property or facility is contaminated by any such substance) in a manner that has
given or could give rise to any liabilities (including any liability for
response costs, corrective action costs, personal injury, natural resource
damages, property damage or attorneys fees or any investigative, corrective or
remedial obligations) pursuant to CERCLA or any other Environmental and Safety
Requirements.
(vi) None of the Company or any of its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability or
corrective, investigatory or remedial obligation of any other Person relating to
any Environmental and Safety Requirements.
6Y. Affiliate Transactions. Except as set forth on the
attached Affiliate Transactions Schedule 6Y, no officer, director, employee,
shareholder or Affiliate of the Company or any of its Subsidiaries or any
individual related by blood, marriage or adoption to any such individual or any
entity in which any such Person or individual owns any beneficial interest, is a
party
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to any agreement, contract, commitment or transaction with the Company or any of
its Subsidiaries or has any material interest in any material property used by
the Company or any of its Subsidiaries.
6Z. Real Property.
(i) The attached Real Property Schedule 6Z sets forth the
address and description of each parcel of real property owned by the Company or
any Subsidiary of the Company (the "Owned Real Property"). The company or its
applicable Subsidiary has good and marketable fee simple title in and to all of
the Owned Real Property subject to no Liens other than Permitted Liens.
(ii) The attached Real Property Schedule 6Z sets forth a list
of all leases, subleases and other occupancy agreements, including all
amendments, extensions and other modifications (the "Leases") for real property
(the "Leased Real Property"; the Owned Real Property and the Leased Real
Property are collectively the "Real Property") to which the Company or any
Subsidiary of the Company is a "tenant," "subtenant" or other lessee party. The
Company or its applicable Subsidiary has a good and valid leasehold interest in
and to all of the Leased Real Property, subject to no Liens except Permitted
Liens. Each Lease is in full force and effect and is enforceable in accordance
with its terms. There exists no default or condition which, with the giving of
notice, the passage of time or both, could become a default under any Lease. The
Company and the Sellers have previously delivered to Purchaser true and complete
copies of all the Leases. Except as described on Consents Schedule 2D, no
consent, waiver, approval or authorization is required from the landlord under
any Lease as a result of the execution of this Agreement or the consummation of
the transactions contemplated hereby.
(iii) The Real Property constitutes all of the real property
owned, leased, occupied or otherwise utilized in connection with the business of
the Company and its Subsidiaries. Other than the Company and its Subsidiaries,
there are no parties in possession or parties having any current or future right
to occupy any of the Real Property. The Real Property is in good condition and
repair and is sufficient and appropriate for the conduct of the business of the
Company and its Subsidiaries. To the knowledge of the Company and the Managing
Sellers, the Real Property and all plants, buildings and improvements located
thereon conform to all applicable building, zoning and other laws, ordinances,
rules and regulations. All permits, licenses and other approvals necessary to
the current occupancy and use of the Real Property have been obtained, are in
full force and effect and have not been violated. There exists no violation of
any covenant, condition, restriction, easement, agreement or order affecting any
portion of the Real Property. All improvements located on the Real Property have
direct access to a public road adjoining such Real Property. No such
improvements or accessways encroach on land not included in the Real Property
and no such improvement is dependent for its access, operation or utility on any
land, building or other improvement not included in the Real Property. There is
no pending or any threatened condemnation proceeding affecting any portion of
the Real Property. There are no outstanding options or rights of first refusal
with respect to the purchase or use of any of the Real Property, any portion
thereof or interest thereon. Neither the Company nor any of its Subsidiaries is
obligated to purchase or lease any real property.
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SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. As a
material incentive to the Purchaser to enter into this Agreement and purchase
the Shares hereunder, each Seller hereby, jointly and severally represents and
warrants to the Purchaser and the Company that the following representations and
warranties are true and correct as of the date hereof and will be true and
complete as of the Closing Date as though the Closing Date were substituted for
the date of this Agreement throughout such representations and warranties:
7A. Power and Authority. Each Seller that is an entity is duly
organized, validly existing and in good standing under the laws of its
incorporation and possesses all requisite power and authority necessary to carry
out the transactions contemplated by this Agreement.
7B. Authorization; No Breach. This Agreement and all other
agreements or instruments contemplated hereby to which any Seller is a party or
by which any Seller is bound, when executed and delivered by such Seller in
accordance with the terms hereof, shall each constitute a valid and binding
obligation of such Seller, enforceable in accordance with its terms, except as
such enforceability may be limited by (x) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (y) applicable equitable principles (whether considered in a
proceeding at law or in equity). The execution, delivery and performance by each
Seller of this Agreement and all other agreements contemplated hereby to which
such Seller is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by such Seller, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under (whether with or without the passage of time,
the giving of notice or both), (iii) result in the creation of any lien,
security interest, mortgage, charge or encumbrance upon such Seller's assets
pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any third party or Government Entity pursuant
to, any Law to which such Seller is subject, the articles of incorporation or
bylaws of such Seller, if applicable, or any material agreement, instrument,
order, judgment or decree to which such Seller is subject. Neither of the
Sellers is a party to or bound by any written or oral agreement or understanding
with respect to an Acquisition Proposal or a Third Party Acquisition other than
this Agreement, and all of them have terminated all discussions with third
parties (other than the Purchaser) regarding Acquisition Proposals or Third
Party Acquisitions.
7C. Title to Shares. All of the Shares are owned of record and
beneficially by the Sellers, and each Seller has good and marketable title to
the Shares owned by such Seller, free and clear of all Liens, agreements, voting
trusts, proxies and other arrangements or restrictions of any kind whatsoever.
None of the Sellers is a Party to any plan, warrant, purchase right or other
contract or commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than this
agreement). The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock of
the Company.
7D. Brokerage. Except as set forth on the Brokerage Schedule
7D attached hereto, there are no claims for brokerage commissions, finders' fees
or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement to which any Seller is a party
or to which any Seller is subject. Each Seller shall pay, indemnify, defend and
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hold the Company, its Subsidiaries and the Purchaser harmless against, any
liability, loss or expense (including reasonable attorneys' fees and
out-of-pocket expenses) arising in connection with any such claim.
7E. Litigation, etc. There are no actions, suits, proceedings
(including any arbitration proceedings), orders, investigations or claims
pending or threatened against or affecting any of the Sellers in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with the transactions contemplated hereby.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. As a
material incentive to the Company and the each of the Sellers to enter into this
Agreement and take the actions set forth in Section 1, the Purchaser hereby
represents and warrants to the Company and each of the Sellers that the
following statements contained in this Section 8 are correct and complete as of
the date of this Agreement and will be correct and complete as of the Closing
Date (as though then made and as though the Closing Date was substituted for the
date of this Agreement throughout this Section 8) as set forth in the disclosure
schedule delivered by the Sellers to the Purchasers on the date hereof:
8A. Organization, Power and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing under the Laws
of its jurisdiction of incorporation. The Purchaser possesses all requisite
power and authority necessary to carry out the transactions contemplated by this
Agreement.
8B. Authorization; No Breach. The execution, delivery and
performance of this Agreement and all other agreements or instruments
contemplated hereby to which the Purchaser is a party or by which the Purchaser
is bound have been duly authorized by the Purchaser. This Agreement and all
other agreements contemplated hereby to which the Purchaser is a party, when
executed and delivered by the Purchaser in accordance with the terms hereof,
shall each constitute a valid and binding obligation of the Purchaser,
enforceable in accordance with its terms, except as such enforceability may be
limited by (x) applicable insolvency, bankruptcy, reorganization, moratorium or
other similar laws affecting creditors' rights generally and (y) applicable
equitable principles (whether considered in a proceeding at law or in equity).
The execution, delivery and performance by the Purchaser of this Agreement and
all other agreements contemplated hereby to which the Purchaser is a party, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and shall not (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under
(whether with or without the passage of time, the giving of notice or both),
(iii) give any third party the right to modify, terminate or accelerate any
obligation under, (iv) result in a violation of the organizational documents of
the Purchaser, or any Law to which the Purchaser is subject, or any agreement,
instrument, order, judgment or decree to which the Purchaser is subject.
8C. Consents. No consent, approval or authorization of, or
designation, declaration or filing with any Governmental Entity or other third
party is necessary for the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, except for
applicable requirements of the HSR Act, the consents of Serta, Inc. and its
stockholders, or as set forth on the attached Consents Schedule 8C.
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8D. Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement to which
the Purchaser is a party or to which the Purchaser is subject. The Purchaser
shall pay, indemnify, defend and hold the Company and the Sellers harmless
against, any liability, loss or expense (including reasonable attorneys' fees
and out-of-pocket expenses) arising in connection with any such claim.
8E. Investment Representations.
(i) The Purchaser hereby represents that it is acquiring the
Shares purchased hereunder for its own account with the present intention of
holding such Shares for purposes of investment, and that it has no intention of
selling any such Shares in a public distribution in violation of the federal
securities laws or any applicable state securities laws; provided, that nothing
contained herein shall prevent the Purchaser or any subsequent holder of any of
the Shares from transferring such securities.
(ii) The Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(iii) The Purchaser understands that the Shares have not been
registered under the Securities Act on the basis that the sale provided for in
this Agreement is exempt from the registration provisions thereof and that the
Company's reliance on such exemption is predicated upon the representations of
the Purchaser set forth herein.
8F. Closing Date. The representations and warranties of the
Purchaser contained in this Section 8 and elsewhere in this Agreement shall be
true and correct in all respects on the Closing Date as though then made and as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties.
SECTION 9. INDEMNIFICATION AND OTHER AGREEMENTS.
9A. Survival of Representations and Warranties. The
representations and warranties in this Agreement and the Schedules and Exhibits
attached hereto shall survive the Closing as follows:
(i) the representations and warranties in Section 6O (Tax
Matters) shall terminate on the sixtieth (60th) day following the expiration of
the applicable statute of limitations (after giving effect to any extensions or
waivers thereof);
(ii) the representations and warranties in Section 6B (Capital
Stock and Related Matters; Subsidiaries), Section 6C (Authorization; No Breach),
Section 6L (Indebtedness), Section 6S (Brokerage), Section 6Y (Affiliate
Transactions), Section 7B (Authorization; No Breach), Section 7C (Title to
Shares), Section 7D (Brokerage), Section 8B (Authorization; No Breach) and
Section 8D (Brokerage) shall terminate on the fourth anniversary of the Closing
Date;
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(iii) the representations and warranties in Section 6V (ERISA)
and Section 6X (Environmental and Safety Matters) shall terminate on the third
anniversary of the Closing Date; and
(iv) all other representations and warranties in this Agreement
and the Schedules and Exhibits attached hereto shall terminate on the second
anniversary of the Closing Date;
provided, that any representation or warranty in respect of which indemnity may
be sought under Section 9B, and the indemnity with respect thereto, shall
survive the time at which it would otherwise terminate pursuant to this Section
9A if notice of the inaccuracy or breach or potential inaccuracy or breach
thereof giving rise to such right or potential right of indemnity shall have
been given to the Party against whom such indemnity may be sought prior to such
time. The representations and warranties in this Agreement and the Schedules and
Exhibits attached hereto or in any writing delivered by any Party to another
Party in connection with this Agreement shall survive for the periods set forth
in this Section 9A and shall in no event be affected by any investigation,
inquiry or examination made for or on behalf of any Party, or the knowledge of
any Party's officers, directors, shareholders, employees or agents or the
acceptance by any Party of any certificate or opinion hereunder.
9B. General Indemnification.
(i) Indemnification for the Benefit of the Company and the
Purchaser by the Sellers. Following the Closing, the Sellers, jointly and
severally, shall indemnify the Purchaser and its members, officers, directors,
employees, agents, representatives, successors and permitted assigns and the
Company (collectively, the "Seller Indemnified Parties") and save and hold each
of them harmless against and pay on behalf of or reimburse such Seller
Indemnified Parties as and when incurred for any direct or indirect loss,
liability, demand, claim, action, cause of action, cost, damage (excluding
consequential damages and damages for lost profits), deficiency, Tax, penalty,
fine or expense, whether or not arising out of third party claims (collectively,
"Losses"), which any such Seller Indemnified Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of: (a) any facts or circumstances which constitute a breach of any
representation or warranty of the Company or the Sellers under this Agreement,
or in any of the certificates or other instruments or documents furnished by the
Company or the Sellers pursuant to this Agreement; (b) any nonfulfillment or
breach of any covenant, agreement or other provision by the Company or the
Sellers under this Agreement required to be performed or complied with by the
Company or the Sellers at or prior to the Closing; (c) any nonfulfillment or
breach of any covenant, agreement or other provision by the Sellers under this
Agreement required to be performed or complied with by the Sellers after the
Closing; or (d) any claim by any Person (other than the Purchaser) with respect
to, or arising as a result of, any Acquisition Proposal or Third Party
Acquisition proposed prior to the Closing Date. If and to the extent any
provision of this Section 9B is unenforceable for any reason, each Seller hereby
agrees to make the maximum contribution to the payment and satisfaction of any
Loss for which indemnification is provided for in this Section 9B which is
permissible under applicable Laws. Notwithstanding anything contained herein, in
no event shall the Company be required to provide indemnification or
contribution for any obligation of the Sellers under this Section 9B(i).
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(ii) Indemnification for the Benefit of the Sellers by the
Company. Following the Closing, the Company shall indemnify the Sellers and
their shareholders, officers, directors, employees, agents, representatives,
successors and permitted assigns (collectively, the "Company Indemnified
Parties") and hold them harmless against any Losses which the Company
Indemnified Parties may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of: (a) any facts or
circumstances which constitute a breach of any representation or warranty of the
Purchaser under this Agreement, or in any of the certificates or other
instruments or documents furnished by the Purchaser pursuant to this Agreement;
(b) any nonfulfillment or breach of any covenant, agreement or other provision
by the Purchaser under this Agreement; or (c) any matters which occur after the
Closing Date as a result of the direction or approval of the Board following the
Closing Date.
(iii) Manner of Payment.
(a) Any indemnification obligations of the Sellers
pursuant to Section 9B(i) shall first be satisfied out of the Indemnity
Escrow Fund to the extent thereof and thereafter shall be paid by wire
transfer of immediately available funds to an account designated in
writing by the applicable Seller Indemnified Party within 15 days after
the determination thereof.
(b) Any indemnification obligations of the Company
pursuant to Section 9B(ii) shall be paid by wire transfer of immediately
available funds to an account designated in writing by the applicable
Company Indemnified Party within 15 days after the determination
thereof.
(c) Any such indemnification payments described in
clause (a) or (b) above shall include interest at 8% per annum
calculated on the basis of the actual number of days elapsed over 360,
from the date any such Loss is suffered or sustained to the date of
payment. The amount of any Loss for which indemnification is provided
pursuant to this Section 9B shall be net of any amounts actually
recovered by the indemnified party under insurance policies with respect
to such Loss.
(iv) Instructions to Escrow Agent. In the event of a
determination that a payment is due to any Seller Indemnified Party, the
Purchaser and the Sellers' Representative shall issue joint written instructions
to the Escrow Agent to distribute a portion of the Indemnity Escrow Fund equal
to such payment.
(v) Defense of Third Party Claims. Any Person making a claim
for indemnification under this Section 9B (an "Indemnitee") shall notify the
indemnifying party (an "Indemnitor") (in the case of a notice to the Sellers,
notice shall be sufficient if made solely to the Sellers' Representatives) of
the claim in writing promptly after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party), describing the claim, the amount thereof (if known and quantifiable) and
the basis thereof; provided that the failure to so notify an Indemnitor shall
not relieve the Indemnitor of its obligations hereunder unless the Indemnitor
shall be actually prejudiced by such failure to so notify. Any Indemnitor shall
be entitled to participate in the defense
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of such action, lawsuit, proceeding, investigation or other claim giving rise to
an Indemnitee's claim for indemnification at such Indemnitor's expense, and at
its option (subject to the limitations set forth below) shall be entitled to
assume the defense thereof by appointing a reputable counsel reasonably
acceptable to the Indemnitee to be the lead counsel in connection with such
defense; provided, that prior to the Indemnitor assuming control of such
defense, it shall first demonstrate to the Indemnitee in writing such
Indemnitor's financial ability to provide full indemnification to the Indemnitee
with respect to such action, lawsuit, proceeding, investigation or other claim
giving rise to such claim for indemnification hereunder; and provided further,
that:
(a) the Indemnitee shall be entitled to participate in
the defense of such claim and to employ counsel of its choice for such
purpose; provided that the fees and expenses of such separate counsel
shall be borne by the Indemnitee (other than any fees and expenses of
such separate counsel that are incurred prior to the date the Indemnitor
effectively assumes control of such defense which, notwithstanding the
foregoing, shall be borne by the Indemnitor);
(b) the Indemnitor shall not be entitled to assume
control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnitee if (1) the claim for indemnification relates
to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation; (2) the Indemnitee reasonably
believes an adverse determination with respect to the action, lawsuit,
investigation, proceeding or other claim giving rise to such claim for
indemnification would be detrimental to or injure the Indemnitee's
reputation or future business prospects; (3) the claim seeks an
injunction or equitable relief against the Indemnitee; (4) a conflict of
interest exists between the Indemnitor and the Indemnitee; or (5) the
Indemnitor failed or is failing to vigorously prosecute or defend such
claim; and
(c) if the Indemnitor shall control the defense of any
such claim, the Indemnitor shall obtain the prior written consent of the
Indemnitee before entering into any settlement of a claim or ceasing to
defend such claim if, pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief will be imposed against
the Indemnitee or if such settlement does not expressly and
unconditionally release the Indemnitee from all liabilities and
obligations with respect to such claim, without prejudice.
(d) if the claim for Indemnification relates to Taxes,
the Indemnitor's rights to control the defense of such matter shall
extend only to the specific issue for which indemnification is claimed
(and not the entire return or taxable period).
(vi) Limitations on Indemnification. Notwithstanding any
provision herein to the contrary, the maximum liability of all of the Sellers
with respect to any Losses suffered by the Seller Indemnified Parties as a
result of any facts or circumstances which constitute a breach of any
representation or warranty set forth in Section 9A above shall be an aggregate
amount equal to $2,250,000; provided, that the Sellers will only be required to
indemnify the Seller Indemnified Parties for any breaches of the representations
and warranties described in Section 9A if such Losses
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in the aggregate exceed $250,000 (the "Basket Amount") and then only to the
extent of such excess over the Basket Amount not to exceed $2,250,000.
(vii) Other Indemnification Provisions; Certain Waivers; etc.
The foregoing indemnification provisions are in addition to, and are not in
derogation of, any statutory or common law remedy that any of the Seller
Indemnified Parties or the Company Indemnified Parties may have for breach of
any representation, warranty, covenant or agreement contained herein or in any
of the Schedules or Exhibits attached hereto. Each Seller hereby agrees that he
shall not make any claim for indemnification hereunder against the Company by
reason of the fact that he was a shareholder, director, officer, employee or
agent of the Company or was serving at the request of the Company as a partner,
trustee, director, officer, employee or agent of another entity (whether such
claim is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expenses or otherwise) with respect to any action, suit,
proceeding, complaint, claim or demand brought by any of the Seller Indemnified
Parties against such Seller pursuant to this Agreement and such Seller hereby
acknowledges and agrees that he shall have no claims or right to contribution or
indemnity from the Company with respect to any amounts paid by the Sellers
pursuant to this Section 9B.
SECTION 10. DEFINITIONS. For the purposes of this Agreement,
the following terms have the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 4J.
"Adjustment Escrow Agreement" shall be the Adjustment Escrow
Agreement to be entered into among the Purchaser, the Sellers' Representative
and the Escrow Agent substantially in the form of Exhibit A attached hereto.
"Adjustment Escrow Fund" has the meaning set forth in Section 1C.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means any affiliated group as defined in Code
Section 1504 that has filed a consolidated return for federal income tax
purposes (or any similar group under state, local or foreign law) for a period
during which any of the Company was a member.
"Agreement" has the meaning set forth in the Preamble.
"Board" means the board of directors of the Company.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
"Closing" has the meaning set forth in Section 1C.
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"Closing Balance Sheet" has the meaning set forth in Section
1E(ii).
"Closing Date" has the meaning set forth in Section 1C.
"Closing Net Worth" has the meaning set forth in Section 1E.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Intellectual Property Rights" means all of the
Intellectual Property Rights owned or used by the Company or any of its
Subsidiaries (along with all income, royalties, damages and payments due or
payable at the Closing or thereafter (including , damages and payments for past
or future infringements or misappropriations thereof)), the right to sue and
recover for past infringements or misappropriations thereof, any and all
corresponding rights that, now or hereafter, may be secured throughout the world
and all copies and tangible embodiments of any such Intellectual Property
Rights.
"Confidential Information" means the information and data of the
Company or any of its Subsidiaries concerning the business or affairs of the
Company or any Subsidiary (including the Company's technology, computer
programs, know-how, designs, inventions, methods of doing business and supplier
and customer information) (i) which is material nonpublic information, (ii)
which is proprietary to the Company or any of its Subsidiaries, (iii) the
disclosure of which could reasonably be expected to be detrimental or adverse to
the Company or any of its Subsidiaries, or (iv) is the property of the Company
or such Subsidiary and that the continued success of the Company and its
Subsidiaries depends in large part on keeping this information from becoming
known to competitors of the Company and its Subsidiaries.
"Consents" has the meaning set forth in Section 2D.
"Controlled Group of Corporations" has the meaning set forth in
Code Section 1563.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution or defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan, (including any Multiemployer Plan), (c) Employee
Welfare Benefit Plan, or (d) other material fringe benefit plan, program or
arrangement.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Environmental and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law, in each case
concerning public health and safety, worker health and safety and pollution or
protection of the environment (including all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release,
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threatened Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" has the meaning set forth in Section 1C.
"Family Group" means such shareholder's spouse and descendants
(whether natural or adopted) and any trust solely for the benefit of such
shareholder and/or such shareholder's spouse, their respective ancestors and/or
descendants (whether natural or adopted).
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Government Entity" means individually, and "Government Entities"
means collectively, the United States of America or any other nation, any state
or other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government,
including any court, in each case having jurisdiction over the Company or any of
its Subsidiaries.
"Guarantee" means any guarantee of the payment or performance of
any Indebtedness or other obligation and any other arrangement whereby credit is
extended to one obligor on the basis of any promise of such Person, whether that
promise is expressed in terms of an obligation to pay the Indebtedness of such
obligor, to provide reimbursement, or to purchase an obligation owed by such
obligor, or to purchase goods and services from such obligor pursuant to a
take-or-pay contract, or to maintain the capital, working capital, solvency or
general financial condition of such obligor, whether or not any such arrangement
is listed in the balance sheet of such Person, or referred to in a footnote
thereto, but shall not include endorsements of items for collection in the
ordinary course of business.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the regulations promulgated thereunder.
"Indebtedness" means at a particular time, without duplication,
(i) any obligations under any indebtedness for borrowed money (including all
principal, interest premiums, penalties, fees, expenses and brokerage costs),
(ii) any indebtedness evidenced by any note, bond, debenture or other debt
security, (iii) any commitment by which a Person assures a creditor against loss
(including contingent reimbursement obligations with respect to letters of
credit), (iv) any indebtedness pursuant to a Guarantee (other than the Mancini
Guarantee), (v) any obligations under capitalized leases (other than equipment
leases entered into in the ordinary course of business) or with respect to which
a Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations a Person assures a creditor
against loss, (vi) any payments required upon a change
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of control, (vii) any indebtedness pursuant to deferred compensation
obligations, (viii) any amounts owed to Persons who hold options to purchase the
Company's or its Subsidiaries' stock, and (ix) any indebtedness secured by a
Lien on a Person's assets.
"Indemnity Escrow Agreement" shall be the Indemnity Escrow
Agreement to be entered into among the Purchaser, the Sellers' Representative
and the Escrow Agent substantially in the form of Exhibit B attached hereto.
"Indemnity Escrow Fund" has the meaning set forth in Section 1C.
"Intellectual Property Rights" means all (i) patents, patent
applications and patent disclosures, as well as any reissues, continuations,
continuations-in-part, divisions, extensions or reexaminations thereof, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names,
domain names and registrations and applications for registration thereof,
together with all of the goodwill associated therewith, (iii) copyrights and
copyrightable works and registrations and applications for registration thereof,
(iv) mask works and registrations and applications for registration thereof, (v)
computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial and marketing plans and
customer and supplier lists and information).
"Investment" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership
interests and joint venture interests) of any other Person and (ii) any capital
contribution by such Person to any other Person.
"Key Employee" means all salaried employees of the Company
receiving a base salary greater than $50,000 per year from the Company as
compensation.
"Latest Balance Sheet" has the meaning set forth in Section 6E.
"Laws" means all statutes, laws, codes, ordinances, regulations,
rules, orders, judgments, writs, injunctions, acts or decrees of any Government
Entity.
"Leased Real Property" has the meaning set forth in Section
6Z(ii).
"Letter of Intent" means the Letter of Intent, dated as of
January 25, 2000, by and between the Purchaser and the Company.
"Liabilities" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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"Lien" or "Liens" means any mortgage, pledge, security interest,
encumbrance, encroachment, claim, lease, right of possession, other defect in
title or lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Company, any filing or agreement to file a
financing statement as debtor under the Uniform Commercial Code or any similar
statute (other than to reflect ownership by a third party of property leased to
the Company under a lease which is not in the nature of a conditional sale or
title retention agreement), or any subordination arrangement in favor of another
Person.
"Managing Sellers" means Donald Simon, Sr., Donald Simon, Jr.,
Lois Jamart and Sid Goldstein.
"Mancini Guarantee" means the limited guaranty dated as of August
31, 1998, granted by the Company in favor of Pleasanton Square I Partners, L.P.,
and Marina Square Partners, L.P. (together, the "Landlord") to guaranty the
lease, dated as of August 31, 1998, by and between Landlord for the premises
located at Pleasanton Square I Shopping Center, 6010 Johnson Drive, Suite A,
Pleasanton, California, currently leased by Mattress Retailers, Inc., a wholly
owned subsidiary of Mancini Sleep World.
"Material Adverse Effect" means a material and adverse effect
upon the business, operations, assets, liabilities, financial condition,
operating results, business prospects, cash flow, net worth or employee,
customer or supplier relations of the Company and its Subsidiaries taken as a
whole.
"Multiemployer Plan" has the meaning set forth in ERISA Section
3(37).
"Net Worth" means, for purposes of Section 1D above, the excess
of the consolidated assets of the Company and its Subsidiaries as of the opening
of business on the date of determination over the consolidated liabilities of
the Company as of the opening of business on the date of determination
determined in accordance with GAAP, except as otherwise specified below. In
determining consolidated assets and liabilities hereunder, (i) all accounting
entries shall be taken into account regardless of their amount and all known
errors and omissions shall be corrected, (ii) all known proper adjustments shall
be made, (iii) appropriate reserves for all known and quantifiable liabilities
and obligations for which reserves are appropriate in accordance with GAAP shall
be included in the calculation, (iv) inventory shall be accounted for on a
first-in-first-out basis, (v) amounts required to be withheld by the Company in
connection with the Phantom Plan and the exercise of stock options by Donald S.
Simon, Jr. and any other liabilities relating thereto shall be excluded from the
calculation, and (vi) cash and cash equivalents, loss receivable with respect to
the Washington Facility Fire and any other receivable relating to such fire, all
deferred tax assets and liabilities, any receivable from Bedtime Stores, Inc.,
any receivable from Dataworks Corp., any bonuses to Sellers and/or employees,
any dividends payable, any note or other receivable from any of the Sellers, and
all other non-operating assets and liabilities shall be excluded from the
calculation.
"Noncompete Period" has the meaning set forth in Section 5B(i).
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"Owned Real Property" has the meaning set forth in Section 6Z(i).
"Party" has the meaning set forth in the Preamble.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (i) Liens for Taxes or assessments and
similar charges, which either are (a) not delinquent or (b) being contested in
good faith and by appropriate proceedings, and adequate reserves (as determined
in accordance with GAAP, consistently applied) have been established on the
Company's books with respect thereto, (ii) mechanics', materialmen's or
contractors' Liens or encumbrances or any similar statutory Lien or restriction
for amounts not yet due and payable and for which the Title Company has
affirmatively insured against collection, (iii) zoning, entitlement, building
and other land use regulations imposed by governmental agencies having
jurisdiction over the Real Property which are not violated by the current use
and operation of the Real Property, and (iv) covenants, conditions,
restrictions, easements and other similar matters of record affecting title to
the Real Property which do not materially impair the occupancy or use, value or
marketability of the Owned Real Property which they encumber for the purposes
for which it is currently used in connection with the business of the Company
and its Subsidiaries.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Phantom Plan" means the Simon Mattress Manufacturing Co. 1995
Phantom Stock Plan for the benefit of Stephen Alloway.
"Prohibited Transactions" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
"Purchaser" has the meaning set forth in the Preamble.
"Release" shall have the meaning set forth in CERCLA.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Sellers" has the meaning set forth in the Preamble.
"Sellers' Representative" has the meaning set forth in Section
1E(ii).
"Stock Option Plan" means the 1995 Stock Option Plan for the
benefit of Donald Simon, Jr.
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"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
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 that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Target Cash" has the meaning set forth in Section 2Q.
"Target Net Worth" means $10,500,000.
"Tax" or "Taxes" means federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including
deficiencies, penalties, additions to tax, and interest attributable thereto)
whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"Third Party Acquisition" has the meaning set forth in Section
4J.
"Title Company" has the meaning set forth in Section 2I
"Treasury Regulation" means the United States Treasury
Regulations promulgated under the Code, and any reference to any particular
Treasury Regulation section shall be interpreted to include any final or
temporary revision of or successor to that section regardless of how numbered or
classified.
"Washington Facility Fire" means the fire which occurred on
November 10, 1999 at the Company's operating plant located at 403 North Lever
Road, Puyallup, Washington 98371.
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SECTION 11. TERMINATION.
11A. Conditions of Termination. This Agreement may be
terminated at any time prior to the Closing (or as otherwise specified):
(i) by the mutual written consent of the Parties;
(ii) by the Purchaser if the Purchaser shall have received
notice of a breach of the representations and warranties set forth in Sections 6
and/or 7 or a breach of a covenant hereunder, in each case, which renders the
condition in Section 2A incapable of being satisfied; or
(iii) by the Sellers if the Sellers shall have received notice
of a breach of the representations and warranties set forth in Section 8 or a
breach of a covenant hereunder, in each case, which renders the condition in
Section 3A incapable of being satisfied; or
(iv) by the Purchaser on the one hand, or the Sellers and the
Company on the other hand, if the transactions contemplated hereby have not been
consummated by May 31, 2000; provided that the reason for the delay beyond May
31, 2000 shall not have been caused by the Party initiating such termination.
11B. Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and of
no further force and effect, except that the covenants and agreements set forth
in the second to last sentence of Section 4J and in Sections 12A, 12E, 12F, 12H,
12I, 12J, 12L, 12N, 12O, 12P and 12Q shall survive such termination
indefinitely, and except that nothing in this Section 11B shall be deemed to
release any Party from any liability for any breach by such Party of the terms
and provisions of this Agreement or to impair the right of any Party to compel
specific performance by another Party of its obligations under this Agreement.
SECTION 12. MISCELLANEOUS.
12A. Fees and Expenses. Except as otherwise set forth herein,
the Purchaser will be responsible for all costs and expenses incurred by the
Purchaser in connection with the negotiation, preparation and entry into this
Agreement and the consummation of the transactions contemplated hereby, and the
Company will pay all costs and expenses incurred by the Sellers or the Company
in connection with the negotiation, preparation and entry into this Agreement
and the consummation of the transactions contemplated hereby.
12B. Remedies. Any Person having any rights under any provision
of this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by
Laws. All such rights and remedies shall be cumulative and non-exclusive, and
may be exercised singularly or concurrently. One or more successive actions may
be brought against the Company, either in the same action or in separate
actions, as often as the Purchaser or any of such holders deems advisable, until
all of the obligations to such Person are paid and performed in full.
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12C. Consent to Amendments; Waivers. This Agreement may be
amended, or any provision of this Agreement may be waived upon the approval, in
a writing, executed by the Purchaser, the Company, and the Sellers'
Representative. No course of dealing between or among the Purchaser, the
Company, and the Sellers' Representative shall be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any such Party or such holder under or by reason of this Agreement.
12D. Successors and Assigns.
(i) This Agreement and all covenants and agreements contained
herein and rights, interests or obligations hereunder, by or on behalf of any of
the Parties hereto, shall bind and inure to the benefit of the respective
successors and permitted assigns of the Parties hereto whether so expressed or
not, except that neither this Agreement nor any of the covenants and agreements
herein or rights, interests or obligations hereunder may be assigned or
delegated by the Sellers, or assigned or delegated by the Company prior to the
Closing, without the prior written consent of the Purchaser and except as
otherwise provided by Section 12D(ii) below, neither this Agreement nor any of
the covenants and agreements herein or rights, interests or obligations
hereunder may be assigned or delegated by the Purchaser without the prior
written consent of the Sellers.
(ii) The Purchaser may assign this Agreement and its rights and
obligations hereunder to one of its Affiliates and to its lenders for collateral
assignment purposes; provided, that no such assignment shall relieve the
Purchaser from its obligations hereunder. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which are for
a Party's benefit as a holder of the Company's equity securities are also for
the benefit of, and enforceable by, any subsequent holder of the Company's
equity securities.
12E. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any Person or circumstance shall be held to be prohibited by,
illegal or unenforceable under applicable law or rule in any respect by a court
of competent jurisdiction, such provision shall be ineffective only to the
extent of such prohibition, illegality or unenforceability, without invalidating
the remainder of such provision or the remaining provisions of this Agreement.
12F. Counterparts. This Agreement may be executed in
counterparts (including by means of telecopied signature pages), any one of
which need not contain the signatures of more than one Party, but all such
counterparts taken together shall constitute one and the same agreement.
12G. Descriptive Headings; Interpretation. The headings and
captions used in this Agreement and the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit attached hereto and not otherwise defined therein shall have the
meanings set forth in this Agreement. The use of the word "including" herein
shall mean "including without limitation."
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12H. Entire Agreement. This Agreement, the agreements and
documents referred to herein and the Confidentiality Agreement contain the
entire agreement and understanding among the Parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, whether
written or oral, relating to such subject matter in any way, including, without
limitation the letter of intent dated January 25, 2000 by and among the Company,
certain of the Sellers and the Purchaser.
12I. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the Parties and their permitted successors and assigns and
nothing herein expressed or implied shall give or be construed to give any
Person, other than the Parties and such permitted successors and assigns, any
legal or equitable rights hereunder.
12J. Cooperation on Tax Matters. The Parties shall cooperate
fully, as and to the extent reasonably requested by each Party and at the
requesting Party's expense, in connection with any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon any Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
12K. Schedules and Exhibits. All Schedules and Exhibits
attached hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein.
12L. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
SCHEDULES AND EXHIBITS HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
12M. 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 shall be deemed to have been given when delivered
personally to the recipient or when sent by facsimile followed by delivery by
reputable overnight courier service, one day after being sent to the recipient
by reputable overnight courier service (charges prepaid) or five days after
being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
shall be sent to the Purchaser, the Sellers and the Company at the addresses
indicated below or to such other address or to the attention of such other
person as the recipient party has specified by prior written notice to the
sending party. All notices, demands and other communications hereunder may be
given by any other means (including telecopy or electronic
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mail), but shall not be deemed to have been duly given unless and until it is
actually received by the intended recipient.
The Company:
Simon Mattress Manufacturing Co.
3777 Vaca Valley Parkway
Vacaville, CA 95688-9430
Attention: Mr. Donald Stewart Simon, Jr.
Facsimile: (707) 446-6057
with copies to:
(which shall not constitute notice to the Company)
Hanson Bridgett Marcus Vlahos & Rudy LLP
333 Market Street
Suite 2300
San Francisco, CA 94105
Attention: William D. Taylor, Esq.
Facsimile: (415) 541-9366
The Sellers' Representative (on behalf of the Sellers):
with a copy to:
(which shall not constitute notice to the Sellers)
Hanson Bridgett Marcus Vlahos & Rudy LLP
333 Market Street
Suite 2300
San Francisco, CA 94105
Attention: William D. Taylor, Esq.
Facsimile: (415) 541-9366
The Purchasers:
Sleepmaster L.L.C.
c/o Serta Mattress Co.
2001 Lower Road
Linden, NJ 07036-6520
Attention: Mr. Charles Schweitzer
Facsimile: (732) 381-4455
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<PAGE> 53
with a copy to:
(which shall not constitute notice to the Purchaser)
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Kimberly P. Taylor, Esq.
Facsimile: (212) 446-4900
12N. Jurisdiction and Venue. SUBJECT TO SECTION 12Q, ALL
JUDICIAL PROCEEDINGS BROUGHT BY OR AGAINST THE COMPANY, THE PURCHASER OR THE
SELLERS WITH RESPECT TO THIS AGREEMENT, ANY OTHER AGREEMENT CONTEMPLATED HEREBY
OR ANY TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN STATE COURT
IN THE COUNTY OF SOLANO IN THE STATE OF CALIFORNIA OR FEDERAL COURT IN THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA IN THE STATE
OF CALIFORNIA. BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE COMPANY, THE
PURCHASER AND EACH SELLER ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH
ITS OR HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE COMPANY, THE
PURCHASER AND EACH SELLER HEREBY WAIVES ANY CLAIM THAT SUCH JURISDICTION IS AN
INCONVENIENT FORUM OR AN IMPROPER FORUM BASED ON LACK OF VENUE. A COPY OF SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY, THE
PURCHASER OR ANY SELLER AT SUCH PERSON'S RESPECTIVE ADDRESSES PROVIDED HEREIN.
TO THE EXTENT PERMITTED BY LAW, IF ANY AGENT APPOINTED BY THE COMPANY, THE
PURCHASER OR ANY SELLER REFUSES TO ACCEPT SERVICE, SUCH PERSON HEREBY AGREES
THAT SERVICE UPON SUCH PERSON BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE.
12O. Waiver of Right to Jury Trial. THE COMPANY, THE PURCHASER
AND EACH SELLER HEREBY WAIVE, TO THE 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, ANY OTHER AGREEMENT CONTEMPLATED HEREBY OR
THEREBY OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF.
12P. No Strict Construction. The Parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties, and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement.
12Q. Dispute Resolution.
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(a) Arbitration. In the event of disputes between the Parties
with respect to the terms and conditions of this Agreement (other than disputes
with respect to Section 1E and claims for specific performance), such disputes
shall be resolved by and through an arbitration proceeding to be conducted under
the auspices of the American Arbitration Association (or any like organization
successor thereto) in California. Such arbitration proceeding shall be conducted
in as expedited a manner as is practical, and the arbitrator or arbitrators in
any such arbitration (an "Arbitration") shall be persons who are expert in the
subject of mergers and acquisitions. Both the foregoing agreement of the Parties
to arbitrate any and all such claims, and the results, determination, finding,
judgment and/or award rendered through such Arbitration, shall be final and
binding on the Parties hereto and may be specifically enforced by legal
proceedings. The Parties agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that any
Party may, in its sole discretion, ask for specific performance and/or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(b) Procedure. The Arbitration shall be conducted before a
panel of arbitrators selected in accordance with the rules of the American
Arbitration Association. Each Party shall bear separately the cost of their
respective attorneys, witnesses and experts in connection with such arbitration.
Time is of the essence of this arbitration procedure, and the arbitrators shall
be instructed and required to render their decision within ten (10) days
following completion of the Arbitration.
(c) Venue and Jurisdiction. Any and all legal proceedings to
enforce this Agreement (including any action to compel arbitration hereunder or
to enforce any award or judgment rendered thereby), shall be governed in
accordance with Section 12N.
* * * * *
-49-
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
SIMON MATTRESS MANUFACTURING CO.
By:
------------------------------------
Name:
Title:
SLEEPMASTER L.L.C.
By:
------------------------------------
Name:
Title:
-50-
<PAGE> 56
SELLER SIGNATURE PAGE
DONALD STEWART SIMON, JR.
---------------------------------------
DONALD SIMON, SR.
--------------------------------------
LOIS JAMART
---------------------------------------
ANN SIMON PIER
---------------------------------------
SID GOLDSTEIN
---------------------------------------
SID GOLDSTEIN (AS TRUSTEE)
---------------------------------------
ELLEN REICH
---------------------------------------
-51-
<PAGE> 57
ELLEN REICH (AS TRUSTEE)
---------------------------------------
ELLEN REICH (AS MILES TRUSTEE)
---------------------------------------
ELLEN REICH (AS TYLER TRUSTEE)
---------------------------------------
ZACK GOLDSTEIN
---------------------------------------
MILES REICH
---------------------------------------
TYLER REICH
---------------------------------------
-52-
<PAGE> 58
EXHIBIT A
Adjustment Escrow Agreement
-53-
<PAGE> 59
EXHIBIT B
Indemnity Escrow Agreement
-54-
<PAGE> 60
EXHIBIT C
Opinion of the Sellers' Counsel
-55-
<PAGE> 61
EXHIBIT D
Opinion of the Purchaser's Counsel
-56-
<PAGE> 1
- --------------------------------------------------------------------------------
$103,875,000
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
SLEEPMASTER L.L.C.,
as Borrower,
SLEEPMASTER HOLDINGS, L.L.C.,
the Parent
and
THE DOMESTIC SUBSIDIARIES
OF THE BORROWER
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
FIRST UNION SECURITIES, INC.,
as Sole Arranger
and
HELLER FINANCIAL, INC.,
as Syndication Agent
IBJ WHITEHALL BANK & TRUST COMPANY,
as Documentation Agent
Dated as of April 28, 2000
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS................................................................................................1
Section 1.1 Defined Terms...........................................................................................1
Section 1.2 Other Definitional Provisions..........................................................................26
Section 1.3 Accounting Terms.......................................................................................26
ARTICLE II THE LOANS; AMOUNT AND TERMS............................................................................27
Section 2.1 Revolving Loans........................................................................................27
Section 2.2 Term Loan..............................................................................................29
Section 2.3 Incremental Term Loan..................................................................................31
Section 2.4 Swingline Loans........................................................................................33
Section 2.5 Letter of Credit Subfacility...........................................................................35
Section 2.6 Fees...................................................................................................39
Section 2.7 Commitment Reductions..................................................................................39
Section 2.8 Prepayments............................................................................................40
Section 2.9 Minimum Principal Amount of Tranches...................................................................42
Section 2.10 Default Rate and Payment Dates.........................................................................42
Section 2.11 Conversion Options.....................................................................................42
Section 2.12 Computation of Interest and Fees.......................................................................43
Section 2.13 Pro Rata Treatment and Payments........................................................................43
Section 2.14 Non-Receipt of Funds by the Administrative Agent.......................................................45
Section 2.15 Inability to Determine Interest Rate...................................................................45
Section 2.16 Illegality.............................................................................................46
Section 2.17 Requirements of Law....................................................................................47
Section 2.18 Indemnity..............................................................................................48
Section 2.19 Taxes..................................................................................................48
Section 2.20 Indemnification; Nature of Issuing Lender's Duties.....................................................50
Section 2.21 Replacement of Lenders.................................................................................51
ARTICLE III REPRESENTATIONS AND WARRANTIES..........................................................................52
Section 3.1 Financial Condition....................................................................................52
Section 3.2 No Change..............................................................................................52
Section 3.3 Corporate Existence; Compliance with Law...............................................................52
Section 3.4 Corporate Power; Authorization; Enforceable Obligations; No Consents...................................53
Section 3.5 No Legal Bar; No Default...............................................................................53
Section 3.6 No Material Litigation.................................................................................53
Section 3.7 Investment Company Act.................................................................................53
Section 3.8 Margin Regulations.....................................................................................54
Section 3.9 ERISA..................................................................................................54
Section 3.10 Environmental Matters..................................................................................54
Section 3.11 Use of Proceeds........................................................................................55
Section 3.12 Subsidiaries...........................................................................................55
Section 3.13 Ownership..............................................................................................56
Section 3.14 Indebtedness...........................................................................................56
Section 3.15 Taxes..................................................................................................56
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 3.16 Intellectual Property..................................................................................56
Section 3.17 Solvency...............................................................................................56
Section 3.18 Investments............................................................................................56
Section 3.19 Security Documents.....................................................................................57
Section 3.20 Location of Collateral.................................................................................57
Section 3.21 No Burdensome Restrictions.............................................................................57
Section 3.22 Brokers' Fees..........................................................................................57
Section 3.23 Labor Matters..........................................................................................57
Section 3.24 Accuracy and Completeness of Information...............................................................57
Section 3.25 Insurance..............................................................................................58
ARTICLE IV CONDITIONS PRECEDENT.....................................................................................58
Section 4.1 Conditions to Closing Date and Initial Loans...........................................................58
Section 4.2 Conditions to All Extensions of Credit.................................................................63
ARTICLE V AFFIRMATIVE COVENANTS.....................................................................................64
Section 5.1 Financial Statements...................................................................................64
Section 5.2 Certificates; Other Information........................................................................66
Section 5.3 Payment of Obligations.................................................................................67
Section 5.4 Conduct of Business and Maintenance of Existence.......................................................67
Section 5.5 Maintenance of Property; Insurance.....................................................................67
Section 5.6 Inspection of Property; Books and Records; Discussions.................................................68
Section 5.7 Notices................................................................................................68
Section 5.8 Environmental Laws.....................................................................................69
Section 5.9 Financial Covenants....................................................................................70
Section 5.10 Additional Subsidiary Guarantors.......................................................................72
Section 5.11 Compliance with Law....................................................................................72
Section 5.12 Pledged Assets.........................................................................................72
ARTICLE VI NEGATIVE COVENANTS.......................................................................................73
Section 6.1 Indebtedness...........................................................................................74
Section 6.2 Liens..................................................................................................75
Section 6.3 Guaranty Obligations...................................................................................75
Section 6.4 Nature of Business.....................................................................................75
Section 6.5 Consolidation, Merger, Sale of Assets, Permitted Acquisitions, etc.....................................75
Section 6.6 Advances, Investments and Loans........................................................................76
Section 6.7 Transactions with Affiliates...........................................................................76
Section 6.8 Ownership of Subsidiaries; Restrictions................................................................76
Section 6.9 Fiscal Year; Organizational Documents; Material Contracts..............................................77
Section 6.10 Limitation on Restricted Actions.......................................................................77
Section 6.11 Restricted Payments....................................................................................77
Section 6.12 Prepayments of Indebtedness, etc.......................................................................78
Section 6.13 Sale Leasebacks........................................................................................78
Section 6.14 No Further Negative Pledges............................................................................78
Section 6.15 Intentionally Omitted..................................................................................78
Section 6.16 Subordinated Debt......................................................................................78
Section 6.17 Operating Leases.......................................................................................79
Section 6.18 Parent Holding Company and Sleepmaster Finance Corporation.............................................79
Section 6.19 Serta Licenses.........................................................................................79
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VII EVENTS OF DEFAULT.......................................................................................79
Section 7.1 Events of Default......................................................................................79
Section 7.2 Acceleration; Remedies.................................................................................82
ARTICLE VIII THE AGENT..............................................................................................82
Section 8.1 Appointment............................................................................................82
Section 8.2 Delegation of Duties...................................................................................82
Section 8.3 Exculpatory Provisions.................................................................................83
Section 8.4 Reliance by Administrative Agent.......................................................................83
Section 8.5 Notice of Default......................................................................................83
Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.................................................84
Section 8.7 Indemnification........................................................................................84
Section 8.8 Administrative Agent in Its Individual Capacity........................................................85
Section 8.9 Successor Administrative Agent.........................................................................85
Section 8.10 Release of Collateral..................................................................................85
Section 8.11 Syndication and Documentation Agents...................................................................85
ARTICLE IX MISCELLANEOUS............................................................................................86
Section 9.1 Amendments and Waivers.................................................................................86
Section 9.2 Notices................................................................................................87
Section 9.3 No Waiver; Cumulative Remedies.........................................................................87
Section 9.4 Survival of Representations and Warranties.............................................................88
Section 9.5 Payment of Expenses and Taxes..........................................................................88
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders.............................................88
Section 9.7 Adjustments; Set-off...................................................................................91
Section 9.8 Table of Contents and Section Headings.................................................................92
Section 9.9 Counterparts...........................................................................................92
Section 9.10 Effectiveness..........................................................................................92
Section 9.11 Severability...........................................................................................92
Section 9.12 Integration............................................................................................92
Section 9.13 Governing Law..........................................................................................93
Section 9.14 Consent to Jurisdiction and Service of Process.........................................................93
Section 9.15 Arbitration............................................................................................93
Section 9.16 Confidentiality........................................................................................94
Section 9.17 Acknowledgments........................................................................................95
Section 9.18 Waivers of Jury Trial..................................................................................95
Section 9.19 Binding Effect; Termination of this Credit Agreement; Termination of Existing Credit Agreement.........95
ARTICLE X GUARANTY..................................................................................................96
Section 10.1 The Guaranty...........................................................................................96
Section 10.2 Bankruptcy.............................................................................................96
Section 10.3 Nature of Liability....................................................................................97
Section 10.4 Independent Obligation.................................................................................97
Section 10.5 Authorization..........................................................................................97
Section 10.6 Reliance...............................................................................................97
Section 10.7 Waiver.................................................................................................97
Section 10.8 Limitation on Enforcement..............................................................................98
Section 10.9 Confirmation of Payment................................................................................99
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
Schedules
- ---------
<S> <C>
Schedule 1.1(a) Form of Account Designation Letter
Schedule 1.1(b) Liens
Schedule 1.1(c) Permitted Adjustments
Schedule 1.1(d) Sweep Plus Loan/Investment Services Description
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(d) Form of Term Note
Schedule 2.3(d) Form of Incremental Term Loan Note
Schedule 2.4(d) Form of Swingline Note
Schedule 2.11 Form of Notice of Conversion/Extension
Schedule 2.19 Form of Section 2.19 Certificate
Schedule 3.6 Litigation
Schedule 3.9 ERISA
Schedule 3.10 Environmental Matters
Schedule 3.12 Subsidiaries
Schedule 3.16 Material Intellectual Property
Schedule 3.20(a) Location of Real Property
Schedule 3.20(b) Location of Collateral
Schedule 3.20(c) Chief Executive Offices
Schedule 3.23 Labor Matters
Schedule 3.24 EBITDA Levels
Schedule 3.25 Insurance
Schedule 4.1(b) Form of Secretary's Certificate
Schedule 4.1(i) Form of Solvency Certificate
Schedule 4.1(w) Form of Financial Covenant Compliance Certificate
Schedule 5.10 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 6.3 Guaranty Obligations
Schedule 6.7 Agreements with Affiliates
Schedule 9.2 Notices/Lending Offices
Schedule 9.6(c) Form of Commitment Transfer Supplement
</TABLE>
<PAGE> 6
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 28, 2000,
among SLEEPMASTER L.L.C., a New Jersey limited liability company (the
"Borrower"), SLEEPMASTER HOLDINGS L.L.C., a New Jersey limited liability company
(the "Parent") and those Domestic Subsidiaries of the Borrower identified as a
"Guarantor" on the signature pages hereto and such other Domestic Subsidiaries
of the Borrower as may from time to time become a party hereto (together with
the Parent, collectively, the "Guarantors"), the several banks and other
financial institutions as may from time to time become parties to this Agreement
(collectively, the "Lenders"; and individually, a "Lender"), and FIRST UNION
NATIONAL BANK, a national banking association, as administrative agent for the
Lenders hereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Lenders and the Administrative
Agent are party to that Amended and Restated Credit Agreement, dated as of
November 5, 1999 as amended by that certain First Amendment to Amended and
Restated Credit Agreement dated as of March 29, 2000 (the "Existing Credit
Agreement") pursuant to which the Lenders have agreed to make loans and other
financial accommodations to the Borrower in the amount of up to $70,000,000
pursuant to the terms and conditions contained therein.
WHEREAS, the Borrower has requested that the Lenders increase the amount
of loans and other financial accommodations available to the Borrower to an
amount of up to $103,875,000, as more particularly described herein;
WHEREAS, the Lenders have agreed to amend and restate the Existing Credit
Agreement and make such increased loans and other financial accommodations to
the Borrower on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
As used in this Agreement, terms defined in the preamble to this
Agreement have the meanings therein indicated, and the following terms have the
following meanings:
"Account Designation Letter" shall mean the Notice of Account Designation
Letter dated the Closing Date from the Borrower to the Administrative Agent
substantially in the form attached hereto as Schedule 1.1(a).
"Acquisition" shall mean the purchase of the stock of Simon Mattress
pursuant to that Stock Purchase Agreement dated as of April 28, 2000 by and
among the Borrower, Simon Mattress and the stockholders party thereto.
<PAGE> 7
"Acquisition Documents" shall mean the Stock Purchase Agreement dated as
of April 28, 2000 between the Borrower, Simon Mattress and the stockholders
party thereto; the Employment Agreement dated as of April 28, 2000 by and among
the Borrower, the Parent, Simon Mattress and Stephen Alloway; the Employment and
Management Stock Agreement dated as of April 28, 2000 by and among the Borrower,
the Parent, Simon Mattress, Sleep Investor L.L.C. and Donald S. Simon, Jr. as
parties thereto; the Adjustment Escrow Agreement dated as of April 28, 2000 by
and among the Borrower, Donald S. Simon, Jr. and Bank One Trust Company, NA; and
the Indemnity Escrow Agreement by and among the Borrower, Donald S. Simon, Jr.
and Bank One Trust Company, N.A. as each of the foregoing may be amended or
modified together with all schedules and exhibits related thereto.
"Adam Wuest" means Adam Wuest, Inc., an Ohio corporation.
"Adam Wuest Bond Indenture" shall mean that certain Trust Indenture dated
as of February 1, 1994 between County of Hamilton, Ohio, as Issuer and The Fifth
Third Bank, as Trustee.
"Additional Credit Party" shall mean each Person that becomes a Guarantor
by execution of a Joinder Agreement in accordance with Section 5.10.
"Administrative Agent" shall have the meaning set forth in the first
paragraph of this Agreement and any successors in such capacity.
"Affiliate" shall mean as to any Person, any other Person (excluding any
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition, a
Person shall be deemed to be "controlled by" a Person if such Person possesses,
directly or indirectly, power either (a) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agreement" shall mean this Second Amended and Restated Credit Agreement,
as amended, modified or supplemented from time to time in accordance with its
terms.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean, at any time, the rate of interest per annum publicly
announced from time to time by First Union at its principal office in Charlotte,
North Carolina as its prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly by First
Union as its Prime Rate is an index or base rate and shall not necessarily be
its lowest or best rate charged to its customers or other banks; and "Federal
Funds Effective Rate" shall mean, for any day, 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 on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the
2
<PAGE> 8
Administrative Agent from three federal funds brokers of recognized standing
selected by it. If for any reason the Administrative Agent shall have determined
(which determination shall be conclusive in the absence of manifest error) that
it is unable to ascertain the Federal Funds Effective Rate, for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first sentence of
this definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate or the Federal Funds Effective Rate shall be effective on the
opening of business on the date of such change.
"Alternate Base Rate Loans" shall mean Loans that bear interest at an
interest rate based on the Alternate Base Rate.
"Applicable Percentage" shall mean, for any day, the rate per annum set
forth below opposite the applicable Level then in effect, it being understood
that the Applicable Percentage for (i) Loans which are Alternate Base Rate Loans
shall be the percentage set forth under the column "Alternate Base Rate Margin
", (ii) Loans which are LIBOR Rate Loans shall be the percentage set forth under
the column "LIBOR Rate Margin for Loans and Letter of Credit Fee", (iii) the
Letter of Credit Fee shall be the percentage set forth under the column "LIBOR
Rate Margin for Loans and Letter of Credit Fee"; and (iv) the Commitment Fee
shall be the percentage set forth under the column "Commitment Fee":
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
LIBOR Rate
Alternate Margin for
Level Leverage Base Rate Loans Commitment
Ratio Margin and Letter of Fee
Credit Fee
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I => 5.50 2.00% 3.25% 0.50%
- ------------------------------------------------------------------------------------
II < 5.50 to 1.0 but 1.75% 3.00% 0.50%
=> 5.00 to 1.0
- ------------------------------------------------------------------------------------
III < 5.00 to 1.0 but 1.50% 2.75% 0.50%
=> 4.50 to 1.0
- ------------------------------------------------------------------------------------
IV < 4.50 to 1.0 but 1.25% 2.50% 0.50%
=> 4.00 to 1.0
- ------------------------------------------------------------------------------------
V < 4.00 to 1.0 but 1.00% 2.25% 0.50%
=> 3.00 to 1.0
- ------------------------------------------------------------------------------------
VI < 3.00 to 1.0 0.75% 2.00% 0.50%
- ------------------------------------------------------------------------------------
</TABLE>
The Applicable Percentage shall, in each case, be determined and adjusted
quarterly on the date five (5) Business Days after the date on which the
Administrative Agent has received from the Borrower the quarterly financial
information and certifications required to be delivered to the Administrative
Agent and the Lenders in accordance with the provisions of Sections 5.1(b) and
5.2(b) (each an "Interest Determination Date"). Such Applicable Percentage shall
be
3
<PAGE> 9
effective from such Interest Determination Date until the next such Interest
Determination Date. The initial Applicable Percentages shall be based on Level
II until the first Interest Determination Date occurring after June 30, 2000.
After the Closing Date, if the Borrower shall fail to provide the quarterly
financial information and certifications in accordance with the provisions of
Sections 5.1(b) and 5.2(b), the Applicable Percentage from such Interest
Determination Date shall, on the date five (5) Business Days after the date by
which the Borrower was so required to provide such financial information and
certifications to the Administrative Agent and the Lenders, be based on Level II
until such time as such information and certifications are provided, whereupon
the Level shall be determined by the then current Leverage Ratio.
"Asset Disposition" shall mean the disposition (other than as a result of
a Recovery Event) of any or all of the assets (including, without limitation,
the Capital Stock of a Subsidiary or any ownership interest in a joint venture)
of any Credit Party, whether by sale, lease, transfer or otherwise. The term
"Asset Disposition" shall not include (i) Specified Sales, (ii) the sale, lease
or transfer of assets (including licensing of Intellectual Property) permitted
by Section 6.5(a)(iii) or (iv), or (iii) any Equity Issuance.
"Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.
"Borrower" shall have the meaning set forth in the first paragraph of
this Agreement.
"Borrowing Date" shall mean, in respect of any Loan, the date such Loan
is made.
"Business" shall have the meaning set forth in Section 3.10(b).
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina or New York, New York
are authorized or required by law to close; provided, however, that when used in
connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits in the London
interbank market.
"Capital Lease" shall mean any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" shall mean the capitalized lease obligations
relating to a Capital Lease determined in accordance with GAAP.
"Capital Stock" shall mean (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company, membership interests and (v) 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.
4
<PAGE> 10
"Cash Equivalents" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than twelve months from the date of acquisition ("Government Obligations"), (ii)
U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit of (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than 364 days from
the date of acquisition, (iii) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) or any variable
rate notes issued by, or guaranteed by any domestic corporation rated A-1 (or
the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within six months of the date of acquisition,
(iv) repurchase agreements with a bank or trust company (including a Lender) or
a recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States of America, (v) obligations of any state of the United States or any
political subdivision thereof for the payment of the principal and redemption
price of and interest on which there shall have been irrevocably deposited
Government Obligations maturing as to principal and interest at times and in
amounts sufficient to provide such payment, and (vi) auction preferred stock
rated in the highest short-term credit rating category by S&P or Moody's.
"Casualty Event" shall mean any theft, loss, physical destruction or
damage, taking or similar event with respect to any property or assets.
"Change of Control" means (i) a sale of a majority of the consolidated
assets of the Parent and its Subsidiaries, in a single transaction or a series
of related transactions to any Person or two or more Persons acting in concert,
(ii) (A) prior to an initial public offering, the failure of Citicorp Venture
Capital, Inc. or one or more of its Affiliates and management shareholders
existing as of the Closing Date (together with their Permitted Transferees (as
such term is defined in the Securityholders Agreement referred to on Schedule
6.7)), collectively to own (directly or indirectly) at least 45% of the Voting
Stock on a fully diluted as if converted basis of the Parent, and (B) following
an initial public offering, the failure of Citicorp Venture Capital, Inc. or one
or more of its Affiliates and management shareholders existing as of the Closing
Date (together with their Permitted Transferees (as such term is defined in the
Securityholders Agreement referred to on Schedule 6.7)), to own (directly or
indirectly) at least 33% of the Voting Stock on a fully diluted as if converted
basis of the Parent or management shareholders existing as of the Closing Date
to own (directly or indirectly) at least 10% of the Voting Stock on a fully
diluted as if converted basis of the Parent or (iii) the Borrower shall cease to
be a wholly-owned subsidiary of the Parent or (iv) any Person or two or more
Persons acting in concert shall have acquired beneficial ownership, directly or
indirectly, or shall have acquired by contract or otherwise control over, Voting
Stock of the Parent, representing (A) prior to an initial public offering, an
amount equal to or greater than the amount of Voting Stock of the Parent then
owned by Citicorp Venture Capital, Inc. or one or more of its Affiliates and
management shareholders on a fully diluted as if converted basis and (B)
following an initial public offering,
5
<PAGE> 11
an amount representing 25% or more of all Voting Stock of the Parent on a fully
diluted as if converted basis or (v) Continuing Directors shall cease for any
reason to constitute a majority of the members of the board of directors of the
Parent then in office. As used herein, "beneficial ownership" shall have the
meaning provided in Rule 13d-3 of the Securities and Exchange Commission
promulgated under the Securities Exchange Act of 1934.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean a collective reference to the collateral which is
identified in, and at any time will be covered by, the Security Documents.
"Commitment" shall mean the Revolving Commitment, the Swingline
Commitment, the Term Loan Commitment, the Incremental Term Loan Commitment and
the LOC Commitment, individually or collectively, as appropriate.
"Commitment Fee" shall have the meaning set forth in Section 2.6(a).
"Commitment Letter" shall mean the letter agreement dated April 4, 2000
addressed to the Borrower from the Administrative Agent, as amended, modified or
otherwise supplemented.
"Commitment Percentage" shall mean the Revolving Commitment Percentage,
the Term Loan Commitment Percentage, the Incremental Term Loan Commitment
Percentage and/or the LOC Commitment Percentage, as appropriate.
"Commitment Period" shall mean the period from and including the Closing
Date to but not including the Maturity Date.
"Commitment Transfer Supplement" shall mean a Commitment Transfer
Supplement, substantially in the form of Schedule 9.6(c).
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Parent within the meaning
of Section 4001 of ERISA or is part of a group which includes the Parent and
which is treated as a single employer under Section 414 of the Code.
"Consolidated Capital Expenditures" means, for any period, all capital
expenditures of the Borrower and its Subsidiaries on a consolidated basis for
such period, as determined in accordance with GAAP. The term "Consolidated
Capital Expenditures" shall not include (i) capital expenditures in respect of
the reinvestment of proceeds derived from Recovery Events received by the
Borrower and its Subsidiaries to the extent that such reinvestment is permitted
under the Credit Documents and (ii) capital expenditures of up to $10,000,000
made on behalf of the Borrower and its Subsidiaries in connection with the
initial construction costs of a new facility in Vacaville, California.
"Consolidated EBITDA" means, for any period, the sum of (i) Consolidated
Net Income for such period, plus (ii) an amount which, in the determination of
Consolidated Net Income for
6
<PAGE> 12
such period, has been deducted for (A) Consolidated Interest Expense, plus (B)
total federal, state, local and foreign income, franchise, value added and other
taxes, plus (C) depreciation, amortization expense and other non-cash charges,
all as determined in accordance with GAAP, plus (D) losses (or minus gains) from
sales or other dispositions of assets (other than sales of inventory in the
ordinary course of business) plus (E) Permitted Adjustments plus (F) Transaction
Costs.
"Consolidated Interest Expense" means, for any period, all interest
expense (excluding pay-in-kind interest) of the Borrower and its Subsidiaries on
a consolidated basis including the interest component of Capital Lease
Obligations, as determined in accordance with GAAP. For purpose of calculating
the Interest Coverage Ratio only, "Consolidated Interest Expense" shall include
cash interest paid by the Parent in connection with the Existing Seller Debt and
the Permitted Seller Debt.
"Consolidated Net Income" means, for any period, net income (excluding
extraordinary items) after taxes for such period of the Borrower and its
Subsidiaries on a consolidated basis, as determined in accordance with GAAP.
"Consolidated Net Worth" means as of any date with respect to the
Borrower and its Subsidiaries on a consolidated basis, Consolidated Total Assets
minus Consolidated Total Liabilities, as determined in accordance with GAAP.
"Consolidated Total Assets" means, as of any date with respect to the
Borrower and its Subsidiaries on a consolidated basis, total assets, as
determined in accordance with GAAP.
"Consolidated Total Liabilities" means, as of any date with respect to
the Borrower and its Subsidiaries on a consolidated basis, total liabilities as
determined in accordance with GAAP.
"Consolidated Working Capital" means, at any time, the excess of (i)
current assets of the Borrower and its Subsidiaries on a consolidated basis at
such time less (ii) current liabilities of the Borrower and its Subsidiaries on
a consolidated basis at such time, all as determined in accordance with GAAP.
The term "Consolidated Working Capital" shall not include (i) cash and (ii)
current maturities of long-term Indebtedness.
"Continuing Directors" means during any period of up to 24 consecutive
months commencing after the Closing Date, individuals who at the beginning of
such 24 month period were directors of the Parent (together with any new
director whose election by the Parent board of directors or whose nomination for
election by the Parent's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved).
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
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<PAGE> 13
"Credit Documents" shall mean this Agreement, each of the Notes, any
Joinder Agreement, the Letters of Credit, the LOC Documents, the Reimbursement
Agreement and the Security Documents.
"Credit Party" shall mean any of the Borrower or the Guarantors.
"Credit Party Obligations" shall mean, without duplication, (i) all of
the liabilities and obligations of the Credit Parties to the Lenders (including
the Issuing Lender) and the Administrative Agent, whenever arising, under this
Agreement, the Notes or any of the other Credit Documents (including, but not
limited to, any interest accruing after the occurrence of a filing of a petition
of bankruptcy under the Bankruptcy Code with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the Bankruptcy
Code) and (ii) all liabilities and obligations, whenever arising, owing from any
Credit Party to any Lender, or any Affiliate of a Lender, arising under any
Hedging Agreement.
"Debt Issuance" shall mean the issuance of any Indebtedness for borrowed
money by any Credit Party (excluding, for purposes hereof, any Equity Issuance
or any Indebtedness of the Parent and its Subsidiaries permitted to be incurred
pursuant to Section 6.1).
"Default" shall mean any of the events specified in Section 7.1, whether
or not any requirement for the giving of notice or the lapse of time, or both,
or any other condition, has been satisfied.
"Defaulting Lender" shall mean, at any time, any Lender that, at such
time (a) has failed to make a Loan required pursuant to the term of this Credit
Agreement, including the funding of a Participation Interest in accordance with
the terms hereof, (b) has failed to pay to the Administrative Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Lending Office" shall mean, initially, the office of each
Lender designated as such Lender's Domestic Lending Office shown on Schedule
9.2; and thereafter, such other office of such Lender as such Lender may from
time to time specify to the Administrative Agent and the Borrower as the office
of such Lender at which Alternate Base Rate Loans of such Lender are to be made.
"Domestic Subsidiary" shall mean any Subsidiary that is organized and
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"EBITDA of Simon Mattress and its Subsidiaries" shall mean, as to Simon
Mattress and its Subsidiaries, the sum of net income plus an amount which, in
the determination of net income for such period, has been deducted for interest
expense, taxes, depreciation, amortization expense and other non-cash charges
plus losses (or minus gains) from sales or other dispositions of assets
8
<PAGE> 14
(other than sales of inventory in the ordinary course), all as determined in
accordance with GAAP.
"Earnout Payments" shall mean any payments which any Credit Party is or
shall be legally obligated to make to Cecil Brauer pursuant to the terms of
Section 2(c)(iv) of that certain Employment Agreement dated as of May 18, 1999
by and among Star Bedding Products Limited, Cecil Brauer and Sleepmaster L.L.C.
"Environmental Laws" shall mean any and all applicable foreign, Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as now or may at any time be in effect during the term of this
Agreement.
"Equity Issuance" shall mean any issuance by any Credit Party to any
Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any
shares of its Capital Stock pursuant to the exercise of options or warrants or
(c) any shares of its Capital Stock pursuant to the conversion of any debt
securities to equity. The term "Equity Issuance" shall not include (i) any Asset
Disposition, (ii) any Debt Issuance, (iii) issuances to members of management
pursuant to stock option plans of the Credit Parties as in effect on the Closing
Date, or (iv) issuances of equity for all or a portion of the purchase price of
Permitted Acquisitions.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Reserve Percentage" shall mean for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Event of Default" shall mean any of the events specified in Section 7.1;
provided, however, that any requirement for the giving of notice or the lapse of
time, or both, or any other condition, has been satisfied.
"Excess Cash Flow" means, with respect to any fiscal year period of the
Borrower and its Subsidiaries on a consolidated basis, an amount equal to (a)
Consolidated EBITDA for such period minus (b) capital expenditures made during
such period minus (c) increases (or plus decreases) in Consolidated Working
Capital for such period minus (d) Scheduled Funded Debt Payments made during
such period minus (e) Consolidated Interest Expense during such period minus (f)
amounts paid in respect of federal, state, local and foreign income, value added
and similar taxes with respect to such period minus (g) voluntary prepayments
made in accordance with Section 2.8(a) made during such period minus (h)
Restricted Payments actually made during such period pursuant to Section
6.11(c)(i) through (v).
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<PAGE> 15
"Excluded Equity Issuance" shall mean any issuance by any Credit Party of
shares of its Capital Stock to members of management which result in Net Cash
Proceeds in an aggregate amount for all such issuances not to exceed $1,000,000.
"Existing Credit Agreement" shall have the meaning set forth in the
recitals hereto.
"Existing Letters of Credit" shall mean that (i) irrevocable direct pay
letter of credit issued by First Union to Branch Banking and Trust Company as
Credit Facility Trustee pursuant to the Reimbursement Agreement in the amount of
approximately $6,900,000 to support the PBBC Industrial Development Bonds, (ii)
Irrevocable Letter of Credit No. SM410694C issued by First Union to Fifth Third
Bank for the account of Adam Wuest Corporation in the amount of $2,284,425 and
(iii) Irrevocable Letter of Credit No. SM408849C issued by First Union to Hartz
Mountain in the amount of $720,462.
"Existing Seller Debt" shall mean (i) those certain Junior Subordinated
Notes each dated as of November 14, 1996 as may be amended or exchanged from
time to time in an initial aggregate principal amount of $7,000,000 of the
Parent together with the pay-in-kind interest notes issued thereon, and (ii) the
Retroactive Notes.
"Extension of Credit" shall mean, as to any Lender, the making of a Loan
by such Lender or the issuance of, or participation in, a Letter of Credit by
such Lender.
"Federal Funds Effective Rate" shall have the meaning set forth in the
definition of "Alternate Base Rate".
"Fee Letter" shall mean the letter agreement dated April 4, 2000
addressed to the Borrower from the Administrative Agent, as amended, modified or
otherwise supplemented.
"First Union" shall mean First Union National Bank, a national banking
association.
"Fixed Charge Coverage Ratio" shall mean, as of the end of each fiscal
quarter of the Borrower, for the Borrower and its Subsidiaries on a consolidated
basis for the four consecutive quarters ending on such date, without
duplication, the ratio of (i) Consolidated EBITDA for the applicable period
minus Consolidated Capital Expenditures for the applicable period to (ii) the
sum of Consolidated Interest Expense for the applicable period plus taxes paid
in cash during the applicable period plus cash dividend payments or other
distributions made during the applicable period plus Scheduled Funded Debt
Payments for the applicable period. Notwithstanding the foregoing, for purposes
of calculating the Fixed Charge Coverage Ratio of the Borrower and its
Subsidiaries for the first three complete fiscal quarters to occur after the
Closing Date, the Fixed Charge Coverage Ratio shall be determined by annualizing
the Consolidated Interest Expense, the Scheduled Funded Debt Payments and the
cash taxes components thereof such that for the first complete fiscal quarter to
occur after the Closing Date such components would be multiplied by four (4),
the first two complete fiscal quarters would be multiplied by two (2) and the
first three complete fiscal quarters would be multiplied by one and one-third (1
1/3).
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
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<PAGE> 16
"Funded Debt" shall mean, with respect to any Person, without
duplication, (a) all Indebtedness of such Person other than Indebtedness of the
types referred to in clauses (e), (f) and (i) of the definition of
"Indebtedness" set forth in this Section 1.1, (b) all Funded Debt of others of
the type referred to in clause (a) above secured by (or for which the holder of
such Funded Debt has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from, property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (c) all Guaranty Obligations of such Person with respect to
Funded Debt of the type referred to in clause (a) above of another Person, (d)
Funded Debt of the type referred to in clause (a) above of any partnership or
unincorporated joint venture in which such Person is legally obligated or has a
reasonable expectation of being liable with respect thereto, and (e) all Earnout
Payments capitalized on any Credit Party's balance sheet in accordance with
GAAP. For purposes of determining the Leverage Ratio only, Indebtedness of the
Parent owing in respect of the Existing Seller Debt and the Permitted Seller
Debt shall be deemed to be "Funded Debt" of the Borrower.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America applied on a consistent basis, subject, however, in
the case of determination of compliance with the financial covenants set out in
Section 5.9 to the provisions of Section 1.3.
"Government Acts" shall have the meaning set forth in Section 2.20(a).
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
"Guarantor" shall mean (a) the Parent, (b) any of the Domestic
Subsidiaries identified as a "Guarantor" on the signature pages hereto and (c)
any Additional Credit Party which executes a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranty" shall mean the guaranty of the Guarantors set forth in Article
X.
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<PAGE> 17
"Hedging Agreements" shall mean, with respect to any Person, any
agreement entered into to protect such Person against fluctuations in interest
rates, or currency or raw materials values, including, without limitation, any
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate or commodity price hedging agreements.
"Incremental Term Loan" shall have the meaning set forth in Section
2.3(a).
"Incremental Term Loan Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make its portion of the Incremental
Term Loan in a principal amount equal to such Lender's Incremental Term Loan
Commitment Percentage of the Incremental Term Loan Committed Amount (and for
purposes of making determinations of Required Lenders hereunder after the
Closing Date, the principal amount outstanding on the Incremental Term Loan).
"Incremental Term Loan Commitment Percentage" shall mean, for any Lender,
the percentage identified as its Incremental Term Loan Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 9.6.
"Incremental Term Loan Committed Amount" shall have the meaning set forth
in Section 2.3(a).
"Incremental Term Note" or "Incremental Term Notes" shall mean the
promissory notes of the Borrower in favor of each of the Lenders evidencing the
portion and the Incremental Term Loan provided pursuant to Section 2.3(d),
individually or collectively, as appropriate, as such promissory notes may be
amended, modified, restated, supplemented, extended, renewed or replaced from
time to time.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to Property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered into
in the ordinary course of business), (d) all obligations of such Person issued
or assumed as the deferred purchase price of Property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guaranty Obligations of such Person
with respect to Indebtedness of another Person, (h) the principal portion of all
obligations of such Person under Capital Leases, (i) all obligations of such
Person under Hedging Agreements, (j) the maximum amount of all standby letters
of credit
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<PAGE> 18
issued or bankers' acceptances facilities created for the account of such Person
and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), (k) all preferred Capital Stock issued by such Person and which
by the terms thereof could be (at the request of the holders thereof or
otherwise) subject to mandatory sinking fund payments, redemption (prior to the
Maturity Date) or other acceleration, (l) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product, and (m) the Indebtedness of any
partnership or unincorporated joint venture in which such Person is a general
partner or a joint venturer.
"Indenture" shall mean that certain Indenture in respect of the
Subordinated Notes dated as of May 18, 1999.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent" shall mean being in a condition of Insolvency.
"Intellectual Property" shall have the meaning set forth in Section 3.16.
"Interest Coverage Ratio" means, with respect to the Borrower and its
Subsidiaries on a consolidated basis for the twelve month period ending on the
last day of any fiscal quarter of the Borrower and its Subsidiaries, the ratio
of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense
for such period. Notwithstanding the foregoing, for purposes of calculating the
Interest Coverage Ratio of the Borrower and its Subsidiaries for the first three
complete fiscal quarters to occur after the Closing Date, the Interest Coverage
Ratio shall be determined by annualizing the Consolidated Interest Expense
component thereof such that for the first complete fiscal quarter to occur after
the Closing Date such components would be multiplied by four (4), the first two
complete fiscal quarters would be multiplied by two (2) and the first three
complete fiscal quarters would be multiplied by one and one-third (l 1/3).
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate
Loan, the last day of each March, June, September and December and on the
Maturity Date, (b) as to any LIBOR Rate Loan having an Interest Period of three
months or less, the last day of such Interest Period, and (c) as to any LIBOR
Rate Loan having an Interest Period longer than three months, each day which is
three months after the first day of such Interest Period and the last day of
such Interest Period.
"Interest Period" shall mean, with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower in the notice of borrowing or notice of conversion given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the
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<PAGE> 19
Administrative Agent not less than three Business Days prior to the last
day of the then current Interest Period with respect thereto;
provided that the foregoing provisions are subject to the following:
(A) if any Interest Period pertaining to a LIBOR Rate
Loan would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business
Day;
(B) any Interest Period pertaining to a LIBOR Rate Loan
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 end on
the last Business Day of the relevant calendar month;
(C) if the Borrower shall fail to give notice as
provided above, the Borrower shall be deemed to have selected an
Alternate Base Rate Loan to replace the affected LIBOR Rate Loan;
(D) any Interest Period in respect of any Loan that
would otherwise extend beyond the Maturity Date shall end on the
Maturity Date; and
(E) no more than eight (8) LIBOR Tranches may be in
effect at any time. For purposes hereof, LIBOR Rate Loans with
different Interest Periods shall be considered as separate LIBOR
Tranches, even if they shall begin on the same date and have the
same duration, although borrowings, extensions and conversions
may, in accordance with the provisions hereof, be combined at the
end of existing Interest Periods to constitute a new LIBOR
Tranche.
"Issuing Lender" shall mean First Union.
"Issuing Lender Fees" shall have the meaning set forth in Section 2.6(c).
"Joinder Agreement" shall mean a Joinder Agreement substantially in the
form of Schedule 5.10, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 5.10.
"Lender" shall have the meaning set forth in the first paragraph of this
Agreement.
"Letters of Credit" shall mean (i) the Existing Letters of Credit, and
(ii) any new letter of credit issued by the Issuing Lender pursuant to the terms
hereof, as such Letters of Credit may be amended, modified, extended, renewed or
replaced from time to time.
"Letter of Credit Fee" shall have the meaning set forth in Section
2.6(b).
"Leverage Ratio" shall mean, as of the end of each fiscal quarter of the
Borrower, for the Borrower and its Subsidiaries on a consolidated basis for the
four consecutive quarters ending on
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<PAGE> 20
such date, the ratio of (a) Funded Debt of the Borrower and its Subsidiaries on
a consolidated basis on the last day of such period to (b) Consolidated EBITDA
for such period.
"LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable rate
shall be the arithmetic mean of all such rates (rounded upwards, if necessary,
to the nearest 1/100 of 1%). If, for any reason, neither of such rates is
available, then "LIBOR" shall mean the rate per annum at which, as determined by
the Administrative Agent, Dollars in an amount comparable to the Loans then
requested are being offered to leading banks at approximately 11:00 A.M. London
time, two (2) Business Days prior to the commencement of the applicable Interest
Period for settlement in immediately available funds by leading banks in the
London interbank market for a period equal to the Interest Period selected.
"LIBOR Lending Office" shall mean, initially, the office of each Lender
designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Administrative Agent and the Borrower as the office of such
Lender at which the LIBOR Rate Loans of such Lender are to be made.
"LIBOR Rate" shall mean a rate per annum (rounded upwards, if necessary,
to the next higher 1/100th of 1%) determined by the Administrative Agent
pursuant to the following formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" shall mean Loans the rate of interest applicable to
which is based on the LIBOR Rate.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Capital Lease having substantially the same economic effect as any of the
foregoing).
"Loan" shall mean a Revolving Loan, a Swingline Loan, the Term Loan
and/or the Incremental Term Loan, as appropriate.
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<PAGE> 21
"LOC Commitment" shall mean the commitment of the Issuing Lender to issue
new Letters of Credit and with respect to each Lender, the commitment of such
Lender to purchase participation interests in the Letters of Credit up to the
excess of (i) the LOC Committed Amount over (ii) the aggregate outstanding face
amount of the Existing Letters of Credit, such Lender's LOC Committed Amount as
specified in Schedule 2.1(a), as such amount may be reduced from time to time in
accordance with the provisions hereof.
"LOC Commitment Percentage" shall mean, for each Lender, the percentage
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6(c).
"LOC Committed Amount" shall mean, collectively, the aggregate amount of
all of the LOC Commitments of the Lenders to issue and participate in Letters of
Credit as referenced in Section 2.3(c) and, individually, the amount of each
Lender's LOC Commitment as specified in Schedule 2.1(a).
"LOC Documents" shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or (ii) any collateral security for such obligations.
"LOC Obligations" shall mean, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be drawn
under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.
"Mandatory Borrowing" shall have the meaning set forth in Section 2.5(e).
"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Parent and its Subsidiaries taken as a whole, (b) the ability of the
Borrower or any Guarantor to perform its obligations, when such obligations are
required to be performed, under this Agreement, any of the Notes or any other
Credit Document or (c) the validity or enforceability of this Agreement, any of
the Notes or any of the other Credit Documents or the rights or remedies of the
Administrative Agent or the Lenders hereunder or thereunder.
"Material Contract" shall mean any contract or other arrangement, whether
written or oral, to which the Borrower or any of its Subsidiaries is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto could reasonably be expected to have a Material Adverse Effect.
"Materials of Environmental Concern" shall mean any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
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"Maturity Date" shall mean (i) with respect to the Term Loan, the last
scheduled quarterly payment date for the Term Loan set forth in Section 2.2(b),
(ii) with respect to the Incremental Term Loan, the last scheduled quarterly
payment date for the Incremental Term Loan set forth in Section 2.3(b), and
(iii) with respect to the Revolving Loans, the Revolving Commitment Termination
Date.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage Instruments" shall have the meaning set forth in Section
4.1(e).
"Mortgage Policies" shall have the meaning set forth in Section 4.1(e).
"Mortgaged Properties" shall have the meaning set forth in Section
4.1(e).
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by
any Credit Party in respect of any Asset Disposition, Equity Issuance or Debt
Issuance, net of (a) direct costs (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and (b) taxes
paid or payable as a result thereof; it being understood that "Net Cash
Proceeds" shall include, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received by any Credit Party in
any Asset Disposition, Equity Issuance or Debt Issuance.
"Note" or "Notes" shall mean the Revolving Notes, the Swingline Note, the
Term Notes and/or the Incremental Term Notes, collectively, separately or
individually, as appropriate.
"Notice of Borrowing" shall mean the written notice of borrowing as
referenced and defined in Section 2.1(b)(i).
"Notice of Conversion" shall mean the written notice of extension or
conversion as referenced and defined in Section 2.11.
"Obligations" shall mean, collectively, Loans and LOC Obligations.
"Parent" shall have the meaning set forth in the first paragraph of this
Agreement.
"Participant" shall have the meaning set forth in Section 9.6(b).
"Participation Interest" shall mean the purchase by a Lender of a
participation interest in Letters of Credit as provided in Section 2.5(c).
"PBBC" shall mean Palm Beach Bedding Company, a Florida corporation and a
wholly-owned subsidiary of the Borrower.
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"PBBC Industrial Development Bonds" shall mean the Variable Rate Demand
Industrial Development Prime Bonds (Palm Beach Bedding Company Project), Series
1996 in the original aggregate principal amount of $7,650,000 issued pursuant to
the PBBC Bond Indenture.
"PBBC Bond Indenture" shall mean that certain Trust Indenture dated as of
April 2, 1996, among the Palm Beach County, Florida, as Issuer, Branch Banking
and Trust Company, as Credit Facility Trustee and First Union National Bank, as
Bond Trustee.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Acquisition" shall mean so long as no Default or Event of
Default shall have occurred and be continuing or would result therefrom on an
actual or pro forma basis, the acquisition by the Borrower or any of its
Subsidiaries of all or a majority of the Capital Stock or other ownership
interest in (or all or a substantial portion of the assets, property and/or
operations of) any Person (i) in a similar or related line of business, (ii)
which shall not have been rejected initially or thereafter by such Person's
board of directors, (iii) which shall have had earnings before the deduction of
interest, taxes, depreciation and amortization expense for the two immediately
preceding fiscal quarters in an amount greater than $0 and (iv) which, in an
aggregate amount for all such acquisitions, shall not exceed $5,000,000 in any
fiscal year.
"Permitted Adjustments" shall mean adjustments to Consolidated EBITDA for
the periods and in the amounts set forth on Schedule 1.1(c).
"Permitted Investments" shall mean:
(i) cash and Cash Equivalents;
(ii) receivables owing to the Borrower or any of its
Subsidiaries or any receivables and advances to suppliers, in each case
if created, acquired or made in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(iii) investments in and loans to any Credit Parties and as
otherwise permitted under Section 6.1(d);
(iv) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed $100,000 at any time
outstanding;
(v) investments (including debt obligations) 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;
(vi) investments, acquisitions or transactions permitted under
Section 6.5(b);
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(vii) additional loan advances and/or investments of a nature not
contemplated by the foregoing clauses hereof, provided that such loans,
advances and/or investments made pursuant to this clause (vii) shall not
exceed an aggregate amount of $100,000;
(viii) installment notes (to the extent the same could be
considered investments) issued in the ordinary course of business from
the Borrower and each of its Subsidiaries to Serta, Inc. in connection
with the Serta Licenses; and
(ix) shares of capital stock of Serta, Inc. held by the Borrower
and its Subsidiaries in connection with the Serta Licenses.
As used herein, "investment" means all investments, in cash or by
delivery of property made, directly or indirectly in, to or from any
Person, whether by acquisition of shares of Capital Stock, property,
assets, indebtedness or other obligations or securities or by loan
advance, capital contribution or otherwise.
"Permitted Liens" shall mean:
(i) Liens created by or otherwise existing, under or in
connection with this Agreement or the other Credit Documents in favor of
the Lenders;
(ii) Liens in favor of a Lender hereunder in connection with
Hedging Agreements, but only (A) to the extent such Liens secure
obligations under Hedging Agreements with any Lender, or any Affiliate
of a Lender, (B) to the extent such Liens are on the same collateral as
to which the Administrative Agent on behalf of the Lenders also has a
Lien and (C) if such provider and the Lenders shall share pari passu in
the collateral subject to such Liens;
(iii) purchase money Liens securing purchase money indebtedness
(and refinancings thereof) to the extent permitted under Section 6.1(c);
(iv) Liens for taxes, assessments, charges or other governmental
levies not yet due or as to which the period of grace (not to exceed 60
days), if any, related thereto has not expired or which are being
contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with GAAP
(or, in the case of Subsidiaries with significant operations outside of
the United States of America, generally accepted accounting principles in
effect from time to time in their respective jurisdictions of
incorporation);
(v) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or which
are being contested in good faith by appropriate proceedings;
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(vi) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(vii) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(viii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of any Lien
referred to in the foregoing clauses; provided that such extension,
renewal or replacement Lien shall be limited to all or a part of the
property which secured the Lien so extended, renewed or replaced (plus
improvements on such property);
(ix) Liens arising in connection with judgments to the extent
not resulting in an Event of Default under Section 7.1(f);
(x) other Liens existing from time to time in an aggregate
amount not to exceed $250,000; and
(xi) Liens existing on the Closing Date and set forth on
Schedule 1.1(b); provided, that (a) no such Lien shall at any time be
extended to cover property or assets other than the property or assets
subject thereto on the Closing Date and (b) the principal amount of the
Indebtedness secured by such Liens shall not be extended, renewed,
refunded or refinanced.
"Permitted Seller Debt" shall mean shall mean that certain Junior
Subordinated Note dated as of the Closing Date executed by the Parent in favor
of Nancourt, Inc. (formerly known as Star Bedding Products (1986) Limited) in an
aggregate principal amount of $1,000,000 Canadian dollars.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"PIK Subordinated Debt" shall mean pay in kind subordinated debt issued
by the Parent to Citicorp Mezzanine Partners, L.P. in an aggregate initial
amount not exceeding $10,000,000.
"Plan" shall mean, at any particular time, any employee benefit plan
which is covered by Title IV of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Second Amended and Restated Pledge
Agreement dated as of the Closing Date to be executed in favor of the
Administrative Agent by the Borrower and each of the other Credit Parties, as
amended, modified, restated or supplemented from time to time.
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"Prime Rate" shall have the meaning set forth in the definition of
Alternate Base Rate.
"Properties" shall have the meaning set forth in Section 3.10(a).
"Purchasing Lenders" shall have the meaning set forth in Section 9.6(c).
"Recovery Event" shall mean the receipt by the Parent or any of its
Subsidiaries of any cash insurance proceeds or condemnation award resulting from
a Casualty Event payable by reason of theft, loss, physical destruction or
damage, taking or similar event with respect to any of their respective property
or assets; provided, however, that for purposes of this Agreement, the receipt
of proceeds from the business interruption insurance relating to the fire at the
Borrower's Puyallup, Washington property shall not be considered to be a
Recovery Event hereunder.
"Register" shall have the meaning set forth in Section 9.6(d).
"Reimbursement Agreement" shall mean the Reimbursement Agreement, dated
as of April 1, 1996 between Palm Beach Bedding Company, a Florida corporation
and First Union, as amended by the Amendment to Reimbursement Agreement, dated
March 3, 1998, pursuant to which an irrevocable direct pay letter of credit was
issued to PBBC to enhance the security and marketability of the PBBC Industrial
Development Bonds.
"Reorganization" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under PBGC Reg. Section 4043.
"Required Lenders" shall mean (a) if First Union holds 50% or more of the
Commitments (and Participation Interests therein) or, if the Commitments have
terminated, of outstanding Loans and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of Credit), Lenders
holding in the aggregate not less than 66 and 2/3% of such Commitments and
Participation Interests therein or outstanding Loans and Participation Interests
(including the Participation Interests of the Issuing Lender in any Letters of
Credit), as the case may be, and (b) if First Union holds less than 50% of
Commitments (and Participation Interests therein) or, if the Commitments have
terminated, of outstanding Loans and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of Credit), Lenders
holding in the aggregate greater than 50% of such Commitments and Participation
Interests therein or outstanding Loans and Participation Interests (including
the Participation Interests of the Issuing Lender in any Letters of Credit), as
the case may be, provided, however, that if any Lender shall be a Defaulting
Lender at such time, then there shall be excluded from the determination of
Required Lenders, Obligations (including Participation Interests) owing to such
Defaulting Lender and such Defaulting Lender's Commitments, or after termination
of the Commitments, the principal balance of the Obligations owing to such
Defaulting Lender.
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"Requirement of Law" shall mean, as to any Person, the Certificate of
Incorporation and Bylaws or other organizational or governing documents of such
Person, and each law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" shall mean, as to (a) the Borrower, the President
and Chief Executive Officer or the Chief Financial Officer or (b) any other
Credit Party, any duly authorized officer thereof.
"Restricted Payment" shall mean (a) any declaration (other than with
respect to pay-in-kind preferred equity in existence as of the Closing Date) or
payment of a dividend or other distribution, direct or indirect, on account of
any shares of any class of Capital Stock of the Borrower or any of its
Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value, direct
or indirect, of any shares of any class of Capital Stock of the Borrower or any
of its Subsidiaries, now or hereafter outstanding, (c) 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 Capital Stock of the Borrower or
any of its Subsidiaries, now or hereafter outstanding, or (d) except as
permitted by Section 6.16, any payment or prepayment of principal of, premium,
if any, or interest on, redemption, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any Subordinated Debt.
"Retroactive Notes" shall mean those certain Junior Subordinated Notes of
the Parent each dated on or following May 18, 1999 in an initial aggregate
principal amount not to exceed $600,000.
"Revolving Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Loans in an aggregate principal amount at any
time outstanding up to such Lender's Revolving Committed Amount as specified in
Schedule 2.1(a), as such amount may be reduced from time to time in accordance
with the provisions hereof.
"Revolving Commitment Percentage" shall mean, for each Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a),
as such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6(c).
"Revolving Commitment Termination Date" shall mean October 29, 2005.
"Revolving Committed Amount" shall mean, collectively, the aggregate
amount of all Revolving Commitments as referenced in Section 2.1(a), as such
amount may be reduced from time to time in accordance with the provisions
hereof, and, individually, the amount of each Lender's Revolving Commitment as
specified on Schedule 2.1(a).
"Revolving Loans" shall have the meaning set forth in Section 2.1.
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"Revolving Note" or "Revolving Notes" shall mean the promissory notes of
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
provided pursuant to Section 2.1(e), individually or collectively, as
appropriate, as such promissory notes may be amended, modified, supplemented,
extended, renewed or replaced from time to time.
"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"Scheduled Funded Debt Payments" shall mean, as of any date of
determination for the Borrower and its Subsidiaries, the sum of all scheduled
payments of principal on Funded Debt for the applied period ending on the date
of determination (including the principal component of payments due on Capital
Lease Obligations during the applicable period ending on the date of
determination and all scheduled payments of principal to be made by the Parent
on the Permitted Seller Debt).
"Security Agreement" shall mean the Second Amended and Restated Security
Agreement dated as of the Closing Date given by the Borrower and the other
Credit Parties to the Administrative Agent, as amended, modified or supplemented
from time to time in accordance with its terms.
"Security Documents" shall mean the Security Agreement, the Pledge
Agreement, the Mortgage Instruments and such other documents executed and
delivered in connection with the attachment and perfection of the Administrative
Agent's security interests and liens arising thereunder, including, without
limitation, UCC financing statements.
"Senior Funded Debt" shall mean as of any date of determination, with
respect to any Person, all Funded Debt (including without limitation Extensions
of Credit hereunder) which is not subordinate in right of payment to the Credit
Party Obligations.
"Senior Leverage Ratio" shall mean as of the end of each fiscal quarter
of the Borrower, for the Borrower and its Subsidiaries on a consolidated basis
for the four consecutive quarters ending on such date, the ratio of (a) Senior
Funded Debt of the Borrower and its Subsidiaries on the last day of such period
to (b) Consolidated EBITDA.
"Serta Consent" shall mean consent of the board of directors or
stockholders of Serta, Inc. in accordance with the applicable terms of any Serta
Licenses or the By-laws of Serta, Inc., as applicable, which provide, under
certain circumstances, that such consent shall not be unreasonably withheld.
"Serta Licenses" shall mean, collectively, (a) the two Standard License
Agreements and the two Memoranda of Agreement, dated January 12, 1995, between
the Borrower and Serta, Inc. covering certain territories in Pennsylvania, New
Jersey, New York, Connecticut, Maryland and Delaware, (b) the Standard License
Agreement and the Memoranda of Agreement, each dated November 4, 1989 between
Palm Beach Bedding Company and Serta Inc. covering a certain territory in
Florida, (c) the Standard License Agreement dated November 4, 1989, and the
Memoranda of Agreement dated December 1, 1969, between Herr Manufacturing
Company and Serta, Inc. covering certain territories in Pennsylvania, New York
and New Jersey, (d) the Standard License Agreement and the Memoranda of
Agreement, each dated December 1, 1969
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between Adam Wuest, Inc. and Serta, Inc., (e) the Standard License Agreement
dated November 4, 1989 between Adam Wuest, Inc. and Serta, Inc., (f) the
Standard License Agreement and the Memorandum of Agreement, each dated as of
December 1, 1998 between Adam Wuest, Inc. and Serta, Inc., (g) Standard Canadian
License Agreement dated as of May 18, 1999 between Serta, Inc. and Star Bedding
Products Limited, (h) License Agreement and the Memorandum Agreement, each dated
December 1, 1969 between Adam Wuest, Inc. and Serta, Inc., (i) Memorandum of
Agreement dated December 22, 1983 between Serta, Inc. and Adam Wuest, Inc., (j)
License Agreement by and between Serta, Inc. and Simon Mattress Manufacturing
Company, dated April 28, 2000, (k) Memorandum of Agreement between Serta, Inc.
and Simon Mattress Manufacturing Company dated April 28, 2000, (l) License
Agreement by and between Serta, Inc. and Simon Mattress Manufacturing Co., dated
November 4, 1989, (m) Memorandum of Agreement between Serta, Inc. and Simon
Mattress Manufacturing Company, dated November 4, 1989, (n) License Agreement by
and between Serta, Inc. and Simon Mattress Manufacturing Co., dated November 4,
1989, (o) Memorandum of Agreement between Serta, Inc. and Simon Mattress
Manufacturing Company dated November 4, 1989; and (p) all additional Standard
License Agreements and Memoranda of Agreement entered into between any Credit
Party and Serta, Inc.
"Simon Mattress" shall mean Simon Mattress Manufacturing Co., a
California corporation.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
"Solvent" shall mean, with respect to the Borrower, the Parent and their
Subsidiaries on a particular date, that any such Person (a) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature, (b) owns property having a value, both at fair valuation and at present
fair saleable value, greater than the amount required to pay its probable
liabilities (including contingencies), and (c) does not believe that it will
incur debts or liabilities beyond its ability to pay such debts or liabilities
as they mature.
"Specified Sales" shall mean (a) the sale, transfer or other disposition
of inventory, materials and licensing of Intellectual Property in the ordinary
course of business and (b) the sale, transfer or other disposition of Permitted
Investments described in clause (i) of the definition thereof.
"Subordinated Credit Agreement" shall mean the Subordinated Credit
Agreement dated as of November 5, 1999 by and between the Parent and Citicorp
Mezzanine Partners, L.P.
"Subordinated Debt" shall mean (i) the Subordinated Notes, (ii) the PIK
Subordinated Debt and (iii) any other Indebtedness incurred by any Credit Party
which by its terms is specifically subordinated in right of payment to the prior
payment of the Credit Party Obligations.
"Subordinated Notes" shall mean those certain 11% senior subordinated
notes in an aggregate principal amount of $115,000,000 due 2009 of the Borrower
and Sleepmaster Finance Corporation issued pursuant to the Indenture.
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"Subsidiary" shall mean, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Sweep Plus Arrangement" shall mean the Sweep Plus Loan/Investment
Services Description attached hereto as Schedule 1.1(d) or any similar
arrangement between the Borrower and the Swingline Lender by which Swingline
Loans may be advanced and deposited from time to time into a specified account
with the Swingline Lender and which deposits may be applied to repay the
Swingline Loans outstanding hereunder.
"Swingline Commitment" shall mean the commitment of the Swingline Lender
to make Swingline Loans in an aggregate principal amount at any time outstanding
up to the Swingline Committed Amount, and the commitment of the Lenders to
purchase participation interests in the Swingline Loans as provided in Section
2.4(b)(ii), as such amounts may be reduced from time to time in accordance with
the provisions hereof.
"Swingline Committed Amount" shall mean the amount of the Swingline
Lender's Swingline Commitment as specified in Section 2.4(a).
"Swingline Lender" shall mean First Union, in its capacity as such.
"Swingline Loan" or "Swingline Loans" shall have the meaning set forth in
Section 2.4(a).
"Swingline Note" shall mean the promissory note of the Borrower in favor
of the Swingline Lender evidencing the Swingline Loans provided pursuant to
Section 2.4(d), as such promissory note may be amended, modified, supplemented,
extended, renewed or replaced from time to time.
"Taxes" shall have the meaning set forth in Section 2.19(a).
"Term Loan" shall have the meaning set forth in Section 2.2(a).
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make its portion of the Term Loan in a principal
amount equal to such Lender's Term Loan Commitment Percentage of the Term Loan
Committed Amount (and for purposes of making determinations of Required Lenders
hereunder after the Closing Date, the principal amount outstanding on the Term
Loan).
"Term Loan Commitment Percentage" shall mean, for any Lender, the
percentage identified as its Term Loan Commitment Percentage on Schedule 2.1(a),
as such percentage may
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be modified in connection with any assignment made in accordance with the
provisions of Section 9.6.
"Term Loan Committed Amount" shall have the meaning set forth in Section
2.2(a).
"Term Note" or "Term Notes" shall mean the promissory notes of the
Borrower in favor of each of the Lenders evidencing the portion of the Term Loan
provided pursuant to Section 2.2(d), individually or collectively, as
appropriate, as such promissory notes may be amended, modified, restated,
supplemented, extended, renewed or replaced from time to time.
"Tranche" shall mean the collective reference to LIBOR Rate Loans whose
Interest Periods begin and end on the same day. A Tranche may sometimes be
referred to as a "LIBOR Tranche".
"Transaction Costs" shall mean all costs and expenses incurred by the
Credit Parties in connection with the transactions closing as of the Closing
Date to the extent not capitalized on the balance sheet of the Parent in an
aggregate amount not to exceed $2,000,000.
"Transfer Effective Date" shall have the meaning set forth in each
Commitment Transfer Supplement.
"2.19 Certificate" shall have the meaning set forth in Section 2.19.
"Type" shall mean, as to any Loan, its nature as an Alternate Base Rate
Loan, LIBOR Rate Loan or Swingline Loan, as the case may be.
"Voting Stock" means, with respect to any Person, Capital Stock issued by
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or other Credit
Documents or any certificate or other document made or delivered pursuant
hereto.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 1.3 ACCOUNTING TERMS.
Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent
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with the most recent audited consolidated financial statements of the Borrower
delivered to the Lenders; provided that, if the Borrower notifies the
Administrative Agent that it wishes to amend any covenant in Section 5.9 (or the
defined terms used therein) to eliminate the effect of any change in GAAP on the
operation of such covenant (or if the Administrative Agent notifies the Borrower
that the Required Lenders wish to amend Section 5.9 for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
GAAP in effect immediately before the relevant change in GAAP became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Lenders.
The Borrower shall deliver to the Administrative Agent and each Lender at
the same time as the delivery of any annual or quarterly financial statements
given in accordance with the provisions of Section 5.1, (i) a description in
reasonable detail of any material change in the application of accounting
principles employed in the preparation of such financial statements from those
applied in the most recently preceding quarterly or annual financial statements
as to which no objection shall have been made in accordance with the provisions
above and (ii) a reasonable estimate of the effect on the financial statements
on account of such changes in application.
The parties hereto acknowledge and agree that, for purposes of all
calculations made under the financial covenants set forth in Section 5.9
(including without limitation for purposes of the definition of "Applicable
Percentage" hereunder), (i) in connection with any asset sale or disposition as
contemplated by Section 6.5, (A) income statement items (whether positive or
negative) attributable to the Property disposed of shall be excluded to the
extent relating to any period occurring prior to the date of such transaction
and (B) Indebtedness which is retired shall be excluded and deemed to have been
retired as of the first day of the applicable period and (ii) in connection with
any acquisition, merger or consolidation as referred to in Section 6.5
(including specifically, without limitation, the Acquisition), income statement
items (whether positive or negative) attributable to any Person or Property so
acquired shall, to the extent not otherwise included in such income statements
items for the Parent and its Subsidiaries on a consolidated basis in accordance
with GAAP or in accordance with any defined terms set forth herein, be included
to the extent relating to any period applicable in such calculations and be
deemed to have been included as of the first day of the applicable period.
ARTICLE II
THE LOANS; AMOUNT AND TERMS
SECTION 2.1 REVOLVING LOANS.
(a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans ("Revolving Loans") to the Borrower from time to time for the
purposes hereinafter set forth; provided, however, that (i) with regard to each
Lender individually, the sum of such Lender's share of outstanding Revolving
Loans plus such Lender's Revolving Commitment Percentage of outstanding
Swingline Loans plus such Lender's LOC Commitment Percentage of outstanding LOC
Obligations shall not exceed such Lender's Revolving Commitment Percentage of
the
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aggregate Revolving Committed Amount, and (ii) with regard to the Lenders
collectively, the sum of the aggregate amount of outstanding Revolving Loans
plus outstanding LOC Obligations shall not exceed the Revolving Committed
Amount. For purposes hereof, the aggregate amount available hereunder shall be
THIRTY-THREE MILLION DOLLARS ($33,000,000) (as such aggregate maximum amount may
be reduced from time to time as provided in Section 2.6, the "Revolving
Committed Amount"). Revolving Loans may consist of Alternate Base Rate Loans or
LIBOR Rate Loans, or a combination thereof, as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof; provided that
no more than five (5) separate LIBOR Tranches shall be outstanding at any one
time. LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office
and Alternate Base Rate Loans at its Domestic Lending Office.
(b) Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a Revolving
Loan borrowing by written notice (or telephone notice promptly confirmed
in writing which confirmation may be by fax) to the Administrative Agent
not later than 11:00 A.M. (Charlotte, North Carolina time) on the
Business Day prior to the date of requested borrowing in the case of
Alternate Base Rate Loans, and on the third Business Day prior to the
date of the requested borrowing in the case of LIBOR Rate Loans. Each
such request for borrowing shall be irrevocable and shall specify (A)
that a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate principal
amount to be borrowed, (D) whether the borrowing shall be comprised of
Alternate Base Rate Loans, LIBOR Rate Loans or a combination thereof, and
if LIBOR Rate Loans are requested, the Interest Period(s) therefor. A
form of Notice of Borrowing (a "Notice of Borrowing") is attached as
Schedule 2.1(b)(i). If the Borrower shall fail to specify in any such
Notice of Borrowing (I) an applicable Interest Period in the case of a
LIBOR Rate Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Revolving Loan
requested, then such notice shall be deemed to be a request for an
Alternate Base Rate Loan hereunder. The Administrative Agent shall give
notice to each Lender promptly upon receipt of each Notice of Borrowing,
the contents thereof and each such Lender's share thereof. All Revolving
Loans made on the Closing Date shall bear interest at the Alternate Base
Rate until the earlier of (i) the completion of the syndication of the
Commitments to financial institutions which shall become Lenders
hereunder or (ii) thirty days from the Closing Date.
(ii) Minimum Amounts. Each Revolving Loan borrowing shall be in
a minimum aggregate amount of (A) with respect to LIBOR Rate Loans,
$1,000,000 and integral multiples of $250,000 in excess thereof (or the
remaining amount of the Revolving Committed Amount, if less) or (B) with
respect to Alternate Base Rate Loans, $500,000 and integral multiples of
$100,000 in excess thereof (or the remaining amount of the Revolving
Committed Amount, if less).
(iii) Advances. Each Lender will make its Revolving Commitment
Percentage of each Revolving Loan borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in Schedule 9.2, or at
28
<PAGE> 34
such other office as the Administrative Agent may designate in writing,
by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in
the applicable Notice of Borrowing in Dollars and in funds immediately
available to the Administrative Agent. Such borrowing will then be made
available to the Borrower by the Administrative Agent by crediting the
account of the Borrower on the books of such office with the aggregate of
the amounts made available to the Administrative Agent by the Lenders and
in like funds as received by the Administrative Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
due and payable in full on the Revolving Commitment Termination Date.
(d) Interest. Subject to the provisions of Section 2.10, Revolving
Loans shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as Revolving
Loans shall be comprised of Alternate Base Rate Loans, each such
Alternate Base Rate Loan shall bear interest at a per annum rate equal to
the sum of the Alternate Base Rate plus the Applicable Percentage; and
(ii) LIBOR Rate Loans. During such periods as Revolving Loans
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall
bear interest at a per annum rate equal to the sum of the LIBOR Rate plus
the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each Interest
Payment Date.
(e) Revolving Notes. Each Lender's Revolving Commitment Percentage of
the Revolving Loans shall be evidenced by a duly executed promissory note of the
Borrower to such Lender in substantially the form of Schedule 2.1(e).
SECTION 2.2 TERM LOAN.
(a) Term Loan. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to make available to the Borrower on the Closing Date such
Lender's Term Loan Commitment Percentage of a term loan in Dollars (the "Term
Loan") in the aggregate principal amount of THIRTY-FIVE MILLION EIGHT HUNDRED
SEVENTY-FIVE THOUSAND DOLLARS ($35,875,000) (the "Term Loan Committed Amount")
for the purposes hereinafter set forth. The Term Loan may consist of Alternate
Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower
may request. The Borrower shall request the initial Term Loan borrowing by
written notice (or telephone notice promptly confirmed in writing which
confirmation may be by fax) to the Administrative Agent not later than 11:00
A.M. (Charlotte, North Carolina time) on the Business Day prior to the date of
requested borrowing. Amounts repaid on the Term Loan may not be reborrowed.
LIBOR Rate Loans shall be made by each Lender at its LIBOR Lending Office and
Alternate Base Rate Loans at its Domestic Lending Office.
29
<PAGE> 35
(b) Repayment of Term Loan. The principal amount of the Term Loan
shall be repaid in 22 consecutive fiscal quarterly installments as follows,
unless accelerated sooner pursuant to Section 7.2:
<TABLE>
<CAPTION>
-------------------------------------------------
TERM LOAN PRINCIPAL
PRINCIPAL AMORTIZATION AMORTIZATION PAYMENT
PAYMENT DATES
-------------------------------------------------
<S> <C>
June 30, 2000 $1,125,000
-------------------------------------------------
September 29, 2000 $1,125,000
-------------------------------------------------
December 29, 2000 $1,125,000
-------------------------------------------------
March 30, 2001 $1,125,000
-------------------------------------------------
June 29, 2001 $1,125,000
-------------------------------------------------
September 28, 2001 $1,125,000
-------------------------------------------------
December 31, 2001 $1,125,000
-------------------------------------------------
March 29, 2002 $1,866,666
-------------------------------------------------
June 28, 2002 $1,866,666
-------------------------------------------------
September 30, 2002 $1,866,666
-------------------------------------------------
December 31, 2002 $1,866,666
-------------------------------------------------
March 31, 2003 $1,866,666
-------------------------------------------------
June 30, 2003 $1,866,666
-------------------------------------------------
September 30, 2003 $1,866,666
-------------------------------------------------
December 31, 2003 $1,866,666
-------------------------------------------------
March 31, 2004 $1,866,666
-------------------------------------------------
June 30, 2004 $1,866,666
-------------------------------------------------
September 30, 2004 $1,866,666
-------------------------------------------------
December 31, 2004 $1,866,666
-------------------------------------------------
March 31, 2005 $1,866,666
-------------------------------------------------
June 30, 2005 $1,866,666
-------------------------------------------------
September 30, 2005 $1,866,676
-------------------------------------------------
</TABLE>
(c) Interest on the Term Loan. Subject to the provisions of Section
2.10, the Term Loan shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as the Term
Loan shall be comprised of Alternate Base Rate Loans, each such Alternate
Base Rate Loan shall bear interest at a per annum rate equal to the sum
of the Alternate Base Rate plus the Applicable Percentage; and
30
<PAGE> 36
(ii) LIBOR Rate Loans. During such periods as the Term Loan
shall be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall
bear interest at a per annum rate equal to the sum of the LIBOR Rate plus
the Applicable Percentage.
Interest on the Term Loan shall be payable in arrears on each Interest
Payment Date.
(d) Term Notes. Each Lender's Term Loan Commitment Percentage of the
Term Loan outstanding as of the Closing Date shall be evidenced by a duly
executed promissory note of the Borrower to such Lender in substantially the
form of Schedule 2.2(d).
SECTION 2.3 INCREMENTAL TERM LOAN.
(a) Incremental Term Loan. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein, each
Lender severally agrees to make available to the Borrower on the Closing Date
such Lender's Incremental Term Loan Commitment Percentage of an incremental term
loan in Dollars (the "Incremental Term Loan") in the aggregate principal amount
of THIRTY-FIVE MILLION DOLLARS ($35,000,000) (the "Incremental Term Loan
Committed Amount") for the purposes hereinafter set forth. The Incremental Term
Loan may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a
combination thereof, as the Borrower may request; provided that the Incremental
Term Loans made on the Closing Date shall bear interest at the Alternate Base
Rate until three (3) Business Days after the Closing Date. The Borrower shall
request the initial Incremental Term Loan borrowing by written notice (or
telephone notice promptly confirmed in writing which confirmation may be by fax)
to the Administrative Agent not later than 11:00 A.M. (Charlotte, North Carolina
time) on the Business Day prior to the date of requested borrowing. Amounts
repaid on the Incremental Term Loan may not be reborrowed. LIBOR Rate Loans
shall be made by each Lender at its LIBOR Lending Office and Alternate Base Rate
Loans at its Domestic Lending Office.
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<PAGE> 37
(b) Repayment of Incremental Term Loan. The principal amount of the
Incremental Term Loan shall be repaid in 22 consecutive fiscal quarterly
installments as follows, unless accelerated sooner pursuant to Section 7.2:
======================================= =======================================
TERM LOAN PRINCIPAL AMORTIZATION
PRINCIPAL AMORTIZATION PAYMENT DATES PAYMENT
- --------------------------------------- ---------------------------------------
June 30, 2000 $1,097,561
- --------------------------------------- ---------------------------------------
September 29, 2000 $1,097,561
- --------------------------------------- ---------------------------------------
December 29, 2000 $1,097,561
- --------------------------------------- ---------------------------------------
March 30, 2001 $1,097,561
- --------------------------------------- ---------------------------------------
June 29, 2001 $1,097,561
- --------------------------------------- ---------------------------------------
September 28, 2001 $1,097,561
- --------------------------------------- ---------------------------------------
December 31, 2001 $1,097,561
- --------------------------------------- ---------------------------------------
March 29, 2002 $1,821,138
- --------------------------------------- ---------------------------------------
June 28, 2002 $1,821,138
- --------------------------------------- ---------------------------------------
September 30, 2002 $1,821,138
- --------------------------------------- ---------------------------------------
December 31, 2002 $1,821,138
- --------------------------------------- ---------------------------------------
March 31, 2003 $1,821,138
- --------------------------------------- ---------------------------------------
June 30, 2003 $1,821,138
- --------------------------------------- ---------------------------------------
September 30, 2003 $1,821,138
- --------------------------------------- ---------------------------------------
December 31, 2003 $1,821,138
- --------------------------------------- ---------------------------------------
March 31, 2004 $1,821,138
- --------------------------------------- ---------------------------------------
June 30, 2004 $1,821,138
- --------------------------------------- ---------------------------------------
September 30, 2004 $1,821,138
- --------------------------------------- ---------------------------------------
December 31, 2004 $1,821,138
- --------------------------------------- ---------------------------------------
March 31, 2005 $1,821,138
- --------------------------------------- ---------------------------------------
June 30, 2005 $1,821,138
- --------------------------------------- ---------------------------------------
September 30, 2005 $1,821,141
- --------------------------------------- ---------------------------------------
(c) Interest on the Incremental Term Loan. Subject to the provisions
of Section 2.10, the Term Loan shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as the
Incremental Term Loan shall be comprised of Alternate Base Rate Loans,
each such Alternate Base Rate Loan shall bear interest at a per annum
rate equal to the sum of the Alternate Base Rate plus the Applicable
Percentage; and
32
<PAGE> 38
(ii) LIBOR Rate Loans. During such periods as the Incremental
Term Loan shall be comprised of LIBOR Rate Loans, each such LIBOR Rate
Loan shall bear interest at a per annum rate equal to the sum of the
LIBOR Rate plus the Applicable Percentage.
Interest on the Incremental Term Loan shall be payable in
arrears on each Interest Payment Date.
(d) Incremental Term Notes. Each Lender's Incremental Term Loan
Commitment Percentage of the Incremental Term Loan outstanding as of the Closing
Date shall be evidenced by a duly executed promissory note of the Borrower to
such Lender in substantially the form of Schedule 2.3(d).
SECTION 2.4 SWINGLINE LOANS.
(a) Swingline Commitment. During the Commitment Period, subject to
the terms and conditions hereof, the Swingline Lender, in its individual
capacity, agrees to make certain revolving credit loans to the Borrower (each a
"Swingline Loan" and, collectively, the "Swingline Loans") for the purposes
hereinafter set forth; provided, however, (i) the aggregate amount of Swingline
Loans outstanding at any time shall not exceed TWO MILLION DOLLARS ($2,000,000)
(the "Swingline Committed Amount"), and (ii) the sum of the aggregate amount of
Revolving Loans outstanding plus Swingline Loans outstanding plus LOC
Obligations outstanding shall not exceed the Revolving Committed Amount.
Swingline Loans hereunder may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Swingline Loan Borrowings.
(i) Notice of Borrowing and Disbursement.
(A) Except as provided in subclause (B) below the
Swingline Lender will make Swingline Loans available to the
Borrower on any Business Day upon request made by the Borrower
not later than 2:00 P.M. (Charlotte, North Carolina time) on
such Business Day. A notice of request for Swingline Loan
borrowing shall be made in the form of Schedule 2.1(b)(i) with
appropriate modifications. Swingline Loan borrowings hereunder
shall be made in minimum amounts of $50,000 and in integral
amounts of $50,000 in excess thereof.
(B) Subject to the Swingline Lender's sole discretion,
borrowings of Swingline Loans hereunder may be made from time to
time into a specified demand deposit account with the Swingline
Lender pursuant to the Sweep Plus Arrangement. Each such
borrowing shall be deemed a reaffirmation by the Borrower that
the representations and warranties set forth in Article III are
true and correct in all material respects as of the date of such
borrowing. Each Swingline Loan requested pursuant to this
subsection (B) shall be in such minimum amounts, if any,
provided in the Sweep Plus Arrangement.
33
<PAGE> 39
(ii) Repayment of Swingline Loans. Unless repaid sooner in
accordance with the Sweep Plus Arrangement, each Swingline Loan
borrowing shall be due and payable on the Revolving Commitment
Termination Date. The Swingline Lender may, at any time, in its sole
discretion, by written notice to the Borrower and the Administrative
Agent, demand repayment of its Swingline Loans by way of a Revolving
Loan borrowing, in which case the Borrower shall be deemed to have
requested a Revolving Loan borrowing comprised entirely of Alternate
Base Rate Loans in the amount of such Swingline Loans; provided,
however, that, in the following circumstances, any such demand shall
also be deemed to have been given one Business Day prior to each of (i)
the Revolving Commitment Termination Date, (ii) the occurrence of any
Event of Default described in Section 7.1(e), (iii) upon acceleration of
the Credit Party Obligations hereunder, whether on account of an Event
of Default described in Section 7.1(e) or any other Event of Default,
and (iv) the exercise of remedies in accordance with the provisions of
Section 7.2 hereof (each such Revolving Loan borrowing made on account
of any such deemed request therefor as provided herein being hereinafter
referred to as "Mandatory Borrowing"). Each Lender hereby irrevocably
agrees to make such Revolving Loans promptly upon any such request or
deemed request on account of each Mandatory Borrowing in the amount and
in the manner specified in the preceding sentence and on the same such
date notwithstanding (I) the amount of Mandatory Borrowing may not
comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (II) whether any conditions specified in
Section 4.2 are then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or deemed request
for Revolving Loans to be made by the time otherwise required in Section
2.1(b)(i), (V) the date of such Mandatory Borrowing, or (VI) any
reduction in the Revolving Committed Amount or termination of the
Revolving Commitments immediately prior to such Mandatory Borrowing or
Contemporaneously therewith. In the event that any Mandatory Borrowing
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code), then each Lender hereby agrees
that it shall forthwith purchase (as of the date the Mandatory Borrowing
would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase) from
the Swingline Lender such participations in the outstanding Swingline
Loans as shall be necessary to cause each such Lender to share in such
Swingline Loans ratably based upon its respective Revolving Commitment
Percentage (determined before giving effect to any termination of the
Commitments pursuant to Section 7.2). provided that (A) all interest
payable on the Swingline Loans shall be for the account of the Swingline
Lender until the date as of which the respective participation is
purchased, and (B) at the time any purchase of participations pursuant
to this sentence is actually made, the purchasing Lender shall be
required to pay to the Swingline Lender interest on the principal amount
of such participation purchased for each day from and including the day
upon which the Mandatory Borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the rate equal
to, if paid within two (2) Business Days of the date of the Mandatory
Borrowing, the Federal Funds Effective Rate, and thereafter at a rate
equal to the Alternate Base Rate.
34
<PAGE> 40
(c) Interest on Swingline Loans. Subject to the provisions of
Section 2.10, Swingline Loans shall bear interest at a per annum rate equal to
the Alternate Base Rate plus the Applicable Percentage for Revolving Loans that
are Alternate Base Rate Loans. Interest on Swingline Loans shall be payable in
arrears on each Interest Payment Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed promissory note of the Borrower to the Swingline Lender in the original
amount of the Swingline Committed Amount and substantially in the form of
Schedule 2.4.
SECTION 2.5 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. The Issuing Lender has heretofore issued the Existing
Letter of Credit. Subject to the terms and conditions hereof and of the LOC
Documents, if any, and any other terms and conditions which the Issuing Lender
may reasonably require, during the Commitment Period the Issuing Lender shall
issue, and the Lenders shall participate in, Letters of Credit for the account
of the Borrower from time to time upon request in a form acceptable to the
Issuing Lender; provided, however, that (i) the aggregate amount of LOC
Obligations shall not at any time exceed FIFTEEN MILLION DOLLARS ($15,000,000)
(the "LOC Committed Amount"), (ii) the sum of the aggregate amount of Revolving
Loans outstanding plus Swingline Loans outstanding plus LOC Obligations
outstanding shall not at any time exceed the Revolving Committed Amount, (iii)
all Letters of Credit shall be denominated in U.S. Dollars and (iv) Letters of
Credit shall be issued for the purpose of supporting tax-advantaged variable
rate demand note financing and for other lawful corporate purposes and may be
issued as standby letters of credit, including in connection with workers'
compensation and other insurance programs, and trade letters of credit. Except
as otherwise expressly agreed upon by all the Lenders, no Letter of Credit shall
have an original expiry date more than twelve (12) months from the date of
issuance; provided, however, that so long as no Default or Event of Default has
occurred and is continuing and subject to the other terms and conditions to the
issuance of Letters of Credit hereunder, the expiry dates of Letters of Credit
may be extended annually or periodically from time to time on the request of the
Borrower or by operation of the terms of the applicable Letter of Credit to a
date not more than twelve (12) months from the date of extension; provided,
further, that no Letter of Credit, as originally issued or as extended, shall
have an expiry date extending beyond the Maturity Date. Each Letter of Credit
shall comply with the related LOC Documents. The issuance and expiry date of
each Letter of Credit shall be a Business Day. Any Letters of Credit issued
hereunder shall be in a minimum original face amount of $100,000. First Union
shall be the Issuing Lender on all Letters of Credit issued after the Closing
Date.
(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted to the Issuing Lender at least five (5) Business Days
prior to the requested date of issuance. The Issuing Lender will promptly upon
request provide to the Administrative Agent for dissemination to the Lenders a
detailed report specifying the Letters of Credit which are then issued and
outstanding and any activity with respect thereto which may have occurred since
the date of any prior report, and including therein, among other things, the
account party, the beneficiary, the face amount, expiry date as well as any
payments or expirations which may have occurred. The Issuing Lender will further
provide to the Administrative Agent promptly upon request copies of the Letters
of Credit. The Issuing Lender will provide to the Administrative
35
<PAGE> 41
Agent promptly upon request a summary report of the nature and extent of LOC
Obligations then outstanding.
(c) Participations. Each Lender upon issuance of a Letter of Credit
(or, with respect to the Existing Letter of Credit, automatically, without any
action by an Person, as of the Closing Date) shall be deemed to have purchased
without recourse a risk participation from the Issuing Lender in such Letter of
Credit and the obligations arising thereunder and any collateral relating
thereto, in each case in an amount equal to its LOC Commitment Percentage of the
obligations under such Letter of Credit and shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and be obligated
to pay to the Issuing Lender therefor and discharge when due, its LOC Commitment
Percentage of the obligations arising under such Letter of Credit. Without
limiting the scope and nature of each Lender's participation in any Letter of
Credit, to the extent that the Issuing Lender has not been reimbursed as
required hereunder or under any LOC Document, each such Lender shall pay to the
Issuing Lender its LOC Commitment Percentage of such unreimbursed drawing in
same day funds on the day of notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The
obligation of each Lender to so reimburse the Issuing Lender shall be absolute
and unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower to reimburse the
Issuing Lender under any Letter of Credit, together with interest as hereinafter
provided.
(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower and the
Administrative Agent. The Borrower shall reimburse the Issuing Lender on the day
of drawing under any Letter of Credit (with the proceeds of a Revolving Loan or
a Swingline Loan obtained hereunder or otherwise) in same day funds as provided
herein or in the LOC Documents. If the Borrower shall fail to reimburse the
Issuing Lender as provided herein, the unreimbursed amount of such drawing shall
bear interest at a per annum rate equal to the Alternate Base Rate plus two
percent (2%). Unless the Borrower shall immediately notify the Issuing Lender
and the Administrative Agent of its intent to otherwise reimburse the Issuing
Lender, the Borrower shall be deemed to have requested a Swingline Loan, or if
and to the extent Swingline Loans shall be unavailable, a Revolving Loan in the
amount of the drawing as provided in subsection (e) hereof, the proceeds of
which will be used to satisfy the reimbursement obligations. The Borrower's
reimbursement obligations hereunder shall be absolute and unconditional under
all circumstances irrespective of any rights of set-off, counterclaim or defense
to payment the Borrower may claim or have against the Issuing Lender, the
Administrative Agent, the Lenders, the beneficiary of the Letter of Credit drawn
upon or any other Person, including without limitation any defense based on any
failure of the Borrower to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing Lender will
promptly notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to the Administrative Agent for the account of
the Issuing Lender in Dollars and in immediately available funds, the amount of
such Lender's LOC Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender from the
Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte,
North Carolina time), otherwise such payment shall be made at or before 12:00
Noon (Charlotte, North Carolina time) on the Business
36
<PAGE> 42
Day next succeeding the day such notice is received. If such Lender does not pay
such amount to the Issuing Lender in full upon such request, such Lender shall,
on demand, pay to the Administrative Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date of such drawing
until such Lender pays such amount to the Issuing Lender in full at a rate per
annum equal to, if paid within two (2) Business Days of the date of drawing, the
Federal Funds Effective Rate and thereafter at a rate equal to the Alternate
Base Rate. Each Lender's obligation to make such payment to the Issuing Lender,
and the right of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and without
regard to the termination of this Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the Credit
Party Obligations hereunder and shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, (i) a Swingline Loan
borrowing to reimburse a drawing under a Letter of Credit, the Swingline Lender
shall make the Swingline Loan advance pursuant to the terms of the request or
deemed request in accordance with the provisions for Swingline Loan advances
hereunder or (ii) a Revolving Loan to reimburse a drawing under a Letter of
Credit, the Administrative Agent shall give notice to the Lenders that a
Revolving Loan has been requested or deemed requested in connection with a
drawing under a Letter of Credit, in which case a Revolving Loan borrowing
comprised entirely of Alternate Base Rate Loans (each such borrowing, a
"Mandatory Borrowing") shall be immediately made (without giving effect to any
termination of the Commitments pursuant to Section 7.2) pro rata based on each
Lender's respective Revolving Commitment Percentage (determined before giving
effect to any termination of the Commitments pursuant to Section 7.2) and the
proceeds thereof shall be paid directly to the Issuing Lender for application to
the respective LOC Obligations. Each Lender hereby irrevocably agrees to make
such Revolving Loans immediately upon any such request or deemed request on
account of each Mandatory Borrowing in the amount and in the manner specified in
the preceding sentence and on the same such date notwithstanding (i) the amount
of Mandatory Borrowing may not comply with the minimum amount for borrowings of
Revolving Loans otherwise required hereunder, (ii) whether any conditions
specified in Section 4.2 are then satisfied, (iii) whether a Default or an Event
of Default then exists, (iv) failure for any such request or deemed request for
a Revolving Loan to be made by the time otherwise required in Section 2.1(b),
(v) the date of such Mandatory Borrowing, or (vi) any reduction in the Revolving
Committed Amount after any such Letter of Credit may have been drawn upon;
provided, however, that in the event any such Mandatory Borrowing should be less
than the minimum amount for borrowings of Revolving Loans otherwise provided in
Section 2.1(b)(ii), the Borrower shall pay to the Administrative Agent for its
own account an administrative fee of $500. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the Borrower), then each such Lender
hereby agrees that it shall forthwith fund (as of the date the Mandatory
Borrowing would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase) its
Participation Interests in the outstanding LOC Obligations; provided, further,
that in the event any Lender shall fail to fund its Participation Interest on
the day the Mandatory Borrowing would otherwise have occurred, then the amount
of
37
<PAGE> 43
such Lender's unfunded Participation Interest therein shall bear interest
payable to the Issuing Lender upon demand, at the rate equal to, if paid within
two (2) Business Days of such date, the Federal Funds Effective Rate, and
thereafter at a rate equal to the Alternate Base Rate.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit shall,
for purposes hereof, be treated in all respects the same as the issuance of a
new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender shall have the
Letters of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
deemed in all respects to be a part thereof.
(h) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any letter of
credit application), this Credit Agreement shall control. The Reimbursement
Agreement is and shall be deemed amended such that the representations and
warranties, covenants and events of default (and definitions related thereto)
set out in the Reimbursement Agreement (the "Existing Provisions"), except to
the extent they relate specifically to the relevant bonds or relevant
remarketing program, conform with the representations and warranties, covenants
and events of default (and definitions related thereto) set out in this Credit
Agreement (the "Incorporated Provisions"). So long as any obligations remain
outstanding under the PBBC Industrial Development Bonds or any documentation
related thereto, such amendments shall survive (i) the payment in full of all
obligations due the Lenders by the Borrower under this Credit Agreement, (ii)
the termination (for any reason) of this Credit Agreement, (iii) the sale or
participation (in whole or in part) of a Lender's interest in this Credit
Agreement, or (iv) any other event which has an effect to terminate the
obligations of the Borrower to the Lenders under this Credit Agreement. Upon the
happening of one of the events set forth in the immediately preceding sentence,
PBBC agrees to promptly execute a modification of the Reimbursement Agreement to
confirm such amendment. Notwithstanding the preceding sentence or the failure of
any such modification to be executed, the Credit Parties, to the extent
applicable, must remain in compliance with the Incorporated Provisions as if set
forth in the Reimbursement Agreement. Any future modification of or amendment to
the Incorporated Provisions shall be a modification of or amendment to the
relevant Reimbursement Agreements for purposes of compliance with such
agreements. Likewise, if First Union grants a waiver of compliance of the
Incorporated Provisions for any period, such waiver shall be deemed to be a
waiver of compliance of the relevant Reimbursement Agreement for the limited
period of time for which the waiver was granted.
(i) Designation of Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including without limitation Section 2.5(a), a Letter of Credit issued hereunder
may contain a statement to the effect that such Letter of Credit is issued for
the account of a Credit Party other than the Borrower, provided that
notwithstanding such statement, the Borrower shall be the actual account party
for all purposes of the Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations hereunder
with respect to such Letter of Credit.
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SECTION 2.6 FEES.
(a) Commitment Fee. In consideration of the Revolving Commitment,
the Borrower agrees to pay to the Administrative Agent for the ratable benefit
of the Lenders a commitment fee (the "Commitment Fee") in an amount equal to the
Applicable Percentage per annum on the average daily unused amount of the
aggregate Revolving Committed Amount. For purposes hereof, Letters of Credit
shall be considered usage but Swingline Loans shall not be considered usage
under the aggregate Revolving Committed Amount. The Commitment Fee shall be
payable quarterly in arrears on the 15th day following the last day of each
calendar quarter for the prior calendar quarter.
(b) Letter of Credit Fees. In consideration of the LOC Commitments,
the Borrower agrees to pay to the Issuing Lender a fee (the "Letter of Credit
Fee") equal to the Applicable Percentage per annum on the average daily maximum
amount available to be drawn under each Letter of Credit from the date of
issuance to the date of expiration. In addition to such Letter of Credit Fee,
the Issuing Lender may charge, and retain for its own account without sharing by
the other Lenders, an additional facing fee of one-eighth of one percent (1/8%)
per annum on the average daily maximum amount available to be drawn under each
such Letter of Credit issued by it. The Issuing Lender shall promptly pay over
to the Administrative Agent for the ratable benefit of the Lenders (including
the Issuing Lender) the Letter of Credit Fee. The Letter of Credit Fee shall be
payable quarterly in arrears on the 15th day following the last day of each
calendar quarter for the prior calendar quarter.
(c) Issuing Lender Fees. In addition to the Letter of Credit Fees
payable pursuant to subsection (b) hereof, the Borrower shall pay to the Issuing
Lender for its own account without sharing by the other Lenders the reasonable
and customary charges from time to time of the Issuing Lender with respect to
the amendment, transfer, administration, cancellation and conversion of, and
drawings under, such Letters of Credit (collectively, the "Issuing Lender
Fees").
(d) Administrative Fee. The Borrower agrees to pay to the
Administrative Agent the annual administrative fee as described in the Fee
Letter.
SECTION 2.7 COMMITMENT REDUCTIONS.
(a) Voluntary Reductions. The Borrower shall have the right to
terminate or permanently reduce the unused portion of the Revolving Committed
Amount at any time or from time to time upon not less than three (3) Business
Days' prior notice to the Administrative Agent (which shall notify the Lenders
thereof as soon as practicable) of each such termination or reduction, which
notice shall specify the effective date thereof and the amount of any such
reduction which shall be in a minimum amount of $500,000 or a whole multiple of
$250,000 in excess thereof (or the remaining amount of the Loans, if less) and
shall be irrevocable and effective upon receipt by the Administrative Agent,
provided that no such reduction or termination shall be permitted if after
giving effect thereto, and to any prepayments of the Revolving Loans made on the
effective date thereof, the sum of the then outstanding aggregate principal
amount of the Revolving Loans plus Swingline Loans plus outstanding LOC
Obligations would exceed the Revolving Committed Amount; and provided further
that in the
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case of Swingline Loans made pursuant to the Sweep Plus Arrangement, prepayments
shall be in such minimum amounts, if any, provided by the Sweep Plus
Arrangement.
(b) Mandatory Reductions. On any date that the Revolving Loans are
required to be prepaid pursuant to the terms of Section 2.8(b) (ii), (iii), (iv)
and (v), the Revolving Committed Amount shall be automatically permanently
reduced by the amount of such required prepayment and/or reduction.
(c) Revolving Commitment Termination Date. The Revolving Commitment
and the LOC Commitment shall automatically terminate on the Revolving Commitment
Termination Date.
SECTION 2.8 PREPAYMENTS.
(a) Optional Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part from time to time; provided, however, that each
partial prepayment of Revolving Loans and Term Loans shall be in a minimum
principal amount of $1,000,000 and integral multiples of $250,000 in excess
thereof with respect to LIBOR Rate Loans, and $500,000 and integral multiples of
$100,000 in excess thereof with respect to Alternate Base Rate Loans, and each
prepayment of Swingline Loans shall be in a minimum principal amount of $100,000
and integral multiples of $100,000 in excess thereof. The Borrower shall give
three Business Days' irrevocable notice in the case of LIBOR Rate Loans and one
Business Day's irrevocable notice in the case of Alternate Base Rate Loans, to
the Administrative Agent (which shall notify the Lenders thereof as soon as
practicable). Subject to the foregoing terms, amounts prepaid under this Section
2.8(a) shall be applied as the Borrower may elect; provided that if the Borrower
fails to specify the application of an optional prepayment then such prepayment
shall be applied first to Revolving Loans and then pro rata to the remaining
principal installments of the Term Loans, in each case first to Alternate Base
Rate Loans and then to LIBOR Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section 2.8(a) shall be subject to
Section 2.18, but otherwise without premium or penalty. Interest on the
principal amount prepaid shall be payable on the next occurring Interest Payment
Date that would have occurred had such loan not been prepaid or, at the request
of the Administrative Agent, interest on the principal amount prepaid shall be
payable on any date that a prepayment is made hereunder through the date of
prepayment. Amounts prepaid on the Revolving Loans may be reborrowed in
accordance with the terms hereof. Amounts prepaid on the Term Loans may not be
reborrowed.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time after the
Closing Date, the sum of the aggregate principal amount of outstanding
Revolving Loans plus outstanding Swingline Loans plus outstanding LOC
Obligations shall exceed the Revolving Committed Amount, the Borrower
immediately shall prepay the Revolving Loans and (after all Revolving
Loans have been repaid) cash collateralize the LOC Obligations, in an
amount sufficient to eliminate such excess.
(ii) Asset Dispositions. Promptly following any Asset
Disposition in excess of $250,000 in any fiscal year, the Borrower shall
notify the Administrative Agent thereof
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and prepay the Loans in an aggregate amount equal to one hundred percent
(100%) of the Net Cash Proceeds derived from such Asset Disposition
(such prepayment to be applied as set forth in clause (vi) below);
provided, however, that such Net Cash Proceeds shall not be required to
be so applied to the extent the Borrower delivers to the Administrative
Agent a certificate that it intends to use such Net Cash Proceeds to
acquire fixed or capital assets in replacement of the disposed assets
within 180 days of the receipt of such Net Cash Proceeds, it being
expressly agreed that any Net Cash Proceeds not so reinvested shall be
applied to repay the Loans.
(iii) Issuances. Immediately upon receipt by any Credit Party
of proceeds from (A) any Debt Issuance, the Borrower shall notify the
Administrative Agent thereof and prepay the Loans in an aggregate amount
equal to one-hundred percent (100%) of the Net Cash Proceeds of such
Debt Issuance to the Lenders (such prepayment to be applied as set forth
in clause (vi) below) or (B) any Equity Issuance, other than an Excluded
Equity Issuance, the Borrower shall notify the Administrative Agent
thereof and prepay the Loans in an aggregate amount equal to one hundred
percent (100%) of the Net Cash Proceeds of such Equity Issuance to the
Lenders.
(iv) Recovery Event. To the extent of cash proceeds received
in connection with a Recovery Event which are not applied in accordance
with Section 6.5(a)(ii), immediately following the 180th day occurring
after the receipt by a Credit Party of such cash proceeds, the Borrower
shall notify the Administrative Agent thereof and prepay the Loans in an
aggregate amount equal to one-hundred percent (100%) of such cash
proceeds to the Lenders (such prepayment to be applied as set forth in
clause (vi) below).
(v) Excess Cash Flow. Within 90 days after the end of each
fiscal year (commencing with the fiscal year ending December 31, 2000),
the Borrower shall prepay the Loans in an amount equal to 50% of the
Excess Cash Flow earned during such prior fiscal year; provided,
however, that no prepayment shall be required pursuant to this Section
2.8(b)(v), if the Leverage Ratio shall be less than or equal to 3.25 to
1.0 as of the end of such fiscal year (such prepayment to be applied as
set forth in clause (vi) below).
(vi) Application of Mandatory Prepayments. All amounts
required to be paid pursuant to this Section 2.8(b) shall be applied
with respect to all amounts prepaid pursuant to Sections 2.8(b)(ii)
through (v), (1) first ratably to the Term Loan and the Incremental Term
Loan (ratably to the remaining principal installments thereof), and (2)
second to the Revolving Loans and (after all Revolving Loans have been
repaid) to a cash collateral account in respect of LOC Obligations.
Within the parameters of the applications set forth above, prepayments
shall be applied first to Alternate Base Rate Loans and then to LIBOR
Rate Loans in direct order of Interest Period maturities. All
prepayments under this Section 2.8(b) shall be subject to Section 2.18
and be accompanied by interest on the principal amount prepaid through
the date of prepayment.
(vii) Prepayment Account. If the Borrower is required to make
a mandatory prepayment of LIBOR Rate Loans under this Section 2.8(b),
the Borrower shall have the right, in lieu of making such prepayment in
full, to deposit an amount equal to such mandatory prepayment with the
Administrative Agent in a cash collateral account
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maintained (pursuant to documentation reasonably satisfactory to the
Administrative Agent) by and in the sole dominion and control of the
Administrative Agent. Any amounts so deposited shall be held by the
Administrative Agent as collateral for the prepayment of such LIBOR Rate
Loans and shall be applied to the prepayment of the applicable LIBOR
Rate Loans at the end of the current Interest Periods applicable
thereto. At the request of the Borrower, amounts so deposited shall be
invested by the Administrative Agent in Cash Equivalents maturing prior
to the date or dates on which it is anticipated that such amounts will
be applied to prepay such LIBOR Rate Loans; any interest earned on such
Cash Equivalents will be for the account of the Borrower and the
Borrower will deposit with the Administrative Agent the amount of any
loss on any such Cash Equivalents to the extent necessary in order that
the amount of the prepayment to be made with the deposited amounts may
not be reduced.
SECTION 2.9 MINIMUM PRINCIPAL AMOUNT OF TRANCHES.
All borrowings, payments and prepayments in respect of the Revolving
Loans and Term Loans shall be in such amounts and be made pursuant to such
elections so that after giving effect thereto the aggregate principal amount of
the Loans comprising any Tranche shall not be less than (i) with respect to
LIBOR Rate Loans, $1,000,000 or a whole multiple of $250,000 in excess thereof
and (ii) with respect to Base Rate Loans, $500,000 or a whole multiple of
$100,000 in excess thereof.
SECTION 2.10 DEFAULT RATE AND PAYMENT DATES.
Upon the occurrence, and during the continuance, of an Event of Default,
the principal of and, to the extent permitted by law, interest on the Loans and
any other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees or other amounts, then the Alternate Base Rate plus 2%).
SECTION 2.11 CONVERSION OPTIONS.
(a) The Borrower may elect from time to time to convert Alternate
Base Rate Loans to LIBOR Rate Loans, by giving the Administrative Agent
irrevocable written notice of such election not later than 11:00 a.m.
(Charlotte, North Carolina time) on the date which is three Business Days prior
to the requested date of conversion. A form of Notice of Conversion/ Extension
is attached as Schedule 2.11. If the date upon which an Alternate Base Rate Loan
is to be converted to a LIBOR Rate Loan is not a Business Day, then such
conversion shall be made on the next succeeding Business Day and during the
period from such last day of an Interest Period to such succeeding Business Day
such Loan shall bear interest as if it were an Alternate Base Rate Loan. All or
any part of outstanding Alternate Base Rate Loans may be converted as provided
herein, provided that (i) no Loan may be converted into a LIBOR Rate Loan when
any Default or Event of Default has occurred and is continuing and (ii) partial
conversions shall be in an aggregate principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof.
(b) Any LIBOR Rate Loans may be continued as such upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the notice provisions contained in Section 2.11(a); provided, that
no LIBOR Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, in which case such Loan
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shall be automatically converted to an Alternate Base Rate Loan at the end of
the applicable Interest Period with respect thereto. If the Borrower shall fail
to give timely notice of an election to continue a LIBOR Rate Loan, or the
continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR Rate
Loans shall be automatically converted to Alternate Base Rate Loans at the end
of the applicable Interest Period with respect thereto.
SECTION 2.12 COMPUTATION OF INTEREST AND FEES.
(a) Interest payable hereunder with respect to Alternate Base Rate
Loans shall be calculated on the basis of a year of 365 days (or 366 days, as
applicable) for the actual days elapsed. All other fees, interest and all other
amounts payable hereunder shall be calculated on the basis of a 360 day year for
the actual days elapsed. The Administrative Agent shall as soon as practicable
notify the Borrower and the Lenders of each determination of a LIBOR Rate on the
Business Day of the determination thereof. Any change in the interest rate on a
Loan resulting from a change in the Alternate Base Rate shall become effective
as of the opening of business on the day on which such change in the Alternate
Base Rate shall become effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the computations used by the Administrative Agent
in determining any interest rate.
SECTION 2.13 PRO RATA TREATMENT AND PAYMENTS.
(a) Each borrowing of Revolving Loans and any reduction of the
Revolving Commitments shall be made pro rata according to the respective
Commitment Percentages of the Lenders. Each payment under this Agreement or any
Note shall be applied, first, to any fees then due and owing by the Borrower
pursuant to Section 2.6, second, to interest then due and owing in respect of
the Notes and, third, to principal then due and owing hereunder and under the
Notes. Each payment on account of any fees pursuant to Section 2.6 shall be made
pro rata in accordance with the respective amounts due and owing (except as to
the portion of the Letter of Credit retained by the Issuing Lender and the
Issuing Lender Fees). Each optional prepayment on account of principal of the
Loans shall be applied to such of the Loans as the Borrower may designate (to be
applied pro rata among the Lenders); provided, that prepayments made pursuant to
Section 2.16 shall be applied in accordance with such section. Each mandatory
prepayment on account of principal of the Loans shall be applied in accordance
with Section 2.7(b). All payments (including prepayments) to be made by the
Borrower on account of principal, interest and fees shall be made without
defense, set-off or counterclaim (except as provided in Section 2.19(b)) and
shall be made to the Administrative Agent for the account of the Lenders at the
Administrative Agent's office specified on Schedule 9.2 in Dollars and in
immediately available funds not later than 1:00 P.M. (Charlotte, North Carolina
time) on the date when due. The Administrative Agent shall distribute such
payments to the Lenders entitled thereto promptly upon receipt in like funds as
received. If any payment hereunder (other than payments on the LIBOR Rate Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension. If
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any payment on a LIBOR Rate Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
(b) Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Administrative Agent or any Lender on account of the Credit Party
Obligations or any other amounts outstanding under any of the Credit Documents
or in respect of the Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of
the Administrative Agent in connection with enforcing the rights of the
Lenders under the Credit Documents and any protective advances made by
the Administrative Agent with respect to the Collateral under or
pursuant to the terms of the Security Documents;
SECOND, to payment of any fees owed to the Administrative Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of
each of the Lenders in connection with enforcing its rights under the
Credit Documents or otherwise with respect to the Credit Party
Obligations owing to such Lender;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal amount of the
Credit Party Obligations (including the payment or cash
collateralization of the outstanding LOC Obligations);
SIXTH, to all other Credit Party Obligations and other
obligations which shall have become due and payable under the Credit
Documents or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whomever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be
applied in the numerical order provided until exhausted prior to
application to the next succeeding category; (ii) each of the Lenders
shall receive an amount equal to its pro rata share (based on the
proportion that the then outstanding Loans and LOC Obligations held by
such Lender bears to the aggregate then outstanding Loans and LOC
Obligations) of amounts available to be applied pursuant to clauses
"THIRD", "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent
that any amounts available for distribution pursuant to clause "FIFTH"
above are attributable to the issued but undrawn amount of outstanding
Letters of Credit, such amounts shall be held by the Administrative
Agent in
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a cash collateral account and applied (A) first, to reimburse the
Issuing Lender from time to time for any drawings under such Letters of
Credit and (B) then, following the expiration of all Letters of Credit,
to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 2.13(b).
SECTION 2.14 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT.
(a) Unless the Administrative Agent shall have been notified in
writing by a Lender prior to the date a Loan is to be made by such Lender (which
notice shall be effective upon receipt) that such Lender does not intend to make
the proceeds of such Loan available to the Administrative Agent, the
Administrative Agent may assume that such Lender has made such proceeds
available to the Administrative Agent on such date, and the Administrative Agent
may in reliance upon such assumption (but shall not be required to) make
available to the Borrower a corresponding amount. If such corresponding amount
is not in fact made available to the Administrative Agent, the Administrative
Agent shall be able to recover such corresponding amount from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent will promptly
notify the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be
entitled to recover from the Lender or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent at a per annum rate equal to (i) from the Borrower at the
applicable rate for the applicable borrowing pursuant to the Notice of Borrowing
and (ii) from a Lender at the Federal Funds Effective Rate.
(b) Unless the Administrative Agent shall have been notified in
writing by the Borrower, prior to the date on which any payment is due from it
hereunder (which notice shall be effective upon receipt) that the Borrower does
not intend to make such payment, the Administrative Agent may assume that such
Borrower has made such payment when due, and the Administrative Agent may in
reliance upon such assumption (but shall not be required to) make available to
each Lender on such payment date an amount equal to the portion of such assumed
payment to which such Lender is entitled hereunder, and if the Borrower has not
in fact made such payment to the Administrative Agent, such Lender shall, on
demand, repay to the Administrative Agent the amount made available to such
Lender. If such amount is repaid to the Administrative Agent on a date after the
date such amount was made available to such Lender, such Lender shall pay to the
Administrative Agent on demand interest on such amount in respect of each day
from the date such amount was made available by the Administrative Agent to such
Lender to the date such amount is recovered by the Administrative Agent at a per
annum rate equal to the Federal Funds Effective Rate.
(c) A certificate of the Administrative Agent submitted to the
Borrower or any Lender with respect to any amount owing under this Section 2.14
shall be conclusive in the absence of manifest error.
SECTION 2.15 INABILITY TO DETERMINE INTEREST RATE.
Notwithstanding any other provision of this Agreement, if (i) the
Administrative Agent shall reasonably determine (which determination shall be
conclusive and binding absent manifest
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error) that, by reason of circumstances affecting the relevant market,
reasonable and adequate means do not exist for ascertaining LIBOR for such
Interest Period, or (ii) the Required Lenders shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that the
LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of
funding LIBOR Rate Loans that the Borrower has requested be outstanding as a
LIBOR Tranche during such Interest Period, the Administrative Agent shall
forthwith give telephone notice of such determination, confirmed in writing, to
the Borrower and the Lenders at least two Business Days prior to the first day
of such Interest Period. Unless the Borrower shall have notified the
Administrative Agent upon receipt of such telephone notice that it wishes to
rescind or modify its request regarding such LIBOR Rate Loans, any Loans that
were requested to be made as LIBOR Rate Loans shall be made as Alternate Base
Rate Loans and any Loans that were requested to be converted into or continued
as LIBOR Rate Loans shall be converted into Alternate Base Rate Loans. Until any
such notice has been withdrawn by the Administrative Agent, no further Loans
shall be made as, continued as, or converted into, LIBOR Rate Loans for the
Interest Periods so affected.
SECTION 2.16 ILLEGALITY.
Notwithstanding any other provision of this Agreement, if the adoption
of or any change in any Requirement of Law or in the interpretation or
application thereof by the relevant Governmental Authority to any Lender shall
make it unlawful for such Lender or its LIBOR Lending Office to make or maintain
LIBOR Rate Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Administrative Agent and
the Borrower thereof, (b) the commitment of such Lender hereunder to make LIBOR
Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended
until the Administrative Agent shall give notice that the condition or situation
which gave rise to the suspension shall no longer exist, and (c) such Lender's
Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the
last day of the Interest Period for such Loans or within such earlier period as
required by law as Alternate Base Rate Loans. The Borrower hereby agrees
promptly to pay any Lender, upon its demand, any additional amounts necessary to
compensate such Lender for actual and direct costs (but not including
anticipated profits) reasonably incurred by such Lender in making any repayment
in accordance with this Section including, but not limited to, any interest or
fees payable by such Lender to lenders of funds obtained by it in order to make
or maintain its LIBOR Rate Loans hereunder. A certificate as to any additional
amounts payable pursuant to this Section submitted by such Lender, through the
Administrative Agent, to the Borrower shall be conclusive in the absence of
manifest error. Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its LIBOR Lending Office) to avoid or to minimize
any amounts which may otherwise be payable pursuant to this Section; provided,
however, that such efforts shall not cause the imposition on such Lender of any
additional costs or legal or regulatory burdens deemed by such Lender in its
sole discretion to be material.
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SECTION 2.17 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any application
relating thereto, any LIBOR Rate Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for (A)
changes in the rate of tax on the overall net income of such Lender or
(B) any changes in or additions to the rate or basis of taxation imposed
on such Lender by either its jurisdiction or formation or the
jurisdiction in which its lending office is located);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the LIBOR Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost
to such Lender of making or maintaining LIBOR Rate Loans or the Letters
of Credit or to reduce any amount receivable hereunder or under any
Note, then, in any such case, the Borrower shall promptly pay such
Lender, upon its demand, any additional amounts necessary to compensate
such Lender for such additional cost or reduced amount receivable which
such Lender reasonably deems to be material as determined by such Lender
with respect to its LIBOR Rate Loans or Letters of Credit. A certificate
as to any additional amounts payable pursuant to this Section submitted
by such Lender, through the Administrative Agent, to the Borrower shall
be conclusive in the absence of manifest error. Each Lender agrees to
use reasonable efforts (including reasonable efforts to change its
Domestic Lending Office or LIBOR Lending Office, as the case may be) to
avoid or to minimize any amounts which might otherwise be payable
pursuant to this paragraph of this Section; provided, however, that such
efforts shall not cause the imposition on such Lender of any additional
costs or legal or regulatory burdens deemed by such Lender to be
material.
(b) If any Lender shall have reasonably determined that the adoption
of or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any central bank
or Governmental Authority made subsequent to the date hereof does or shall have
the effect of reducing the rate of return on such Lender's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which such Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by
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an amount reasonably deemed by such Lender to be material, then from time to
time, within fifteen (15) days after demand by such Lender, the Borrower shall
pay to such Lender such additional amount as shall be certified by such Lender
as being required to compensate it for such reduction. Such a certificate as to
any additional amounts payable under this Section submitted by a Lender (which
certificate shall include a description of the basis for the computation),
through the Administrative Agent, to the Borrower shall be conclusive absent
manifest error.
(c) The agreements in this Section 2.17 shall survive the
termination of this Agreement and payment of the Notes and all other amounts
payable hereunder.
SECTION 2.18 INDEMNITY.
The Borrower hereby agrees to indemnify each Lender and to hold such
Lender harmless from any funding loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in payment of the
principal amount of or interest on any Loan by such Lender in accordance with
the terms hereof, (b) default by the Borrower in accepting a borrowing after the
Borrower has given a notice in accordance with the terms hereof, (c) default by
the Borrower in making any prepayment after the Borrower has given a notice in
accordance with the terms hereof, and/or (d) the making by the Borrower of a
prepayment of a Loan, or the conversion thereof, on a day which is not the last
day of the Interest Period with respect thereto, in each case including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to maintain its Loans
hereunder. A certificate as to any additional amounts payable pursuant to this
Section submitted by any Lender, through the Administrative Agent, to the
Borrower (which certificate must be delivered to the Administrative Agent within
thirty days following such default, prepayment or conversion) shall be
conclusive in the absence of manifest error. The agreements in this Section
shall survive termination of this Agreement and payment of the Notes and all
other amounts payable hereunder.
SECTION 2.19 TAXES.
(a) All payments made by the Borrower hereunder or under any Note
will be, except as provided in Section 2.19(b), made free and clear of, and
without deduction or withholding for, any present or future taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any Governmental Authority or by any political subdivision
or taxing authority thereof or therein with respect to such payments (but
excluding any tax imposed on or measured by the net income or profits of a
Lender pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Lender is located or any subdivision thereof or therein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the
Borrower agrees to pay the full amount of such Taxes, and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement or under any Note, after withholding or deduction for or on account of
any Taxes, will not be less than the amount provided for herein or in such Note.
The Borrower will furnish to the Administrative Agent as soon as practicable
after the date the payment of any Taxes is due pursuant to applicable law
certified copies (to the extent reasonably available and required by law) of tax
receipts evidencing such payment by the Borrower. The Borrower agrees
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to indemnify and hold harmless each Lender, and reimburse such Lender upon its
written request, for the amount of any Taxes so levied or imposed and paid by
such Lender.
(b) Each Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Administrative Agent on or prior to the Closing Date, or in the case of
a Lender that is an assignee or transferee of an interest under this Agreement
pursuant to Section 9.6(d) (unless the respective Lender was already a Lender
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Lender, (i) if the Lender is a "bank" within the
meaning of Section 881(c)(3)(A) of the Code, two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying such Lender's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or
4224 as set forth in clause (i) above, or (x) a certificate substantially in the
form of Schedule 2.19 (any such certificate, a "2.19 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying such Lender's entitlement to an exemption
from United States withholding tax with respect to payments of interest to be
made under this Agreement and under any Note. In addition, each Lender agrees
that it will deliver upon the Borrower's request updated versions of the
foregoing, as applicable, whenever the previous certification has become
obsolete or inaccurate in any material respect, together with such other forms
as may be required in order to confirm or establish the entitlement of such
Lender to a continued exemption from or reduction in United States withholding
tax with respect to payments under this Agreement and any Note. Notwithstanding
anything to the contrary contained in Section 2.19(a), but subject to the
immediately succeeding sentence, (x) each Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold Taxes imposed by
the United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the account
of any Lender which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the
extent that such Lender has not provided to the Borrower U.S. Internal Revenue
Service Forms that establish a complete exemption from such deduction or
withholding and (y) the Borrower shall not be obligated pursuant to Section
2.19(a) to gross-up payments to be made to a Lender in respect of Taxes imposed
by the United States if (I) such Lender has not provided to the Borrower the
Internal Revenue Service Forms required to be provided to the Borrower pursuant
to this Section 2.19(b) or (II) in the case of a payment, other than interest,
to a Lender described in clause (ii) above, to the extent that such Forms do not
establish a complete exemption from withholding of such Taxes. Notwithstanding
anything to the contrary contained in the preceding sentence or elsewhere in
this Section 2.19, the Borrower agrees to pay additional amounts and to
indemnify each Lender in the manner set forth in Section 2.19(a) (without regard
to the identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Closing Date
in any applicable law, treaty, governmental rule, regulation, guideline or
order, or in the interpretation thereof, relating to the deducting or
withholding of Taxes.
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(c) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Domestic Lending Office or LIBOR Lending
Office, as the case may be) to avoid or to minimize any amounts which might
otherwise be payable pursuant to this Section; provided, however, that such
efforts shall not cause the imposition on such Lender of any additional costs or
legal or regulatory burdens deemed by such Lender in its sole discretion to be
material.
(d) If the Borrower pays any additional amount pursuant to this
Section 2.19 with respect to a Lender, such Lender shall use reasonable efforts
to obtain a refund of tax or credit against its tax liabilities on account of
such payment; provided that such Lender shall have no obligation to use such
reasonable efforts if either (i) it is in an excess foreign tax credit position
or (ii) it believes in good faith, in its sole discretion, that claiming a
refund or credit would cause adverse tax consequences to it. In the event that
such Lender receives such a refund or credit, such Lender shall pay to the
Borrower an amount that such Lender reasonably determines is equal to the net
tax benefit obtained by such Lender as a result of such payment by the Borrower.
In the event that no refund or credit is obtained with respect to the Borrower's
payments to such Lender pursuant to this Section 2.19, then such Lender shall
upon request provide a certification that such Lender has not received a refund
or credit for such payments. Nothing contained in this Section 2.19 shall
require a Lender to disclose or detail the basis of its calculation of the
amount of any tax benefit or any other amount or the basis of its determination
referred to in the proviso to the first sentence of this Section 2.19 to the
Borrower or any other party.
(e) The agreements in this Section 2.19 shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
SECTION 2.20 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
(a) In addition to its other obligations under Section 2.7, the
Borrower hereby agrees to protect, indemnify, pay and save each Issuing Lender
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees) that
the Issuing Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or future de jure
or de facto government or governmental authority (all such acts or omissions,
herein called "Government Acts").
(b) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of Credit
by the beneficiary thereof. The Issuing Lender shall not be responsible: (i) for
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 Letter of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply fully with conditions required in order to draw upon
a Letter of Credit; (iv) for 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) for errors in interpretation of
technical terms; (vi) for any loss or delay in the transmission or
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otherwise of any document required in order to make a drawing under a Letter of
Credit or of the proceeds thereof; and (vii) for any consequences arising from
causes beyond the control of the Issuing Lender, including, without limitation,
any Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuing Lender, under or in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such Issuing
Lender under any resulting liability to the Borrower. It is the intention of the
parties that this Agreement shall be construed and applied to protect and
indemnify the Issuing Lender against any and all risks involved in the issuance
of the Letters of Credit, all of which risks are hereby assumed by the Borrower,
including, without limitation, any and all risks of the acts or omissions,
whether rightful or wrongful, of any Government Authority. The Issuing Lender
shall not, in any way, be liable for any failure by the Issuing Lender or anyone
else to pay any drawing under any Letter of Credit as a result of any Government
Acts or any other cause beyond the control of the Issuing Lender.
(d) Nothing in this Section 2.20 is intended to limit the
reimbursement obligation of the Borrower contained in Section 2.2(d) hereof. The
obligations of the Borrower under this Section 2.20 shall survive the
termination of this Agreement. No act or omissions of any current or prior
beneficiary of a Letter of Credit shall in any way affect or impair the rights
of the Issuing Lender to enforce any right, power or benefit under this
Agreement.
(e) Notwithstanding anything to the contrary contained in this
Section 2.20, the Borrower shall have no obligation to indemnify any Issuing
Lender in respect of any liability incurred by such Issuing Lender arising out
of the gross negligence or willful misconduct of the Issuing Lender (including
action not taken by an Issuing Lender), as determined by a court of competent
jurisdiction.
SECTION 2.21 REPLACEMENT OF LENDERS.
If any Lender delivers a notice pursuant to Section 2.16, 2.17 or 2.19
(hereinafter any such Lender shall be referred to as a "Replaced Lender"), then
in such case, the Borrower may, upon at least five (5) Business Days' notice to
the Administrative Agent and such Replaced Lender, designate a replacement
lender (a "Replacement Lender") acceptable to the Administrative Agent in its
reasonable discretion, to which such Replaced Lender shall, subject to its
receipt (unless a later date for the remittance thereof shall be agreed upon by
the Borrower and the Replaced Lender) of all amounts owed to such Replaced
Lender hereunder, assign all (but not less than all) of its rights and
obligations hereunder. Upon any assignment by any Lender pursuant to this
Section 2.21 becoming effective, the Replacement Lender shall thereupon be
deemed to be a "Lender" for all purposes of this Agreement and such Replaced
Lender shall thereupon cease to be a "Lender" for all purposes of this Agreement
and shall have no further rights or obligations hereunder (other than pursuant
to Sections 2.15, 2.16, 2.17 or 9.5 while such Replaced Lender was a Lender).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, the Credit Parties hereby represent
and warrant to the Administrative Agent and to each Lender that:
SECTION 3.1 FINANCIAL CONDITION.
The balance sheets and the related statements of income and of cash
flows of the Borrower for fiscal year 1997, fiscal year 1998 and fiscal year
1999 audited by PricewaterhouseCoopers L.L.P. are complete and correct and
present fairly the financial condition of the Borrower and its Subsidiaries as
of such dates. The monthly financial statements of the Borrower for the period
beginning January 1, 2000 through the calendar month ending immediately prior to
the Closing Date are complete and correct in all material respects and present
fairly the financial condition of the Borrower and its Subsidiaries as of such
dates (provided that if the Closing Date is a date prior to the twentieth day of
any month, then such statements shall be provided for the month-end occurring
immediately prior to the last month then ended). The balance sheets and the
related statements of income and of cash flows of Simon Mattress for fiscal year
1997, fiscal year 1998 and fiscal year 1999 audited by PricewaterhouseCoopers
L.L.P. are complete and correct and present fairly the financial condition of
Simon Mattress and its Subsidiaries as of such dates. Additionally, the
company-prepared pro forma balance sheets of the Borrower and its Subsidiaries
and of Simon Mattress and its Subsidiaries and the six-year projections have
been prepared in good faith based upon reasonable assumptions. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as disclosed therein).
SECTION 3.2 NO CHANGE.
Since December 31, 1999 (and after delivery of annual audited financial
statements in accordance Section 5.1(a), from the date of the most recently
delivered annual audited financial statements) there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of the Credit Parties (a) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization, (b) has
the requisite power and authority and the legal right to own and operate all its
material property, to lease the material property it operates as lessee and to
conduct the business in which it is currently engaged, (c) is duly qualified to
conduct business and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification except to the extent that the failure to so qualify
or be in good standing could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
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SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS; NO
CONSENTS.
Each of the Borrower and the other Credit Parties has full power and
authority and the legal right to make, deliver and perform the Credit Documents
to which it is party and has taken all necessary limited liability company or
corporate action to authorize the execution, delivery and performance by it of
the Credit Documents to which it is party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery or performance of any Credit Document
by the Borrower or the other Credit Parties (other than those which have been
obtained) or with the validity or enforceability of any Credit Document against
the Borrower or the other Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which it is a party has been duly executed
and delivered on behalf of the Borrower or any other Credit Party, as the case
may be. Each Credit Document to which it is a party constitutes a legal, valid
and binding obligation of the Borrower and each other Credit Party, as the case
may be, enforceable against the Borrower or such other Credit Party, as the case
may be, in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
SECTION 3.5 NO LEGAL BAR; NO DEFAULT.
The execution, delivery and performance of the Credit Documents, the
borrowings thereunder and the use of the proceeds of the Loans will not violate
any Requirement of Law, any organizational document or any Contractual
Obligation of any Credit Party (except those as to which waivers or consents
have been obtained), and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any Requirement of Law or Contractual Obligation other than the
Liens arising under or contemplated in connection with the Credit Documents.
Neither the Borrower nor any Credit Party is in default under or with respect to
any of its Contractual Obligations in any respect which could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
SECTION 3.6 NO MATERIAL LITIGATION.
Except as set forth in Schedule 3.6, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Borrower, threatened by or against the Borrower or
any other Credit Party or against any of its or their respective properties or
revenues (a) with respect to the Credit Documents or any Loan or any of the
transactions contemplated hereby, or (b) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.7 INVESTMENT COMPANY ACT.
Neither the Borrower nor any Credit Party is an "investment company", or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
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SECTION 3.8 MARGIN REGULATIONS.
No part of the proceeds of any Loan hereunder will be used directly or
indirectly for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. The Credit
Parties taken as a group do not own "margin stock" except as identified in the
financial statements referred to in Section 3.1 and the aggregate value of all
"margin stock" owned by the Credit Parties taken as a group does not exceed 25%
of the value of their assets.
SECTION 3.9 ERISA.
Except as set forth in Schedule 3.9, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code, except to the extent that any such occurrence
or failure to comply would not reasonably be expected to have a Material Adverse
Effect. No termination of a Single Employer Plan has occurred resulting in any
liability that has remained underfunded, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period which could reasonably be expected
to have a Material Adverse Effect. The present value of all accrued benefits
under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such Plan allocable to such accrued benefits by an amount which, as determined
in accordance with GAAP, could reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any Commonly Controlled Entity is currently
subject to any liability for a complete or partial withdrawal from a
Multiemployer Plan which could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.10 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 3.10 or except for matters which, in the
aggregate, could not be reasonably expected to have a Material Adverse Effect:
(a) The facilities and properties owned, leased or operated by the
Credit Parties (the "Properties") do not contain any Materials of Environmental
Concern in amounts or concentrations which (i) constitute a violation of, or
(ii) could give rise to liability under, any Environmental Law.
(b) The Properties and all operations of the Borrower and the other
Credit Parties at the Properties are in compliance, and have in the last five
years been in compliance, in all material respects with all applicable
Environmental Laws, and there is no contamination at, under or about the
Properties or violation of any Environmental Law with respect to the Properties
or the business operated by the Borrower and the other Credit Parties (the
"Business").
(c) Neither the Borrower nor any other Credit Party has received any
written or actual notice of violation, alleged violation, non-compliance,
liability or potential liability regarding
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environmental matters or compliance with Environmental Laws with regard to any
of the Properties or the Business, nor does the Borrower nor any other Credit
Party have knowledge or reason to believe that any such notice will be received
or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could give rise to liability under any Environmental Law, nor have any
Materials of Environmental Concern been generated, treated, stored or disposed
of at, on or under any of the Properties in violation of, or in a manner that
could give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower or any other Credit Party,
threatened, under any Environmental Law to which the Borrower, or any other
Credit Party, is or will be named as a party with respect to the Properties or
the Business, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Properties or the Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Borrower, or any other Credit Party, in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could give rise to liability under Environmental
Laws.
SECTION 3.11 USE OF PROCEEDS.
The proceeds of the Loans hereunder shall be used solely by the Borrower
to (i) finance the Acquisition including the fees and expenses incurred in
connection therewith, (ii) provide for working capital, capital expenditures and
other general corporate purposes, (iii) refinance existing indebtedness, and
(iv) finance acquisitions as permitted by the terms hereof. The Letters of
Credit shall be used only as referred to in Section 2.5(a) and for or in
connection with appeal bonds, reimbursement obligations arising in connection
with surety and reclamation bonds, reinsurance, domestic or international trade
transactions and obligations not otherwise aforementioned relating to
transactions entered into by the applicable account party in the ordinary course
of business.
SECTION 3.12 SUBSIDIARIES.
Set forth on Schedule 3.12 is a complete and accurate list of all
Subsidiaries of the Credit Parties. Information on the attached Schedule
includes state of incorporation; the number of shares of each class of Capital
Stock or other equity interests outstanding; the number and percentage of
outstanding shares of each class of stock; and the number and effect, if
exercised, of all outstanding options, warrants, rights of conversion or
purchase and similar rights. The outstanding Capital Stock and other equity
interests of all such Subsidiaries are validly issued, fully paid and
non-assessable and are owned, free and clear of all Liens (other than those
arising under or contemplated in connection with the Credit Documents).
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SECTION 3.13 OWNERSHIP.
Each of the Credit Parties is the owner of, and has sufficient and legal
title to, all of its respective assets, except as may be permitted pursuant to
Section 6.14 hereof, and none of such assets is subject to any Lien other than
Permitted Liens.
SECTION 3.14 INDEBTEDNESS.
Except as otherwise permitted under Section 6.1, the Credit Parties have
no Indebtedness.
SECTION 3.15 TAXES.
Each of the Credit Parties has filed, or caused to be filed, all tax
returns (federal, state, local and foreign) required to be filed and paid (a)
all amounts of taxes shown thereon to be due (including interest and penalties)
and (b) all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP.
Neither the Borrower nor any other Credit Party is aware as of the Closing Date
of any proposed tax assessments against it or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.
SECTION 3.16 INTELLECTUAL PROPERTY.
Each of the Credit Parties owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes
("Intellectual Property") necessary for each of them to conduct its business as
currently conducted. Set forth on Schedule 3.16 is a list of all registered
Intellectual Property and all other material unregistered Intellectual Property
owned by each of the Credit Parties or that any Credit Party has the right to
use pursuant to a written license. Except as provided on Schedule 3.16, no claim
has been asserted and is pending by any Person challenging or questioning the
use of any such Intellectual Property or the validity or effectiveness of any
such Intellectual Property, nor does any Credit Party know of any such claim,
and, to the knowledge of the Credit Parties, the use of such Intellectual
Property by such Credit Party does not infringe on the rights of any Person,
except for such claims and infringements that in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Schedule 3.16 may be
updated from time to time by the Borrower to include new Intellectual Property
by giving written notice thereof to the Administrative Agent.
SECTION 3.17 SOLVENCY.
After giving effect to its rights and obligations hereunder (including
rights of contribution), the fair saleable value of each Credit Party's assets,
measured on a going concern basis, exceeds all probable liabilities, including
those to be incurred pursuant to this Agreement. None of the Credit Parties (a)
has unreasonably small capital in relation to the business in which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions contemplated by this Agreement, debts beyond
its ability to pay such debts as they become due.
SECTION 3.18 INVESTMENTS.
All Investments of each of the Credit Parties are Permitted Investments.
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SECTION 3.19 SECURITY DOCUMENTS.
The Security Documents create valid security interests in, and Liens
on, the Collateral purported to be covered thereby, which security interests and
Liens are currently (or will be, upon the filing of appropriate financing
statements in favor of First Union, as Agent for the Lenders) perfected security
interests and Liens, prior to all other Liens other than Permitted Liens.
SECTION 3.20 LOCATION OF COLLATERAL.
Set forth on Schedule 3.20(a) is a list of the Properties of the Credit
Parties with street address, county and state where located. Set forth on
Schedule 3.20(b) is a list of all locations where any tangible personal property
of the Credit Parties is located, including county and state where located.
There is no tangible personal property owned by any Domestic Subsidiary of the
Borrower or any other Credit Party which is not itself a Credit Party. Set forth
on Schedule 3.20(c) is the chief executive office and principal place of
business of each of the Credit Parties. Schedules 3.20(a), 3.20(b) and 3.20(c)
may be updated from time to time by the Borrower to include new properties or
locations by giving written notice thereof to the Administrative Agent.
SECTION 3.21 NO BURDENSOME RESTRICTIONS.
Neither the Borrower nor any other Credit Party is a party to any
agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.22 BROKERS' FEES.
Neither the Borrower nor any other Credit Party has any obligation to
any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents other than the closing and other fees payable pursuant to this
Agreement.
SECTION 3.23 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any other Credit Party as of the
Closing Date, other than as set forth in Schedule 3.23 hereto, and neither the
Borrower nor any other Credit Party (i) has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years, other
than as set forth in Schedule 3.23 hereto or (ii) has knowledge of any potential
or pending strike, walkout or work stoppage.
SECTION 3.24 ACCURACY AND COMPLETENESS OF INFORMATION.
All written information furnished by the Borrower or any other Credit
Party to the Administrative Agent or any Lender for purposes of or in connection
with this Agreement or any other Credit Document, or any transaction
contemplated hereby or thereby, including, without limitation, the items set
forth in Schedule 3.24 hereto, is or will be true and accurate in all material
respects and not incomplete by omitting to state any material fact necessary to
make such information not misleading. There is no fact now known to any Credit
Party which has, or could reasonably be expected to have, a Material Adverse
Effect which fact has not been set forth herein, in the financial statements of
the Credit Parties furnished to the Administrative
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Agent and/or the Lenders, or in any certificate, opinion or other written
statement made or furnished by the Borrower to the Administrative Agent and/or
the Lenders.
SECTION 3.25 INSURANCE.
The present insurance coverage of the Credit Parties is outlined as to
carrier, policy number, expiration date, type and amount on Schedule 3.25. The
Credit Parties maintain insurance in accordance with past practices against such
risks and in such amounts as historically in effect.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL LOANS.
This Agreement shall become effective upon, and the obligation of each
Lender to make the initial Loans on the Closing Date is subject to, the
satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Administrative Agent shall have
received (i) counterparts of this Agreement, executed by a duly authorized
officer of each party hereto, (ii) duly executed Notes for the account of each
Lender, (iii) counterparts of the Security Agreement, and the Pledge Agreement,
and the Mortgage Instruments in each case conforming to the requirements of this
Agreement and executed by duly authorized officers of the Credit Parties, and
(iv) all other Credit Documents, each in form and substance reasonably
acceptable to the Administrative Agent and the Arranger in their reasonable
discretion.
(b) Authority Documents. The Administrative Agent shall have
received the following:
(i) Organizational Documents. Copies of the limited
liability company operating agreement, articles of incorporation or
other organizational documents, as applicable, of each Credit Party
certified to be true and complete as of a recent date by the appropriate
governmental authority of the state of its organization.
(ii) Resolutions. Copies of resolutions of the managing
member (or, if required, of all members) or board of directors or
advisors of each Credit Party approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing
execution and delivery thereof, certified by an officer of such Credit
Party as of the Closing Date to be true and correct and in force and
effect as of such date.
(iii) Bylaws. A copy of the bylaws of each Credit Party, if
applicable, certified by an officer of such Credit Party as of the
Closing Date to be true and correct and in force and effect as of such
date.
(iv) Good Standing. Copies of (i) certificates of good
standing, existence or its equivalent with respect to the each Credit
Party certified as of a recent date by the appropriate governmental
authorities of the state of incorporation and each other state in which
the failure to so qualify and be in good standing could reasonably be
expected to
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have a Material Adverse Effect on the business or operations of the
Credit Parties in such state and (ii) a certificate indicating payment
of all corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each Credit
Party certified by a secretary or assistant secretary to be true and
correct as of the Closing Date.
(c) Legal Opinions of Counsel. The Administrative Agent shall have
received an opinion of (i) Kirkland & Ellis, counsel for the Credit Parties,
(ii) Baker & Hostetler, Ohio counsel to the Credit Parties, (iii) Salvo, Russell
& Fichter, Pennsylvania counsel to the Credit Parties, (iv) Greenberg, Traurig,
Florida counsel to the Credit Parties, (v) Drinker, Biddle & Shanley, New Jersey
counsel to the Credit Parties; (vi) Stein & Lubin, LLP, California counsel to
the Credit Parties and (vii) Hillis, Clark, Martin and Peterson, Washington
counsel to the Credit Parties, each of the foregoing to be dated as of the
Closing Date and addressed to the Administrative Agent and the Lenders, in form
and substance acceptable to the Administrative Agent.
(d) Personal Property Collateral. The Administrative Agent shall
have received, in form and substance satisfactory to the Administrative Agent:
(i) searches of Uniform Commercial Code ("UCC") filings in
the jurisdiction of the chief executive office of each Credit Party and
each jurisdiction where any Collateral is located or where a filing
would need to be made in order to perfect the Administrative Agent's
security interest in the Collateral, copies of the financing statements
on file in such jurisdictions and evidence that no Liens exist other
than Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Administrative Agent's
sole discretion, to perfect the Administrative Agent's security interest
in the Collateral;
(iii) duly executed consents as are necessary, in the
Administrative Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral; and
(iv) in the case of any personal property Collateral located
at premises leased by a Credit Party, such estoppel letters, consents
and waivers from the landlords on such real property as may be required
by the Administrative Agent.
(e) Real Property Collateral. The Administrative Agent shall have
received, in form and substance satisfactory to the Administrative Agent:
(i) fully executed and notarized mortgages, deeds of trust
or deeds to secure debt (each, as the same may be amended, modified,
restated or supplemented from time to time, a "Mortgage Instrument" and
collectively the "Mortgage Instruments") encumbering the fee interest in
the properties listed in Schedule 3.20(a) as properties owned by the
Credit Parties (each a "Mortgaged Property" and collectively the
"Mortgaged Properties");
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(ii) a title report obtained by the Credit Parties in respect
of each of the Mortgaged Properties;
(iii) With respect to each Mortgaged Property, an ALTA
mortgagee title insurance policies issued by Chicago Title Insurance
Company (the "Mortgage Policies"), in amounts not less than the
respective amounts designated in Schedule 3.20(a) with respect to any
particular Mortgaged Property, assuring the Agent that each of the
Mortgage Instruments creates a valid and enforceable first priority
mortgage lien on the applicable Mortgaged Property, free and clear of
all defects and encumbrances except Permitted Liens, which Mortgage
Policies shall be in form and substance reasonably satisfactory to the
Agent and shall provide for affirmative insurance and such reinsurance
as the Agent may reasonably request, all of the foregoing in form and
substance reasonably satisfactory to the Agent;
(iv) evidence as to (A) whether any Mortgaged Property is in
an area designated by the Federal Emergency Management Agency as having
special flood or mud slide hazards (a "Flood Hazard Property") and (B)
if any Mortgaged Property is a Flood Hazard Property, (1) whether the
community in which such Mortgaged Property is located is participating
in the National Flood Insurance Program, (2) the applicable Credit
Party's written acknowledgment of receipt of written notification from
the Agent (a) as to the fact that such Mortgaged Property is a Flood
Hazard Property and (b) as to whether the community in which each such
Flood Hazard Property is located is participating in the National Flood
Insurance Program and (3) copies of insurance policies or certificates
of insurance of the Borrowers and their Subsidiaries evidencing flood
insurance reasonably satisfactory to the Agent and naming the Agent as
sole loss payee on behalf of the Lenders; and
(v) maps or plats of an as-built survey of the sites of the
Mortgaged Properties certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
satisfactory to each of the Agent and the Title Insurance Company by an
independent professional licensed land surveyor reasonably satisfactory
to each of the Agent and the Title Insurance Company, which maps or
plats and the surveys on which they are based shall be sufficient to
delete any standard printed survey exception contained in the applicable
title policy and be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by
the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of
the foregoing, there shall be surveyed and shown on such maps, plats or
surveys the following: (A) the locations on such sites of all the
buildings, structures and other improvements and the established
building setback lines; (B) the lines of streets abutting the sites and
width thereof; (C) all access and other easements appurtenant to the
sites necessary to use the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a
physical inspection of the sites or otherwise known to the surveyor; (E)
any encroachments on any adjoining property by the building structures
and improvements on the sites; and (F) if the site is described as being
on a filed map, a legend relating the survey to said map;
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(f) Liability and Casualty Insurance. The Administrative Agent shall
have received copies of insurance policies or certificates of insurance
evidencing liability and casualty insurance meeting the requirements set forth
herein or in the Security Documents. The Administrative Agent shall be named as
loss payee and additional insured on all such insurance policies for the benefit
of the Lenders.
(g) Fees. The Administrative Agent shall have received all fees, if
any, owing pursuant to the Fee Letter and Section 2.6.
(h) Litigation. There shall not exist any pending litigation,
investigation, injunction, order or claim affecting or relating to the Borrower,
any other Credit Party, this Agreement or the other Credit Documents that in the
reasonable judgment of the Administrative Agent could materially adversely
affect on such Person, this Agreement or the other Credit Documents, that has
not been settled, dismissed, vacated, discharged or terminated prior to the
Closing Date.
(i) Solvency Evidence. The Administrative Agent shall have received
an officer's certificate for each Credit Party prepared by the chief financial
officer of each such Credit Party as to the financial condition, solvency and
related matters of each such Credit Party, in each case after giving effect to
the initial borrowings under the Credit Documents, in substantially the form of
Schedule 4.1(i) hereto.
(j) Account Designation Letter. The Administrative Agent shall have
received the executed Account Designation Letter in the form of Schedule 1.1(a)
hereto.
(k) Ownership Structure. The capital and ownership structure of the
Credit Parties (after giving effect to the transactions contemplated hereby)
shall be as described in Schedule 3.12. The Administrative Agent shall be
satisfied with management structure, legal structure, voting control, liquidity,
total leverage and total capitalization of the Borrower as of the Closing Date.
(l) Consents. The Administrative Agent shall have received evidence
that all governmental, shareholder and material third party consents (including
the Serta Consents) and approvals necessary in connection with the financings
and other transactions contemplated hereby have been obtained and all applicable
waiting periods have expired without any action being taken by any authority or
third party that could restrain, prevent or impose any material adverse
conditions on such transactions or that could seek or threaten any of the
foregoing.
(m) Compliance with Laws. The financings and other transactions
contemplated hereby shall be in compliance with all applicable laws and
regulations (including all applicable securities and banking laws, rules and
regulations).
(n) Bankruptcy. There shall be no bankruptcy or insolvency
proceedings with respect to any Credit Party or any of its Subsidiaries.
(o) Material Adverse Effect. No material adverse change shall have
occurred since December 31, 1999 in the business, properties, operations,
conditions (financial or otherwise) or prospects of the Credit Parties taken as
a whole.
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(p) Financial Statements. The Administrative Agent shall have
received copies of all of the financial statements referred to in Section 3.1,
each in form and substance satisfactory to it.
(q) Due Diligence. The Administrative Agent and the Arranger shall
have completed, in form and scope satisfactory thereto, their due diligence on
the Credit Parties.
(r) Environmental Reports. The Administrative Agent shall have
received satisfactory environmental reviews of all real property owned by the
Credit Parties.
(s) Termination of Existing Indebtedness. All existing Indebtedness
for borrowed money of the Credit Parties (other than the Indebtedness listed on
Schedule 6.1(b)) shall have been repaid in full and all Liens relating thereto
terminated.
(t) Officer's Certificates. The Administrative Agent shall have
received a certificate or certificates executed by a responsible officer of the
Borrower as of the Closing Date stating that (i) no action, suit, investigation
or proceeding is pending or, to the knowledge of any Credit Party, threatened in
any court or before any arbitrator or governmental instrumentality that purports
to affect any Credit Party or any transaction contemplated by the Credit
Documents, if such action, suit, investigation or proceeding could reasonably be
expected to have a Material Adverse Effect and (ii) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (A) no Default or Event
of Default exists, (B) all representations and warranties contained herein and
in the other Credit Documents are true and correct in all material respects, and
(C) the Credit Parties are in compliance with each of the financial covenants
set forth in Section 5.9.
(u) Acquisition and Acquisition Documents. The Acquisition shall
have been consummated in accordance with the terms of the documentation related
thereto. There shall not have been any material modification, amendment,
supplement or waiver to the Acquisition Documents without the prior written
consent of the Administrative Agent, including, but not limited to, any
modification, amendment, supplement or waiver relating to the amount or type of
consideration to be paid in connection with the Acquisition and the contents of
all disclosure schedules and exhibits, and the Acquisition shall have been
consummated in accordance with the terms of the Acquisition Documents (without
waiver of any material conditions precedent to the obligations of the buyer
thereunder). The Administrative Agent shall have received final copies of the
Acquisition Documents, together with all exhibits and schedules thereto,
certified by an officer of the Borrower.
(v) Financial Covenant Compliance Certificate. The Administrative
Agent shall have received a certificate in substantially the form of Schedule
4.1(w) executed by a responsible officer of the Borrower as of the Closing Date
demonstrating pro forma compliance with (i) the financial covenants set forth in
Section 5.9 as if the Acquisition had occurred on the first day of the four
fiscal quarter period most recently ended prior to the Closing Date and (ii) the
indebtedness incurrence tests set forth in Section 1008 of the Indenture and
Section 6.1(b) of the Subordinated Credit Agreement after giving effect to the
incurrence of the Credit Party Obligations.
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(w) Minimum EBITDA/Maximum Total Funded Debt. The Administrative
Agent shall have received evidence reasonably satisfactory to it that:
(i) Consolidated EBITDA before giving effect to the
Acquisition for the Borrower and its Subsidiaries on a consolidated
basis, for the twelve consecutive calendar month period ending with the
last calendar month immediately preceding the Closing Date, shall have
been not less than $33,300,000 (provided, that if the Closing Date shall
occur prior to the twentieth day of any month, then such determination
shall be made using the month-end occurring immediately prior to the
last month then ended);
(ii) minimum pro forma adjusted EBITDA of Simon Mattress and
its Subsidiaries (as determined by the Administrative Agent) for the
fiscal year ended December 31, 1999 shall not be less than $5,850,000;
and
(iii) Total Funded Debt of the Borrower and its Subsidiaries
on a consolidated basis on the Closing Date, after giving effect to the
Acquisition on a pro forma basis, shall not exceed $215,000,000 (of
which, the total amount of Indebtedness (including Letters of Credit
issued and outstanding) loaned by banks shall not exceed $80,000,000).
(x) No Default. On the Closing Date, no Default or Event of Default
shall have occurred, be continuing or result under any material contract or
agreement of the Borrower, including without limitation, the bond financing
documentation of the Borrower.
(y) No Conflict with Subordinated Notes, etc. The Administrative
Agent shall have received evidence to its satisfaction that the transactions
contemplated hereunder, under the Acquisition Documents and under the other
Credit Documents do not conflict with and will not cause a default or event of
default under any of the Subordinated Credit Agreement, the Indenture, the Adam
Wuest Bond Indenture and the PBBC Bond Indenture.
(z) Additional Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Administrative Agent and
its counsel.
SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender to make any Extension of Credit hereunder
is subject to the satisfaction of the following conditions precedent on the date
of making such Extension of Credit:
(a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein, in the Security Documents or which
are contained in any certificate furnished at any time under or in connection
herewith and taking into account any amendments to the Schedules or Exhibits
hereto, except as such relate explicitly to an earlier date, shall be true and
correct in all material respects on and as of the date of such Extension of
Credit as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect to the
Extension of Credit to be
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made on such date unless such Default or Event of Default shall have been waived
in accordance with this Agreement.
(c) Compliance with Commitments. Immediately after giving effect to
the making of any such Extension of Credit (and the application of the proceeds
thereof), (i) the sum of the aggregate principal amount of outstanding Revolving
Loans plus outstanding LOC Obligations shall not exceed the Revolving Committed
Amount and (ii) the outstanding LOC Obligations shall not exceed the LOC
Committed Amount.
(d) Additional Conditions to Revolving Loans. If such Loan is made
pursuant to Section 2.1, all conditions set forth in such Section shall have
been satisfied.
(e) Additional Conditions to Term Loans. If such Loan is made
pursuant to Section 2.2, all conditions set forth in such Section shall have
been satisfied.
(f) Additional Conditions to Incremental Term Loans. If such Loan is
made pursuant to Section 2.3, all conditions set forth in such Section shall
have been satisfied.
(g) Additional Conditions to Swingline Loans. If such Extension of
Credit is made pursuant to Section 2.4, all conditions set forth in such Section
shall have been satisfied.
(h) Additional Conditions to Letters of Credit. If such Extension of
Credit is made pursuant to Section 2.5, all conditions set forth in such Section
shall have been satisfied.
Each request for an Extension of Credit and each acceptance by the
Borrower of any such Extension of Credit shall be deemed to constitute a
representation and warranty by the Borrower as of the date of such Extension of
Credit that the applicable conditions in paragraphs (a) through (f) of this
Section have been satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
The Credit Parties hereby covenant and agree that on the Closing Date,
and thereafter for so long as this Agreement is in effect and until the
Commitments have terminated, no Note remains outstanding and unpaid and the
Credit Party Obligations, together with interest, Commitment Fees and all other
amounts then due and owing to the Administrative Agent or any Lender hereunder,
are paid in full, the Credit Parties shall, and shall cause each of their
Subsidiaries (other than in the case of Sections 5.1, 5.2 or 5.7 hereof), to:
SECTION 5.1 FINANCIAL STATEMENTS.
Furnish to the Administrative Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but in any
event within ninety (90) days after the end of each fiscal year of the Borrower,
a copy of the consolidated and consolidating balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income and retained earnings and of
cash flows of the Borrower and its consolidated Subsidiaries for such year, and
a
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copy of the company-prepared balance sheet of the Parent as at the end of such
fiscal year and the related statements of income and retained earnings and of
cash flows of the Parent for such year, in the case of the statements of the
Borrower and its consolidated Subsidiaries only, audited by a firm of
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Required Lenders, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification indicating that
the scope of the audit was inadequate to permit such independent certified
public accountants to certify such financial statements without such
qualification;
(b) Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each of the fiscal quarters
of the Borrower (other than at the end of a fiscal year, in which case 90 days
after the end thereof), a company-prepared consolidated balance sheet and a
company-prepared consolidating balance sheet of the Borrower and its
consolidated Subsidiaries and a company-prepared balance sheet of the Parent as
at the end of such period and related company-prepared statements of income and
retained earnings and of cash flows for the Borrower and its consolidated
Subsidiaries and the Parent, respectively, for such quarterly period and for the
portion of the fiscal year ending with such period, in each case, setting forth
in comparative form consolidated and consolidating (in the case of the Borrower
and its Subsidiaries) figures for the corresponding period or periods of the
preceding fiscal year (subject to normal recurring year-end audit adjustments);
(c) Monthly Financial Statements. As soon as available and in any
event within thirty (30) days after the end of each month (other than (i) at the
end of a fiscal quarter, in which case 45 days after the end thereof and (ii) at
the end of a fiscal year, in which case 90 days after the end thereof), a
company-prepared consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such period and related company-prepared
statements of income and retained earnings and of cash flows for the Borrower
and its consolidated Subsidiaries for such monthly period and for the portion of
the fiscal year ending with such period, in each case setting forth in
comparative form consolidated and consolidating figures for the corresponding
period or periods of the preceding fiscal year (subject to normal recurring
year-end audit adjustments and the absence of footnotes); and
(d) Annual Budget Plan. As soon as available, but in any event
within thirty (30) days after the end of each fiscal year, a copy of the
detailed annual budget or plan of the Borrower for the next fiscal year on a
month-by-month basis, in form and detail reasonably acceptable to the
Administrative Agent and the Required Lenders, together with a summary of the
material assumptions made in the preparation of such annual budget or plan;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments and, with respect to the monthly financial
statements, the absence of footnotes) and to be prepared in reasonable detail
and, in the case of the annual and quarterly financial statements provided in
accordance with subsections (a) and (b) above, in accordance with GAAP applied
consistently throughout the periods reflected therein and further accompanied by
a description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
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SECTION 5.2 CERTIFICATES; OTHER INFORMATION.
Furnish to the Administrative Agent and each of the Lenders:
(a) concurrently with the delivery of the financial statements of
the Borrower referred to in Section 5.1(a) above, a certificate of the
independent certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements of
the Borrower referred to in Sections 5.1(a), 5.1(b) and 5.1(c) above, a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, each of the Credit Parties during such period
observed or performed in all material respects all of its covenants and other
agreements, and satisfied in all material respects every condition, contained in
this Agreement to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate and such certificate shall include
(except in the case of those statements delivered only pursuant to Section
5.1(c)) the calculations in reasonable detail required to indicate compliance
with Section 5.9 as of the last day of such period;
(c) promptly after the same are sent, copies of all reports (other
than those otherwise provided pursuant to Section 5.1 and those which are of a
promotional nature) and other financial information which the Borrower sends to
its members, and within thirty days after the same are filed, copies of all
financial statements and non-confidential reports which the Borrower may make
to, or file with the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) within ninety (90) days after the end of each fiscal year of the
Borrower, a certificate containing information regarding the amount of all Asset
Dispositions, Debt Issuances, and Equity Issuances that were made during the
prior fiscal year and a calculation of Excess Cash Flow and amounts received in
connection with any Recovery Event during the prior fiscal year;
(e) promptly upon receipt thereof, a copy of any other report or
"management letter" submitted by independent accountants to the Borrower or any
other Credit Party in connection with any annual, interim or special audit of
the books of such Person;
(f) within ninety (90) days after the end of each fiscal year of the
Borrower a certificate signed by the chief financial officer of each Borrower
that summarizes the insurance policies, including, without limitation, key-man
life insurance, if requested by the Administrative Agent, carried by the
Borrower and each Subsidiary of the Borrower (such certificate to be in form and
substance reasonably satisfactory to Administrative Agent), and written
notification 30 days prior to any cancellation or material change of any such
insurance by the Borrower or any Subsidiary, as the case may be, within 10 days
after receipt of any notice (whether formal or informal) of cancellation,
reduction in coverage, shortening of policy period or material adverse change by
any of such Person's insurers;
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(g) within ten (10) Business Days after each anniversary of the
Closing Date, a complete list of the officers and directors (or members of the
board of advisors or other similar governing body) of the Borrower, and within
fifteen (15) Business Days after any change in the information provided pursuant
to the foregoing clause, written notice of such change;
(h) within thirty (30) days after the filing thereof, copies of all
income tax returns filed by the Parent with any Federal or state taxing
authority and within thirty (30) days after receipt thereof by the Borrower,
evidence of payment of property taxes by the Borrower; and
(i) promptly, such additional financial and other information
regarding the business, properties, prospects or financial condition of the
Borrower as the Administrative Agent, on behalf of any Lender, may from time to
time reasonably request.
SECTION 5.3 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, in accordance with industry and
historical company practice (subject, where applicable, to specified grace
periods) all its material obligations (including, without limitation, all taxes)
of whatever nature and any additional costs that are imposed as a result of any
failure to so pay, discharge or otherwise satisfy such obligations, except when
the amount or validity of such obligations and costs is currently being
contested in good faith by appropriate proceedings and reserves, if applicable,
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or any other Credit Party, as the case may be.
SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Continue to engage in business of the same general type as now conducted
by it on the Closing Date and preserve, renew and keep in full force and effect
its existence as a corporation or limited liability company, as applicable, and
take all reasonable action to maintain all rights, privileges and franchises
material to its business; comply with all Contractual Obligations and
Requirements of Law applicable to it except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Maintain all material property in good working order and
condition (ordinary wear and tear and obsolescence excepted) and in accordance
with past practices;
(b) (i) Maintain such insurance as may be required by law, by the
Security Documents or otherwise by the Required Lenders, all to such extent and
against such hazards and liabilities, as is maintained by such Person on the
Closing Date, (ii) maintain a sufficient amount of insurance so that no Credit
Party and no Subsidiary of any Credit Party nor the Administrative Agent or any
Lender will be considered a co-insurer or co-insurers, (iii) with respect to
each liability insurance policy, (A) cause such policy to provide, pursuant to
endorsements in form and substance reasonably satisfactory to the Administrative
Agent, that the Administrative Agent and "Lenders" are identified as additional
insureds and (B) notify the Administrative Agent within five (5) days after
obtaining any new policy, or increasing coverage under any existing policy,
describing in detail in such notice any such new policy or increase, and (iv)
with respect to each physical damage or casualty policy and each life insurance
policy,
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(A) cause such policy to provide, pursuant to endorsements in form and substance
reasonably satisfactory to the Administrative Agent, that Administrative Agent
is named as a loss payee as to personal property and a mortgagee as to real
property, (B) cause such policy to provide, pursuant to endorsements in form and
substance satisfactory to the Administrative Agent, that the insurance shall not
be invalidated as against the Administrative Agent or any Lender by any action
or inaction of such Person other than the Administrative Agent or such Lender,
regardless of any breach or violation of any warranty, declaration or condition
contained in such policy, (C) as against the Administrative Agent and Lenders,
the insurers shall waive any rights of subrogation to the extent that the named
insured has waived such rights (and each Credit Party hereby irrevocably and
unconditionally waives any right of subrogation against the Administrative Agent
and Lenders, except for claims arising out of the gross negligence or willful
misconduct of the Administrative Agent or Lenders), and (D) notify the
Administrative Agent within five (5) days of obtaining any new policy or
increasing coverage under any existing policy, describing in detail in such
notice any such new policy or increase.
(c) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Administrative Agent generally
describing the nature and extent of such damage or destruction. In case of any
loss, damage to or destruction of the Collateral of any Credit Party or any part
thereof, such Credit Party, whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be sufficient for that
purpose, at such Credit Party's cost and expense, will promptly repair or
replace the Collateral (or similar assets or property in replacement thereof) of
such Credit Party so lost, damaged or destroyed.
SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of records and account containing entries correct in
all material respects and in conformity with GAAP and all material Requirements
of Law concerning all dealings and transactions in relation to its businesses
and activities, and permit, during regular business hours and upon reasonable
notice by the Administrative Agent or any Lender, the Administrative Agent or
any Lender to visit and inspect any of its properties and examine and make
abstracts from any of its books and records (other than materials protected by
the attorney-client privilege and materials which the Borrower may not disclose
without violation of a confidentiality obligation binding upon it) at any
reasonable time and as often as may reasonably be desired, and to discuss the
business, operations, properties and financial and other condition of the Credit
Parties with officers and employees of the Credit Parties and with its
independent certified public accountants; provided, however, that so long as no
Default or Event of Default shall have occurred or be continuing, there shall be
not more than one visit to or inspection of the properties of the Credit Parties
per fiscal quarter of the Borrower.
SECTION 5.7 NOTICES.
Give notice in writing to the Administrative Agent (which shall promptly
transmit such notice to each Lender) of:
(a) promptly, but in any event within two (2) Business Days after
the Borrower knows or has reason to know thereof, the occurrence of any Default
or Event of Default;
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(b) promptly, any default or event of default under any Contractual
Obligation of any Credit Party which could reasonably be expected to have a
Material Adverse Effect;
(c) promptly, any litigation, or any investigation or proceeding
(including, without limitation, any governmental or environmental proceeding)
known to the Borrower, affecting any Credit Party which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within thirty (30) days
after the Borrower knows or has reason to know thereof: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any Plan, a failure
to make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC (other than a Permitted Lien) or a Plan or any withdrawal from, or
the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii)
the institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and
(e) promptly, any other development or event which could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement
of a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower proposes to take with respect
thereto. In the case of any notice of a Default or Event of Default, the
Borrower shall specify that such notice is a Default or Event of Default notice
on the face thereof.
SECTION 5.8 ENVIRONMENTAL LAWS.
(a) Comply in all material respects with, and ensure compliance in
all material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws and obtain and comply in all material respects
with and maintain, and ensure that all tenants and subtenants obtain and comply
in all material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings or the pendency of such proceedings could not reasonably
be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative Agent and
the Lenders, and their respective employees, agents, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Borrower or any of its Subsidiaries or the
Properties, or any
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orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this paragraph shall survive repayment of the Notes and all
other amounts payable hereunder.
SECTION 5.9 FINANCIAL COVENANTS.
Commencing on the day immediately following the Closing Date, the
Borrower and its Subsidiaries shall comply with the following financial
covenants:
(a) Leverage Ratio. The Leverage Ratio, as of the last day of each
fiscal quarter occurring during the periods indicated below, shall be less than
or equal to the following:
Period Ratio
------ -----
Closing Date through and including December 31, 2000 5.75 to 1.0
January 1, 2001 through and including June 30, 2001 5.25 to 1.0
July 1, 2001 through and including September 30, 2001 5.00 to 1.0
October 1, 2001 through and including December 31, 2001 4.75 to 1.0
January 1, 2002 through and including December 31, 2002 4.00 to 1.0
January 1, 2003 and thereafter 3.75 to 1.0
(b) Interest Coverage Ratio. The Interest Coverage Ratio, as of the
last day of each fiscal quarter occurring during the periods indicated below,
shall be greater than or equal to the following:
Period Ratio
------ -----
Closing Date through and including December 31, 2000 1.80 to 1.0
January 1, 2001 through and including June 30, 2001 1.90 to 1.0
July 1, 2001 through and including December 31, 2001 2.00 to 1.0
January 1, 2002 through and including December 31, 2002 2.25 to 1.0
January 1, 2003 and thereafter 2.75 to 1.0
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(c) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as
of the last day of each fiscal quarter occurring during the periods set forth
below, shall be greater than or equal to the following:
Period Ratio
------ -----
Closing Date through and including December 31, 2000 1.05 to 1.0
January 1, 2001 through and including December 31, 2002 1.10 to 1.0
January 1, 2003 through and including December 31, 2003 1.15 to 1.0
January 1, 2004 and thereafter 1.20 to 1.0
(d) Consolidated Net Worth. Consolidated Net Worth as of the last
day of each month shall be greater than or equal to (i) 80% of the Consolidated
Net Worth as of the Closing Date, plus (ii) 50% of positive Consolidated Net
Income following the Closing Date, plus (iii) 100% of Equity Issuances on or
following the Closing Date.
(e) Senior Leverage Ratio. The Senior Leverage Ratio, as of the last
day of each fiscal quarter occurring during the periods indicated below, shall
be less than or equal to the following:
Period Ratio
------ -----
Closing Date through and including December 31, 2000 2.50 to 1.0
January 1, 2001 through and including June 30, 2001 2.25 to 1.0
July 1, 2001 and thereafter 2.00 to 1.0
(f) Consolidated Capital Expenditures.
(i) Consolidated Capital Expenditures as of the end of any
fiscal year of the Borrower shall not exceed $6,000,000 in the aggregate
during such fiscal year; provided, however, that 50% of any amounts not
utilized during any fiscal year may be carried forward to the
immediately following fiscal year only.
(ii) Expansion capital expenditures (as excluded in clause
(ii) of the definition of Consolidated Capital Expenditures) shall not
exceed $10,000,000 in the aggregate (as demonstrated on a quarterly
basis in the compliance certificate delivered pursuant to Section 5.2(b)
which shall detail the amount of such expenditures made as of such
quarter-end date) during the term of this Agreement.
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(g) Minimum Consolidated EBITDA. Consolidated EBITDA, as of the last
day of each fiscal quarter occurring during the periods indicated below, shall
not be less than the following:
Period Amount
------ ------
Closing Date through and including September 30, 2000 $35,500,000
October 1, 2000 through and including December 31, 2000 $36,000,000
January 1, 2001 through and including March 31, 2001 $38,000,000
April 1, 2001 through and including December 31, 2001 $38,500,000
January 1, 2002 through and including March 31, 2002 $39,000,000
April 1, 2002 through and including September 30, 2002 $42,000,000
October 1, 2002 through and including December 31, 2003 $46,000,000
January 1, 2004 through and including December 31, 2004 $48,000,000
January 1, 2005 and thereafter $50,000,000
SECTION 5.10 ADDITIONAL SUBSIDIARY GUARANTORS.
The Credit Parties will cause each of their Domestic Subsidiaries,
whether newly formed, after acquired or otherwise existing, to promptly become a
Guarantor hereunder by way of execution of a Joinder Agreement. The guaranty
obligations of any such Additional Credit Party shall be secured by, among other
things, the Collateral of the Additional Credit Party.
SECTION 5.11 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
property (including, without limitation, all ERISA laws and regulations) except
to the extent that noncompliance with any such law, rule, regulation, order or
restriction could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.12 PLEDGED ASSETS.
(a) Each Credit Party will be, and will cause each of its
Subsidiaries to be, subject at all times to a first priority, perfected Lien
with respect to all of such Credit Party's property and assets (subject in each
case to Permitted Liens and excluding assets in the nature of stock of Serta
Inc. to the extent the same is prohibited from being pledged or assigned) in
favor of the Administrative Agent pursuant to the terms and conditions of the
Security Documents or such other security documents as the Administrative Agent
shall reasonably request. Each Credit Party shall, and shall cause each of its
Subsidiaries to, adhere to the covenants regarding the location of personal
property as set forth in the Security Documents.
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(b) Each Credit Party shall, and shall cause each of its
Subsidiaries to, take such action at its own expense as requested by the Agent
(including, without limitation, any of the actions described in Section 4.1(d)
or (e) hereof) to ensure that the Agent has a first priority perfected Lien to
secure the Credit Party Obligations in (i) all personal property of the Credit
Parties located in the United States, (ii) all real property of the Credit
Parties located in the United States and (iii) to the extent deemed to be
material by the Agent or the Required Lenders in its or their sole reasonable
discretion, all other personal and real property of the Credit Parties, subject
in each case only to Permitted Liens.
SECTION 5.13 FURTHER ASSURANCES.
(a) As soon as practicable, but in any event within 60 days
following the Closing Date, the Borrower shall have used its commercially
reasonable best efforts to provide to the Administrative Agent, in form and
substance satisfactory to the Administrative Agent, the following:
(i) fully executed and notarized leasehold Mortgage
Instruments encumbering the leasehold interests in the manufacturing
facility located at 2001 Lower Road, Linden, New Jersey 07036 and the
manufacturing facility located at 94-134 Leowaena St., Waipahu, Hawaii
96797;
(ii) such estoppel letters, consents, subordinations and
waivers from the landlords (and any lenders or other Persons having a
lien on or security interest in such landlords' interest) on such real
property as may be required by the Administrative Agent; and
(iii) evidence that the applicable lease, a memorandum of
lease with respect thereto, or other evidence of such lease in form and
substance reasonably satisfactory to the Administrative Agent, has been
or will be recorded in all places to the extent necessary or desirable,
in the reasonable judgment of the Administrative Agent, so as to enable
the Mortgage Instrument encumbering such leasehold interest to
effectively create a valid and enforceable first priority lien (subject
to Permitted Liens) on such leasehold interest in favor of the
Administrative Agent (or such other Person as may be required or desired
under local law) for the benefit of the Lenders.
ARTICLE VI
NEGATIVE COVENANTS
The Credit Parties hereby covenant and agree that on the Closing Date,
and thereafter for so long as this Agreement is in effect and until the
Commitments have terminated, no Note remains outstanding and unpaid and the
Credit Party Obligations, together with interest, Commitment Fees and all other
amounts then due and owing to the Administrative Agent or any Lender hereunder,
are paid in full that:
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SECTION 6.1 INDEBTEDNESS.
The Credit Parties will not, nor will they permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement and the
other Credit Documents;
(b) Indebtedness of the Credit Parties existing as of or incurred on
the Closing Date and described on Schedule 6.1(b) and renewals, refinancings or
extensions thereof in a principal amount not in excess of that outstanding as of
the date of such renewal, refinancing or extension;
(c) Indebtedness of the Borrower and its Subsidiaries incurred after
the Closing Date consisting of Capital Leases or Indebtedness incurred to
provide all or a portion of the purchase price or cost of construction of an
asset provided that (i) such Indebtedness when incurred shall not exceed the
purchase price or cost of construction of such asset; (ii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing; and (iii) the total amount
of all such Indebtedness shall not exceed $1,500,000 at any time outstanding;
(d) Unsecured intercompany Indebtedness (i) among the Credit Parties
and (ii) between the Borrower and Star Bedding Products Limited, provided that
any such Indebtedness shall be fully subordinated to the Credit Party
Obligations hereunder on terms reasonably satisfactory to the Administrative
Agent;
(e) Indebtedness and obligations owing under Hedging Agreements
relating to the Loans hereunder and other Hedging Agreements entered into in
order to manage existing or anticipated interest rate, exchange rate or
commodity price risks and not for speculative purposes;
(f) Indebtedness and obligations of Credit Parties owing under
documentary letters of credit for the purchase of goods or other merchandise
generally (but not under standby, direct pay or other letters of credit except
for the Letters of Credit hereunder);
(g) Indebtedness of the Credit Parties in respect of the
Subordinated Notes in an aggregate amount not to exceed $115,000,000;
(h) Indebtedness in respect of judgment liens not resulting in an
Event of Default pursuant to Section 7.1(f);
(i) Indebtedness in respect of trade payables incurred in the
ordinary course of business;
(j) Unsecured Indebtedness owing in respect of the performance bonus
in favor of Cecil Brauer pursuant to Section 2(c)(ii) of that certain Employment
Agreement dated as of May 18, 1999 by and among Star Bedding Products Limited,
Cecil Brauer and the Borrower;
(k) Indebtedness in respect of the PIK Subordinated Debt;
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(l) installment notes (to the extent the same could be considered
Indebtedness) from the Borrower and each of its Subsidiaries to Serta, Inc. in
connection with the Serta Licenses issued in the ordinary course of business;
and
(m) other Indebtedness of the Borrower and its Subsidiaries which
does not exceed $1,500,000 in the aggregate at any time outstanding.
SECTION 6.2 LIENS.
The Credit Parties will not, nor will they permit any Subsidiary to,
contract, create, incur, assume or permit to exist any Lien with respect to any
of its property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
SECTION 6.3 GUARANTY OBLIGATIONS.
The Credit Parties will not, nor will they permit any Subsidiary to,
enter into or otherwise become or be liable in respect of any Guaranty
Obligations (excluding specifically therefrom endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) other
than (i) those in favor of the Lenders in connection herewith, (ii) Guaranty
Obligations of Indebtedness permitted under Section 6.1(g) and (iii) Guaranty
Obligations set forth on Schedule 6.3.
SECTION 6.4 NATURE OF BUSINESS.
The Credit Parties will not, nor will they permit any Subsidiary to,
alter the character of its business in any material respect from that conducted
as of the Closing Date other than logical extensions thereof.
SECTION 6.5 CONSOLIDATION, MERGER, SALE OF ASSETS, PERMITTED ACQUISITIONS, ETC.
The Credit Parties will not, nor will they permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell, transfer,
lease or otherwise voluntarily dispose of its property or assets or agree to do
so at a future time except the following, without duplication, shall be
expressly permitted:
(i) Specified Sales; and
(ii) the sale, transfer, lease or other disposition of
property or assets (a) to an unrelated party not in the ordinary course
of business (other than Specified Sales), where and to the extent that
they are the result of a Casualty Event or (b) the sale, lease, transfer
or other disposition of machinery, parts and equipment no longer used or
useful in the conduct of the business of such Credit Party or any of its
Subsidiaries, as appropriate, in its reasonable discretion, so long as
and the net proceeds therefrom are used to repair, replace or relocate
damaged property or to purchase or otherwise acquire new assets or
property;
(iii) the sale, lease or transfer of property or assets (at
fair value) between the Borrower and any Guarantor;
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(iv) the sale, lease or transfer of property or assets (at
fair value) from a Credit Party other than the Borrower to another
Credit Party; and
(v) the sale, lease or transfer of property or assets not to
exceed $150,000 in the aggregate in any fiscal year;
provided, that in each case at least 75% of the consideration
received therefor by any Credit Party is in the form of cash or Cash
Equivalents; provided, further, that with respect to sales of assets
permitted hereunder only, the Administrative Agent shall, without the
consent of the Required Lenders, release its Liens relating to the
particular assets sold;
(b) enter into any transaction of merger or consolidation, except
for the merger or consolidation of a Credit Party with and into another Credit
Party, provided that if the Borrower is a party thereto, the Borrower will be
the surviving corporation; and
(c) enter into any transaction or series of transactions for the
purposes of acquiring all or a substantial portion of the assets, property
and/or Capital Stock of any Person other than Permitted Acquisitions.
SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS.
The Credit Parties will not, nor will they permit any Subsidiary to,
lend money or extend credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, any Person except for Permitted Investments.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES.
Except (i) with respect to the agreements listed on Schedule 6.7 as such
are in existence on the Closing Date and (ii) as permitted in subsection (iv) of
the definition of Permitted Investments, the Credit Parties will not, nor will
they permit any Subsidiary to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder or
Affiliate.
SECTION 6.8 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS.
The Credit Parties will not, nor will they permit any Subsidiary to,
create, form or acquire any Subsidiaries, except for Domestic Subsidiaries which
are joined as Additional Credit Parties in accordance with the terms hereof;
provided, however, notwithstanding any other provision of this Agreement to the
contrary, so long as Bedtime Stores, Inc. has no assets or operations (other
than as necessary to maintain its corporate existence) it shall not be required
to become a Guarantor hereunder, it being understood and agreed that if Bedtime
Stores, Inc. shall acquire any assets or conduct any operations other than as
set forth above prior to the same being joined as an Additional Credit Party,
then an Event of Default shall occur hereunder. The Credit Parties will not
sell, transfer, pledge or otherwise dispose of any Capital Stock or other equity
interests in any of their Subsidiaries, nor will they permit any of their
Subsidiaries to issue, sell, transfer,
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pledge or otherwise dispose of any of their Capital Stock or other equity
interests, except in a transaction permitted by Section 6.5.
SECTION 6.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL CONTRACTS.
The Credit Parties will not, nor will they permit any of their
Subsidiaries to, change their fiscal year. The Credit Parties will not, nor will
they permit any Subsidiary to, amend, modify or change their limited liability
company operating agreement or articles of incorporation, as applicable (or
corporate charter or other similar organizational document) or bylaws (or other
similar document) in any way that could reasonably be expected to have an
adverse effect on the Lenders without the prior written consent of the Required
Lenders. The Credit Parties will not, nor will they permit any of their
Subsidiaries to, without the prior written consent of the Administrative Agent,
amend, modify, cancel or terminate or fail to renew or extend or permit the
amendment, modification, cancellation or termination of any of the Material
Contracts, except in the event that such amendments, modifications,
cancellations or terminations could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.10 LIMITATION ON RESTRICTED ACTIONS.
The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any such Person to
(a) pay dividends or make any other distributions to any Credit Party on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, (b) pay any Indebtedness or other obligation owed to
any Credit Party, (c) make loans or advances to any Credit Party, (d) sell,
lease or transfer any of its properties or assets to any Credit Party, or (e)
act as a Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Agreement
and the other Credit Documents, (ii) applicable law, (iii) any document or
instrument governing Indebtedness incurred pursuant to Section 6.1(c), provided
that any such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith, (iv) any Permitted Lien or any
document or instrument governing any Permitted Lien, provided that any such
restriction contained therein relates only to the asset or assets subject to
such Permitted Lien or (v) Indebtedness incurred pursuant to Section 6.1(b) and
6.1(g).
SECTION 6.11 RESTRICTED PAYMENTS.
The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (a) to make dividends payable solely in the same
class of Capital Stock of such Person, (b) to make dividends or other
distributions payable to any Credit Party other than the Parent (directly or
indirectly through Subsidiaries), and (c) provided that no Default or Event of
Default has occurred and is continuing at such time or would be directly or
indirectly caused as a result thereof and provided that the Borrower is in pro
forma compliance with all provisions of this Agreement before and after giving
effect thereto, the Borrower may pay cash distributions to the Parent (i) to
repurchase membership interests held by management in an aggregate amount not to
exceed $2,500,000 in the aggregate during the term of this Agreement, (ii) to
pay taxes of the Credit Parties to the extent actually incurred and/or due and
payable, (iii) to pay other expenses of the Parent in an aggregate amount not to
exceed $50,000, (iv) to pay cash interest expense as
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required under the Existing Seller Debt in an aggregate amount not to exceed 6%
of the principal amount of the Existing Seller Debt per annum; provided that if
the Consolidated Fixed Charge Coverage Ratio (as such term is defined in the
Indenture) shall exceed 2.0 to 1.0 as of the end of the immediately preceding
fiscal quarter, then the Borrower may make distributions to the Parent to pay
cash interest expense in an aggregate amount not to exceed 12% of the principal
amount of the Existing Seller Debt per annum, and (v) after May 18, 2002, to
make payments owing under the Permitted Seller Debt.
SECTION 6.12 PREPAYMENTS OF INDEBTEDNESS, ETC.
Following the Closing Date, the Credit Parties will not, nor will they
permit any Subsidiary to, after the issuance thereof, amend or modify (or permit
the amendment or modification of) any of the terms of any Indebtedness if such
amendment or modification would add or change any terms in a manner adverse to
the issuer of such Indebtedness, or shorten the final maturity or average life
to maturity or require any payment to be made sooner than originally scheduled
or increase the interest rate applicable thereto or change any subordination
provision thereof.
SECTION 6.13 SALE LEASEBACKS.
The Credit Parties will not, nor will they permit any Subsidiary to,
directly or indirectly, become or remain liable as lessee or as 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 in excess of $100,000 in the aggregate on an annual basis,
(a) which any Credit Party or any Subsidiary has sold or transferred or is to
sell or transfer to a Person which is not the Borrower or any Subsidiary or (b)
which any Credit Party or any Subsidiary intends to use for substantially the
same purpose as any other property which has been sold or is to be sold or
transferred by any Credit Party or any Subsidiary to another Person which is not
a Credit Party or a Subsidiary in connection with such lease.
SECTION 6.14 NO FURTHER NEGATIVE PLEDGES.
The Credit Parties will not, nor will they permit any Subsidiary to,
enter into, assume or become subject to any agreement (other than the Indenture,
the Adam Wuest Bond Indenture and the PBBC Bond Indenture as in effect on the
Closing Date) prohibiting or otherwise restricting the creation or assumption of
any Lien upon their properties or assets, whether now owned or hereafter
acquired, or requiring the grant of any security for such obligation if security
is given for some other obligation, except (a) pursuant to this Agreement and
the other Credit Documents, (b) pursuant to any document or instrument governing
Indebtedness incurred pursuant to Section 6.1(c), provided that any such
restriction contained therein relates only to the asset or assets constructed or
acquired in connection therewith and (c) in connection with any Permitted Lien
or any document or instrument governing any Permitted Lien, provided that any
such restriction contained therein relates only to the asset or assets subject
to such Permitted Lien.
SECTION 6.15 INTENTIONALLY OMITTED.
SECTION 6.16 SUBORDINATED DEBT.
No Credit Party will (i) make or offer to make any payments with respect
to any Subordinated Debt, (ii) redeem or offer to redeem any Subordinated Debt,
or (iii) deposit any funds intended to discharge or defease any or all
Subordinated Debt; provided, however, that so long as no Default or Event of
Default shall have occurred or be continuing or would occur on an
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actual or pro forma basis as a result thereof, the (i) Borrower may make
payments in respect of interest obligations owing under the Subordinated Notes
in an aggregate amount not to exceed $13,000,000 during any fiscal year, and
(ii) the Parent may make interest payments in respect of the Existing Seller
Debt and may make payments in respect of the Permitted Seller Debt as set forth
in Section 6.11(c)(iv) and 6.11(c)(v). No Subordinated Debt may be amended or
modified in any material manner without the prior written consent of the
Required Lenders, it being specifically understood and agreed that no amendment
to Article X or Article XIII of the Indenture shall be made without the prior
written consent of the Required Lenders.
SECTION 6.17 OPERATING LEASES.
The Credit Parties will not, nor will they permit any Subsidiary to,
incur or permit to exist any obligations in respect of operating leases which
require rental payments in excess of $5,000,000 in the aggregate for all such
Persons in the aggregate during any fiscal year.
SECTION 6.18 PARENT HOLDING COMPANY AND SLEEPMASTER FINANCE CORPORATION.
The Parent will not engage in any activities or operations whatsoever
(exclusive of general administrative and other functions required by law) other
than owning 99.9% of the Borrower's membership interests and obligations related
thereto and otherwise permitted hereunder, including, without limitation, being
obligated under the Existing Seller Notes and the Permitted Seller Debt,
entering into this Agreement and the other Credit Documents and performing its
obligations hereunder and thereunder. Sleepmaster Finance Corporation will not
engage in any activities or operations whatsoever other than as set forth in the
Indenture and the Subordinated Notes and entering into this Agreement and the
other Credit Documents and performing its obligations hereunder and thereunder.
SECTION 6.19 SERTA LICENSES.
The Credit Parties will not, nor will they permit any Subsidiary to,
enter into or permit to exist any Serta License not in existence on the Closing
Date, without (i) the express prior written consent of the Required Lenders
(which consent will not be unreasonably withheld), and (ii) the delivery to the
Administrative Agent of a copy of such Serta License, a new Serta Consent
covering such new Serta License, all documentation required by the
Administrative Agent to effect the grant to the Administrative Agent for the
benefit of the Administrative Agent and Lenders of a first priority, perfected
security interest therein, and such other documentation required by the
Administrative Agent in its reasonable discretion in connection therewith.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) The Borrower shall fail to pay any principal on any Note when
due in accordance with the terms thereof or hereof; or the Borrower shall fail
to reimburse the Issuing Lender for any LOC Obligations when due in accordance
with the terms hereof; or the Borrower shall fail to pay any interest on any
Note or any fee or other amount payable hereunder when due in accordance with
the terms thereof or hereof and such failure shall continue unremedied for three
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(3) Business Days (or any Guarantor shall fail to pay on the Guaranty in respect
of any of the foregoing or in respect of any other Guaranty Obligations
thereunder); or
(b) Any representation or warranty made or deemed made herein, in
the Security Documents or in any of the other Credit Documents or which is
contained in any certificate, document or financial or other statement furnished
at any time under or in connection with this Agreement shall prove to have been
false, misleading or incorrect in any material respect on or as of the date made
or deemed made; or
(c) (i) Any Credit Party shall fail to perform, comply with or
observe any term, covenant or agreement applicable to it contained in Section
5.7(a), Section 5.9 or Article VI hereof; or (ii) any Credit Party shall fail to
comply with any other covenant, contained in this Credit Agreement or the other
Credit Documents or any other agreement, document or instrument among any Credit
Party, the Administrative Agent and the Lenders or executed by any Credit Party
in favor of the Administrative Agent or the Lenders (other than as described in
Sections 7.1(a) or 7.1(c)(i) above), and in the event such breach or failure to
comply is capable of cure, is not cured within thirty (30) days of its
occurrence; or
(d) Any Credit Party shall (i) default in any payment of principal
of or interest on any Indebtedness (other than the Notes) in a principal amount
outstanding of at least $500,000 in the aggregate for the Credit Parties beyond
the period of grace (not to exceed 30 days), if any, provided in the instrument
or agreement under which such Indebtedness was created; or (ii) default (after
giving effect to any applicable period of grace) in the observance or
performance of any other agreement or condition relating to any Indebtedness in
a principal amount outstanding of at least $500,000 in the aggregate for the
Credit Parties or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to become due prior to its stated maturity; or
(e) (i) Any Credit Party shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Credit Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Credit Party any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against any Credit Party any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) any Credit Party shall take any action in furtherance of, or
indicating its
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consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Credit Party shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(f) One or more judgments or decrees shall be entered against any
Credit Party involving in the aggregate a liability (to the extent not paid when
due or covered by insurance) of $400,000 or more and all such judgments or
decrees shall not have been paid and satisfied, vacated, discharged, stayed or
bonded pending appeal within 10 days from the entry thereof; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of
the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a Trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) any Credit Party or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, any
Multiemployer Plan or (vi) any other similar event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions, if any, could have a Material Adverse Effect; or
(h) There shall occur a Change of Control; or
(i) The Guaranty or any provision thereof shall cease to be in full
force and effect or any Guarantor or any Person acting by or on behalf of any
Guarantor shall deny or disaffirm any Guarantor's obligations under the
Guaranty; or
(j) Any other Credit Document shall fail to be in full force and
effect or to give the Administrative Agent and/or the Lenders the security
interests, liens, rights, powers and privileges purported to be created thereby
(except as such documents may be terminated or no longer in force and effect in
accordance with the terms thereof, other than those indemnities and provisions
which by their terms shall survive);
(k) Any Serta License is terminated, assigned or deemed assigned;
(l) An event of default occurs under (i) the PBBC Bond Indenture or
any of the other "Bond Documents" (as such term is defined therein) or (ii) the
Adam Wuest Bond Indenture or any of the other documents related thereto; or
(m) (i) Any Governmental Authority with applicable jurisdiction
determines that the Lenders are not holders of Designated Senior Indebtedness
(as defined in the Indenture and/or the Senior Subordinated Credit Agreement) or
(ii) the subordination provisions of the
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Subordinated Notes or the PIK Subordinated Debt shall, in whole or in part,
terminate, cease to be effective or cease to be legally valid, binding and
enforceable as to any holder of the Subordinated Notes or the PIK Subordinated
Debt, as applicable.
SECTION 7.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, then, and in any such event,
(a) if such event is an Event of Default specified in Section 7.1(e) above,
automatically the Commitments shall immediately terminate and the Loans (with
accrued interest thereon), and all other amounts under the Credit Documents
(including without limitation the maximum amount of all contingent liabilities
under Letters of Credit) shall immediately become due and payable, and (b) if
such event is any other Event of Default, either or both of the following
actions may be taken: (i) the Administrative Agent may, or upon the written
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the written consent of
the Required Lenders, the Administrative Agent may, or upon the written request
of the Required Lenders, the Administrative Agent shall, by notice of default to
the Borrower, declare the Loans (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable forthwith
and direct the Borrower to pay to the Administrative Agent cash collateral as
security for the LOC Obligations for subsequent drawings under then outstanding
Letters of Credit an amount equal to the maximum amount of which may be drawn
under Letters of Credit then outstanding, whereupon the same shall immediately
become due and payable.
ARTICLE VIII
THE AGENT
SECTION 8.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints First Union
National Bank as the Administrative Agent of such Lender under this Agreement,
and each such Lender irrevocably authorizes First Union National Bank, as the
Administrative Agent for such Lender, to take such action on its behalf under
the provisions of this Agreement and to exercise such powers and perform such
duties as are expressly delegated to the Administrative Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent.
SECTION 8.2 DELEGATION OF DUTIES.
The Administrative Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care. Without
limiting the foregoing, the Administrative Agent may appoint one of its
affiliates as its agent to perform the functions of the Administrative Agent
hereunder relating to the advancing of funds to the Borrower and distribution of
funds to the Lenders and to perform such other
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related functions of the Administrative Agent hereunder as are reasonably
incidental to such functions.
SECTION 8.3 EXCULPATORY PROVISIONS.
Neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement (except for its or such Person's own gross
negligence or willful misconduct) or (ii) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
the Borrower or any officer thereof contained in this Agreement or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of any of the Credit Documents or for any failure of the Borrower
to perform its obligations hereunder or thereunder. The Administrative Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance by the Borrower of any of the agreements contained
in, or conditions of, this Agreement, or to inspect the properties, books or
records of the Borrower.
SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless (a) a written notice of assignment, negotiation
or transfer thereof shall have been filed with the Administrative Agent and (b)
the Administrative Agent shall have received the written agreement of such
assignee to be bound hereby as fully and to the same extent as if such assignee
were an original Lender party hereto, in each case in form satisfactory to the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
any of the Credit Documents in accordance with a request of the Required Lenders
or all of the Lenders, as may be required under this Agreement, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
SECTION 8.5 NOTICE OF DEFAULT.
The Administrative Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such Default or Event of Default. In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give prompt notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
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reasonably directed by the Required Lenders; provided, however, that unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders except
to the extent that this Credit Agreement expressly requires that such action be
taken, or not taken, only with the consent or upon the authorization of the
Required Lenders, or all of the Lenders, as the case may be.
SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
SECTION 8.7 INDEMNIFICATION.
The Lenders agree to indemnify the Administrative Agent in its capacity
hereunder (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their respective
Commitment Percentages in effect on the date on which indemnification is sought
under this Section, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Administrative Agent in any way relating to
or arising out of any Credit Document or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing; provided, however, that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent resulting from the Administrative Agent's gross negligence or
willful misconduct, as determined by a court of
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competent jurisdiction. The agreements in this Section 8.7 shall survive the
termination of this Agreement and payment of the Notes and all other amounts
payable hereunder.
SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower as
though the Administrative Agent were not the Administrative Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign as Administrative Agent upon 30
days' prior notice to the Borrower and the Lenders. If the Administrative Agent
shall resign as Administrative Agent under this Agreement and the Notes, then
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders, which successor agent shall be acceptable to the Borrower,
whereupon such successor agent shall succeed to the rights, powers and duties of
the Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Notes. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 8.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
SECTION 8.10 RELEASE OF COLLATERAL.
Each Lender hereby irrevocably authorizes the Administrative Agent, as
its option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any property covered by this Agreement or the other
Credit Documents (i) upon termination of the Commitments and payment and
satisfaction of all Obligations then due and payable, (ii) constituting property
being sold or disposed of if Borrower certifies to the Administrative Agent that
the sale or disposition is made in compliance with the provisions of this
Agreement (and the Administrative Agent may rely in good faith conclusively on
any such certificate, without further inquiry); or (iii) constituting property
leased to Borrower under a lease which has expired or been terminated in a
transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by Borrower to be, renewed or extended.
SECTION 8.11 SYNDICATION AND DOCUMENTATION AGENTS.
Notwithstanding any other provision hereof, each of the Syndication
Agent and the Documentation Agent identified on the cover page of this
Agreement, in their respective capacities as such, shall have no duties or
responsibilities and shall incur no liability under this Agreement or the other
Credit Documents
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS AND WAIVERS.
Neither this Agreement, nor any of the Notes, nor any of the other
Credit Documents, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this Section nor
may be released except as specifically provided herein or in the Security
Documents or in accordance with the provisions of this Section 9.1. The Required
Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Borrower
written amendments, supplements or modifications hereto and to the other Credit
Documents for the purpose of adding any provisions to this Agreement or the
other Credit Documents or changing in any manner the rights of the Lenders or of
the Borrower hereunder or thereunder or (b) waive, on such terms and conditions
as the Required Lenders may specify in such instrument, any of the requirements
of this Agreement or the other Credit Documents or any Default or Event of
Default and its consequences; provided, however, that no such waiver and no such
amendment, waiver, supplement, modification or release shall:
(i) reduce the amount or extend the scheduled date of
maturity of any Loan or Note or any installment thereon, or reduce the
stated rate of any interest or fee payable hereunder (other than
interest at the increased post-default rate) or extend the scheduled
date of any payment thereof or increase the amount (other than in
connection with an assignment or participation made in accordance with
Section 9.6) or extend the expiration date of any Lender's Commitment,
in each case without the written consent of all of the Lenders, or
(ii) amend, modify or waive any provision of this Section 9.1
or reduce the percentages specified in the definition of Required
Lenders, without the written consent of all the Lenders, or
(iii) amend, modify or waive any provision of Article VIII
without the written consent of the then Administrative Agent, or
(iv) release any of the Guarantors from their obligations
under the Guaranty, without the written consent of all of the Lenders,
or
(v) release all or substantially all of the Collateral,
without the written consent of all of the Lenders, or
(vi) amend, modify or waive any provision of the Credit
Documents requiring consent, approval or request of the Required Lenders
or all Lenders, without the written consent of all of the Required
Lenders or Lenders as appropriate and, provided, further, that no
amendment, waiver or consent affecting the rights or duties of the
Administrative Agent or the Issuing Lender under any Credit Document
shall in any event be effective, unless in writing and signed by the
Administrative Agent and/or the Issuing Lender, as applicable, in
addition to the Lenders required hereinabove to take such action.
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Any such waiver, any such amendment, supplement or modification and any
such release shall apply equally to each of the Lenders and shall be binding
upon the Borrower, the other Credit Parties, the Lenders, the Administrative
Agent and all future holders of the Notes. In the case of any waiver, the
Borrower, the other Credit Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
outstanding Loans and Notes and other Credit Documents, 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.
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article VIII (other than the provisions of Section 8.9); provided,
however, that the Administrative Agent will provide written notice to the
Borrower of any such amendment, modification or waiver. In addition, the
Borrower and the Lenders hereby authorize the Administrative Agent to modify
this Credit Agreement by unilaterally amending or supplementing Schedule 2.1(a)
from time to time in the manner requested by the Borrower, the Administrative
Agent or any Lender in order to reflect any assignments or transfers of the
Loans as provided for hereunder; provided, however, that the Administrative
Agent shall promptly deliver a copy of any such modification to the Borrower and
each Lender.
Notwithstanding the fact that the consent of all the Lenders is required
in certain circumstances as set forth above, (x) each Lender is entitled to vote
as such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersede the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
SECTION 9.2 NOTICES.
Except as otherwise provided in Article II, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made (a) when delivered by
hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case, addressed to each such party
at the address set forth on Schedule 9.2, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of
the Notes.
SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
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SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any document,
certificate or written statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes and the making of the Loans, provided that all such representations and
warranties shall terminate on the date upon which the Commitments have been
terminated and all amounts owing hereunder and under any Notes have been paid in
full.
SECTION 9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees (a) to pay or reimburse the Administrative Agent for
all its reasonable out-of-pocket costs and expenses incurred in connection with
the preparation, negotiation, printing and execution of, and any amendment,
supplement or modification to, this Agreement and the other Credit Documents and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, together with the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under, or defense against any actions arising out
of, this Agreement, the Notes and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent and to the Lenders (including reasonable allocated costs of
in-house legal counsel), and (c) on demand, to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from any
delay in paying, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, the Credit Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their Affiliates harmless from and against, any and all
other liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of the Credit Documents and any such other documents and the use,
or proposed use, of proceeds of the Loans (all of the foregoing, collectively,
the "indemnified liabilities"); provided, however, that the Borrower shall not
have any obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of the Administrative Agent or any such Lender, as determined by a
court of competent jurisdiction. The agreements in this Section 9.5 shall
survive repayment of the Loans, Notes and all other amounts payable hereunder.
SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Administrative Agent, all future holders of the
Notes and their respective successors and assigns, except that the Borrower may
not assign or transfer any of its rights or obligations under this Agreement or
the other Credit Documents without the prior written consent of each Lender.
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(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender, or any other interest of such Lender hereunder. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement, and the Borrower and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. No Lender shall
transfer or grant any participation under which the Participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the scheduled maturity of any Loan or Note or any installment thereon in which
such Participant is participating, or reduce the stated rate or extend the time
of payment of interest or fees thereon (except in connection with a waiver of
interest at the increased post-default rate) or reduce the principal amount
thereof, or increase the amount of the Participant's participation over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default shall not constitute a change in the terms of such
participation, and that an increase in any Commitment or Loan shall be permitted
without consent of any participant if the Participant's participation is not
increased as a result thereof), (ii) release any of the Guarantors from their
obligations under the Guaranty, (iii) release all or substantially all of the
Collateral, or (iv) consent to the assignment or transfer by the Borrower of any
of its rights and obligations under this Agreement. In the case of any such
participation, the Participant shall not have any rights under this Agreement or
any of the other Credit Documents (the Participant's rights against such Lender
in respect of such participation to be those set forth in the agreement executed
by such Lender in favor of the Participant relating thereto) and all amounts
payable by the Borrower hereunder shall be determined as if such Lender had not
sold such participation, provided that each Participant shall be entitled to the
benefits of Sections 2.17, 2.18, 2.19 and 9.5 with respect to its participation
in the Commitments and the Loans outstanding from time to time; provided, that
no Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time, sell or assign to
any Lender or any affiliate thereof and with the consent of the Administrative
Agent and, so long as no Default or Event of Default has occurred and is
continuing, the Borrower (in each case, which consent shall not be unreasonably
withheld), to one or more additional banks or financial institutions
("Purchasing Lenders"), all or any part of its rights and obligations under this
Agreement and the Notes in minimum amounts of $2,500,000 with respect to its
Revolving Commitment and its Loans (or, if less, the entire amount of such
Lender's obligations), pursuant to a Commitment Transfer Supplement, executed by
such Purchasing Lender and such transferor Lender (and, in the case of a
Purchasing Lender that is not then a Lender or an affiliate thereof, the
Administrative Agent and, so long as no Default or Event of Default has occurred
and is continuing, the Borrower), and delivered to the Administrative Agent for
its acceptance and recording in the Register (the
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recording in the Register a condition to such transfer); provided, however, that
any sale or assignment to an existing Lender shall not require the consent of
the Administrative Agent or the Borrower nor shall any such sale or assignment
be subject to the minimum assignment amounts specified herein. Upon such
execution, delivery, acceptance and recording, from and after the Transfer
Effective Date specified in such Commitment Transfer Supplement, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender hereunder with a Commitment as set forth therein, and (y) the transferor
Lender thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement (and, in the
case of a Commitment Transfer Supplement covering all or the remaining portion
of a transferor Lender's rights and obligations under this Agreement, such
transferor Lender shall cease to be a party hereto). Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Notes. On or prior to the
Transfer Effective Date specified in such Commitment Transfer Supplement, the
Borrower, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for the Notes delivered to the Administrative Agent pursuant
to such Commitment Transfer Supplement new Notes to the order of such Purchasing
Lender in an amount equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and, unless the transferor Lender has not
retained a Commitment hereunder, new Notes to the order of the transferor Lender
in an amount equal to the Commitment retained by it hereunder. Such new Notes
shall be dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Notes surrendered by the transferor Lender shall be
returned by the Administrative Agent to the Borrower marked "canceled".
(d) The Administrative Agent shall maintain at its address referred
to in Section 9.2 a copy of each Commitment Transfer Supplement delivered to it
and a register (the "Register") for the recordation of the names and addresses
of the Lenders and the Commitment of, and principal amount of the Loans owing
to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of a duly executed Commitment Transfer
Supplement, together with payment to the Administrative Agent by the transferor
Lender or the Purchasing Lender, as agreed between them, of a registration and
processing fee of $3,000.00 for each Purchasing Lender listed in such Commitment
Transfer Supplement and the Notes subject to such Commitment Transfer
Supplement, the Administrative Agent shall (i) accept such Commitment Transfer
Supplement, (ii) record the information contained therein in the Register and
(iii) give prompt notice of such acceptance and recordation to the Lenders and
the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any prospective
Transferee any and all financial information
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in such Lender's possession concerning the Borrower and its Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Affiliates prior to becoming a party to this Agreement, in each case subject
to Section 9.16.
(g) At the time of each assignment pursuant to this Section 9.6 to a
Person which is not already a Lender hereunder and which is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code) for Federal
income tax purposes, the respective assignee Lender shall provide to the
Borrower and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable, a 2.19 Certificate) described in Section 2.19.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under this Agreement (including, without limitation,
any right to payment of principal and interest under any Note) to any Federal
Reserve Bank in accordance with applicable laws.
SECTION 9.7 ADJUSTMENTS; SET-OFF.
(a) Each Lender agrees that if any Lender (a "benefited Lender")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7.1(e), or otherwise) in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefited Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or benefits
of such collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loans may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided
by law (including, without limitation, other rights of set-off), each Lender
shall have the right, without prior notice to the Borrower, any such notice
being expressly waived by the Borrower to the extent permitted by applicable
law, upon the occurrence of any Event of Default, to setoff and appropriate and
apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower, or any part
thereof in such amounts as such Lender may elect, against and on account of the
obligations and liabilities of the Borrower to such Lender hereunder and claims
of every nature and description of such Lender against the Borrower, in any
currency, whether arising hereunder, under the Notes or under any documents
contemplated by or referred to herein or therein, as such Lender may elect,
whether or not such Lender has made any demand for payment and although
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such obligations, liabilities and claims may be contingent or unmatured. The
aforesaid right of set-off may be exercised by such Lender against the Borrower
or against any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or attachment creditor of
the Borrower, or against anyone else claiming through or against the Borrower or
any such trustee in bankruptcy, debtor in possession, assignee for the benefit
of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the occurrence of any Event of Default. Each
Lender agrees promptly to notify the Borrower and the Administrative Agent after
any such set-off and application made by such Lender; provided, however, that
the failure to give such notice shall not affect the validity of such set-off
and application.
SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS.
The table of contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing this Agreement.
SECTION 9.9 COUNTERPARTS.
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrower and the Administrative Agent.
SECTION 9.10 EFFECTIVENESS.
This Credit Agreement shall become effective on the date on which all of
the parties have signed a copy hereof (whether the same or different copies) and
shall have delivered the same to the Administrative Agent pursuant to Section
9.2 or, in the case of the Lenders, shall have given to the Administrative Agent
written, telescoped or telex notice (actually received) at such office that the
same has been signed and mailed to it.
SECTION 9.11 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.12 INTEGRATION.
This Agreement and the Notes represent the agreement of the Borrower,
the Administrative Agent and the Lenders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent, the Borrower or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the Notes and
this Agreement supersedes the Commitment Letter (except to the extent that the
Commitment Letter provides that certain terms contained therein shall expressly
survive the execution hereof).
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SECTION 9.13 GOVERNING LAW.
This Agreement and the Notes and the rights and obligations of the
parties under this Agreement and the Notes shall be governed by, and construed
and interpreted in accordance with, the law of the State of North Carolina.
SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
All judicial proceedings brought against the Borrower and/or any other
Credit Party with respect to this Agreement, any Note or any of the other Credit
Documents may be brought in any state or federal court of competent jurisdiction
in the State of North Carolina, and, by execution and delivery of this
Agreement, each of the Borrower and the other Credit Parties accepts, for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any final judgment rendered thereby in connection with this Agreement
from which no appeal has been taken or is available. Each of the Borrower and
the other Credit Parties irrevocably agrees that all service of process in any
such proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in Section 9.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto, such service being hereby acknowledged by the each of the Borrower and
the other Credit Parties to be effective and binding service in every respect.
Each of the Borrower, the other Credit Parties, the Administrative Agent and the
Lenders irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non conveniens
which it may now or hereafter have to the bringing of any such action or
proceeding in any such jurisdiction. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
any Lender to bring proceedings against the Borrower or the other Credit Parties
in the court of any other jurisdiction.
SECTION 9.15 ARBITRATION.
(a) Notwithstanding the provisions of Section 9.14 to the contrary,
upon demand of any party hereto, whether made before or within three (3) months
after institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Agreement and other Credit
Documents ("Disputes") between or among parties to this Agreement shall be
resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions, claims arising from Credit Documents executed in the
future, or claims arising out of or connected with the transaction reflected by
this Agreement.
Arbitration shall be conducted under and governed by the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. A hearing shall begin within 90
days of demand for arbitration and all hearings shall be concluded within 120
days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then no more than a total extension
of 60 days. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A
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judgment upon the award may be entered in any court having jurisdiction.
Arbitrators shall be licensed attorneys selected from the Commercial Financial
Dispute Arbitration Panel of the AAA with expertise in corporate finance. The
parties hereto do not waive applicable Federal or state substantive law except
as provided herein. Notwithstanding the foregoing, this arbitration provision
does not apply to disputes under or related to Hedging Agreements.
(b) Notwithstanding the preceding binding arbitration provisions,
the Administrative Agent, the Lenders, the Borrower and the other Credit Parties
agree to preserve, without diminution, certain remedies that the Administrative
Agent on behalf of the Lenders may employ or exercise freely, independently or
in connection with an arbitration proceeding or after an arbitration action is
brought. The Administrative Agent on behalf of the Lenders shall have the right
to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted under Credit Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
Dispute.
(c) The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
(d) By execution and delivery of this Agreement, each of the parties
hereto accepts, for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction relating to any arbitration
proceedings conducted under the Arbitration Rules in Charlotte, North Carolina
and irrevocably agrees to be bound by any final judgment rendered thereby in
connection with this Agreement from which no appeal has been taken or is
available.
SECTION 9.16 CONFIDENTIALITY.
The Administrative Agent and each of the Lenders agrees that it will use
its best efforts not to disclose without the prior consent of the Borrower
(other than to its employees, affiliates, auditors or counsel or to another
Lender) any information with respect to the Credit Parties which is furnished
pursuant to this Agreement, any other Credit Document or any documents
contemplated by or referred to herein or therein and which is designated by the
Borrower to the Lenders in writing as confidential or as to which it is
otherwise reasonably clear such information is not public, except that any
Lender may disclose any such information (a) as has become generally available
to the public other than by a breach of this Section 9.16, (b) as may be
required or appropriate in any report, statement or testimony submitted to any
municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or the OCC or the NAIC or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be
required or appropriate in response to any summons or subpoena or any law,
order, regulation
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or ruling applicable to such Lender, (d) to any prospective Participant or
assignee in connection with any contemplated transfer pursuant to Section 9.6,
provided that such prospective transferee shall have been made aware of this
Section 9.16 and shall have agreed to be bound by its provisions as if it were a
party to this Agreement or (e) to Gold Sheets and other similar bank trade
publications, such information to consist of deal terms and other information
regarding the credit facilities evidenced by this Credit Agreement customarily
found in such publications.
SECTION 9.17 ACKNOWLEDGMENTS.
The Borrower and the other Credit Parties each hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of each Credit Document;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower or any other Credit Party
arising out of or in connection with this Agreement and the relationship between
Administrative Agent and Lenders, on one hand, and the Borrower and the other
Credit Parties, on the other hand, in connection herewith is solely that of
debtor and creditor; and
(c) no joint venture exists among the Lenders or among the Borrower
or the other Credit Parties and the Lenders.
SECTION 9.18 WAIVERS OF JURY TRIAL.
THE BORROWER, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 9.19 BINDING EFFECT; TERMINATION OF THIS CREDIT AGREEMENT; TERMINATION
OF EXISTING CREDIT AGREEMENT.
(a) This Credit Agreement shall become effective at such time when
all of the conditions set forth in Section 5.1 have been satisfied or waived by
the Lenders and it shall have been executed by each Credit Party and the
Administrative Agent, and the Administrative Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the signatures
of each Lender, and thereafter this Credit Agreement shall be binding upon and
inure to the benefit of each Credit Party, the Administrative Agent and each
Lender and their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts payable hereunder or under any of the other
Credit Documents shall remain outstanding, no Letters of Credit shall be
outstanding, all of the Credit Party Obligations have been irrevocably satisfied
in full and all of the Commitments hereunder shall have expired or been
terminated.
(c) The Credit Parties and the Lenders (including the Issuing
Lender) party to the Existing Credit Agreement each hereby agrees that, at such
time as this Credit Agreement shall
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have become effective pursuant to the terms of subsection (a) above, (i) the
Existing Credit Agreement automatically shall be deemed amended and restated in
its entirety by this Credit Agreement, (ii) the Commitments under the Existing
Credit Agreement and as defined therein automatically shall be terminated and
replaced with the Commitments hereunder and (iii) all of the promissory notes
executed by the Borrower in connection with the Existing Credit Agreement
automatically shall be canceled and replaced by the Notes.
ARTICLE X
GUARANTY
SECTION 10.1 THE GUARANTY.
In order to induce the Lenders to enter into this Agreement and to
extend credit hereunder and in recognition of the direct benefits to be received
by the Guarantors from the Extensions of Credit hereunder, each of the
Guarantors hereby agrees with the Administrative Agent and the Lenders as
follows: the Guarantor hereby unconditionally and irrevocably jointly and
severally guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all Obligations of the Borrower to the Administrative Agent and the
Lenders. If any or all of the Obligations of the Borrower to the Administrative
Agent and the Lenders becomes due and payable hereunder, each Guarantor
unconditionally promises to pay such indebtedness to the Administrative Agent
and the Lenders, on order, or demand, together with any and all reasonable
expenses which may be incurred by the Administrative Agent or the Lenders in
collecting any of the Obligations.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
SECTION 10.2 BANKRUPTCY.
Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all indebtedness of the
Borrower to the Lenders whether or not due or payable by the Borrower upon the
occurrence of any of the events specified in Section 7.1(e), and unconditionally
promises to pay such Obligations to the Administrative Agent for the account of
the Lenders, or order, on demand, in lawful money of the United States. Each of
the Guarantors further agrees that to the extent that the Borrower or a
Guarantor shall make a payment or a transfer of an interest in any property to
the Administrative Agent or any Lender, which payment or transfer or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
or otherwise is avoided, and/or required to be repaid to the Borrower or a
Guarantor, the estate of the Borrower or a Guarantor, a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such avoidance or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
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SECTION 10.3 NATURE OF LIABILITY.
The liability of each Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the indebtedness of the Borrower
whether executed by any such Guarantor, any other guarantor or by any other
party, and no Guarantor's liability hereunder shall be affected or impaired by
(a) any direction as to application of payment by the Borrower or by any other
party, or (b) any other continuing or other guaranty, undertaking or maximum
liability of a guarantor or of any other party as to the indebtedness of the
Borrower, or (c) any payment on or in reduction of any such other guaranty or
undertaking, or (d) any dissolution, termination or increase, decrease or change
in personnel by the Borrower, or (e) any payment made to the Administrative
Agent or the Lenders on the indebtedness which the Administrative Agent or such
Lenders repay the Borrower pursuant to court order in any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding, and
each of the Guarantors waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
SECTION 10.4 INDEPENDENT OBLIGATION.
The obligations of each Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other guarantor or the Borrower and whether or not
any other Guarantor or the Borrower is joined in any such action or actions.
SECTION 10.5 AUTHORIZATION.
Each of the Guarantors authorizes the Administrative Agent and each
Lender without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to (a) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise change the
terms of the indebtedness or any part thereof in accordance with this Agreement,
including any increase or decrease of the rate of interest thereon, (b) take and
hold security from any guarantor or any other party for the payment of this
Guaranty or the indebtedness and exchange, enforce waive and release any such
security, (c) apply such security and direct the order or manner of sale thereof
as the Administrative Agent and the Lenders in their discretion may determine
and (d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors.
SECTION 10.6 RELIANCE.
It is not necessary for the Administrative Agent or the Lenders to
inquire into the capacity or powers of the Borrower or the officers, directors,
members, partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
SECTION 10.7 WAIVER.
(a) Each of the Guarantors waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Administrative Agent or any Lender to (i) proceed against the Borrower, any
other guarantor or any other party, (ii) proceed against or exhaust any security
held from the Borrower, any other guarantor or any other party, or (iii) pursue
any other
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remedy in the Administrative Agent's or any Lender's power whatsoever. Each of
the Guarantors waives any defense based on or arising out of any defense of the
Borrower, any other guarantor or any other party other than payment in full of
the indebtedness, including without limitation any defense based on or arising
out of the disability of the Borrower, any other guarantor or any other party,
or the unenforceability of the indebtedness or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower other than
payment in full of the indebtedness. Without limiting the generality of the
provisions of this Article X, each of the Guarantors hereby specifically waives
the benefits of N.C. Gen. Stat. Section 26-7 through 26-9, inclusive. The
Administrative Agent or any of the Lenders may, at their election, foreclose on
any security held by the Administrative Agent or a Lender by one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable (to the extent such sale is permitted by applicable
law), or exercise any other right or remedy the Administrative Agent and any
Lender may have against the Borrower or any other party, or any security,
without affecting or impairing in any way the liability of any Guarantor
hereunder except to the extent the indebtedness has been paid. Each of the
Guarantors waives any defense arising out of any such election by the
Administrative Agent and each of the Lenders, even though such election operates
to impair or extinguish any right of reimbursement or subrogation or other right
or remedy of the Guarantors against the Borrower or any other party or any
security.
(b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of acceptance of
this Guaranty, and notices of the existence, creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the indebtedness
and the nature, scope and extent of the risks which such Guarantor assumes and
incurs hereunder, and agrees that neither the Administrative Agent nor any
Lender shall have any duty to advise such Guarantor of information known to it
regarding such circumstances or risks.
(c) Each of the Guarantors hereby agrees it will not exercise any
rights of subrogation which it may at any time otherwise have as a result of
this Guaranty (whether contractual, under Section 509 of the U.S. Bankruptcy
Code, or otherwise) to the claims of the Lenders against the Borrower or any
other guarantor of the indebtedness of the Borrower owing to the Lenders
(collectively, the "Other Parties") and all contractual, statutory or common law
rights of reimbursement, contribution or indemnity from any Other Party which it
may at any time otherwise have as a result of this Guaranty until such time as
the Loans hereunder shall have been paid and the Commitments have been
terminated. Each of the Guarantors hereby further agrees not to exercise any
right to enforce any other remedy which the Administrative Agent and the Lenders
now have or may hereafter have against any Other Party, any endorser or any
other guarantor of all or any part of the indebtedness of the Borrower and any
benefit of, and any right to participate in, any security or collateral given to
or for the benefit of the Lenders to secure payment of the indebtedness of the
Borrower until such time as the Loans hereunder shall have been paid and the
Commitments have been terminated.
SECTION 10.8 LIMITATION ON ENFORCEMENT.
The Lenders agree that this Guaranty may be enforced only by the action
of the Administrative Agent acting upon the instructions of the Required Lenders
and that no Lender
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<PAGE> 104
shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Administrative Agent for the benefit of the Lenders under the
terms of this Agreement. The Lenders further agree that this Guaranty may not be
enforced against any director, officer, employee or stockholder of the
Guarantors.
SECTION 10.9 CONFIRMATION OF PAYMENT.
The Administrative Agent and the Lenders will, upon request after
payment of the indebtedness and obligations which are the subject of this
Guaranty and termination of the Commitments relating thereto, confirm to the
Borrower, the Guarantors or any other Person that the such indebtedness and
obligations have been paid and the Commitments relating thereto terminated,
subject to the provisions of Section 10.2.
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<PAGE> 105
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by its proper and duly authorized officers as of the
day and year first above written.
BORROWER: SLEEPMASTER L.L.C.,
a New Jersey limited liability company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
GUARANTORS: SLEEPMASTER HOLDINGS L.L.C.,
a New Jersey limited liability company,
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
LOWER ROAD ASSOCIATES, LLC,
a New Jersey limited liability company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
PALM BEACH BEDDING COMPANY, a
Florida corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HERR MANUFACTURING COMPANY,
a Pennsylvania corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SLEEPMASTER FINANCE CORPORATION
a Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 106
STAR BEDDING PRODUCTS
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ADAM WUEST CORPORATION,
a Delaware corporation
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SIMON MATTRESS MANUFACTURING
COMPANY, a California company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
AGENT AND LENDERS: FIRST UNION NATIONAL BANK,
as Administrative Agent and as a Lender
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
HELLER FINANCIAL, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
IBJ WHITEHALL BANK & TRUST COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 107
FIFTH THIRD BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
FIRST SOURCE FINANCIAL LLP,
By First Source Financial Inc., its manager
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SIMON MATTRESS MANUFACTURING
COMPANY, a California company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 1
SIMON MATTRESS CO. JOINS SLEEPMASTER L.L.C.
Linden, New Jersey-- Sleepmaster L.L.C. ("Sleepmaster"), located in
Linden, New Jersey, has acquired the stock of Simon Mattress Manufacturing Co.
("Simon Mattress Co."), a Serta licensee. Simon Mattress Co. will continue to
operate under its current management, with Donald Stewart Simon, Jr., as
president and CEO.
Charlie Schweitzer, president and CEO of Sleepmaster, said of the
acquisition:
"With this merger, Sleepmaster takes on tremendous geographic
diversification, with eight manufacturing facilities serving 18 states. We are
enthusiastic about the opportunity to do business in Northern California and the
Pacific Northwest, two of the fastest growing areas for the mattress industry.
Over the years, the Simon family has made considerable contributions to Serta
and the industry. We are eager to maintain its rich heritage and to grow as a
combined entity," concluded Schweitzer.
Including the acquisition of Simon Mattress Co., Sleepmaster will have
more than one million square feet of manufacturing space and annual sales in
excess of $300 million.
Don Stewart Simon, Jr., president and CEO of Simon Mattress Co., noted
the advantages of the combined companies in today's competitive marketplace:
"Since 1906, our family business has prospered in the Northern
California and Northwest regions. Today, as part of the Sleepmaster
organization, we will be able to make Serta an even more formidable and
competitive force in our marketplaces."
With the addition of Simon Mattress Co., Sleepmaster is the largest
Serta licensee in the United States and has plants in Linden, New Jersey; Palm
Beach, Florida; Cincinnati, Ohio; Lancaster, Pennsylvania; Toronto, Ontario,
Canada; San Francisco, California; Seattle, Washington; and Honolulu, Hawaii.
