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EXHIBIT 10.42
EXECUTION COPY
SUBORDINATED CREDIT AGREEMENT
DATED AS OF
NOVEMBER 5, 1999
SLEEPMASTER HOLDINGS L.L.C.
AS BORROWER
AND
CITICORP MEZZANINE PARTNERS, L.P.
AS LENDER
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TABLE OF CONTENTS
PAGE
ARTICLE 1. DEFINITIONS...........................................................................................1
SECTION 1.1 Certain Defined Terms.........................................................1
SECTION 1.2 Accounting Terms.............................................................17
ARTICLE 2. AMOUNT AND TERMS OF NOTE AND LOAN....................................................................17
SECTION 2.1 Loan and Note................................................................17
SECTION 2.2 Interest on the Loan.........................................................17
SECTION 2.3 Prepayments and Payments.....................................................18
SECTION 2.4 Use of Proceeds..............................................................20
SECTION 2.5 Fees.........................................................................20
ARTICLE 3. CONDITIONS TO LOAN...................................................................................20
SECTION 3.1 Conditions to Loan...........................................................20
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.......................................................................22
SECTION 4.1 Organization and Good Standing...............................................22
SECTION 4.2 Authorization and Power......................................................22
SECTION 4.3 No Conflicts or Consents.....................................................22
SECTION 4.4 Enforceable Obligations......................................................22
SECTION 4.5 No Event of Default..........................................................23
SECTION 4.6 Use of Proceeds; Margin Stock................................................23
SECTION 4.7 No Financing of Regulated Corporate Takeovers................................23
SECTION 4.8 Compliance with Law..........................................................23
SECTION 4.9 Capital Structure and Subsidiaries...........................................23
SECTION 4.10 Investment Company Act.......................................................23
SECTION 4.11 Public Utility Holding Company Act...........................................23
SECTION 4.12 Financial Condition..........................................................23
SECTION 4.13 Senior Debt Documents........................................................24
SECTION 4.14 Acquisition..................................................................24
ARTICLE 5. AFFIRMATIVE COVENANTS................................................................................24
SECTION 5.1 Financial Statements and Other Reports.......................................24
SECTION 5.3 Payment of Taxes; Tax Consolidation..........................................25
SECTION 5.4 Maintenance of Properties; Insurance.........................................26
SECTION 5.5 Inspection...................................................................26
SECTION 5.6 Compliance with Laws, Etc....................................................26
SECTION 5.7 Maintenance of Accurate Records, Etc.........................................26
SECTION 5.8 Lender Meeting...............................................................27
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ARTICLE 6. NEGATIVE COVENANTS...................................................................................27
SECTION 6.1 Indebtedness..........................................................................27
SECTION 6.2 Limitation on Transactions with Affiliates............................................30
SECTION 6.3 Restricted Payments...................................................................31
SECTION 6.4 Mergers...............................................................................35
SECTION 6.5 Asset Sales; Sale of Subsidiary Stock.................................................36
SECTION 6.6 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries..........................................................................37
SECTION 6.7 Limitation on Liens...................................................................38
SECTION 6.8 Limitations on Unrestricted Subsidiaries..............................................39
ARTICLE 7. EVENTS OF DEFAULT....................................................................................41
SECTION 7.1 Failure To Make Payments When Due.....................................................41
SECTION 7.2 Default in Other Agreements...........................................................41
SECTION 7.3 Breach of Certain Covenants and Agreements............................................41
SECTION 7.4 Breach of Warranty....................................................................42
SECTION 7.5 Involuntary Bankruptcy; Appointment of Receiver, Etc..................................42
SECTION 7.6 Voluntary Bankruptcy; Appointment of Receiver, Etc....................................42
SECTION 7.7 Judgments and Attachments.............................................................42
SECTION 7.8 Agreements............................................................................42
ARTICLE 8. SUBORDINATION........................................................................................43
SECTION 8.1 Note Subordinate to Senior Debt.......................................................43
SECTION 8.2 Payment Over of Proceeds Upon Dissolution.............................................43
SECTION 8.3 No Payment in Certain Circumstances...................................................45
SECTION 8.4 Acceleration Rights; Remedies.........................................................46
SECTION 8.5 Payments Otherwise Permitted..........................................................46
SECTION 8.6 Subrogation to Rights of Holders of Senior Debt.......................................46
SECTION 8.7 Provisions Solely to Define Relative Rights...........................................47
SECTION 8.8 No Waiver of Subordination Provisions. ..............................................47
SECTION 8.9 Reliance on Judicial Order. .........................................................47
SECTION 8.10 Amendment. ..........................................................................48
SECTION 8.11 Remedies. ...........................................................................48
ARTICLE 9. MISCELLANEOUS........................................................................................48
SECTION 9.1 Participations in Loan and Note.......................................................48
SECTION 9.2 Expenses..............................................................................48
SECTION 9.3 Indemnity.............................................................................49
SECTION 9.4 Amendments and Waivers................................................................50
SECTION 9.5 Independence of Covenants.............................................................50
SECTION 9.6 Notices...............................................................................50
SECTION 9.7 Survival of Warranties and Certain Agreements.........................................51
SECTION 9.8 Failure or Indulgence Not Waiver; Remedies Cumulative.................................52
SECTION 9.9 Severability..........................................................................52
SECTION 9.10 Headings..............................................................................52
SECTION 9.11 APPLICABLE LAW........................................................................52
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SECTION 9.12 Successors and Assigns; Subsequent Holders of Notes...................................52
SECTION 9.13 Consent to Jurisdiction and Service of Process........................................52
SECTION 9.14 Waiver of Jury Trial..................................................................53
SECTION 9.15 Counterparts; Effectiveness...........................................................53
SECTION 9.16 Entirety..............................................................................54
Exhibit A - Form of Note
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Securityholders Agreement
Exhibit D - Form of Warrant
Exhibit E - Form of Warrant Agreement
Schedule 4.13 - Capital Stock; Subsidiaries
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SUBORDINATED CREDIT AGREEMENT (the "Agreement") dated as of November 5,
1999 by and among SLEEPMASTER HOLDINGS L.L.C., a New Jersey limited liability
company (the "Company"), and CITICORP MEZZANINE PARTNERS, L.P., a Delaware
limited partnership (the "Lender").
WHEREAS the Company has requested that the Lender lend to the Company
$10,000,000 to partially finance the Acquisition (as defined below), and the
Lender is willing to agree to lend such amount on the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Company and the Lender agree as
follows:
ARTICLE 1. DEFINITIONS
SECTION 1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Acquired Indebtedness" means Indebtedness of a Person (a) existing at
the time such Person becomes a Restricted Subsidiary or (b) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Acquisition" means the acquisition by AWI Corporation of substantially
all of the assets of and the assumption by AWI Corporation of certain of the
liabilities of each of Adam Wuest, Inc. and Adam Wuest Realty, Inc., in
accordance with the terms of the Purchase Agreement.
"Affiliate" means, with respect to any specified Person: (a) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (b) any other Person that
owns, directly or indirectly, 10% or more of any class or series of such
specified Person's (or any of such Person's direct or indirect parent's) Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(c) any other Person 10% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. Neither the Lender nor any Affiliate of Lender
(other than CVC) shall be treated as an Affiliate of any Credit Party or CVC.
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"Asset Sales" means any sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer"),
directly or indirectly, in one or a series of related transactions, of: (a) any
Capital Stock of any Restricted Subsidiary; (b) all or substantially all of the
properties and assets of any division or line of business of Sleepmaster or any
Restricted Subsidiary; or (c) any other properties or assets of Sleepmaster or
any Restricted Subsidiary other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include any
transfer of properties and assets (i) that is permitted by the provisions
described under Section 6.5 hereof, (ii) that is by Sleepmaster to any Majority
Owned Restricted Subsidiary, or by any Restricted Subsidiary to Sleepmaster or
any Majority Owned Restricted Subsidiary in accordance with the terms of this
Agreement, (iii) to an Unrestricted Subsidiary to the extent permitted by the
terms of Section 6.3; (iv) that is of obsolete equipment in the ordinary course
of business, or (v) the Fair Market Value of which in the aggregate does not
exceed $500,000 in any transaction or series of related transactions.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (ii) the amount of each such principal payment by (b)
the sum of all such principal payments.
"Bankruptcy Code" means Title 11 of the United States Code, as now and
hereafter in effect, or any successor statute.
"Board of Advisors" means the Board of Advisors of any Credit Party or a
Subsidiary of any Credit Party, as applicable, or any duly authorized committee
of that Board of Advisors.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company or Sleepmaster, as the case
may be, to have been duly adopted by the applicable Board of Advisors and to be
in full force and effect on the date of such certification, and delivered to the
Lender.
"Business Day" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are authorized or required by law or
other governmental action to close.
"Capital Lease Obligations" of any Person means any obligation of such
Person and its Restricted Subsidiaries on a Consolidated basis under any capital
lease of (or other agreement conveying the right to use) real or personal
property which, in accordance with GAAP, is required to be recorded as a
capitalized lease obligation.
"Capital Stock" of any Person means any and all shares, interests,
participations, rights in or other equivalents (however designated) of such
Person's capital stock, other equity interests whether now outstanding or issued
after the date hereof, partnership or membership interests (whether general or
limited), limited liability company interests, any other interest or
participation that confers on a Person that right to receive a share of the
profits and losses of, or
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distributions of assets of, the issuing Person, including any Preferred Stock,
and any rights (other than debt securities convertible into Capital Stock),
warrants or options exchangeable for or convertible into such Capital Stock.
"Cash" means such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts.
"Cash Flows" means, with respect to the principal amount of the Loan
repaid, collectively, (a) the principal amount so repaid, (b) the interest paid
on such principal, whether paid prior to the date of the repayment of such
principal or on the date of the repayment of such principal and (c) any premium
payable pursuant to Section 2.5(b) to reach the required Internal Rate of
Return. In the event of a partial repayment of principal, the interest
previously paid on such principal shall be calculated, as of the date of each
payment of interest, by multiplying the total amount of interest paid on such
date by a fraction, (i) the denominator of which is the total outstanding and
unpaid principal of the Loan as of the date on which such interest payment was
made and (ii) the numerator of which is the amount of principal being repaid for
which Cash Flows are calculated.
"Change in Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of all shares
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total outstanding Voting Stock of the Company or Sleepmaster;
(b) during any period of two consecutive years, individuals who (i) at the
beginning of such period constituted the Board of Advisors of the Company or
Sleepmaster (together with any new advisors whose election to such board or
whose nomination for election by the securityholders of the Company or
Sleepmaster was approved by a vote of a majority of the advisors then still in
office who were either advisors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of such Board of Advisors then in office or (ii)
were designated by the Permitted Holders cease for any reason to constitute a
majority of such Board of Advisors then in office; (c) the Company or
Sleepmaster consolidates with or merges with or into any Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person consolidates with
or merges into or with the Company or Sleepmaster, in any such event pursuant to
a transaction in which the outstanding Voting Stock of the Company or
Sleepmaster is converted into or exchanged for Cash, securities or other
property, other than any such transaction where (i) the outstanding Voting Stock
of the Company or Sleepmaster is changed into or exchanged for (A) Voting Stock
of the surviving corporation which is not Redeemable Capital Stock or (B) Cash,
securities and other property (other than Capital Stock of the surviving
corporation) in an amount which could be paid by the Company or Sleepmaster, as
the case may be, as a Restricted Payment as described under Section 6.3 (and
such amount shall be treated as a Restricted Payment subject to the provisions
of Section 6.3 hereof and (ii) immediately after such transaction, no "person"
or "group," other than Permitted Holders, is the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have beneficial ownership of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50%
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of the total outstanding Voting Stock of the surviving corporation; or (d) the
Company or Sleepmaster is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions under Section 6.5 herein. For purposes of this definition, any
transfer of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company or Sleepmaster will be deemed to be a
transfer of such portion of such Voting Stock as corresponds to the portion of
the equity of such entity that has been so transferred.
"Closing Date" means November 5, 1999.
"Common Stock" means, with respect to any Person, Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Consolidated Fixed Charge Coverage Ratio" of any Person means, for any
period, the ratio of (a) the sum of Consolidated Net Income (Loss), and in each
case to the extent deducted in computing Consolidated Net Income (Loss) for such
period, Consolidated Interest Expense, Consolidated Income Tax Expense and
Consolidated Non-Cash Charges for such period, of such Person and its Restricted
Subsidiaries on a Consolidated basis, all determined in accordance with GAAP,
less all non-Cash items increasing Consolidated Net Income for such period and
less all Cash payments during such period relating to non-Cash charges that were
added back to Consolidated Net Income in determining the Consolidated Fixed
Charge Coverage Ratio in any prior period to (b) the sum of Consolidated
Interest Expense for such period, plus Cash and non-Cash dividends (except for
dividends on Qualified Capital Stock paid in shares of Qualified Capital Stock)
paid on any Preferred Stock of such Person and its Restricted Subsidiaries on a
Consolidated basis during such period, in each case after giving pro forma
effect (as calculated in accordance with Article 11 of Regulation S-X under the
Securities Act of 1933 as in effect on the date of this Agreement) to (i) the
incurrence of the Indebtedness giving rise to the need to make such calculation
and (if applicable) the application of the Net Cash Proceeds therefrom,
including to refinance other Indebtedness, as if such Indebtedness was incurred,
and the application of such proceeds occurred, on the first day of such period;
(ii) the incurrence, repayment or retirement of any other Indebtedness by the
Credit Parties and their Restricted Subsidiaries since the first day of such
period as if such Indebtedness was incurred, repaid or retired at the beginning
of such period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such period); (iii) in the
case of Acquired Indebtedness or any acquisition occurring at the time of the
incurrence of such Indebtedness, the related acquisition, assuming such
acquisition had been consummated on the first day of such period; and (iv) any
acquisition or disposition by the Credit Parties and their Restricted
Subsidiaries of any company or any business or any assets out of the ordinary
course of business, whether by merger, stock purchase or sale or asset purchase
or sale, or any related repayment of Indebtedness, in each case since the first
day of such period, assuming such acquisition or disposition had been
consummated on the first day of such period; provided, that (A) in making such
computation, the Consolidated Interest Expense attributable to interest on any
Indebtedness computed on a pro forma basis and (1) bearing a floating interest
rate shall be computed as if the rate in effect on the date of computation had
been the applicable rate for the entire period and (2) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of such
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Person, a fixed or floating rate of interest, shall be computed by applying at
the option of such Person either the fixed or floating rate and (B) in making
such computation, the Consolidated Interest Expense of such Person attributable
to interest on any Indebtedness under a revolving credit facility computed on a
pro forma basis shall be computed based upon the average daily balance of such
Indebtedness during the applicable period.
"Consolidated Income Tax Expense" of any Person means, for any period,
the provision for federal, state, local and foreign income taxes of such Person
and its Consolidated Restricted Subsidiaries for such period as determined in
accordance with GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of (a) the interest expense of such Person and its
Restricted Subsidiaries for such period, on a Consolidated basis, including,
without limitation, (i) amortization of debt discount, (ii) the net costs
associated with Interest Rate Agreements and Currency Hedging Agreements
(including amortization of discounts), (iii) the interest portion of any
deferred payment obligation, (iv) all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers acceptance financing
and (v) accrued interest, plus (b) (i) the interest component of the Capital
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period and (ii) all
capitalized interest of such Person and its Restricted Subsidiaries plus (c) the
interest expense under any Guaranteed Debt of such Person and any Restricted
Subsidiary to the extent not included under clause (a)(iv) above, whether or not
paid by such Person or its Restricted Subsidiaries, less (d) for purposes of
calculating the Consolidated Fixed Charge Coverage Ratio, amortization of
deferred financing costs incurred in connection with any Existing Indebtedness.
"Consolidated Net Income (Loss)" of any Person means, for any period, the
Consolidated net income (or loss) of such Person and its Restricted Subsidiaries
for such period on a Consolidated basis as determined in accordance with GAAP,
adjusted, to the extent included in calculating such net income (or loss), by
excluding, without duplication, (a) all extraordinary gains or losses net of
taxes (less all fees and expenses relating thereto), (b) the portion of net
income (or loss) of such Person and its Restricted Subsidiaries on a
Consolidated basis allocable to minority interests in unconsolidated Persons or
Unrestricted Subsidiaries to the extent that Cash dividends or distributions
have not actually been received by such Person or one of its Consolidated
Restricted Subsidiaries, (c) net income (or loss) of any Person combined with
such Person or any of its Restricted Subsidiaries on a "pooling of interests"
basis attributable to any period prior to the date of combination, (d) any gain
or loss, net of taxes, realized upon the termination of any employee pension
benefit plan, (e) gains or losses, net of taxes (less all fees and expenses
relating thereto), in respect of dispositions of assets other than in the
ordinary course of business, (f) the net income of any Restricted Subsidiary to
the extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its securityholders, (g) any
restoration to net income of any contingency reserve, except to the extent
provision for such reserve was made out of income accrued at any time following
the date of this Agreement, or (h) any net gain arising from the acquisition of
any securities or extinguishment, under GAAP, of any Indebtedness of such
Person.
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"Consolidated Net Tangible Assets" of any Person means as of any date of
determination, the total assets, less goodwill, patents, trade names, trade
marks, copyrights, franchises and other intangible assets, and less deferred tax
assets, if any, in each case as shown on the balance sheet of the Company and
its Restricted Subsidiaries for the most recently ended Fiscal Quarter for which
financial statements are available, determined on a Consolidated basis in
accordance with GAAP.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-Cash charges of such Person
and its Restricted Subsidiaries on a Consolidated basis for such period, as
determined in accordance with GAAP (excluding any non-Cash charge which requires
an accrual or reserve for Cash charges for any future period).
"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its Restricted Subsidiaries would
normally be consolidated with those of such Person, all in accordance with GAAP.
The term "Consolidated" shall have a similar meaning.
"Contested Claim" means any Tax, Indebtedness, Contingent Liabilities or
other claim or liability, (a) the validity or amount of which is being
diligently contested in good faith by appropriate proceedings, (b) which has
been bonded or for which appropriate reserves, to the extent required by GAAP,
have been established, and (c) with respect to which any right to execute upon
or sell any assets of the Company or its Subsidiaries has not matured or has
been and continues to be effectively enjoined, superseded, or stayed.
"Contingent Liabilities" means, as applied to any Person, any Guarantees,
endorsements, agreements to purchase or provide funds for the payment of
obligations of others, or other liabilities which would be classified as
contingent liabilities in accordance with GAAP.
"Contractual Obligations" means, as applied to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust, or other instrument, document or
agreement to which such Person is a party or by which it or any of its property
is bound.
"Credit Parties" means the Company and Sleepmaster.
"Currency Hedging Agreements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"Disinterested Advisor" means, with respect to any transaction or series
of related transactions, a member of the Board of Advisors of the Company or
Sleepmaster, as applicable, who
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does not have any material direct or indirect financial interest in or with
respect to such transaction or series of related transactions.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Issuance" has the meaning set forth in Section 2.3(a)(ii).
"Event of Default" means each of the events set forth in Article 7
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"Existing Indebtedness" means Indebtedness of the Company, Sleepmaster
and their respective Subsidiaries (other than the Senior Credit Agreement) in
existence on the Closing Date, until such amounts are repaid.
"Existing Preferred Interests" means, collectively, the Company's Series
A Preferred Interests, to the extent issued and outstanding on the Closing Date.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length free market transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. Fair Market Value shall
be determined by the Board of Advisors of the Company or Sleepmaster, as
applicable, acting in good faith and shall be evidenced by a Board Resolution.
"Fiscal Quarter" means any fiscal quarter of the Company and its
Subsidiaries for financial accounting purposes, which Fiscal Quarters end on
March 31, June 30, September 30 and December 31 of each calendar year.
"Fiscal Year" means the fiscal year of the Credit Parties for financial
accounting purposes, which fiscal year ends on December 31 of each calendar
year.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied, which are in effect on the date of this Agreement.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including,
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without limitation, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person referred to in the definition of Indebtedness
below Guaranteed directly or indirectly in any manner by such Person, or in
effect Guaranteed directly or indirectly by such Person through an agreement (a)
to pay or purchase such Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (b) to purchase, sell or lease (as
lessee or lessor) property, or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such Indebtedness or to assure
the holder of such Indebtedness against loss, (c) to supply funds to, or in any
other manner invest in, the debtor (including any agreement to pay for property
or services without requiring that such property be received or such services be
rendered), (d) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial condition of
the debtor or to cause such debtor to achieve certain levels of financial
performance or (e) otherwise to assure a creditor against loss.
"Guarantor" means any Subsidiary which is a guarantor under the
Subordinated Notes Documents.
"Incur" means create, issue, incur, assume, Guarantee, or otherwise
become directly or indirectly liable for the payment of or otherwise incur,
contingently or otherwise; provided, however, that any Indebtedness or Capital
Stock of a Person existing at the time such Person becomes a Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary. The terms
"Incurred" and "Incurrence" shall have correlative meanings. The accretion of
principal of a non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, without duplication,
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities arising in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of such
Person in connection with any letters of credit issued under letter of credit
facilities, acceptance facilities or other similar facilities, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property), but excluding trade payables arising in the ordinary course
of business, (d) all obligations under Interest Rate Agreements or Currency
Hedging Agreements of such Person, (e) all Capital Lease Obligations of such
Person, (f) all Indebtedness referred to in clauses (a) through (e) above of
other Persons and all dividends of other Persons, the payment of which is
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien, upon or with respect to
property (including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (g) all Guaranteed Debt of such Person, (h) all
Redeemable Capital Stock issued by such Person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and unpaid
dividends, (i) Preferred
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13
Stock of the Company, Sleepmaster or any Restricted Subsidiary of Sleepmaster or
any Guarantor and (j) any amendment, supplement, modification, deferral,
renewal, extension, refunding or refinancing of any liability of the types
referred to in clauses (a) through (i) above. For purposes hereof, the "maximum
fixed repurchase price" of any Redeemable Capital Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness shall be required to be determined pursuant to
this Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value to be determined
in good faith by the Board of Advisors of the issuer of such Redeemable Capital
Stock.
"Initial Interest Payment Date" means April 5, 2000.
"Interest Notes" has the meaning set forth in Section 2.2(b).
"Interest Payment Date" means the last day of each Interest Period.
"Interest Period" means initially the period commencing on the Closing
Date and ending on the Initial Interest Payment Date, and, thereafter, each
six-month period; provided, that:
(i) if an Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; and
(ii) no Interest Period shall extend beyond the Maturity Date.
"Interest Rate Agreement" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements (including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements) and/or other types of interest rate
hedging agreements from time to time.
"Internal Rate of Return" shall mean the discount rate compounded
semi-annually on an annual basis at which the present value as of the Closing
Date of Cash Flows of the principal of the Loan repaid discounted back to the
Closing Date equals the principal of the Loan so repaid.
"Investments" means, with respect to any Person, directly or indirectly,
any advance, loan (including Guarantees), or other extension of credit or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase, acquisition or ownership by such Person of any Capital
Stock, bonds, notes, debentures or other securities issued or owned by any other
Person and all other items that would be classified as investments on a balance
sheet prepared in accordance with GAAP.
"Lender" has the meaning assigned to that term in the introduction to
this Agreement and shall include any assignees of the Loan or Note pursuant to
the terms and conditions of Section 10.1 hereof.
"Lien" means any mortgage or deed of trust, charge, pledge, lien
(statutory or otherwise), privilege, security interest, assignment, deposit,
arrangement, easement, hypothecation,
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14
claim, preference, priority or other encumbrance upon or with respect to any
property of any kind (including any conditional sale, capital lease or other
title retention agreement, any leases in the nature thereof, and any agreement
to give any security interest), real or personal, movable or immovable, now
owned or hereafter acquired. A Person will be deemed to own subject to a Lien
any property which it has acquired or holds subject to the interest of a vendor
or lessor under any conditional sale agreement, Capitalized Lease Obligation or
other title retention agreement.
"Loan" means the loan made by the Lender to the Company pursuant to
Section 2.1 hereof.
"Loan Documents" shall mean this Agreement, the Note, the Registration
Rights Agreement, the Securityholders Agreement, the Warrant, the Warrant
Agreement, and all other documents, instruments and agreements executed and/or
delivered in connection therewith, each as amended, supplemented or modified
from time to time.
"Majority Owned Restricted Subsidiary" means any Restricted Subsidiary at
least 90% of the Capital Stock of which is beneficially owned by Sleepmaster.
"Margin Stock" has the meaning assigned to that term in Regulation U of
the Board of Governors of the Federal Reserve System as in effect from time to
time.
"Material Adverse Effect" means, (a) any material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of Sleepmaster or the Company and its
Subsidiaries taken as a whole, (b) a material impairment of the ability of the
Company, Sleepmaster or any of their respective Subsidiaries to perform under
any Loan Document, or (c) a material impairment of the rights of or benefits
available to the Lender under any Loan Document.
"Maturity Date" means June 30, 2007.
"Net Cash Proceeds" means with respect to any Asset Sale or Equity
Issuance by any Person, the proceeds thereof (without duplication in respect of
all Asset Sales or Equity Issuances) in the form of Cash or Temporary Cash
Investments including payments in respect of deferred payment obligations when
received in the form of, or stock or other assets when disposed of for, Cash or
Temporary Cash Investments (except to the extent that such obligations are
financed or sold with recourse to the Company, Sleepmaster or any Restricted
Subsidiary) net of (a) in the case of any Asset Sale (i) brokerage commissions
and other reasonable fees and expenses (including fees and expenses of counsel
and investment bankers) related to such Asset Sale, (ii) provisions for all
Taxes payable as a result of such Asset Sale, (iii) payments made to retire
Indebtedness where payment of such Indebtedness is secured by the assets or
properties the subject of such Asset Sale, (iv) amounts required to be paid to
any Person (other than the Company, Sleepmaster or any Restricted Subsidiary)
owning a beneficial interest in the assets subject to the Asset Sale and (v)
appropriate amounts to be provided by the Company, Sleepmaster or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company,
Sleepmaster or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities,
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15
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, and (b) in the case
of any Equity Issuance, attorney's fees, accountant's fees, underwriters' or
placement agents' fees, discounts, commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and Taxes
paid or payable as a result thereof.
"Note" means one or more of the notes of the Company issued pursuant to
the terms and conditions of Sections 2.1, 2.2(b)(ii) or 9.1 hereof,
substantially in the form of Exhibit A hereto,as amended, replaced, supplemented
or modified from time to time.
"Obligations" means all obligations of every nature of the Credit Parties
from time to time owed to the Lender under the Loan Documents.
"Officer's Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chief Executive
Officer, its President or its Chief Financial Officer; provided, that every
Officer's Certificate with respect to the compliance with a condition precedent
to the making of a Loan hereunder shall include (a) a statement that the officer
or officers making or giving such Officer's Certificate have read such condition
and any definitions or other provisions contained in this Agreement relating
thereto, (b) a statement of the signers that they have made or have caused to be
made such examination or investigation as they deem necessary to enable them to
certify that such condition has been complied with, and (c) a statement that
such condition has been complied with.
"Pari Passu Indebtedness" means (a) with respect to the Company,
Indebtedness of the Company pari passu in right of payment to the Note, and (b)
with respect to Sleepmaster or any Guarantor, Indebtedness pari passu in right
of payment to the Subordinated Notes.
"Permitted Holders" means (a) CVC and its Affiliates (provided that for
purposes of this provision only the definition of "Affiliate" shall not include
clauses (b) or (c) included in the definition thereof) and (b) Charles
Schweitzer, James Koscica, Michael Reilly, Timothy Dupont and Michael Bubis,
their respective spouses and children, and trusts for their benefit or for the
benefit of their spouses and/or children.
"Permitted Investments" means (a) Investments in any Majority Owned
Restricted Subsidiary or any Person which, as a result of such Investment, (i)
becomes a Majority Owned Restricted Subsidiary or (ii) is merged or consolidated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Sleepmaster or any Majority Owned Restricted Subsidiary; (b)
Indebtedness of Sleepmaster or a Restricted Subsidiary described under clauses
(iv), (v) and (vi) of the definition of "Permitted Indebtedness;" (c)
Investments in any Existing Indebtedness; (d) Temporary Cash Investments; (e)
Investments acquired by Sleepmaster or any Restricted Subsidiary in connection
with an Asset Sale permitted under Section 6.5 herein to the extent such
Investments are non-Cash proceeds as permitted under such Section; (f)
Investments in existence on the date of this Agreement; and (g) Investments, in
addition to those listed in clauses (a) to (f), not to exceed $5 million at any
one time outstanding. In connection with any assets or property contributed or
transferred to any Person as an Investment, such property and assets shall be
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16
equal to the Fair Market Value (as determined by the Sleepmaster's Board of
Advisors) at the time of Investment.
"Person" means and includes natural persons, corporations, limited
partnerships, limited liability companies, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Purchase Agreement" means the Asset Purchase Agreement, dated as of
November 5, 1999, by and among AWI Corporation, a Delaware corporation, as
purchaser, Sleepmaster L.L.C., a New Jersey limited liability company and each
of Adam Wuest, Inc., an Ohio corporation and Adam Wuest Realty, Inc., an Ohio
corporation, as sellers, as amended, restated or modified from time to time.
"Purchase Money Obligations" means any Indebtedness secured by a Lien on
assets related to the business of Sleepmaster and any additions and accessions
thereto, which are purchased by Sleepmaster at any time after the Closing Date;
provided, that (a) the security agreement or conditional sales or other title
retention contract pursuant to which the Lien on such assets is created
(collectively a "Purchase Money Security Agreement") shall be entered into
within 90 days after the purchase or substantial completion of the construction
of such assets and shall at all times be confined solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom, (b) at no time shall the aggregate principal amount of the
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees
and other obligations in respect of such Indebtedness and (c) (i) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Purchase Money Security Agreement is entered into exceed 100% of the
purchase price to Sleepmaster of the assets subject thereto or (ii) the
Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock
of such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to the final Stated Maturity of the
Subordinated Notes or is redeemable at the option of the holder thereof at any
time
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17
prior to such final Stated Maturity (other than upon a change of control of the
Company or Sleepmaster in circumstances where the holders of the Subordinated
Notes would have similar rights), or is convertible into or exchangeable for
debt securities at any time prior to such final Stated Maturity at the option of
the holder thereof.
"Registration Rights Agreement" means the Amended and Restated
Registration Rights Agreement, dated as of March 3, 1998, among the Company and
certain other securityholders of the Company to which the Lender has become a
party through a Joinder dated as of the date hereof, in the form of Exhibit B
hereto, as the same may be amended, modified or restated from time to time in
accordance with the terms thereof.
"Requirements of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Restricted Payment" with respect to any Person means (a) declare or pay
any dividend on, or make any distribution on account of, any shares of Capital
Stock (other than dividends or distributions payable solely in shares of
Qualified Capital Stock or in options, warrants or other rights to acquire
shares of such Qualified Capital Stock); (b) purchase, redeem, defease or
otherwise acquire or retire for value, directly or indirectly, Capital Stock,
any Capital Stock of any Subsidiary (other than Capital Stock of any Wholly
Owned Restricted Subsidiary or any Restricted Subsidiary if as a result of such
purchase, redemption, defeasance, acquisition or retirement, such Restricted
Subsidiary becomes a Majority Owned Restricted Subsidiary), any Capital Stock of
any entity that owns, directly or indirectly, a majority of the Capital Stock of
such Person, or options, warrants or other rights to acquire any of the
aforementioned Capital Stock; (c) make any principal payment on, or repurchase,
redeem, defease, retire or otherwise acquire for value, prior to any required or
mandatory principal payment, sinking fund payment or maturity, any Subordinated
Indebtedness; (d) declare or pay any dividend or distribution on any Capital
Stock of any Restricted Subsidiary to any Person (other than (i) to Sleepmaster
or any of its Wholly Owned Restricted Subsidiaries or (ii) dividends or
distributions made by a Restricted Subsidiary on a pro rata basis to all
securityholders of such Restricted Subsidiary); or (e) make any Investment in
any Person (other than any Permitted Investments); provided, that the amount of
any such Restricted Payment, if other than Cash, shall be the Fair Market Value
of the assets proposed to be transferred, as determined by the Board of Advisors
of the Company or Sleepmaster, as applicable.
"Restricted Subsidiary" means any Subsidiary of Sleepmaster that has not
been designated by the Board of Advisors of Sleepmaster as an Unrestricted
Subsidiary pursuant to and in compliance with Section 6.8 herein.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
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"Senior Agent" means First Union National Bank, as administrative agent
under the Senior Credit Agreement.
"Senior Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of November 5, 1999, by and among Sleepmaster, the Company,
certain subsidiaries of Sleepmaster as guarantors thereto, the Lenders party
thereto and the Senior Agent, as a lender and administrative agent, including
any related notes, Guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced, increased or refinanced from time to time.
"Senior Debt" means, with respect to the Company, (a) the obligations of
the Company with respect to the Senior Credit Agreement and (b) any other
Indebtedness permitted to be incurred by the Company under the terms of this
Agreement, unless the instrument under which such Indebtedness is incurred
expressly provides that it is Subordinated Indebtedness. Notwithstanding
anything to the contrary in the foregoing, Senior Debt shall not include (i) any
obligation of the Company to, in respect of or imposed by any environmental,
landfill, waste management or other regulatory governmental agency, statute, law
or court order, (ii) any liability for federal, state, local or other taxes owed
or owing by the Company, (iii) any Indebtedness of the Company to any of the
Company's Subsidiaries or other Affiliates, (iv) any trade payables or (v) any
Indebtedness that is incurred in violation of this Agreement on or after the
date of this Agreement.
"Senior Debt Documents" means, collectively, the Senior Credit Agreement,
and all "Credit Documents" (as defined in the Senior Credit Agreement).
"Senior Default" means an "Event of Default" as defined in the Senior
Credit Agreement.
"Sleepmaster" means Sleepmaster, L.L.C., a Delaware limited liability
company and substantially-owned subsidiary of the Company.
"Sleep Investor" means Sleep Investor L.L.C., a Delaware limited
liability company and parent of the Company.
"Sleep Investor Promissory Notes" means the notes of the Company issued
to Sleep Investor on November 14, 1996, as amended, in an initial principal
amount of $7,000,000 and the note of the Company issued to Sleep Investor on or
following May 18, 1999 in an amount equal to the Retroactive Notes (as defined
in the Senior Credit Agreement), in each case together with the pay-in-kind
interest notes issued thereon.
"Special Preferred Stock" means Preferred Stock of Sleepmaster, in an
aggregate amount not to exceed $40 million, which after the date of issuance of
the Subordinated Notes are issued to and held solely by CVC or the Company;
provided, that (a) dividends on such Preferred Stock are not payable until the
earlier of the Stated Maturity of the Subordinated Notes and the date on which
the Subordinated Notes have been repaid in full and (b) such Preferred Stock is
not Redeemable Capital Stock.
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"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, the dates specified in such Indebtedness as
the fixed date on which the principal of such Indebtedness or such installment
of interest, as the case may be, is due and payable.
"Securityholders Agreement" means the Amended and Restated
Securityholders Agreement, dated as of March 3, 1998, among the Company and
certain other securityholders of the Company to which the Lender has become a
party through a Joinder dated as of the date hereof, in the form of Exhibit C
hereto, as the same may be amended, modified or restated from time to time in
accordance with the terms thereof.
"Subordinated Indebtedness" means (a) with respect to the Company,
Indebtedness of the Company subordinated in right of payment to the Note, and
(b) with respect to Sleepmaster or any Guarantor, Indebtedness subordinated in
right of payment to the Subordinated Notes.
"Subordinated Notes" means the 11% Senior Subordinated Notes due 2009
originally issued by Sleepmaster on May 18, 1999 in an initial aggregate
principal amount of $115,000,000, and any notes issued in exchange, substitution
or replacement therefor.
"Subordinated Notes Documents" means the indentures under which the
Subordinated Notes were issued and all other instruments, agreements and other
documents evidencing or governing the Subordinated Notes or providing for any
Guarantee or other rights in respect thereof.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, (b)
any limited partnership of which such Person or any Subsidiary of such Person is
a general partner, or (c) any other Person in which such Person, or one or more
other Subsidiaries of such Person, or such Person and one or more other
Subsidiaries, directly or indirectly, has more than 50% of the outstanding
partnership or similar interests or has the power, by contract or otherwise, to
direct or cause the direction of the policies, management and affairs thereof.
"Tax" or "Taxes" means all taxes, assessments, fees, levies, imposts,
duties, penalties, deductions, withholdings, or other charges of any nature
whatsoever from time to time or at any time imposed by any law or any
Governmental Authority.
"Tax Amounts" means, with respect to a calendar year or portion thereof,
an amount equal to the sum of (a) the federal income tax that would be imposed
on the Taxable Income of Sleepmaster for such calendar year or portion thereof
at the highest marginal tax rate applicable to corporate taxpayers in such
calendar year or portion thereof, and (b) the state and local income tax that
would be imposed on the Taxable Income of Sleepmaster for such calendar year or
portion thereof in the state and local jurisdictions in which Sleepmaster
qualifies as a corporation within the meaning of state and local provisions
which are analogous to Section 7701 of the Internal Revenue Code, at the highest
marginal tax rates applicable to corporate taxpayers in such jurisdictions, in
each case computed taking into account all available deductions or credits for
federal, state or local
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income tax purposes of state and local income taxes described in clause (b)
(such rate, the "Applicable Tax Rate").
"Taxable Income" means the taxable income of Sleepmaster computed as if
Sleepmaster filed a tax return for such calendar year as the parent of a
consolidated group of corporations that includes Sleepmaster and each domestic
Subsidiary of Sleepmaster (provided that any amount distributed by Sleepmaster
to the Company to allow Sleep Investor to make current cash interest payments on
the Sleep Investor Promissory Notes shall be treated as a deduction from Taxable
Income), except that such taxable income shall be reduced by any tax losses of
Sleepmaster for prior years which were available to offset the taxable income of
Sleepmaster and were not previously taken into account hereunder for prior
years.
"Temporary Cash Investments" means (a) any evidence of Indebtedness,
maturing not more than one year after the date of acquisition, issued by the
United States of America, or an instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the full
faith and credit of the United States of America, (b) any certificate of
deposit, maturing not more than one year after the date of acquisition, issued
by, or time deposit of, a commercial banking institution that is a member of the
Federal Reserve System and that has combined capital and surplus and undivided
profits of not less than $500 million, whose debt has a rating, at the time as
of which any investment therein is made, of "P-1" (or higher) according to
Moody's or "A-1" (or higher) according to S&P, (c) commercial paper, maturing
not more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate or Subsidiary of the Company or Sleepmaster) organized
and existing under the laws of the United States of America, any state thereof
or the District of Columbia with a rating, at the time as of which any
investment therein is made, of "P-1" (or higher) according to Moody's or "A-1"
(or higher) according to S&P and (d) any money market deposit accounts issued or
offered by a domestic commercial bank having capital and surplus in excess of
$500 million; provided, that the short term debt of such commercial bank has a
rating, at the time of Investment, of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P.
"Transactions" has the meaning set forth in Section 4.3.
"Unrestricted Subsidiary" means any Subsidiary of Sleepmaster (other than
a Guarantor) designated as such pursuant to and in compliance with Section 6.8
herein.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to elect at least a majority of the board of
directors or board of advisors, as applicable, managers or trustees of such
Person (irrespective of whether or not at the time Capital Stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Warrant" means, collectively, one or more warrants to purchase shares of
Common Stock issued by the Company in connection with this Agreement,
substantially in the form of Exhibit D hereto, as the same may be amended,
modified, or restated from time to time.
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"Warrant Agreement" means the Warrant Agreement dated as of the date
hereof by and between the Company and the Lender in the form of Exhibit E
hereto, as the same may be amended, modified, or restated from time to time.
SECTION 1.2 Accounting Terms. For purposes of this Agreement, unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder shall be made, and all financial statements required to
be delivered hereunder or thereunder shall be prepared in accordance with GAAP.
ARTICLE 2. AMOUNT AND TERMS OF NOTE AND LOAN
SECTION 2.1 Loan and Note.
(a) Loan. Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of the Company herein set
forth, the Lender hereby agrees to lend to the Company on the Closing Date, an
amount equal to $10,000,000.
(b) Payment of Loan. The unpaid principal amount of the Loan plus all
accrued and unpaid interest thereon and all other amounts owed hereunder with
respect thereto (including pursuant to Section 2.5(b)) shall be paid in full in
Cash on the Maturity Date.
(c) Note. On the Closing Date, the Company shall execute and deliver to
the Lender the Note dated as of the Closing Date, to evidence the Loan made on
such date, in the aggregate principal amount of $10,000,000.
SECTION 2.2 Interest on the Loan.
(a) Rate of Interest. Except as provided in Section 2.2(d) below, the
Loan shall bear interest on the unpaid principal amount thereof from the date
made through maturity (whether by acceleration or otherwise) at a rate equal to
14.00% per annum.
(b) Interest Payments.
(i) Interest shall be payable with respect to the Loan, in arrears
on and to each Interest Payment Date commencing on the Initial Interest
Payment Date, and upon any prepayment of the Loan (to the extent of
accrued interest on the principal amount of the Loan so prepaid) and at
maturity of the Loan; provided, that no accrued interest payable hereunder
shall be paid in Cash prior to 3 months following the repayment in full of
all obligations of the Company with respect to the Senior Credit
Agreement..
(ii) On any Interest Payment Date after the Closing Date ("PIK
Interest Dates"), the Company may, at its election, pay the unpaid accrued
interest with respect to the Loan due on any PIK Interest Date by (A)
issuing to the Lender or any other holder of the Note one or more Notes
(the "Interest Notes") in an aggregate principal amount equal to such
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unpaid accrued interest to be paid on such PIK Interest Date, or (B)
adding such unpaid accrued interest to the then outstanding principal
amount of the Loan, in either case, minus the amount of such interest paid
in Cash; provided, that no accrued interest payable hereunder shall be
paid in Cash prior to 3 months following the repayment in full of all
obligations of the Company with respect to the Senior Credit Agreement.
(iii) All Interest Notes shall have the same terms and conditions as
the Note issued pursuant to Section 2.1.
(c) Post-Default Interest. Following the occurrence and during the
continuance of an Event of Default or Senior Default, to the extent permitted by
applicable law, the Loan and Interest Notes shall bear interest at a rate equal
to 2.00% per annum in excess of the rate of interest otherwise payable under
this Agreement for the Loan.
(d) Computation of Interest. Interest on the Loan shall be computed on
the basis of a 360-day year. In computing such interest, the date or dates of
the making of the Loan shall be included and the date of payment shall be
excluded.
SECTION 2.3 Prepayments and Payments.
(a) Prepayments.
(i) Voluntary Prepayments. Subject to Article 8 and the Senior
Debt Documents, the Company may, upon not less than five (5) Business
Days and not more than thirty-five (35) Business Days prior written
notice to the Lender (which notice shall be irrevocable), at any time and
from time to time, prepay the Loan, in whole or in part, in an aggregate
minimum amount of $1,000,000 and integral multiples of $100,000 in excess
of such amount. All voluntary prepayments under this Section 2.3(a)(i)
shall include the premiums payable pursuant to Section 2.5(b). Voluntary
prepayments hereunder shall be credited against the Loan pursuant to the
terms and conditions of Section 2.3(a)(iii). Amounts of the Loan so
prepaid may not be reborrowed.
(ii) Mandatory Prepayments.
(A) Equity Issuance. Subject to Article 8 and the Senior Debt
Documents, to the extent not (x) required by the Senior Credit Agreement
to prepay any Senior Debt and/or reduce the commitments for the Senior
Debt, (y) required by the Subordinated Notes Documents to prepay
Indebtedness thereunder, or (z) voluntarily used by the Company or
Sleepmaster to prepay or repay any Senior Debt and/or reduce the
commitments for the Senior Credit Agreement, upon any issuance of Capital
Stock (other than Redeemable Capital Stock) of the Company or Sleepmaster
in one or more public offerings (such issuance, an "Equity Issuance") and
to the extent permissible under the Senior Debt Documents, the Company
shall apply an amount equal to 100% of the Net Cash Proceeds of such
Equity Issuance to the prepayment of the Loan, all as provided in
subsection 2.3(a)(iii) below. Concurrently with the making of any
prepayment pursuant to this subsection 2.3(a)(ii)(A), the Company shall
deliver to the Lender an Officer's Certificate
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demonstrating the derivation of Net Cash Proceeds of the Equity Issuance.
The Company shall provide Lender at least ten (10) Business Days notice
prior to any prepayment under this subsection 2.3(a)(ii)(A). All mandatory
prepayments under this Section 2.3(a)(ii)(A) shall include the premiums
payable pursuant to Section 2.5(b).
(B) Change in Control. Simultaneously with the occurrence of a
Change in Control (the "Change in Control Date"), the Lender shall have
the right, but not the obligation, to require the prepayment of the Loan
in whole; provided, that such right shall be subject to the terms of
Article 8 and the Senior Debt Documents. Within thirty (30) days following
a Change in Control Date, the Company shall give a written notice to the
Lender stating that a Change in Control has occurred. The Lender shall,
within ten (10) Business Days receipt of such notice, notify the Company
if it will require a prepayment hereunder. All mandatory prepayments under
this Section 2.3(a)(ii)(B) shall include the premiums payable pursuant to
Section 2.5(b).
(iii) Application of Prepayments. All prepayments (whether voluntary
or mandatory) shall include payment of accrued interest on the principal
amount of the Loan so prepaid and shall be applied to payment of interest
and fees before application to principal. All mandatory prepayments which
are applied to principal on the Note will be applied to the scheduled
installments in inverse order of maturity thereof. All voluntary
prepayments which are applied to principal will be applied to each
scheduled installment on a pro rata basis.
(b) Manner and Time of Payment. All payments by the Company hereunder and
under the Note of principal, interest, premium, and fees shall be made without
defense, set off, or counterclaim, in same day funds and delivered to the Lender
not later than 2:00 P.M. (New York time) on the date due at 399 Park Avenue,
14th Floor, New York, New York, or such other place designated in writing by the
Lender and delivered to the Company, for the account of the Lender. Funds
received by the Lender after such time shall be deemed to have been paid by the
Company on the next succeeding Business Day.
(c) Payments on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a day which is not a
Business Day, the payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Note.
(d) Notation of Payment. The Lender agrees that before disposing of the
Note held by it, or any part thereof (other than by granting participations
therein), the Lender will make a notation thereon of all principal payments
previously made thereon and of the date to which interest thereon has been paid
and will notify the Company of the name and address of the transferee of that
Note; provided, that the failure to make (or any error in the making of) a
notation of the Loan made under such Note or to notify the Company of the name
and address of a transferee shall not limit or otherwise affect the obligation
of the Company hereunder or under such Note with respect to the Loan and
payments of principal or interest on such Note.
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SECTION 2.4 Use of Proceeds.
(a) Loan. The proceeds of the Loan to be made on the Closing Date shall
be used by the Company to partially finance the consideration in the Acquisition
and for general corporate purposes.
(b) Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by any Credit Party in any manner which might cause
the borrowing or the application of such proceeds to violate Regulations T, U or
X or any other regulation of the Board of Governors of the Federal Reserve
System, or to violate the Exchange Act, in each case as in effect on the date or
dates of such borrowing and such use of proceeds.
SECTION 2.5 Fees.
(a) On the Closing Date, the Company shall pay to the Lender a
nonrefundable closing fee in the amount of $200,000. Such closing fee shall be
nonrefundable under all circumstances.
(b) In connection with any prepayment or repayment of any portion of the
Loans (whether at maturity, pursuant to this Article 2 or otherwise), the
Company shall pay a premium on the principal amount of the Loan so prepaid or
repaid, as the case may be, such that the Internal Rate of Return on such
principal amount of the Loan so prepaid or repaid (without giving effect to any
fees paid pursuant to Sections 2.5(b) or 3.1(f), the Warrant or any increase in
interest as a result of Section 2.2(c)) is equal to (i) 18% per annum if such
prepayment or repayment occurs prior to November 5, 2002 or (ii) 20% per annum
if such prepayment or repayment occurs on or after November 5, 2002.
ARTICLE 3. CONDITIONS TO LOAN
SECTION 3.1 Conditions to Loan. The obligation of the Lender to make the
Loan hereunder on the Closing Date is subject to the satisfaction of all of the
following conditions:
(a) Organizational Documents. On or before the Closing Date, the Lender
shall have received the following items, each of which shall be in form and
substance satisfactory to the Lender and, unless otherwise noted, dated the
Closing Date:
(i) a certified copy of the certificate of formation of the each of
the Credit Parties certified by the Secretary of the State of the relevant
Credit Party's state of organization, together with a good standing
certificate from the Secretary of State of the relevant Credit Party's
state of incorporation to be dated a recent date prior to the Closing
Date;
(ii) a copy of the limited liability company agreement of each of
the Credit Parties, such copy certified as of the Closing Date by the
Secretary or an Assistant Secretary of the relevant Credit Party;
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(iii) Board Resolutions of each of the Credit Parties and, if
necessary, shareholders, approving and authorizing the execution, delivery
and performance of the Loan Documents to which the relevant Credit Party
is a party and any other documents, instru ments, and certificates
required to be executed by each party thereto in connection therewith,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of the relevant Credit Party as being in full force and effect
without modification or amendment;
(iv) signature and incumbency certificates of the officers of the
Company executing the Loan Documents; and
(v) executed copies of the Loan Documents and such other documents
and information as the Lender may reasonably request.
(b) Proceedings Satisfactory. On or before the Closing Date, all
corporate and other proceedings taken or to be taken in connection with the
Transactions and all documents incidental thereto not previously found
acceptable by the Lender shall be reasonably satisfactory in form and substance
to the Lender and the Lender shall have received all such counterpart originals
or certified copies of such documents as the Lender may reasonably request.
(c) Representations and Warranties. Concurrently with the making of the
Loans, each of the Credit Parties shall have delivered to the Lenders an
Officer's Certificate in form and substance satisfactory to the Required Lenders
to the effect that the representations and warranties in Article 4 are true,
correct and complete in all respects on and as of the Closing Date to the same
extent as though made on and as of such date.
(d) Potential Event of Default; Event of Default. No event shall have
occurred and be continuing or would result from the consummation of the
borrowing contemplated hereby which would constitute an Event of Default or
Potential Event of Default.
(e) No Injunction, etc. No order, judgment, or decree of any court,
arbitrator or governmental authority shall enjoin or restrain the Lender from
making the Loan.
(f) Regulations T, U or X. The making of the Loan shall not violate
Regulations T, U or X of the Federal Reserve Board.
(g) Acquisition. The Acquisition shall have been consummated on terms and
conditions satisfactory to the Lender, the fees and expenses paid in connection
therewith shall be satisfactory to the Lender and the conditions precedent to
the Acquisition set forth in the Purchase Agreement shall have been satisfied or
waived.
(h) Fees and Expenses. The Lender shall have received payment in full for
all expenses (including reasonable attorney's fees) incurred in connection with
the negotiation and execution of this Agreement and the Loan Documents and the
closing fee required by Section 2.5.
(i) Senior Debt Documents. The Lender shall have received certified
copies of each of the Senior Debt Documents, and all of such Senior Debt
Documents shall be satisfactory,
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in form and substance, to the Lender. All of the conditions contained in the
Senior Credit Agreement as in effect on the Closing Date will have been
satisfied or waived with the consent of the Lender.
(j) Material Adverse Change. No change which could reasonably be expected
to have a Material Adverse Effect shall have occurred since December 31, 1998.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Loan, each of the Credit Parties represents and warrants to the Lender that:
SECTION 4.1 Organization and Good Standing. Each Credit Party is a
limited liability company, duly organized and existing in good standing under
the laws of its jurisdiction of organization. Each Credit Party has the limited
liability company power and authority to own its properties and assets and to
transact the business in which it is engaged and is duly qualified as a foreign
limited liability company and in good standing in all states in which it is
required to be so qualified, except where failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect.
SECTION 4.2 Authorization and Power. Each Credit Party, to the extent it
is a party thereto, has the limited liability company power and requisite
authority, and has taken all limited liability company action necessary, to
execute, deliver and perform its obligations under the Loan Documents.
SECTION 4.3 No Conflicts or Consents. The execution, delivery, and
performance by each Credit Party of its obligations under the Loan Documents and
the Senior Debt Documents, the consummation of any of the transactions
contemplated thereby, and the consummation of the Acquisition (collectively, the
"Transactions"), and compliance with the terms and provisions hereof or thereof
will not contravene or conflict with any provision of law to which any Credit
Party is subject or any material judgment, license, order, or permit applicable
to any Credit Party, or any material Contractual Obligations of any Credit
Party, or violate any provision of the certificate of formation or limited
liability company agreement of any Credit Party, which could reasonably be
expected, in any case, to have a Material Adverse Effect. No consent, approval,
authorization, or order of any Governmental Authority or other Person is
required in connection with the consummation of the Transactions, except for
such required consents, approvals, and authorizations which (a) have been
obtained by the relevant Credit Party or permanently waived in writing, or (b)
the failure to obtain could not reasonably be expected to have a Material
Adverse Effect.
SECTION 4.4 Enforceable Obligations. The Loan Documents have been duly
executed and delivered by each Credit Party (to the extent such Credit Party is
a party thereto) and are, or will be, the legal and binding obligations of each
Credit Party, enforceable in accordance with their respective terms, subject to
applicable laws of bankruptcy, insolvency, and similar laws affecting creditors'
rights and the application of general rules at equity.
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SECTION 4.5 No Event of Default. No event has occurred and is continuing
which constitutes a Potential Event of Default or an Event of Default.
SECTION 4.6 Use of Proceeds; Margin Stock. The proceeds of the Loan will
be used solely for the purposes specified herein. None of such proceeds will be
used to, or to reduce or retire any Indebtedness which was originally incurred
to, purchase or carry a Margin Stock, or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulations
T, U or X. No Credit Party has taken nor will take any action which might cause
any of the Loan Documents to violate Regulations T, U or X, or any other
regulations of the Board of Governors of the Federal Reserve System or to
violate Section 8 of the Exchange Act or any rule or regulation thereunder, in
each case as now in effect or as the same may hereafter be in effect.
SECTION 4.7 No Financing of Regulated Corporate Takeovers. No proceeds of
the Loan will be used to acquire any security in any transaction which is
subject to Sections 13 or 14 of the Exchange Act, including particularly (but
without limitation) Sections 13(d) and 14(d) thereof.
SECTION 4.8 Compliance with Law. Each Credit Party is in compliance with
all laws, except where failure to so comply could not reasonably be expected to
have a Material Adverse Effect.
SECTION 4.9 Capital Structure and Subsidiaries.
(a) As of the Closing Date, the authorized Capital Stock of the Company
is as set forth on Schedule 4.13. Except as set forth on Schedule 4.13, as of
the Closing Date, all outstanding shares of each class of such Capital Stock
were duly authorized and validly issued, and are fully paid and nonassessable.
As of the Closing Date, other than the Warrants or as set forth in Schedule
4.13, there are no outstanding securities, rights, or other agreements of any
nature that require any Credit Party or any of their respective Subsidiaries to
issue any of its Capital Stock.
(b) Schedule 4.13 sets forth a true and complete list of each
Subsidiary of each of the Credit Parties and each such Subsidiary's jurisdiction
of incorporation.
SECTION 4.10 Investment Company Act. No 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.
SECTION 4.11 Public Utility Holding Company Act. No Credit Party is a
"holding company", an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
SECTION 4.12 Financial Condition. Immediately after the consummation of
the Transactions to occur on the Closing Date, (a) the fair value of the assets
of each Credit Party, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the present fair
saleable value of the property of each Credit Party will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated,
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contingent or otherwise, as such debts and other liabilities become absolute and
matured; (c) each Credit Party will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) each Credit Party will not have unreasonably small
capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
SECTION 4.13 Senior Debt Documents. The Company has delivered to the
Lender true and correct copies of the Senior Debt Documents as in effect on the
date hereof. The representations and warranties of the Company contained in the
Senior Debt Documents are true and correct in all material respects. There exist
no material defaults with respect to the Senior Debt Documents nor any basis for
the exercise by any party thereto of any rights of acceleration, cancellation,
rescission, or any rights of offset.
SECTION 4.14 Acquisition. The transactions contemplated by the Purchase
Agreement have been consummated in accordance with the terms of the Purchase
Agreement, and nothing has come to the Credit Parties' attention that would
indicate that any of the representations and warranties contained in such
agreement are not true and correct in all material respects and, except as
otherwise disclosed to the Lender, none of the material terms thereof have been
modified, amended, or waived.
ARTICLE 5. AFFIRMATIVE COVENANTS
Each of the Credit Parties covenants and agrees that, until the Loan and
the Note and all other amounts due under this Agreement have been paid in full,
unless the Lender shall otherwise give prior written consent, the Credit Parties
shall jointly and severally perform all covenants contained in this Article 5:
SECTION 5.1 Financial Statements and Other Reports. The Credit Parties
will deliver to the Lender:
(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 Company, a copy
of the consolidated and consolidating balance sheet of the Company and its
consolidated Subsidiaries and within one hundred twenty (120) days after the end
of each fiscal year of the Company, a copy of the consolidated and consolidating
balance sheet of Sleepmaster and its consolidated Subsidiaries as at the end of
such fiscal year and with respect to each of the foregoing, the related
consolidated and consolidating statements of income and retained earnings and of
cash flows of the Company and its consolidated Subsidiaries and for Sleepmaster
and its consolidated Subsidiaries for such year, audited by a firm of
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Lender, 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;
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(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
Company, a company-prepared consolidated balance sheet and a company-prepared
consolidating balance sheet of the Company and its consolidated Subsidiaries and
of Sleepmaster 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 Company and its consolidated subsidiaries and for Sleepmaster
and its consolidated Subsidiaries 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 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 at the end of a
fiscal quarter, in which case forty-five (45) days after the end thereof), a
company-prepared consolidated balance sheet of the Company and its consolidated
Subsidiaries and for Sleepmaster 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 Company and its consolidated Subsidiaries and
for Sleepmaster 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 Sleepmaster for the next fiscal year on a
month-by-month basis, in form and detail reasonably acceptable to the Lender,
together with a summary of the material assumptions made in the preparation of
such annual budget or plan.
all such financial statements are 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 GAAP.
SECTION 5.2 Corporate Existence, Etc. Except as otherwise expressly
permitted herein, each of the Credit Parties will, and shall cause each of its
Subsidiaries to, at all times preserve and maintain in full force and effect its
corporate or limited liability company existence, as the case may be, and good
standing under the laws of its state or jurisdiction of incorporation, except
when the failure to so preserve or maintain could not reasonably be expected to
have a Material Adverse Effect.
SECTION 5.3 Payment of Taxes; Tax Consolidation.
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(a) Each of the Credit Parties and any consolidated group of which any
Credit Party is a member will, and will cause each of their respective
Subsidiaries to, pay all Taxes imposed upon it or any of its properties or
assets or in respect of any of its franchises, business, income, or property
before any material penalty accrues thereon, prior to the time when any material
penalty or fine shall be incurred with respect thereto; provided, that no such
Taxes need be paid with respect to any Contested Claim.
(b) None of the Credit Parties will, or will permit any of its
Subsidiaries to, file or consent to the filing of any consolidated income tax
return with any Person other than the Credit Parties, or any of their
Subsidiaries or such other Person as may be reasonably acceptable to the Lender.
SECTION 5.4 Maintenance of Properties; Insurance. Except as permitted by
the terms and conditions of Section 6.5, each Credit Party will maintain or
cause to be maintained in good repair, working order and condition all material
properties used or useful in the business of the Credit Parties, ordinary wear
and tear excepted, and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Each Credit Party will
keep its insurable properties adequately insured at all times in accordance with
past practice; maintain such other insurance, to such extent and against such
risks, including fire and other risks insured against by extended coverage,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it, and maintain such other
insurance as may be required by law.
SECTION 5.5 Inspection. No more than twice during each annual period
following the Closing Date, the Company shall permit, and shall cause each of
its Subsidiaries to permit, representatives of the Lender to visit and inspect
any of their respective properties, to examine their respective corporate,
financial and operating records, and make copies thereof or abstracts therefrom,
and to discuss their respective affairs, finances and accounts with their
respective directors, officers, and independent public accountants, all at such
reasonable times during normal business hours and as often as may be reasonably
requested, upon reasonable advance notice to the Company; provided, when an
Event of Default exists the Lender may do any of the foregoing at the expense of
the Company at any time during normal business hours and without advance notice.
SECTION 5.6 Compliance with Laws, Etc. Each Credit Party shall comply
with, and shall cause each of their respective Subsidiaries to comply with, in
all material respects, all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business, except as may be contested in good
faith or as to which a bona fide dispute may exist.
SECTION 5.7 Maintenance of Accurate Records, Etc. Each Credit Party shall
maintain, and will cause each of its Subsidiaries to maintain, proper books of
records and accounts, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and
matters involving the assets and business of each Credit Party and its
Subsidiaries.
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SECTION 5.8 Lender Meeting. Each Credit Party will participate in a
meeting with the Lender once during each Fiscal Year to be held at a location
and a time selected by each Credit Party and reasonably acceptable to the
Lender.
ARTICLE 6. NEGATIVE COVENANTS
The Company covenants and agrees that until the Loans and the Note and
all other Obligations due at the time of such termination or payment have been
paid in full, unless the Lender shall otherwise give prior written consent, the
Company shall perform all covenants in this Article 6:
SECTION 6.1 Indebtedness.
(a) The Company shall not, directly or indirectly, Incur any Indebtedness
(including, without limitation, Acquired Indebtedness) other than (i)
Indebtedness under this Agreement, (ii) Senior Debt, (iii) Indebtedness in
respect of indemnities of advisors and officers of the Company, (iv)
Indebtedness in respect of Existing Preferred Interests and (v) Permitted Seller
Debt and Existing Seller Debt (each as defined in the Senior Credit Agreement).
(b) The Company shall not permit Sleepmaster or any of Sleepmaster's
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including, without limitation, Acquired Indebtedness) unless such Indebtedness
is Incurred by Sleepmaster or a Guarantor or constitutes Acquired Indebtedness
of a Restricted Subsidiary and, in each case, the Company's Consolidated Fixed
Charge Coverage Ratio for the most recent four full Fiscal Quarters for which
financial statements are available immediately preceding the Incurrence of such
Indebtedness taken as one period is at least equal to or greater than 2:1.
Notwithstanding the foregoing, Sleepmaster and, to the extent
specifically set forth below, its Restricted Subsidiaries may Incur each and all
of the following (collectively, the "Permitted Indebtedness"):
(i) Indebtedness of Sleepmaster (and Guarantees thereof by the
Guarantors) under the Senior Debt Documents in an aggregate principal amount
then classified as having been incurred in reliance on this clause (i) at any
one time outstanding not to exceed the greater of (A) $25 million under any
revolving credit facility thereof and in respect of letters of credit
thereunder minus the amount by which any commitments thereunder are
permanently reduced and minus the aggregate amount of Net Cash Proceeds of
Asset Sales applied to permanently reduce the commitments with respect to
such Indebtedness pursuant to Section 6.5, and (B) the sum of (1) 80% of the
consolidated net book value of the accounts receivable and (2) 60% of the net
book value of the inventory, in each case of Sleepmaster and its Restricted
Subsidiaries as set forth on the latest available consolidated balance sheet
of Sleepmaster determined in accordance with GAAP;
(ii) Existing Indebtedness outstanding on the Closing Date;
(iii) Indebtedness represented by the Note and this Agreement;
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(iv) Indebtedness of Sleepmaster owing to a Restricted
Subsidiary; provided, that any Indebtedness of Sleepmaster owing to a
Restricted Subsidiary that is not a Guarantor is made pursuant to an
intercompany note in the form provided for in the Subordinated Notes
Documents and is unsecured and is Subordinated Indebtedness of Sleepmaster;
provided, further, that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to a
Restricted Subsidiary) shall be deemed to be an Incurrence of such
Indebtedness by Sleepmaster or other obligor not permitted by this clause
(iv);
(v) Indebtedness of a Majority Owned Restricted Subsidiary
owing to Sleepmaster or another Majority Owned Restricted Subsidiary;
provided, that any such Indebtedness is made pursuant to an intercompany note
in the form provided for in the Subordinated Notes Documents; provided,
further, that (A) any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer to
Sleepmaster or a Majority Owned Restricted Subsidiary) shall be deemed to be
an incurrence of such Indebtedness by the obligor not permitted by this
clause (v), and (B) any transaction pursuant to which any Majority Owned
Restricted Subsidiary, which has Indebtedness owing to Sleepmaster or any
other Wholly Owned Restricted Subsidiary, ceases to be a Majority Owned
Restricted Subsidiary shall be deemed to be the Incurrence of Indebtedness by
such Majority Owned Restricted Subsidiary that is not permitted by this
clause (v);
(vi) Guarantees of any Restricted Subsidiary made in
accordance with the Subordinated Notes Documents;
(vii) obligations of Sleepmaster or any Restricted Subsidiary
entered into in the ordinary course of business (A) pursuant to Interest Rate
Agreements designed to protect Sleepmaster or any Restricted Subsidiary
against fluctuations in interest rates in respect of Indebtedness of
Sleepmaster or any Restricted Subsidiary as long as such obligations do not
exceed the aggregate principal amount of such Indebtedness then outstanding
or (B) under any Currency Hedging Agreements, relating to (1) Indebtedness of
Sleepmaster or any Restricted Subsidiary and/or (2) obligations to purchase
or sell assets or properties, in each case, incurred in the ordinary course
of business of Sleepmaster or any Restricted Subsidiary; provided, that such
Currency Hedging Agreements do not increase the Indebtedness or other
obligations of Sleepmaster or any Restricted Subsidiary outstanding other
than as a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(viii) Indebtedness of Sleepmaster or any Restricted Subsidiary
represented by Capital Lease Obligations or Purchase Money Obligations or
other Indebtedness Incurred or assumed in connection with the acquisition or
development of real or personal, movable or immovable, property in each case
Incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property (including
common stock) used in the business of Sleepmaster, in an aggregate principal
amount outstanding at any time pursuant to this clause (viii) not to exceed
the greater of $7.5 million or 10% of Sleepmaster's Consolidated Net Tangible
Assets; provided, that the principal amount of any Indebtedness permitted
under this clause (viii) did not in each case
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at the time of Incurrence exceed the Fair Market Value, as determined by
Sleepmaster in good faith, of the acquired or constructed asset or
improvement so financed;
(ix) Acquired Indebtedness, Indebtedness incurred to finance
acquisitions, or Indebtedness Incurred to refinance Acquired Indebtedness or
Indebtedness Incurred to finance acquisitions, in any such case of
Sleepmaster or any Guarantor; provided, that after giving pro forma effect
thereto (A) Sleepmaster's Consolidated Fixed Charge Coverage Ratio is less
than 2.0:1 but greater than or equal to 1.75:1 and (B) Sleepmaster's
Consolidated Fixed Charge Coverage Ratio increases as a consequence of such
incurrence and related acquisition;
(x) any renewals, extensions, substitutions, refundings,
refinancings or replacements (collectively, a "refinancing") of any
Indebtedness described in clauses (ii), (iii) or (ix) of this definition of
"Permitted Indebtedness," including any successive refinancings so long as
the borrower under such refinancing is Sleepmaster, or, if not Sleepmaster,
the same as the borrower of the Indebtedness being refinanced and the
aggregate principal amount of Indebtedness represented thereby (or if such
Indebtedness provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity
thereof, the original issue price of such Indebtedness plus any accreted
value attributable thereto since the original issuance of such Indebtedness)
is not increased by such refinancing plus the lesser of (A) the stated amount
of any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (B)
the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
Sleepmaster incurred in connection with such refinancing and (1) in the case
of any refinancing of Indebtedness that is Subordinate Indebtedness, such new
Indebtedness is made subordinated to the Subordinated Notes or such Guarantee
at least to the same extent as the Indebtedness being refinanced and (2) in
the case of Indebtedness that is Subordinated Indebtedness or Pari Passu
Indebtedness, such refinancing does not reduce the Average Life to Stated
Maturity or the Stated Maturity of such Indebtedness;
(xi) any Guarantee by Sleepmaster or any of its Restricted
Subsidiaries of Indebtedness of Sleepmaster or a Restricted Subsidiary of
Sleepmaster that was not prohibited from being Incurred pursuant to any of
the terms of this Agreement or the Subordinated Notes Documents;
(xii) Indebtedness incurred by Sleepmaster or any of its
Restricted Subsidiaries constituting reimbursement obligations with respect
to letters of credit issued in the ordinary course of business, including
without limitation to letters of credit in respect to workers' compensation
claims or self-insurance, or other Indebtedness with respect to reimbursement
type obligations regarding workers' compensation claims; provided, that upon
the drawing of such letters of credit or the incurrence of such Indebtedness,
such obligations are reimbursed within 30 days following such drawing or
incurrence;
(xiii) Indebtedness arising from agreements of Sleepmaster or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar
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obligations, in each case, incurred or assumed in connection with the
disposition of any business, asset or Restricted Subsidiary, other than
Guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition; provided, that (A) such Indebtedness is not
reflected on the balance sheet of Sleepmaster or any Restricted Subsidiary
(contingent obligations referred to in a footnote or footnotes to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this clause (A))
and (B) the maximum assumable liability in respect of such Indebtedness shall
at no time exceed the gross Cash proceeds actually received by Sleepmaster
and/or such Restricted Subsidiary in connection with such disposition;
(xiv) obligations in respect of performance and surety bonds
and completion Guarantees provided by Sleepmaster or any Restricted
Subsidiary in the ordinary course of business; and
(xv) Indebtedness of Sleepmaster in addition to that described
in clauses (i) through (xiv) above, and any refinancings or replacements of
such Indebtedness, so long as the aggregate principal amount of all such
Indebtedness shall not exceed $10 million outstanding at any one time in the
aggregate.
For purposes of determining compliance with this Section 6.1, in the
event that an item of Indebtedness meets the criteria of more than one of the
types of Indebtedness permitted by this covenant, Sleepmaster in its sole
discretion shall classify such item of Indebtedness and only be required to
include the amount of such Indebtedness as one of such types. In addition,
Sleepmaster may, at any time, change the classification of an item of
Indebtedness (or any portion thereof) to any other clause or to the second
paragraph hereof; provided, that Sleepmaster would be permitted to Incur such
item of Indebtedness (or portion thereof) pursuant to such other clause or the
second paragraph hereof, as the case may be, at such time of reclassification
except for Redeemable Capital Stock outstanding on the date of this Agreement.
SECTION 6.2 Limitation on Transactions with Affiliates. The Company shall
not, and shall not permit, cause, or suffer Sleepmaster or any Restricted
Subsidiary of Sleepmaster to, directly or indirectly, enter into any transaction
or series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with or for the
benefit of any Affiliate of the Company or Sleepmaster (other than the Company,
Sleepmaster or a Majority Owned Restricted Subsidiary of Sleepmaster) unless
such transaction or series of related transactions is entered into in good faith
and in writing and (a) (i) such transaction or series of related transactions is
on terms that are no less favorable to the Company, Sleepmaster or such
Restricted Subsidiary, as the case may be, than those that would be available in
a comparable transaction in arm's-length dealings with an unrelated third party,
and (ii) the Company or Sleepmaster, in the case of such a transaction involving
Sleepmaster or any Restricted Subsidiary, delivers an officers' certificate to
the Lender certifying that such transaction or series of related transactions
complies with clause (a)(i) of this Section, (b) with respect to any transaction
or series of related transactions involving aggregate value in excess of $5
million, such transaction or series of related transactions has been approved by
a majority of the Disinterested Advisors of the Board of Advisors of the Company
or Sleepmaster, in the case of such a transaction involving Sleepmaster
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or any Restricted Subsidiary, or in the event there is only one Disinterested
Advisor, by such Disinterested Advisor, and (c) with respect to any transaction
or series of related transactions involving aggregate value in excess of $10
million, the Company or Sleepmaster, in the case of such a transaction involving
Sleepmaster or any Restricted Subsidiary, delivers to the Lender a written
opinion of an investment banking firm of national standing or other recognized
independent expert with experience appraising the terms and conditions of the
type of transaction or series of related transactions for which an opinion is
required stating that the transaction or series of related transactions is fair
to the Company, Sleepmaster or such Restricted Subsidiary from a financial point
of view; provided, that this provision shall not apply to (i) employment
agreements and employee benefit arrangements with any officer or director or
advisor of the Company, Sleepmaster or any Restricted Subsidiary of Sleepmaster,
including under any unit purchase, unit option or unit incentive plans, entered
into in the ordinary course of business and consistent with the past practices
of the Company, Sleepmaster or such Restricted Subsidiary, (ii) transactions
pursuant to agreements in effect on the date of this Agreement, including
amendments thereto entered into after that date; provided, that the terms of any
such amendment are not less favorable to the Company, Sleepmaster or such
Restricted Subsidiary than the terms of such agreement prior to such amendment
or (iii) any Permitted Payment or Restricted Payment which is permitted to be
made under Section 6.3.
SECTION 6.3 Restricted Payments. (a) The Company will not, directly or
indirectly, make any Restricted Payments other than with respect to (i)
Permitted Seller Debt (as defined in the Senior Credit Agreement) and (ii)
repurchases of management units pursuant to the terms and conditions of any
employment agreements between the Company or any of its Subsidiaries and the
management of the Company or any of its Subsidiaries.
(b) The Company will not permit Sleepmaster or any Restricted Subsidiary
of Sleepmaster to, directly or indirectly, make a Restricted Payment unless:
(i) immediately before and immediately after giving effect to
such proposed Restricted Payment on a pro forma basis, no Default or Event of
Default shall have occurred and be continuing and such Restricted Payment
shall not be an event which is, or after notice or lapse of time or both,
would be, an "event of default" under the terms of any Indebtedness of
Sleepmaster or its Restricted Subsidiaries;
(ii) immediately before and immediately after giving effect to
such Restricted Payment on a pro forma basis, Sleepmaster could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the
provisions described under Section 6.1 herein; and
(iii) after giving effect to the proposed Restricted Payment, the
aggregate amount of all such Restricted Payments declared or made after the
date of the Subordinated Notes Documents does not exceed the sum of:
(A) 50% of the aggregate Consolidated Net Income of Sleepmaster
accrued on a cumulative basis during the period beginning on the first day of
Sleepmaster's Fiscal Quarter beginning after the date of the Subordinated
Notes Documents and ending on the last day of Sleepmaster's last Fiscal
Quarter ending prior to the date of the Restricted
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Payment (or, if such aggregate cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss);
(B) the aggregate Net Cash Proceeds (including the Fair Market
Value of property other than Cash, provided that such Fair Market Value is
determined by the Board of Advisors of Sleepmaster in good faith and
evidenced by a Board Resolution set forth in an officer's certificate
delivered to the Lender and, if the Fair Market Value is in excess of $5
million, an opinion as to the value thereof issued by an investment banking
firm of national standing, (a copy of which shall be delivered to the
Lender), which opinion shall provide a specific value which, or a range of
values the lowest point of which, is not lower than the value set forth in
the Board Resolution; provided, further, that such property is related,
ancillary or complementary to any business of Sleepmaster and its Restricted
Subsidiaries) received after the date of the Subordinated Notes Documents by
Sleepmaster either (1) as capital contributions in the form of common equity
to Sleepmaster or (2) from the issuance or sale (other than to any of its
Subsidiaries) of Qualified Capital Stock of Sleepmaster or any options,
warrants or rights to purchase such Qualified Capital Stock of Sleepmaster
(except, in each case, to the extent such proceeds are used to purchase,
redeem or otherwise retire Capital Stock or Subordinated Indebtedness as set
forth below in clause (ii) or (iii) of paragraph (c) below) (and excluding
the Net Cash Proceeds from the issuance of Qualified Capital Stock financed,
directly or indirectly, using funds borrowed from Sleepmaster or any
Subsidiary until and to the extent such borrowing is repaid);
(C) the aggregate Net Cash Proceeds (including the Fair Market
Value of property other than Cash; provided, that such Fair Market Value is
determined by the Board of Advisors of Sleepmaster in good faith and
evidenced by a Board Resolution set forth in an officer's certificate
delivered to the Lender and, if the Fair Market Value is in excess of $5
million, an opinion as to the value thereof issued by an investment banking
firm of national standing (a copy of which shall be delivered to the Lender),
which opinion shall provide a specific value which, or a range of values the
lowest point of which, is not lower than the value set forth in the Board
Resolution, and provided further, that such property is related, ancillary or
complementary to any business of Sleepmaster and its Restricted Subsidiaries)
received after the date of this Agreement by Sleepmaster (other than from any
of its Subsidiaries) upon the exercise of any options, warrants or rights to
purchase Qualified Capital Stock of Sleepmaster (and excluding the Net Cash
Proceeds from the exercise of any options, warrants or rights to purchase
Qualified Capital Stock financed, directly or indirectly, using funds
borrowed from Sleepmaster or any Subsidiary until and to the extent such
borrowing is repaid);
(D) the aggregate Net Cash Proceeds received after the date of
the Subordinated Notes Documents by Sleepmaster from the conversion or
exchange, if any, of debt securities or Redeemable Capital Stock of
Sleepmaster or its Restricted Subsidiaries into or for Qualified Capital
Stock of Sleepmaster plus, to the extent such debt securities or Redeemable
Capital Stock were issued after the date of the Subordinated Notes Documents,
the aggregate of Net Cash Proceeds from their original issuance (and
excluding the Net Cash Proceeds from the conversion or exchange of debt
securities or Redeemable Capital Stock
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financed, directly or indirectly, using funds borrowed from Sleepmaster or
any Subsidiary until and to the extent such borrowing is repaid); and
(E) (1) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the date of the
Subordinated Notes Document, an amount (to the extent not included in
Consolidated Net Income) equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such Investment, in
either case, less the cost of the disposition of such Investment and net of
taxes, and (2) in the case of the designation of an Unrestricted Subsidiary
as a Restricted Subsidiary (as long as the designation of such Subsidiary as
an Unrestricted Subsidiary was deemed a Restricted Payment), the Fair Market
Value of Sleepmaster's interest in such Subsidiary provided that such amount
shall not in any case exceed the amount of the Restricted Payment deemed made
at the time the Subsidiary was designated as an Unrestricted Subsidiary.
(c) Notwithstanding the foregoing, and in the case of clauses (ii)
through (xi) below, so long as no Default or Event of Default is continuing or
would arise therefrom, the foregoing provisions shall not prohibit the following
actions (each of clauses (i) through (xi) being referred to as a "Permitted
Payment"):
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment was
permitted by the provisions of paragraph (b) of this Section 6.3 and such
payment shall have been deemed to have been paid on such date of declaration
and shall not have been deemed a "Permitted Payment" for purposes of the
calculation required by paragraph (b) of this Section 6.3;
(ii) the repurchase, redemption, or other acquisition or
retirement for value of any shares of any class of Capital Stock of
Sleepmaster in exchange for (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which Cash is
paid in lieu of the issuance of fractional shares or scrip), or out of the
Net Cash Proceeds of a substantially concurrent issuance and sale for Cash
(other than to a Subsidiary) of, other shares of Qualified Capital Stock of
Sleepmaster; provided, that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (iii)(B) of
paragraph (b) of this Section 6.3;
(iii) the repurchase, redemption, defeasance, retirement or
acquisition for value or payment of principal of any Subordinated
Indebtedness in exchange for, or in an amount not in excess of the Net Cash
Proceeds of, a substantially concurrent issuance and sale for Cash (other
than to any Subsidiary of Sleepmaster) of any Qualified Capital Stock of
Sleepmaster; provided, that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (iii)(B) of
paragraph (b) of this Section 6.3;
(iv) the refinancing of any Subordinated Indebtedness, including
the repurchase, redemption, defeasance, retirement, acquisition for value or
payment of principal of any Subordinated Indebtedness (other than Redeemable
Capital Stock) through the substantially concurrent issuance of new
Subordinated Indebtedness; provided, that any such new Subordinated
Indebtedness (A) shall be in a principal amount that does not exceed the
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principal amount so refinanced (or, if such Subordinated Indebtedness
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, then such lesser amount
as of the date of determination), plus the lesser of (1) the stated amount of
any premium or other payment required to be paid in connection with such a
refinancing pursuant to the terms of the Indebtedness being refinanced or (2)
the amount of premium or other payment actually paid at such time to
refinance the Indebtedness, plus, in either case, the amount of expenses of
Sleepmaster incurred in connection with such refinancing; (B) has an Average
Life to Stated Maturity greater than the remaining Average Life to Stated
Maturity of the Subordinated Indebtedness being refinanced; and (C) is
expressly subordinated in right of payment to the Subordinated Notes at least
to the same extent as the Subordinated Indebtedness to be refinanced;
(v) the purchase or redemption of shares of Special Preferred
Stock issued subsequent to the date of the Subordinated Notes Documents;
provided, that immediately following such purchase or redemption the
Consolidated Fixed Charge Coverage Ratio of Sleepmaster is not less than
2.0:1;
(vi) the declaration or payment of dividends or other
distributions, or the making of loans, to the Company for (A) reasonable and
customary salary, bonus and other benefits payable to officers, employees and
consultants of the Company consistent with past practice, (B) reasonable fees
and expenses paid to members of the Board of Advisors of the Company
consistent with past practice, (C) general corporate overhead expenses of the
Company in the ordinary course of business consistent with past practice, (D)
management, consulting or advisory fees paid to the Company to permit the
Company to pay management, consulting or advisory fees, in each case, not to
exceed $500,000 in any fiscal year, and (E) the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company
or Sleepmaster held by any member or former member of the Company's or
Sleepmaster's (or any of the Sleepmaster's Restricted Subsidiaries')
management pursuant to any management equity subscription agreement,
securityholders agreement or unit option agreement, in each case as in effect
as of the date of this Agreement; provided, (1) with respect to clauses (A)
through (C) above in the aggregate, the aggregate amount paid does not exceed
$500,000 in any Fiscal Year and (2) with respect to clause (E) above, the
aggregate price paid shall not exceed (x) $2 million in any calendar year
(with unused amounts in any one calendar year being carried over to the
immediately succeeding calendar year subject to a maximum (without giving
effect to clause (y)) of $5 million in any calendar year), plus (y) the Net
Cash Proceeds contributed to Sleepmaster by the Company from any issuance or
reissuance of Capital Stock by the Company to members of management of
Sleepmaster and its Restricted Subsidiaries (provided that the Net Cash
Proceeds contributed to Sleepmaster from the issuance of such shares of
Capital Stock are excluded from clause (iii)(B) of paragraph (b) of this
Section 6.3 to the extent used pursuant to this clause (vi)(E) of paragraph
(c) of this Section 6.3) and the proceeds to Sleepmaster of any "key-man"
life insurance policies; provided that the cancellation of Indebtedness owing
to Sleepmaster from members of management of Sleepmaster or any Restricted
Subsidiary in connection with such repurchase of Capital Stock will not be
deemed to be a Restricted Payment;
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(vii) distributions to the Company of Tax Amounts with respect to
such calendar year, which distributions or payments may be made from time to
time with respect to a calendar year, based on reasonable estimates of such
Tax Amounts, as are necessary in order for the Company to make estimated and
final payments of income tax with respect to the Taxable Income of
Sleepmaster with respect to such calendar year; provided, that in the event
that the amounts which were actually distributed under this clause (vii) with
respect to such calendar year exceed the required Tax Amounts with respect to
such calendar year as determined by Sleepmaster's accountants, the Company
shall promptly pay to Sleepmaster such excess; provided, further, that all
such distributions or payments in respect of a calendar year are made no
later than 120 days after the end of such calendar year;
(viii) the declaration and payment of dividends on Redeemable
Capital Stock issued on after the date of this Agreement, the Incurrence of
which satisfied the covenant set forth in the first paragraph of Section
6.1(b);
(ix) repurchases of Capital Stock deemed to occur upon the
exercise of stock options if such Capital Stock represents a portion of the
exercise price thereof;
(x) loans, advances, dividends or distributions from Sleepmaster
to the Company in an amount equal to the current Cash interest payments then
due on the Sleep Investor Promissory Notes as in effect on the Closing Date;
provided, that with respect to any such loans, advances, dividends or
distributions and after giving effect thereto, the Consolidated Fixed Charge
Coverage Ratio of Sleepmaster is not less than 2.0:1; and
(xi) additional Restricted Payments, other than those listed
above, not to exceed $5 million in the aggregate while the Note is
outstanding.
SECTION 6.4 Mergers. (a) The Company shall not consolidate or merge with
or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless, (i)
the entity formed by or surviving any such consolidation or merger (if other
than the Company), or to which such conveyance or other disposition shall have
been made the ("Surviving Entity"), is a corporation organized and existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the Surviving Entity assumes all of the Obligations by written
instrument reasonably satisfactory to the Lender; and (iii) immediately after
giving effect to such transaction on a pro forma basis and treating any
Indebtedness which becomes an obligation of the Company or the Surviving Entity,
as applicable, as a result of such transaction as having been incurred by the
Company or the Surviving Entity, as applicable, at the time of the transaction,
no Potential Event of Default or Event of Default shall have occurred and be
continuing.
(b) The Company shall not permit Sleepmaster to consolidate or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless, (i)
the entity formed by or surviving any such consolidation or merger (if other
than Sleepmaster), or to which such conveyance or other disposition shall have
been made the ("Sleepmaster Surviving Entity"), is a corporation organized and
existing under the laws of the United States, any state thereof or the District
of Columbia; (ii) immediately after giving effect
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to such transaction and the use of any Net Cash Proceeds therefrom on a pro
forma basis as if such transaction had occurred at the beginning of the
applicable four-quarter period, Sleepmaster or the Sleepmaster Surviving Entity,
as applicable, could incur at least $1.00 of Indebtedness pursuant to Section
6.1(b); and (iii) immediately after giving effect to such transaction on a pro
forma basis and treating any Indebtedness which becomes an obligation of
Sleepmaster or the Sleepmaster Surviving Entity, as applicable, as a result of
such transaction as having been incurred by Sleepmaster or the Sleepmaster
Surviving Entity, as applicable, at the time of the transaction, no Potential
Event of Default or Event of Default shall have occurred and be continuing.
SECTION 6.5 Asset Sales; Sale of Subsidiary Stock.
(a) The Company shall not permit Sleepmaster or any Restricted
Subsidiary of Sleepmaster to, directly or indirectly, consummate any Asset
Sales, unless:
(i) at least 75% of the consideration from such Asset Sale is
received in Cash or Temporary Cash Investments (provided, that the 75%
limitation will not apply to any Asset Sale in which the Cash or Temporary
Cash Investments portion of the consideration received therefrom, determined
in accordance with the foregoing proviso, is equal to or greater than what the
after-tax proceeds would have been had such Asset Sale complied with the
aforementioned 75% limitation);
(ii) Sleepmaster or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares or assets subject to such Asset Sale (as
determined by the Board of Advisors of Sleepmaster and evidenced in a Board
Resolution); and
(iii) an amount equal to 100% of the Net Cash Proceeds from such
Asset Sale is applied by Sleepmaster (or such Restricted Subsidiary, as the
case may be):
(A) first, to the extent Sleepmaster elects (or is required by
the terms of any Indebtedness), to prepay, repay, redeem or purchase Senior
Debt pursuant to the Senior Debt Documents or invest the Net Cash Proceeds
in properties and other assets that (as determined by the Board of Advisors
of Sleepmaster) replace the properties and assets that were the subject of
the Asset Sale or in properties and assets that will be used in the
businesses of Sleepmaster or its Restricted Subsidiaries existing on the
date of this Agreement or in businesses reasonably related thereto, within
one year from the later of the date of such Asset Sale and the receipt of
such Net Cash Proceeds;
(B) second, to the extent of the balance of such Net Cash
Proceeds after application in accordance with clause (A), to prepay, repay,
redeem or purchase Indebtedness pursuant to the Subordinated Notes
Documents, within one year from the later of the date of such Asset Sale and
the receipt of such Net Cash Proceeds; and
(C) third, to the extent of the balance of such Net Cash
Proceeds after application in accordance with clauses (A) and (B) and to the
extent permissible pursuant to the Senior Debt Documents, to prepay, repay,
redeem or purchase the Loan.
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Pending the final application of any such Net Cash Proceeds, Sleepmaster
or such Restricted Subsidiary may invest such Net Cash Proceeds in any manner
that is not prohibited by this Agreement or the Subordinated Notes Documents.
For the purposes of this Section 6.5, the following are deemed to be Cash
or Temporary Cash Investments: the amount of (x) any liabilities (as shown on
Sleepmaster's or such Restricted Subsidiary's most recent balance sheet) of
Sleepmaster or any Restricted Subsidiary (other than contingent liabilities,
liabilities that are subordinated to or rank equally with the Subordinated Notes
or any Guarantee thereof and liabilities that are incurred in connection with or
in contemplation of the related Asset Sale) that are assumed by the transferee
of any such assets pursuant to a customary novation agreement that fully and
unconditionally releases Sleepmaster or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by
Sleepmaster or any such Restricted Subsidiary from such transferee that are
promptly converted by Sleepmaster or such Restricted Subsidiary into Cash or
Temporary Cash Investments (to the extent of the Cash received).
(b) The Company shall not permit Sleepmaster or any Restricted Subsidiary
of Sleepmaster to issue, sell or transfer any Capital Stock, except (i) if after
giving effect to such issuance, sale or transfer of Capital Stock such
Restricted Subsidiary would be a Majority Owned Restricted Subsidiary, (ii) for
Capital Stock issued or sold to, held by or transferred to Sleepmaster or a
Wholly Owned Restricted Subsidiary, and (iii) for Capital Stock issued by a
Person prior to the time (A) such Person becomes a Restricted Subsidiary, (B)
such Person merges with or into a Restricted Subsidiary or (C) a Restricted
Subsidiary merges with or into such Person; provided, that such Capital Stock
was not issued or incurred by such Person in anticipation of the type of
transaction contemplated by subclause (A), (B) or (C). This clause (b) shall not
apply upon the acquisition of all the outstanding Capital Stock of such
Restricted Subsidiary in accordance with the terms of this Agreement.
(c) Sleepmaster will not permit any Person (other than Sleepmaster or a
Wholly Owned Restricted Subsidiary) to acquire Capital Stock of any Restricted
Subsidiary from Sleepmaster or any Restricted Subsidiary except (i) upon the
acquisition of all the outstanding Capital Stock of such Restricted Subsidiary
in accordance with the terms of this Agreement or (ii) if after giving effect to
such acquisition such Restricted Subsidiary would be a Majority Owned
Subsidiary.
(d) Notwithstanding the foregoing, this covenant shall not prohibit any
issuance or sale of the Capital Stock of any Restricted Subsidiary if
immediately after giving effect to such issuance or sale, any Investment in such
Person remaining after giving effect to such issuance or sale would have been
permitted to be made under Section 6.3 herein if made on the date of such
issuance or sale. Any such Investment shall be deemed a Restricted Payment.
SECTION 6.6 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Company will not cause or permit Sleepmaster or any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause to exist or become effective any consensual encumbrance or restriction on
the ability of Sleepmaster or any Restricted Subsidiary to (a) pay dividends or
make any other distribution on its Capital Stock or any other interest or
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participation in or measured by its profits, (b) pay any Indebtedness owed to
the Company, Sleepmaster or any other Restricted Subsidiary, (c) make any
Investment in Sleepmaster or any other Restricted Subsidiary or (d) transfer any
of its properties or assets to Sleepmaster or any other Restricted Subsidiary.
However, this covenant does not prohibit any encumbrance or restriction (i)
pursuant to an agreement in effect on the date of this Agreement; (ii) with
respect to a Restricted Subsidiary that is not a Restricted Subsidiary of
Sleepmaster on the date of this Agreement, in existence at the time such Person
becomes a Restricted Subsidiary of Sleepmaster and not incurred in connection
with, or in contemplation of, such Person becoming a Restricted Subsidiary;
provided, that such encumbrances and restrictions are not applicable to
Sleepmaster or any Restricted Subsidiary or the properties or assets of
Sleepmaster or any Restricted Subsidiary other than such Subsidiary which is
becoming a Restricted Subsidiary; (iii) under the Senior Debt Documents as in
effect on the date of this Agreement, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof; (iv) under the Subordinated Notes Documents; (v) under any
applicable law, rule, regulation or order; (vi) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vii) Purchase Money Obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (d) above on the property so
acquired; (viii) under contracts for the sale of assets, including without
limitation customary restrictions with respect to a Subsidiary pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted Subsidiary;
and (ix) under any agreement that extends, renews, refinances or replaces the
agreements containing the encumbrances or restrictions in the foregoing clauses
(i) through (viii), or in this clause (ix); provided, that the terms and
conditions of any such encumbrances or restrictions are no more restrictive in
any material respect than those under or pursuant to the agreement evidencing
the Indebtedness so extended, renewed, refinanced or replaced.
SECTION 6.7 Limitation on Liens. The Company shall not, and shall not
cause or permit Sleepmaster or any of its Restricted Subsidiaries to, directly
or indirectly, create, incur or affirm any Lien of any kind securing any
Subordinated Indebtedness or Pari Passu Indebtedness (including any assumption,
Guarantee or other liability with respect thereto by any Restricted Subsidiary),
upon any property or assets (including any intercompany notes) of the Company,
Sleepmaster or any Restricted Subsidiary owned on the date of this Agreement or
acquired after the date of this Agreement, or assign or convey any right to
receive any income or profits therefrom, unless the Notes or the Subordinates
Notes, as the case may be (or a Guarantee in the case of Liens of a Guarantor),
are directly secured equally and ratably with (or, in the case of Subordinated
Indebtedness, prior or senior thereto, with the same relative priority as the
Note or the Subordinated Notes, as the case may be, shall have with respect to
such Subordinated Indebtedness) the obligation or liability secured by such
Lien, except for Liens:
(a) securing Acquired Indebtedness which was created prior to (and not
created in connection with, or in contemplation of) the incurrence of such
Subordinated Indebtedness or Pari Passu Indebtedness (including any assumption,
Guarantee or other liability with respect thereto by any Restricted Subsidiary)
and which Indebtedness is permitted under the provisions of Section 6.1 herein;
provided, that in the case of this clause (a), any such Lien only extends to the
assets that were subject to such Lien securing such Indebtedness prior to the
related acquisition by the Company, Sleepmaster or its Restricted Subsidiaries;
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(b) securing any Indebtedness incurred in connection with any
refinancing, renewal, substitutions or replacements of any such Indebtedness
described in clause (a), so long as the aggregate principal amount of
Indebtedness represented thereby (or if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price of such
Indebtedness plus any accreted value attributable thereto since the original
issuance of such Indebtedness) is not increased by such refinancing by an amount
greater than the lesser of (i) the stated amount of any premium or other payment
required to be paid in connection with such a refinancing pursuant to the terms
of the Indebtedness being refinanced or (ii) the amount of premium or other
payment actually paid at such time to refinance the Indebtedness, plus, in
either case, the amount of expenses of the Company or Sleepmaster, as the case
may be, incurred in connection with such refinancing; provided, that in the case
of this clause (b), any such Lien only extends to the assets that were subject
to such Lien securing such Indebtedness prior to the related acquisition by the
Company, Sleepmaster or its Restricted Subsidiaries;
(c) Liens in favor of the Company, Sleepmaster or any Restricted
Subsidiary of Sleepmaster;
(d) Liens on property existing at the time of acquisition thereof by the
Company, Sleepmaster or any Restricted Subsidiary of Sleepmaster, provided, such
Liens were not incurred in contemplation of such acquisition;
(e) Liens existing on the date of this Agreement; and
(f) Liens securing Indebtedness incurred pursuant to clause (x) of the
third paragraph of Section 6.1 herein where the Liens securing the Indebtedness
being refinanced were permitted under this Agreement and Subordinated Notes
Documents.
Notwithstanding the foregoing, any Lien securing the Notes or the
Subordinated Notes granted pursuant to this covenant shall be automatically and
unconditionally released and discharged upon the release by the holders of the
Subordinated Indebtedness or Pari Passu Indebtedness, as the case may be,
described above of their Lien on the property or assets of the Company,
Sleepmaster or any Restricted Subsidiary of Sleepmaster (including any deemed
release upon payment in full of all obligations under such Pari Passu
Indebtedness or Subordinated Indebtedness), at such time as the holders of all
such Subordinated Indebtedness and Pari Passu Indebtedness also release their
Lien on the property or assets of the Company, Sleepmaster or such Restricted
Subsidiary of Sleepmaster, or upon any sale, exchange or transfer to any Person
not an Affiliate of the Company or Sleepmaster of the property or assets secured
by such Lien, or of all of the Capital Stock held by the Company, Sleepmaster or
any Restricted Subsidiary of Sleepmaster in, or all or substantially all the
assets of, any Restricted Subsidiary creating such Lien.
SECTION 6.8 Limitations on Unrestricted Subsidiaries.
The Company may permit Sleepmaster to designate after the Closing Date
any Subsidiary (other than a Guarantor) as an "Unrestricted Subsidiary" under
this Agreement (a "Designation") only if:
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(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) Sleepmaster would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the effectiveness of
such Designation) pursuant to the second paragraph of Section 6.3 herein in an
amount (the "Designation Amount") equal to the greater of (i) the net book value
of Sleepmaster's interest in such Subsidiary calculated in accordance with GAAP
or (ii) the Fair Market Value of Sleepmaster's interest in such Subsidiary as
determined in good faith by Sleepmaster's Board of Advisors;
(c) such Unrestricted Subsidiary does not own any Capital Stock in any
Restricted Subsidiary of Sleepmaster which is not simultaneously being
designated an Unrestricted Subsidiary;
(d) such Unrestricted Subsidiary is not liable, directly or indirectly,
with respect to any Indebtedness other than Unrestricted Subsidiary
Indebtedness; provided that an Unrestricted Subsidiary may provide a Guarantee
for the Subordinated Notes; and
(e) such Unrestricted Subsidiary is not a party to any agreement,
contract, arrangement or understanding at such time with Sleepmaster or any
Restricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Sleepmaster or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of Sleepmaster, or, in the event such condition is not
satisfied, the value of such agreement, contract, arrangement or understanding
to such Unrestricted Subsidiary shall be deemed a Restricted Payment.
In the event of any such Designation, Sleepmaster shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to Section 6.3
hereof for all purposes of this Agreement in the Designation Amount.
The Company shall not cause or permit Sleepmaster or any Restricted
Subsidiary of Sleepmaster to at any time:
(a) provide credit support for, Guarantee or subject any of its property
or assets (other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness) (other than
Permitted Investments in Unrestricted Subsidiaries); or
(b) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of Sleepmaster as an Unrestricted Subsidiary shall be deemed to be
the Designation of all of the Subsidiaries of such Subsidiary as Unrestricted
Subsidiaries.
The Company may permit Sleepmaster to revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary (a "Revocation") only if:
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(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture; and
(c) unless such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted Indebtedness),
immediately after giving effect to such proposed Revocation, and after giving
pro forma effect to the incurrence of any such Indebtedness of such redesignated
Subsidiary as if such Indebtedness was incurred on the date of the Revocation,
Sleepmaster could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 6.1 herein.
All Designations and Revocations must be evidenced by a Board Resolution
of Sleepmaster delivered to the Lender certifying compliance with the foregoing
provisions.
ARTICLE 7. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default") shall
occur and be continuing:
SECTION 7.1 Failure To Make Payments When Due. (i) Failure to pay any
installment of principal of the Loan when due, whether at Stated Maturity, by
acceleration, by notice of prepayment, by operation of Section 2.3 or otherwise;
or (ii) failure to pay any interest on any Loan or any other amount due under
this Agreement and such default continues for a period of thirty (30) Business
Days; or
SECTION 7.2 Default in Other Agreements. (a) Failure of any Credit Party
to pay when due any principal of or interest on any Indebtedness in excess of
$10,000,000 in principal outstanding and the expiration of any applicable grace
periods or (b) any breach or default by any Credit Party, including a Senior
Default, and the expiration of any applicable grace periods under any evidences
of Indebtedness in excess of $10,000,000 in the aggregate; provided, that as a
result of any such failure to pay such Indebtedness under clause (a) above, or
any such breach or default under clause (b) above, the Indebtedness thereunder
shall have become due and payable prior to its Stated Maturity and such
Indebtedness shall be automatically accelerated or accelerated upon by the
holders of any such Indebtedness; or
SECTION 7.3 Breach of Certain Covenants and Agreements. Failure of any
Credit Party to perform or comply in any material respect with (a) any term or
condition contained in Section 2.3(a), or Article 6 (other than a failure to
purchase the Note when required under Sections 2.3(a)(ii)(B) or 6.5), or (b) any
other term contained in this Agreement, and (i) in the case of clause (a), such
failure shall not have been remedied or waived within thirty (30) days after
receipt of written notice from the Lender of such default (other than any
occurrence described in the other provisions of this Article 7 for which a
different grace or cure period is specified or which constitutes an immediate
Event of Default), and (ii) in the case of clause (b), such failure shall not
have been
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46
remedied or waived within sixty (60) days after receipt of written notice from
the Lender of such default (other than any occurrence described in the other
provisions of this Article 7 for which a different grace or cure period is
specified or which constitutes an immediate Event of Default); or
SECTION 7.4 Breach of Warranty. Any representation or warranty made by
any Credit Party in any Loan Document or in any statement or certificate at any
time given by any Credit Party in writing pursuant hereto or thereto or in
connection herewith or therewith shall be false in any material respect on the
date as of when made; or
SECTION 7.5 Involuntary Bankruptcy; Appointment of Receiver, Etc. (a) A
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of any Credit Party in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, which decree or order is not stayed; or any other
similar relief shall be granted and remain unstayed under any applicable federal
or state law; or (b) an involuntary case is commenced against any Credit Party
under any applicable bankruptcy, insolvency, or other similar law now or
hereafter in effect; or a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over any Credit Party or over
all or a substantial part of any of its property, shall have been entered; or an
interim receiver, trustee or other custodian of any Credit Party or all or a
substantial part of its property is involuntarily appointed; or a warrant of
attachment, execution or similar process is issued against any substantial part
of the property of any Credit Party, and the continuance of any such events in
this clause (b) for sixty (60) days unless dismissed, bonded, stayed, vacated,
or discharged; or
SECTION 7.6 Voluntary Bankruptcy; Appointment of Receiver, Etc. Any
Credit Party shall have an order for relief entered with respect to it or
commence a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property; the making by
any Credit Party of any assignment for the benefit of creditors the admission by
any Credit Party in writing of its inability to pay its debts as such debts
become due; or the Board of Advisors of any Credit Party (or any committee
thereof) adopts any Board Resolution or otherwise authorizes action to approve
any of the foregoing; or
SECTION 7.7 Judgments and Attachments. Any money judgment, writ or
warrant of attachment, or similar process involving in any individual case or in
the aggregate at any time an amount in excess of $10,000,000 (not covered by
insurance) shall be entered or filed against any Credit Party or any of its
respective assets by a final, nonappealable order of a court of competent
jurisdiction, shall remain outstanding, undischarged, unvacated, unbonded or
unstayed for a period of sixty (60) days following such entry or filing; or
SECTION 7.8 Agreements. Any material provision of any Loan Document shall
cease to be a valid and binding obligation against the Company or the Company
shall so state in writing.
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THEN, subject to the terms of Article 8, (i) upon the occurrence of any
Event of Default described in the foregoing Section 7.5 or 7.6 (but expressly
excluding the other Events of Default in this Article VII), the unpaid principal
amount of and accrued interest on the Loan shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company, and the obligations of the Lender hereunder shall thereupon terminate,
and (ii) upon the occurrence of any other Event of Default, the Lender may, by
written notice to the Company, declare the Loan to be, and the same shall
forthwith become, due and payable, as specified below, together with accrued
interest thereon, and if such Event of Default results from a failure to comply
with Section 2.3(a), together with the prepayment premium applicable thereto, if
any, and the obligations of the Lender hereunder shall thereupon terminate.
ARTICLE 8. SUBORDINATION
SECTION 8.1 Note Subordinate to Senior Debt. Each of the Credit Parties
covenants and agrees, and the Lender covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article 8, the payment of the
principal of and interest, premiums and fees on the Note or in connection with
this Agreement both before and after the commencement of a bankruptcy
proceeding, and all other sums or obligations due and payable by the Credit
Parties to the Lender hereunder (collectively with the Note and this Agreement,
the "Subordinated Obligations"), are to the extent provided in this Article 8
hereby expressly made subordinate and subject in right of payment to the prior
payment in Cash in full of all Senior Debt.
SECTION 8.2 Payment Over of Proceeds Upon Dissolution.
(a) In the event of any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization, adjustment, composition or other
similar case or proceeding in connection therewith, relative to any Credit Party
or to its creditors, as such, or to its assets, or any liquidation, dissolution
or other winding up of any Credit Party whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy, or any assignment for the
benefit of creditors or any other marshaling of assets and liabilities of any
Credit Party (collectively, "Bankruptcy Events"), then and in any such event:
(i) the holders of Senior Debt shall be entitled to receive
payment in Cash in full of all amounts due or to become due on or in respect
of all such Senior Debt, before the Lender is entitled to receive any
payment or distribution, whether in Cash, securities or other property, on
account of the Subordinated Obligations;
(ii) any payment or distribution of assets of any Credit Party
of any kind or character, whether in Cash, property or securities, by
set-off or otherwise, to which the Lender would be otherwise entitled but
for the provisions of this Article 8, including any such payment or
distribution which may be payable or deliverable by reason of the payment of
any other Indebtedness of any Credit Party being subordinated to the payment
of the Subordinated Obligations of any Credit Party (except for any such
payment or distribution of securities which, if debt securities, are
subordinated to at least the same extent as such
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Subordinated Obligations to the payment of all Senior Debt then outstanding
and which, in any case, do not mature or become subject to a mandatory
repurchase, mandatory defeasance or similar mandatory redemption obligation
prior to one year following the maturity of such Senior Debt ("Junior
Securities")) shall be paid by the liquidating trustee or agent or other
Person making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or otherwise, directly to the holders of such
Senior Debt or their representative or representatives or to the trustee or
trustees under any indenture under which any instruments evidencing any of
such Senior Debt may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the principal of, and interest on, such
Senior Debt held or represented by each, to the extent necessary to make
payment in Cash in full of all such Senior Debt remaining unpaid, after giving
effect to any concurrent payment or distribution to the holders of such Senior
Debt; and
(iii) in the event that, notwithstanding the foregoing provisions
of this Article 8, the Lender shall have received any such payment or
distribution of assets of any Credit Party of any kind or character, whether
in Cash, property or securities, including any such payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Credit Parties being subordinated to the payment of
Subordinated Obligations (but excluding any Junior Securities) before all
Senior Debt is paid in full or payment thereof provided for, then and in such
event such payment or distribution shall be held in trust for the benefit of
the holders of Senior Debt and paid over or delivered forthwith directly to
the holders of all Senior Debt or their representative or representatives or
to the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Debt may have been issued, ratably according to
the aggregate amounts remaining unpaid on the principal of, and interest on,
such Senior Debt held or represented by each, to the extent necessary to pay
all such Senior Debt in full in Cash, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt; provided,
that if the Lender is ordered by any court of competent jurisdiction to pay
such payment or distribution to such trustee in bankruptcy, receiver,
liquidating trustee or otherwise, then the Lender shall have no liability to
the holders of Senior Debt pursuant to the provisions of this Section 8.2(a)
for complying with such order.
(b) The Senior Agent or any other agent for or trustee of any Senior Debt
created after the Closing Date shall have the right to request the Lender to
file and, in the event the Lender fails to do so within 14 days, is hereby
authorized to file a proper claim or proof of debt in the form required in any
Bankruptcy Event for and on behalf of the Lender or any other holder of the Note
(including on behalf of each such holder with respect to any such rights
received by such holders from holders of Indebtedness of the Credit Parties due
to such Indebtedness being subordinated to the Subordinated Obligations), to
accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of the Subordinated Obligations in an
amount not in excess of the Senior Debt then outstanding and to take such other
action as may be reasonably necessary to effectuate the foregoing. Each holder
of the Note shall provide to the Senior Agent all information and documents
reasonably necessary to present claims or seek enforcement as aforesaid. The
Lender and any other holder of the Note shall retain the right to vote to accept
or reject any plan of partial or complete liquidation, reorganization,
arrangement, composition or extension); provided, that such holder shall not
take any action or vote in any way so as to contest the enforceability of this
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Article 8, the Senior Debt or any other agreement or instrument to the extent
evidencing or relating to the Senior Debt. The Senior Agent shall retain the
right to vote its Senior Debt and otherwise act in any such Bankruptcy Event
(including the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension); provided,
that the Senior Agent shall not take any action or vote in any way so as to
contest the enforceability of this Article 8, the Subordinated Obligations or
any other agreement or instrument to the extent evidencing or relating to the
Subordinated Obligations.
(c) If, notwithstanding the provisions of this Agreement, there shall
occur any consolidation of any Credit Party with, or any Acquisition of any
Credit Party into, another corporation or the liquidation or dissolution of any
Credit Party following any conveyance, transfer or lease of its properties and
assets substantially as an entirety to another corporation, such consolidation,
Acquisition or liquidation shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of such Credit Party for the purposes of
this Article 8; provided, that no other Bankruptcy Event shall have occurred and
be continuing at the time of such consolidation, Acquisition or liquidation.
SECTION 8.3 No Payment in Certain Circumstances.
(a) In the event that (i) any Credit Party shall fail to pay when due,
upon acceleration or otherwise, any principal, interest, premiums or fees with
respect to Senior Debt of the Company (a "Payment Default") which Payment
Default shall not have been cured or waived, or (ii) any Credit Party shall fail
to comply with the covenants contained in the Senior Debt Documents or any event
of default (other than a Payment Default) under the Senior Debt Documents shall
occur and be continuing, which default shall not have been cured or waived (a
"Covenant Default"), and the Company and the Lender receive written notice of
such Covenant Default from the Senior Agent (a "Blockage Notice") (provided,
that no such Blockage Notice shall be required with respect to a Payment
Default), then no payment or other amount on account of the Subordinated
Obligations shall be made by any Credit Party or received by the holders of the
Subordinated Obligations (x) in the case of any Payment Default, unless and
until such Senior Debt shall have been paid in full or until such Payment
Default shall have been cured or waived, or (y) in the case of any Covenant
Default, from the earlier of the date on which the Company or the Lender
receives such Blockage Notice until the earlier of (1) 179 days after such date
and (2) the date, if any, on which the Senior Debt to which such Covenant
Default relates is paid in full or such Covenant Default is waived by the
holders of such Senior Debt or otherwise cured (a "Blockage Period"); provided,
that (A) only one Blockage Period consisting of an aggregate of 179 days may
exist in any 360-day period, and (B) no Covenant Default that previously served
as the basis for a Blockage Notice or that was in existence during a prior
Blockage Period may serve as the basis for a subsequent Blockage Notice unless
such Covenant Default was subsequently cured for a period of at least 90
consecutive days.
(b) In the event that, notwithstanding the foregoing, any Credit Party
shall make or the holders of the Subordinated Obligations shall receive any
payment or other amount prohibited by the foregoing provisions of this Section
8.3, then and in such event such payment or other amount shall be held in trust
for the benefit of the holders of Senior Debt and paid over and delivered
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forthwith to such holders of Senior Debt. The provisions of this Section 8.3
shall not apply to any payment with respect to which Section 8.2 would be
applicable.
SECTION 8.4 Acceleration Rights; Remedies. If an Event of Default shall
exist at any time that any Senior Debt shall be outstanding, neither the Lender
nor any other holder of the Note shall take any action, judicial or otherwise,
to accelerate or to collect payment on, or redeem, retire, purchase or otherwise
acquire the Subordinated Obligations or to pursue any other remedy with respect
to the Subordinated Obligations prior (including joining with any creditor to
commence any bankruptcy proceeding) to the earlier of:
(a) the payment in full of all Senior Debt;
(b) the occurrence or commencement of a Bankruptcy Event (with respect to
which the provisions of Section 8.2 shall govern);
(c) the expiration of 90 days immediately following the receipt by the
holders of the Senior Debt (or agents representing all such holders) of notice
of the occurrence of such Event of Default from the holder or holders entitled
to accelerate payments on the Subordinated Obligations, and such holder's or
holders' good faith intention to declare the unpaid amount of all Subordinated
Obligations to be immediately due and payable in accordance with the Loan
Documents, unless, during such period the Senior Agent or such holder shall have
caused such Event of Default to be cured; and
(d) the acceleration of the maturity of the Senior Debt;
provided, that any amount received by the Lender as a result of or following any
acceleration permitted above, prior to payment in full of the Senior Debt, shall
be and paid to the holders of Senior Debt (or the agent or agents therefor) in
accordance with the provisions of this Article 8.
SECTION 8.5 Payments Otherwise Permitted. Nothing contained in this
Article 8 or elsewhere in this Agreement or in the Note shall prevent any Credit
Party, at any time except during a Bankruptcy Event as set forth in Section 8.2
or under the conditions described in Section 8.3, from making payments at any
time of principal of and interest on the Loan required or permitted by the terms
of the Note or this Agreement or any other amount payable by such Credit Party
under the Note or this Agreement.
SECTION 8.6 Subrogation to Rights of Holders of Senior Debt. Subject to,
and solely effective following, the final and indefeasible payment in full of
all Senior Debt, the Lender shall be subrogated to the rights of the holders of
such Senior Debt to receive payments and distributions of Cash, property and
securities applicable to such Senior Debt until the principal of and interest on
the Loan and the Note shall be paid in full. For purposes of such subrogation,
no payments or distributions to the holders of such Senior Debt of any Cash,
property or securities to which the Lender would be entitled except for the
provisions of this Article 8, and no payments over pursuant to the provisions of
this Article 8 to the holders of such Senior Debt by the Lender shall, as among
any Credit Party, its creditors (other than holders of such Senior Debt) and the
Lender, be deemed to be a payment or distribution by such Credit Party to or on
account of such Senior Debt.
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SECTION 8.7 Provisions Solely to Define Relative Rights. The provisions
of this Article 8 are solely for the purpose of defining the relative rights of
the holders of the Subordinated Obligations on the one hand and the holders of
Senior Debt on the other hand. Nothing contained in this Article 8 or elsewhere
in this Agreement or in the Note is intended to or shall (i) impair, as among
any Credit Party, its creditors (other than holders of Senior Debt) and the
Lender, the obligation of such Credit Party, which is absolute and
unconditional, to pay to the Lender the principal of, and premium and interest
on, and any other amount payable by such Credit Party under, the Note or this
Agreement as and when the same shall become due and payable in accordance with
its terms; or (ii) affect the relative rights against such Credit Party of the
Lender and its creditors (other than the holders of Senior Debt); or (iii)
prevent the Lender from accelerating the Loan and exercising all other remedies
otherwise permitted by applicable law upon default under this Agreement, subject
to the terms of Section 8.4, or the rights, if any, under this Article 8 of the
holders of Senior Debt (x) upon the occurrence of a Bankruptcy Event, to
receive, pursuant to and in accordance with Section 8.2, Cash, property and
securities otherwise payable or deliverable to the Lender, or (y) under the
conditions specified in Section 8.3, to prevent or receive any payment
prohibited by such Section.
SECTION 8.8 No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Debt to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of any Credit Party or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by any Credit Party
with the terms, provisions and covenants of this Agreement, regardless of any
knowledge thereof any such holder may have or be otherwise charged with. Without
in any way limiting the generality of the foregoing, the holders of Senior Debt
may at any time and from time to time, without the consent of or notice to the
Lender, without incurring responsibility to the Lender and without impairing or
releasing the subordination provided in this Article 8 or the obligations
hereunder of the Lender and such holders to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew, increase, modify or alter, Senior
Debt or any instrument evidencing the same or any agreement under which Senior
Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any
Person liable in any manner for the collection of Senior Debt; and (iv) exercise
or refrain from exercising or waiving any rights, powers or remedies against any
Credit Party and any other Person.
The provisions of this Article 8 are intended to be for the benefit of,
have been relied upon by and shall be enforceable directly by the holders of
Senior Debt.
SECTION 8.9 Reliance on Judicial Order. Upon any payment or distribution
of assets of any Credit Party referred to in this Article 8, the Lender shall be
entitled to rely upon any unstayed, final, nonappealable order or decree entered
by any court of competent jurisdiction in which a Bankruptcy Event is pending
for the purpose of ascertaining the Persons entitled to participate in such
payment or distribution, the holders of Senior Debt in such payment or
distribution, the holders of Senior Debt and other Indebtedness of such Credit
Party, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 8.
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SECTION 8.10 Amendment. Any material amendment to the provisions of this
Article 8 shall not be effective against any holder of Senior Debt without such
holder's consent.
SECTION 8.11 Remedies. The holders of Senior Debt shall be entitled to
enforce their rights under this Article 8 specifically, to recover damages by
reason of any breach of any provisions of this Article 8 and to exercise all
other rights existing in their favor. The Lender acknowledges and agrees that
money damages may not be an adequate remedy for any breach of the provisions of
this Article 8 and that holders of Senior Debt may apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relief (without posting bond or other security) in order to enforce or prevent
any violation of the provisions of this Article 8.
ARTICLE 9. MISCELLANEOUS
SECTION 9.1 Participations in Loan and Note.
(a) The Lender shall have the right at any time, to sell, assign,
transfer, or negotiate all or any part of the Loan or Note to one or more
Persons; provided, that the Lender shall at all times retain at least 51% of the
aggregate principal amount of the Loan. In the case of any sale, assignment,
transfer, or negotiation of all or part of the Loan or Note as authorized under
this Section 9.1(a), the assignee, transferee, or recipient shall have, to the
extent of such sale, assignment, transfer, or negotiation, the same rights,
benefits, and obligations as it would if it were a Lender with respect to such
Loan or Note.
(b) Subject to Section (a) above, the Lender may grant participations in
all or any part of the Loan or Note to one or more Persons.
(c) In connection with any sales, assignments, or transfers of any Loan
or Note referred to in Section 9.1(a), the Lender shall give notice to the
Company and Persons holding a majority of the outstanding principal amount of
the Senior Debt and the Senior Agent of the identity of such parties and obtain
agreements from the purchasers, assignees and transferees, as the case may be
(the "Assignees"), that all information given to such parties will be held in
strict confidence pursuant to a confidentiality agreement reasonably
satisfactory to the Company. The Company shall maintain a register on which it
will record the name and address of the Lender and all Assignees and shall be
entitled to treat the holder or holders of record as the Lender for all purposes
hereunder.
(d) In the event of an assignment by the Lender, or any subsequent
assignment, the term "Lender" herein shall be deemed to refer to each such
Lender, the term "Note" shall be deemed to refer to each "Note", and any action
requiring the consent of the Lender shall be deemed to require the consent of
Persons holding in excess of 50% of the outstanding principal amount of the
Note.
SECTION 9.2 Expenses. Whether or not the transactions contemplated hereby
shall be consummated, the Company agrees to pay promptly (i) all the actual and
reasonable costs and expenses of preparation of the Loan Documents and all the
costs of furnishing all opinions by counsel for the Company (including, without
limitation, any opinions requested by the Lender as to any legal matters arising
hereunder), and of the Company's performance of and compliance with all
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agreements and conditions contained herein on its part to be performed or
complied with; (ii) the reasonable fees, expenses, and disbursements of counsel
to the Lender in connection with the negotiation, preparation, execution, and
administration of the Loan Documents, and the Loan hereunder, and any amendments
and waivers hereto or thereto; and (iii) after the occurrence of an Event of
Default, all costs and expenses (including reasonable attorneys' fees) incurred
by the Lender in enforcing any Obligations of or in collecting any payments due
from any Credit Party hereunder or under the Note by reason of such Event of
Default or in connection with any Refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a workout, or any
insolvency or bankruptcy proceedings.
SECTION 9.3 Indemnity. In addition to the payment of expenses pursuant to
the terms and conditions of Section 9.2 hereof, whether or not the transactions
contemplated hereby shall be consummated, each Credit Party (each an
"Indemnitor") agrees to indemnify, pay, and hold the Lender and any holder of
the Note, and the officers, directors, employees, agents, and Affiliates of the
Lender and such holders (collectively, the "Indemnitees") harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of one counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto), which may
be imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement, the other Loan Documents, the
Lender's agreement to make the Loan or the use or intended use of the proceeds
of any of the Loan hereunder, including, without limitation, any of the
foregoing arising pursuant to any Environmental Laws (the "Indemnified
Liabilities"); provided, that the Indemnitor shall not have any obligation to an
Indemnitee hereunder with respect to an Indemnified Liability to the extent that
such Indemnified Liability arises from the gross negligence or willful
misconduct of that Indemnitee. Each Indemnitee shall give the Indemnitor prompt
written notice of any claim that might give rise to Indemnified Liabilities
setting forth a description of those elements of such claim of which such
Indemnitee has knowledge; provided, that any failure to give such notice shall
not affect the obligations of the Indemnitor unless (and then solely to the
extent) the Indemnitor is prejudiced. The Indemnitor shall have the right at any
time during which such claim is pending to select counsel to defend and control
the defense thereof and settle any claims for which it is responsible for
indemnification hereunder (provided that the Indemnitor will not settle any such
claim without (i) the appropriate Indemnitee's prior written consent which
consent shall not be unreasonably withheld or (ii) obtaining an unconditional
release of the appropriate Indemnitee from all claims arising out of or in any
way relating to the circumstances involving such claim) so long as in any such
event, the Indemnitor shall have stated in a writing delivered to the Indemnitee
that, as between the Indemnitor and the Indemnitee, the Indemnitor is
responsible to the Indemnitee with respect to such claim to the extent and
subject to the limitations set forth herein; provided, that the Indemnitor shall
not be entitled to control the defense of any claim in the event that in the
reasonable opinion of counsel for the Indemnitee there are one or more material
defenses available to the Indemnitee which are not available to the Indemnitor;
provided, further, that with respect to any claim as to which the Indemnitee is
controlling the defense, the Indemnitor will not be liable to any Indemnitee for
any settlement of any claim pursuant to this Section 9.3 that is effected
without its prior written consent. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each Credit
Party
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shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them.
SECTION 9.4 Amendments and Waivers. No amendment, modification,
termination or waiver of any provision of this Agreement or of the Note, or
consent to any departure by the Company therefrom, shall in any event be
effective without the written concurrence of the Lender and each of the Credit
Parties and an opinion of counsel of the Company to the effect that such
amendment, modification, termination, or waiver does not violate Article 8 and
the Senior Credit Agreement; provided, that no amendment, modification, waiver,
or consent shall, unless in writing and signed by all the Lenders, do any of the
following: (a) increase or subject the Lender to any additional obligations; (b)
reduce the principal of, or interest on the Note or any fees, premiums, or other
amounts payable hereunder; (c) postpone any date fixed for any payment of
principal of, or premium or interest on, the Note or any fees or other amounts
payable hereunder; or (d) amend this Section 9.4. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on such Credit Party in any case shall
entitle any Credit Party to any further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver, or consent
effected in accordance with this Section 9.4 shall be binding upon each holder
of the Note at the time outstanding and each future holder of the Note.
SECTION 9.5 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of an Event of Default or Potential Event of Default if
such action is taken or condition exists.
SECTION 9.6 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and delivered personally, mailed by certified or registered mail,
return receipt requested and postage prepaid, sent via a nationally recognized
overnight courier, or via facsimile. Such notices, demands and other
communications will be sent to the address indicated below:
To the Company:
Sleepmaster Holdings L.L.C.
2001 Lower Road
Linden, NJ 07036-6520
Attention: Mr. Charles Schweitzer
Facsimile: (732) 381-3925
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with copies (which shall not
constitute notice to the Company) to:
Citicorp Venture Capital, Ltd.
399 Park Avenue
14th Floor, Zone 4
New York, New York 10043
Attention: John Weber
Telecopy No: (212) 888-2940
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022-4675
Attention: Kimberly P. Taylor, Esq.
Telecopy No.: (212) 446-4900
To the Lender:
c/o Citicorp Capital Investors, Ltd.
399 Park Avenue
14th Floor, Zone 4
New York, New York 10043
Attention: Richard E. Mayberry, Jr.
Telecopy No.: (212) 888-2940
with a copy (which shall not
constitute notice to the Lender) to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022-4675
Attention: Eunu Chun, Esq.
Telecopy No.: (212) 446-4900
or such other address or to the attention of such other Person as the recipient
party shall have specified by prior written notice to the sending party;
provided, that the failure to deliver copies of notices as indicated above shall
not affect the validity of any notice. Any such communication shall be deemed to
have been received (i) when delivered, if personally delivered, or sent by
nationally-recognized overnight courier or sent via facsimile or (ii) on the
third Business Day following the date on which the piece of mail containing such
communication is posted if sent by certified or registered mail.
SECTION 9.7 Survival of Warranties and Certain Agreements. (a) All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the making of the Loan hereunder and
the execution and delivery of the Note and shall continue (but, with respect to
representations and warranties, such representations and warranties are made
only as of the date when made pursuant to Section 4) until repayment of the Note
and the Obligations in full; provided, that if all or any part of such payment
is set aside, the
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56
representations and warranties in the Loan Documents shall continue as if no
such payment had been made.
(b) Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of the Credit Parties set forth in Sections 9.2 and 9.3
shall survive the payment of the Loans and the Note and the termination of this
Agreement.
SECTION 9.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any Lender or any holder of any Note in the
exercise of any power, right or privilege hereunder or under the Note shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under this
Agreement or the Note are cumulative to and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.9 Severability. In case any provision in or obligation under
this Agreement or the Note shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.10 Headings. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
SECTION 9.11 APPLICABLE LAW. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 9.12 Successors and Assigns; Subsequent Holders of Notes. This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of the Lender. The terms and provisions of this
Agreement and all other certificates delivered pursuant to Section 3 shall inure
to the benefit of any assignee or transferee of the Note pursuant to Section
9.1(a), and in the event of such transfer or assignment, the rights and
privileges herein conferred upon the Lender shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. The Company's rights or any interest therein hereunder may not be
assigned without the written consent of the Lender.
SECTION 9.13 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY OR THE LENDER WITH RESPECT TO THIS
AGREEMENT, ANY NOTE OR ANY WARRANT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT
OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK LOCATED IN THE CITY OF NEW
YORK AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH CREDIT PARTY AND THE
LENDER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
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UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH THIS AGREEMENT SUBJECT, HOWEVER, TO RIGHTS OF APPEAL. EACH CREDIT PARTY AND
THE LENDER DESIGNATES AND APPOINTS CORPORATION SERVICE COMPANY, 375 HUDSON
STREET, NEW YORK, NEW YORK 10014 AND SUCH OTHER PERSONS AS MAY HEREAFTER BE
SELECTED BY SUCH CREDIT PARTY OR THE LENDER, AS APPLICABLE, IRREVOCABLY AGREEING
IN WRITING TO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF, SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY SUCH CREDIT PARTY OR THE LENDER, AS APPLICABLE, TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT, A COPY OF SUCH PROCESS SO SERVED SHALL BE
SENT BY AIR COURIER TO SUCH CREDIT PARTY OR THE LENDER, AS APPLICABLE, AT ITS
ADDRESS PROVIDED IN SECTION 9.6 HEREOF, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY ANY CREDIT PARTY OR THE LENDER, AS
APPLICABLE, REFUSES TO ACCEPT SERVICE, EACH CREDIT PARTY AND THE LENDER HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE PARTIES HERETO TO BRING PROCEEDINGS AGAINST
ANY OTHER PARTY HERETO IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 9.14 Waiver of Jury Trial. EACH CREDIT PARTY AND THE LENDER
HEREBY WAIVES, 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 OR ANY OTHER LOAN DOCUMENT OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY ANY PARTY
HERETO AGAINST ANY OTHER PARTY HERETO FOR ANY LOST PROFITS OR ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT
(OTHER THAN WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH,
ARISING OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER
OR UNDER THE OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH; EACH CREDIT PARTY AND THE LENDER HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES. EACH CREDIT
PARTY AND THE LENDER AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT
OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE PARTIES HERETO WOULD NOT ENTER INTO
THIS AGREEMENT IF THIS SECTION WERE NOT PART OF THIS AGREEMENT.
SECTION 9.15 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered
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shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto, and written or
telephonic notification of such execution and authorization of delivery thereof
has been received by the Company and the Lender.
SECTION 9.16 Entirety. This Agreement and the other Loan Documents embody
the entire agreement among the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
* * * * *
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IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
SLEEPMASTER HOLDINGS L.L.C.
By:
-----------------------
Name:
Title:
CITICORP MEZZANINE PARTNERS, L.P.
By: Citicorp Capital Investors, Ltd.
Its: General Partner
By:
-----------------------
Name:
Title: