Exhibit 10.36
SEALY MATTRESS COMPANY
SEALY CORPORATION
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of June 25, 1999 and entered into by and among Sealy Mattress Company, an
Ohio corporation ("Company"), Sealy Corporation, a Delaware corporation
("Holdings"), the financial institutions listed on the signature pages hereof
("Lenders"), Goldman Sachs Credit Partners L.P., as arranger and syndication
agent ("Syndication Agent"), Morgan Guaranty Trust Company of New York, as
administrative agent for Lenders ("Administrative Agent"; collectively,
Syndication Agent and Administrative Agent are referred to herein as "Agents"),
and Bankers Trust Company, as documentation agent for Lenders, and is made with
reference to (i) that certain Credit Agreement dated as of December 18, 1997 (as
amended, supplemented or otherwise modified to the date hereof, the
"Revolver/Term A Loan Credit Agreement") and (ii) that certain AXEL Credit
Agreement dated as of December 18, 1997 (as amended, supplemented or otherwise
modified to the date hereof, the "AXEL Credit Agreement"; the AXEL Credit
Agreement and the Revolver/Term A Loan Credit Agreement are, collectively, the
"Credit Agreements"), in each case by and among Company, Holdings, certain
Lenders, Syndication Agent and Administrative Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Revolver/Term A Loan Credit Agreement or the AXEL Credit Agreement, as
applicable, or in subsection 1.1 hereof.
RECITALS
WHEREAS, Company, Holdings and Lenders desire to amend certain of the
terms and provisions of each of the Credit Agreements as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENTS
1.1 Amendments to Section 1: Definitions
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A. Subsection 1.1 of each of the Credit Agreements is hereby amended by
adding thereto the following definitions, which shall be inserted in proper
alphabetical order:
"Second Amendment" means that certain Second Amendment to Credit
Agreement dated as of June 25, 1999 by and among Company, Holdings and
the Lenders party thereto.
"Second Amendment Effective Date" has the meaning assigned to that
term in the Second Amendment.
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B. Subsection 1.1 of the Revolver/Term A Loan Credit Agreement is hereby
further amended by adding thereto the following definition, which shall be
inserted in proper alphabetical order:
"Total Assets" means the total consolidated assets of Company and its
Restricted Subsidiaries (as defined in the AXEL Credit Agreement), as
set forth on Company's most recent consolidated balance sheet.
C. Subsection 1.1 of the AXEL Credit Agreement is hereby further amended
by adding thereto the following definition, which shall be inserted in proper
alphabetical order:
"Total Assets" means the total consolidated assets of Company and its
Restricted Subsidiaries, as set forth on Company's most recent
consolidated balance sheet.
D. Subsection 1.1 of the AXEL Credit Agreement is hereby further amended
by adding, immediately prior to the comma at the end of clause (x) of the
definition of "Permitted Investments", the following parenthetical phrase:
"(it being understood that changes in value of all such outstanding
Investments shall be given effect in calculating Total Assets at the
time of the making of any new Investment proposed to be made pursuant to
this clause (x), but that changes in value of any Investment which occur
subsequent to the making of such Investment cannot result in a breach of
this covenant unless a further Investment is made which is purported to
be made pursuant to this clause (x) at a time when (A) the sum of (1)
the fair market value of all outstanding Investments made pursuant to
this clause (x), with such fair market value measured at the time of
making of each such outstanding Investment, plus (2) the fair market
value, measured at such time, of such further Investment, exceeds (B) 5%
of Total Assets, measured at such time and giving effect to all changes
in value of all outstanding Investments)"
E. Subsection 1.1 of the Revolver/Term A Loan Credit Agreement is hereby
further amended by deleting the definition of "Consolidated Excess Cash Flow"
therefrom and substituting therefor the following:
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a) Consolidated Adjusted EBITDA, (b) the Consolidated
Working Capital Adjustment and (c) payments made to Holdings or any of
its Subsidiaries as an adjustment to purchase price after the Closing
Date under the Recapitalization Agreement, minus (ii) the sum, without
duplication, of the amounts for such period (to the extent not financed
with the proceeds of related financings) of (a) voluntary and scheduled
repayments of Consolidated Total Debt (excluding repayments of Revolving
Loans except to the extent the Revolving Loan Commitments are
permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (net of any proceeds of any related
financings with respect to such
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expenditures) plus (or minus, if negative) the Carryforward for such
period to be carried forward to the next period less the Carryforward
(if any) for the preceding period carried forward to the current period,
(c) Consolidated Cash Interest Expense, (d) payments made by Holdings
and its Subsidiaries as an adjustment to purchase price after the
Closing Date under the Recapitalization Agreement, (e) any cash payments
made during such period with respect to items set forth on Schedule
1.1(i) annexed hereto, (f) the provision for current taxes based on
income of Holdings and its Subsidiaries and payable in cash with respect
to such period, including taxes payable in cash within 90 days following
the end of such period, (g) non-cash charges added in calculating
Consolidated Adjusted EBITDA in a prior period to the extent such
non-cash charges are paid in cash in the current period, (h) to the
extent not otherwise deducted in determining Consolidated Excess Cash
Flow, tender payments, fees and expenses paid during such period in
connection with the exchange of the Senior Subordinated Notes and the
Discount Notes, cash payments made during such period with respect to
non-current liabilities and cash payments made during such period with
respect to restructuring reserves and expenditures with respect to
Permitted Acquisitions, and (i) any cash expenditures made during such
period constituting Investments in Subsidiaries or Joint Ventures
permitted under subsection 7.3(xxi).
F. Subsection 1.1 of the AXEL Credit Agreement is hereby further amended
by deleting the definition of "Consolidated Excess Cash Flow" therefrom and
substituting therefor the following:
"Consolidated Excess Cash Flow" means, for any period, an amount (if
positive) equal to (i) the sum, without duplication, of the amounts for
such period of (a) IR Consolidated Adjusted EBITDA, (b) the Consolidated
Working Capital Adjustment and (c) payments made to Holdings or any of
its Subsidiaries as an adjustment to purchase price after the Closing
Date under the Recapitalization Agreement, minus (ii) the sum, without
duplication, of the amounts for such period (to the extent not financed
with the proceeds of related financings) of (a) voluntary and scheduled
repayments of IR Consolidated Total Debt (excluding repayments of the
Revolving Loans except to the extent the Revolving Loan Commitments are
permanently reduced in connection with such repayments), (b)
Consolidated Capital Expenditures (net of any proceeds of any related
financings with respect to such expenditures) plus (or minus, if
negative), so long as the Revolving Credit Agreement is in effect, the
Carryforward (as defined in the Revolving Credit Agreement) for such
period to be carried forward to the next period less the Carryforward
(if any) for the preceding period carried forward to the current period,
(c) Consolidated Cash Interest Expense, (d) payments made by Holdings
and its Subsidiaries as an adjustment to purchase price after the
Closing Date under the Recapitalization Agreement, (e) any cash payments
made during such period with respect to items set forth on Schedule
--------
1.1(i) annexed hereto, (f) the provision for current taxes based on
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income of Holdings and its Subsidiaries and payable in cash with respect
to such period, including taxes payable in cash within 90 days following
the end of such period, (g) non-cash charges added in calculating IR
Consolidated Adjusted EBITDA in a prior period to the extent such
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non-cash charges are paid in cash in the current period, (h) to the
extent not otherwise deducted in determining Consolidated Excess Cash
Flow, tender payments, fees and expenses paid during such period in
connection with the exchange of the Senior Subordinated Notes and the
Discount Notes, cash payments made during such period with respect to
non-current liabilities and cash payments made during such period with
respect to restructuring reserves and expenditures with respect to
Permitted Acquisitions, and (i) any cash expenditures made during such
period constituting Investments in Subsidiaries or Joint Ventures
permitted hereunder pursuant to clause (x) of the definition of
Permitted Investments.
1.2 Amendments to Section 2: Amounts and Terms of Commitments and Loans
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A. Subsection 2.4B(iv)(a) of the Revolver/Term A Loan Credit Agreement
is hereby amended by deleting the first four sentences therefrom in their
entirety and substituting therefor the following:
"On and after the Second Amendment Effective Date, any voluntary
prepayments pursuant to subsection 2.4B(i) shall be applied (1) at
Company's option to either Revolving Loans or Tranche A Term Loans; (2)
if applied to Tranche A Term Loans, to reduce the scheduled installments
of principal of the Tranche A Term Loans set forth in subsection 2.4A
(x) on a pro rata basis (in accordance with the respective outstanding
principal amounts thereof), or (y) in forward order of maturity
(provided that any such prepayment may only be applied in forward order
of maturity to the extent the scheduled installments of principal
against which such prepayments are to be applied are due on or prior to
the date which is one year from the date of such prepayment), or (z) in
inverse order of maturity, at Company's option, in each case as
specified by Company in the applicable notice of prepayment; and (3) if
applied to Revolving Loans, first to repay outstanding Revolving Loans
which are not Acquisition Loans to the full extent thereof, and second
to repay outstanding Acquisition Loans and to reduce the Acquisition
Loan Commitments in the amount of such prepayment, so as to minimize the
amount of any repayment of the Acquisition Loans and any corresponding
reduction of the Acquisition Loan Commitments. On and after the Second
Amendment Effective Date, any voluntary reduction of Revolving Loan
Commitments pursuant to subsection 2.4B(ii) shall be applied first to
reduce the Revolving Loan Commitments, to the extent they exceed the
Acquisition Loan Commitments, to the full extent of such excess, and
second to reduce the remaining Revolving Loan Commitments (and
Acquisition Loan Commitments) in the remaining amount of such reduction,
so as to minimize the amount of any reduction of the Acquisition Loan
Commitments."
B. Subsection 2.4B(iv)(a) of the Revolver/Term A Loan Credit Agreement
is hereby further amended by deleting the last sentence therefrom in its
entirety.
C. Subsection 2.4B(iii)(a) of the AXEL Credit Agreement is hereby
amended by deleting it in its entirety and substituting therefor the following:
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"(a) Application of Voluntary Prepayments by Type of Loans and Order
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of Maturity. On and after the Second Amendment Effective Date, any
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voluntary prepayments of the Loans pursuant to subsection 2.4B(i) shall
be applied (x) to prepay the AXELs Series B, the AXELs Series C and the
AXELs Series D on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof) and (y) to reduce the scheduled
installments of principal of the AXELs Series B, the AXELs Series C and
the AXELs Series D set forth in subsections 2.4A(i), 2.4A(ii) and
2.4A(iii) (x) on a pro rata basis (in accordance with the respective
outstanding principal amounts thereof), or (y) in forward order of
maturity (provided that any such prepayment may only be applied in
forward order of maturity to the extent the scheduled installments of
principal against which such prepayments are to be applied are due on or
prior to the date which is one year from the date of such prepayment),
or (z) in inverse order of maturity, at Company's option, as specified
by Company in the applicable notice of prepayment); provided, however,
that so long as any Tranche A Term Loans are outstanding, any prepayment
of the Loans pursuant to subsection 2.4B(i) shall be applied to the
repayment of the Tranche A Term Loans and the Loans on a pro rata basis
according to the respective outstanding principal amounts thereof."
1.3 Amendment to Section 7: Negative Covenants
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A. Subsection 7.3(xxi) of the Revolver/Term A Loan Credit Agreement is
hereby amended by deleting it in its entirety and substituting therefor the
following:
"(xxi) Company and its Subsidiaries may make and own any Investment
having a fair market value, together with the fair market value of all
other Investments made pursuant to this subsection 7.3(xxi) that are at
that time outstanding, not exceeding 5% of Total Assets at the time of
such Investment (with the fair market value of each such Investment
being measured at the time made and without giving effect to subsequent
changes in value) (it being understood that changes in value of all such
outstanding Investments shall be given effect in calculating Total
Assets at the time of the making of any new Investment proposed to be
made pursuant to this subsection 7.3(xxi), but that changes in value of
any Investment which occur subsequent to the making of such Investment
cannot result in a breach of this covenant unless a further Investment
is made which is purported to be made pursuant to this subsection
7.3(xxi) at a time when (A) the sum of (1) the fair market value of all
outstanding Investments made pursuant to this subsection 7.3(xxi), with
such fair market value measured at the time of making of each such
outstanding Investment, plus (2) the fair market value, measured at such
time, of such further Investment, exceeds (B) 5% of Total Assets,
measured at such time and giving effect to all changes in value of all
outstanding Investments); provided, that Company and its Subsidiaries
(1) shall be in pro forma compliance with the covenants set forth in
subsection 7.6 and (2) concurrently with the making of any such
Investment, shall pledge or cause to be pledged to the Collateral Agent
as security for the Obligations (x) any capital stock or other equity
interests acquired by Company or any of its Subsidiaries as a result of
any such Investment, except (in the case of an Investment in a Joint
Venture) to the extent such pledge is
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expressly prohibited under the terms of the documentation relating to
such Investment, and (y) any intercompany indebtedness representing
loans made by Company or any of its Subsidiaries in connection with any
such Investment; provided, however, that nothing in this subsection
7.3(xxi) shall be construed to require, in the case of an Investment in
a Subsidiary, that the capital stock of such Subsidiary be pledged to a
greater extent than is required under the Collateral Documents."
Section 2. CONSENT OF LENDERS
The undersigned Lenders hereby consent to execution by Collateral Agent
and Company or any of its Subsidiaries of such amendments, supplements or other
modifications of the Collateral Documents, and of such additional Collateral
Documents, as are reasonably deemed necessary from time to time by
Administrative Agent to permit Company and its Subsidiaries to pledge or cause
to be pledged to the Collateral Agent as security for the Obligations (i) any
capital stock or other equity interests acquired by Company or any of its
Subsidiaries as a result of any Investment permitted pursuant to subsection
7.3(xxi) of the Revolver/Term A Loan Credit Agreement, as amended hereby, or
(ii) any intercompany indebtedness representing loans made by Company or any of
its Subsidiaries in connection with any such Investment.
Section 3. CONDITIONS TO EFFECTIVENESS
Anything herein to the contrary notwithstanding, Sections 1 and 2 of
this Amendment shall become effective only upon the prior or concurrent
satisfaction or waiver of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Second
Amendment Effective Date"):
(i) On or before the Second Amendment Effective Date, each of Company
and Holdings shall have delivered to Lenders (or to Administrative Agent
for Lenders with sufficient originally executed copies, where
appropriate, for each Lender and its counsel) the following, each,
unless otherwise noted, dated the Second Amendment Effective Date:
(a) A certificate of its corporate secretary or an assistant
secretary to the effect that (i) there have been no amendments to its
Certificate of Incorporation or Bylaws after the Closing Date (or, in
lieu thereof, certified copies of any such amendments), (ii) the
Resolutions of its Board of Directors delivered on the Closing Date
are in full force and effect without modification or amendment, and
(iii) there have been no changes after the Closing Date in the
incumbency of its officers (or, in lieu thereof, a certificate of
signatures and incumbency for the officers executing this Amendment
and any related documents), together with a good standing certificate
with respect to Company from the Secretary of State of the State of
Ohio, dated a recent date prior to the Second Amendment Effective
Date; and
(b) This Amendment, executed by Holdings, Company, Requisite
Lenders under the Revolver/Term A Loan Credit Agreement and Requisite
Lenders under the AXEL Credit Agreement.
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(ii) So long as Requisite Lenders under the Revolver/Term A Loan
Credit Agreement and Requisite Lenders under the AXEL Credit Agreement
shall have executed this Amendment, Administrative Agent shall have
received from Company, for distribution to each Lender that has executed
and delivered this Amendment on or prior to 5:00 p.m. (New York City
time) on June 17, 1999, an amendment fee in an amount equal to .05% of
the aggregate Revolving Loan Exposure, Tranche A Term Loan Exposure,
AXEL Series B Exposure, AXEL Series C Exposure and AXEL Series D
Exposure of such Lender.
(iii) Company shall have delivered to Administrative Agent for
Lenders (with sufficient originally executed copies for each Lender and
its counsel) originally executed copies of a written opinion letter of
Kirkland & Ellis, special counsel to Company, dated the Closing Date and
in form and substance reasonably satisfactory to Administrative Agent
and its counsel, regarding certain customary matters.
Section 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreements in the manner provided herein, Company represents and
warrants to each Lender under each Credit Agreement that the following
statements are true, correct and complete:
A. Incorporation of Representations and Warranties From Credit
Agreements. On and as of the date hereof and the Second Amendment Effective
Date, the representations and warranties contained in subsections 5.1A, 5.2A,
5.2B, 5.2C and 5.2D of the Revolver/Term A Loan Credit Agreement and subsections
4.1A, 4.2A, 4.2B, 4.2C and 4.2D of the AXEL Credit Agreement are and will be
true, correct and complete with respect to this Amendment and the Credit
Agreements as amended by this Amendment (each, as so amended, an "Amended
Agreement," and collectively, the "Amended Agreements") as if this Amendment and
the Amended Agreements were "Loan Documents" referred to in such representations
and warranties, and with the foregoing modifications such representations and
warranties are incorporated herein by this reference; and the representations
and warranties contained in Section 5 of the Revolver/Term A Loan Credit
Agreement and Section 4 of the AXEL Credit Agreement are and will be true,
correct and complete in all material respects on and as of the Second Amendment
Effective Date to the same extent as though made on and as of that date, except
to the extent such representations and warranties specifically relate to an
earlier date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
B. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event of Default or a Potential Event of Default under
any of the Credit Agreements.
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Section 5. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreements and the Other Loan
Documents.
(i) On and after the Second Amendment Effective Date, each reference
in each of the Revolver/Term A Loan Credit Agreement and the AXEL Credit
Agreement to "this Agreement", "hereunder", "hereof'", "herein" or words
of like import referring to such Credit Agreement, and each reference in
the other applicable Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to such Credit
Agreement shall mean and be a reference to the applicable Amended
Agreement.
(ii) Except as specifically amended by this Amendment, each Credit
Agreement and the other Loan Documents relating thereto shall remain in
full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein or therein, constitute a waiver
of any provision of, or operate as a waiver of any right, power or
remedy of any Agent or any Lender under, any Credit Agreement or any of
the other Loan Documents relating thereto.
B. Fees and Expenses. Company acknowledges that all reasonable costs,
fees and expenses incurred by Agents and their counsel with respect to this
Amendment and the documents and transactions contemplated hereby shall be for
the account of Company.
C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
E. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than Sections 1 and 2 hereof) shall
become effective with respect to the Revolver/Term A Loan Credit Agreement and
the AXEL Credit Agreement upon (A) the execution of counterparts hereof by (1)
Requisite Lenders (as defined in the Revolver/Term A Loan Credit Agreement), (2)
Requisite Lenders (as defined in the AXEL Credit Agreement), (3) Company and (4)
Holdings, and (B) receipt by Company and Administrative Agent of written or
telephonic notification of such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
SEALY MATTRESS COMPANY
By:
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Name:
Title:
SEALY CORPORATION
By:
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Name:
Title:
S-1
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually and as Syndication Agent
By:
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Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
individually and as Administrative Agent
By:
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Name:
Title:
BANKERS TRUST COMPANY, individually
and as Documentation Agent
By:
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Name:
Title:
S-2
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[NAME OF LENDER]
By:
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Name:
Title:
S-3