EXHIBIT 10.30
EXECUTION COPY
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$20,000,000
CREDIT AGREEMENT
among
MATTRESS DISCOUNTERS HOLDING CORPORATION,
MATTRESS DISCOUNTERS CORPORATION,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
BANKBOSTON, N.A.
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Co-Agents,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of August 6, 1999
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CHASE SECURITIES INC.,
as Lead Arranger and Sole Book Manager
TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS........................................................ 1
1.1 Defined Terms........................................................ 1
1.2 Other Definitional Provisions........................................ 20
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................... 20
2.1 Commitments.......................................................... 20
2.2 Procedure for Loan Borrowing......................................... 20
2.3 Commitment Fees, etc. ............................................... 21
2.4 Termination or Reduction of Commitments.............................. 21
2.5 Optional Prepayments................................................. 21
2.6 Mandatory Prepayments and Commitment Reductions...................... 21
2.7 Conversion and Continuation Options.................................. 23
2.8 Limitations on Eurodollar Tranches................................... 23
2.9 Interest Rates and Payment Dates..................................... 24
2.10 Computation of Interest and Fees.................................... 24
2.11 Inability to Determine Interest Rate................................ 24
2.12 Pro Rata Treatment and Payments..................................... 25
2.13 Requirements of Law................................................. 26
2.14 Taxes............................................................... 27
2.15 Indemnity........................................................... 28
2.16 Change of Lending Office............................................ 29
2.17 Replacement of Lenders.............................................. 29
SECTION 3. LETTERS OF CREDIT.................................................. 29
3.1 L/C Commitment....................................................... 29
3.2 Procedure for Issuance of Letter of Credit........................... 30
3.3 Fees and Other Charges............................................... 30
3.4 L/C Participations................................................... 30
3.5 Reimbursement Obligation of the Borrower............................. 31
3.6 Obligations Absolute................................................. 31
3.7 Letter of Credit Payments............................................ 32
3.8 Applications......................................................... 32
SECTION 4. REPRESENTATIONS AND WARRANTIES..................................... 32
4.1 Financial Condition.................................................. 32
4.2 No Change............................................................ 33
4.3 Corporate Existence; Compliance with Law............................. 33
4.4 Corporate Power; Authorization; Enforceable Obligations.............. 33
4.5 No Legal Bar......................................................... 34
4.6 Litigation........................................................... 34
4.7 No Default........................................................... 34
4.8 Ownership of Property................................................ 34
4.9 Intellectual Property................................................ 34
4.10 Taxes............................................................... 34
Page
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4.11 Federal Regulations................................................. 34
4.12 Labor Matters....................................................... 35
4.13 ERISA............................................................... 35
4.14 Investment Company Act; Other Regulations........................... 35
4.15 Subsidiaries........................................................ 35
4.16 Use of Proceeds..................................................... 35
4.17 Environmental Matters............................................... 36
4.18 Accuracy of Information, etc. ...................................... 36
4.19 Security Documents.................................................. 37
4.20 Solvency............................................................ 37
4.21 Senior Indebtedness................................................. 37
4.22 Year 2000 Matters................................................... 37
4.23 Regulation H........................................................ 38
SECTION 5. CONDITIONS PRECEDENT............................................... 38
5.1 Conditions to Initial Extension of Credit............................ 38
5.2 Conditions to Each Extension of Credit............................... 42
5.3 Conditions to Permitted Acquisitions................................. 42
SECTION 6. AFFIRMATIVE COVENANTS.............................................. 43
6.1 Financial Statements................................................. 43
6.2 Certificates; Other Information...................................... 44
6.3 Payment of Obligations............................................... 45
6.4 Maintenance of Existence; Compliance................................. 45
6.5 Maintenance of Property; Insurance................................... 45
6.6 Inspection of Property; Books and Records; Discussions............... 45
6.7 Notices.............................................................. 46
6.8 Environmental Laws................................................... 46
6.9 Additional Collateral, etc. ......................................... 46
6.10 Payment of Obligations Relating to Alabama Mortgage.................. 46
SECTION 7. NEGATIVE COVENANTS................................................. 48
7.1 Financial Condition Covenants........................................ 48
7.2 Indebtedness......................................................... 50
7.3 Liens................................................................ 51
7.4 Fundamental Changes.................................................. 52
7.5 Disposition of Property.............................................. 53
7.6 Restricted Payments.................................................. 53
7.7 Capital Expenditures................................................. 54
7.8 Investments.......................................................... 55
7.9 Payments and Modifications of Certain Debt Instruments............... 56
7.10 Transactions with Affiliates........................................ 56
7.11 Sales and Leasebacks................................................ 56
7.12 Changes in Fiscal Periods........................................... 56
7.13 Negative Pledge Clauses............................................. 57
7.14 Clauses Restricting Subsidiary Distributions........................ 57
7.15 Lines of Business................................................... 57
7.16 Amendments to Certain Agreements.................................... 57
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Page
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SECTION 8. EVENTS OF DEFAULT.................................................. 58
SECTION 9. THE AGENTS......................................................... 61
9.1 Appointment.......................................................... 61
9.2 Delegation of Duties................................................. 61
9.3 Exculpatory Provisions............................................... 61
9.4 Reliance by Administrative Agent..................................... 62
9.5 Notice of Default.................................................... 62
9.6 Non-Reliance on Agents and Other Lenders............................. 62
9.7 Indemnification...................................................... 63
9.8 Agent in Its Individual Capacity..................................... 63
9.9 Successor Administrative Agent....................................... 63
9.10 Co-Agents........................................................... 64
SECTION 10. MISCELLANEOUS..................................................... 64
10.1 Amendments and Waivers.............................................. 64
10.2 Notices............................................................. 65
10.3 No Waiver; Cumulative Remedies...................................... 66
10.4 Survival of Representations and Warranties.......................... 66
10.5 Payment of Expenses and Taxes....................................... 66
10.6 Successors and Assigns; Participations and Assignments.............. 67
10.7 Adjustments; Set-off................................................ 69
10.8 Counterparts........................................................ 69
10.9 Severability........................................................ 70
10.10 Integration........................................................ 70
10.11 GOVERNING LAW...................................................... 70
10.12 Submission To Jurisdiction; Waivers................................ 70
10.13 Acknowledgements................................................... 70
10.14 Releases of Guarantees and Liens................................... 71
10.15 Confidentiality.................................................... 71
10.16 WAIVERS OF JURY TRIAL.............................................. 71
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ANNEX:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
4.10 Taxes
4.15 Subsidiaries
4.19(a) UCC Filing Jurisdictions
4.19(b) Mortgage Filing Jurisdictions
4.19(c) Owned Properties
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
7.10 Transactions with Affiliates
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Mortgage
E Form of Assignment and Acceptance
F Form of Legal Opinion of Xxxxxxxx & Xxxxx
G Form of Exemption Certificate
H Form of Subordination Provisions of Subordinated Debt
I Form of Borrower/Holdings Subordinated Debt
J Form of Management Note
K Form of Borrowing Base Certificate
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CREDIT AGREEMENT, dated as of August 6, 1999, among Mattress
Discounters Holding Corporation, a Virginia corporation ("Holdings"), Mattress
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Discounters Corporation, a Delaware corporation (the "Borrower"), the several
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banks and other financial institutions or entities from time to time parties to
this Agreement (the "Lenders"), BankBoston, N.A. and Canadian Imperial Bank of
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Commerce, as co-agents (in such capacity, the "Co-Agents"), and The Chase
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Manhattan Bank, as administrative agent.
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed
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in this Section 1.1 shall have the respective meanings set forth in this
Section 1.1 .
"ABR": for any day, a rate per annum (rounded upwards, if
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necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly
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announced from time to time by Chase as its prime rate in effect at its
principal office in New York City (the Prime Rate not being intended to be the
lowest rate of interest charged by Chase in connection with extensions of credit
to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the
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Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one
and the denominator of which is one minus the C/D Reserve Percentage and (b) the
C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall mean, for any
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day, the secondary market rate for three-month certificates of deposit reported
as being in effect on such day (or, if such day shall not be a Business Day, the
next preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under
the current practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate shall
not be so reported on such day or such next preceding Business Day, the average
of the secondary market quotations for three-month certificates of deposit of
major money center banks in New York City received at approximately 10:00 A.M.,
New York City time, on such day (or, if such day shall not be a Business Day, on
the next preceding Business Day) by Chase from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it. Any change
in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate
or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively .
"ABR Loans": Loans the rate of interest applicable to which is
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based upon the ABR.
"Adjustment Date": as defined in the Pricing Grid.
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"Administrative Agent": Chase, together with its affiliates, as
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the lead arranger of the Commitments and as the administrative agent for the
Lenders under this Agreement and the other Loan Documents, together with any of
its successors.
"Affiliate": as to any Person, any other Person that, directly or
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indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such
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Person or (b) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.
"Agents": the collective reference to the Co-Agents and the
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Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an
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amount equal to such Lender's Commitment then in effect or, if the Commitments
have been terminated, the amount of such Lender's Extensions of Credit then
outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at
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any time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
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otherwise modified from time to time.
"Applicable Margin": (a) 3.0% per annum, in the case of
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Eurodollar Loans and (b) 2.0% per annum, in the case of ABR Loans; provided,
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that, on and after February 6, 2000, the Applicable Margin will be determined
pursuant to the Pricing Grid.
"Application": an application, in such form as the Issuing Lender
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may specify from time to time, requesting the Issuing Lender to open a Letter of
Credit.
"Approved Fund": with respect to any Lender that is a fund that
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invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Sale": any Disposition of property or series of related
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Dispositions of property (excluding any such Disposition permitted by clause
(a), (b), (c), (d), (e), (f) or (g) of Section 7.5) that yields Net Cash
Proceeds to Holdings, the Borrower or any of their respective Subsidiaries in
excess of $500,000.
"Assignee": as defined in Section 10.6(c).
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"Assignment and Acceptance": an Assignment and Acceptance,
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substantially in the form of Exhibit E.
"Assignor": as defined in Section 10.6(c).
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"Available Commitment": as to any Lender at any time, an amount
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equal to the excess, if any, of (a) such Lender's Commitment then in effect over
(b) such Lender's Extensions of Credit then outstanding.
"Xxxx Advisory Services Agreement": the Advisory Services
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Agreement between the Borrower and the Sponsor, dated on or about the Closing
Date, as the same may thereafter be amended, restated, supplemented or otherwise
modified from time to time to the extent permitted under Section 7.16.
"Base Amount": as defined in Section 7.7(a).
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"Bedding Experts": The Bedding Experts, Inc., an Illinois
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corporation.
"Benefitted Lender": as defined in Section 10.7(a).
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"Board": the Board of Governors of the Federal Reserve System of
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the United States (or any successor).
"Borrower": as defined in the preamble hereto.
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"Borrower/Holdings Subordinated Indebtedness": as defined in
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Section 7.2(i).
"Borrowing Base": an amount equal to the sum of (a) 80% of the
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sum of net "accounts receivable" and net "inventory" plus (b) 50% of net
"property and equipment". For purposes of determining the amount of the
Borrowing Base, the terms "accounts receivable", "inventory" and "property and
equipment" are used herein as such terms are used and/or defined in the
consolidated balance sheet of Holdings and its Subsidiaries.
"Borrowing Base Certificate": as defined in Section 6.2(e).
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"Borrowing Date": any Business Day specified by the Borrower as a
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date on which the Borrower requests the Lenders to make Loans hereunder.
"Business": as defined in Section 4.17(b).
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"Business Day": a day other than a Saturday, Sunday or other day
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on which commercial banks in New York City are authorized or required by law to
close, provided, that with respect to notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, such day is
also a day for trading by and between banks in Dollar deposits in the interbank
eurodollar market.
"Capital Expenditures": for any period, with respect to any
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Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing (pursuant to a capital lease) of fixed or capital
assets or additions to equipment (including replacements, capitalized repairs
and improvements during such period) that should be capitalized under GAAP
within the property, plant and equipment captions on a consolidated balance
sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
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such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
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other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase or acquire any of the
foregoing.
"Cash Equivalents": (a) marketable securities issued or directly
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and unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith
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and credit of the United States, in each case maturing within one year from the
date of acquisition thereof; (b) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Ratings Services ("S&P") or
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Xxxxx'x Investor Service, Inc. ("Moody's"); (c) commercial paper maturing no
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more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (d) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's, issued by
any Lender or any commercial bank organized under the laws of the United States
of America or any state thereof or the District of Columbia, Canada, any member
of the European Economic Community or any U.S. branch of a foreign bank having
combined capital and surplus of not less than $250,000,000 (each Lender and each
such commercial bank being herein called a "Cash Equivalent Bank"); (e)
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Eurodollar time deposits having a maturity of less than one year purchased
directly from any Cash Equivalent Bank (provided such deposit is with such Cash
Equivalent Bank or any other Cash Equivalent Bank); (f) repurchase obligations
for underlying securities of the types described in clauses (a) through (e); and
(g) investments in money market funds which invest their assets substantially
exclusively in the types of Cash Equivalents described in clauses (a) through
(e) above.
"Cash Pay Subordinated Debt": shall have the meaning set forth in
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the definition of Subordinated Debt.
"C/D Assessment Rate": for any day as applied to any ABR Loan,
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the annual assessment rate in effect on such day that is payable by a member of
the Bank Insurance Fund maintained by the Federal Deposit Insurance Corporation
(the "FDIC") classified as well-capitalized and within supervisory subgroup "B"
(or a comparable successor assessment risk classification) within the meaning of
12 C.F.R. (S) 327.4 (or any successor provision) to the FDIC (or any successor)
for the FDIC's (or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any ABR Loan,
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that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board as in effect
from time to time) in respect of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Change of Control": any of the following events:
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(a) the Permitted Investors shall cease to own (on a fully diluted basis) at
least 51% of the economic and voting interests in the Capital Stock of
Holdings (which percentage shall be reduced to 35% from and after the date
(the "IPO Date") of an initial registered primary public offering by
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Holdings of its common stock);
(b) prior to the IPO Date, the Sponsor and its Control Investment Affiliates
shall cease to own of record and beneficially an amount of common stock of
Holdings equal to at least 66-2/3% of the amount of common stock of Holdings
owned by the Sponsor and its Control Investment Affiliates as of the Closing
Date (which percentage shall be reduced to 33-1/3% from and after the IPO
Date);
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(c) prior to the IPO Date, the Permitted Investors shall cease to "control" (as
such term is defined in Rule 405 promulgated under the Securities Act of
1933, as amended) Holdings;
(d) from and after the IPO Date, (i) any Person or "group" (within the meaning
of Rules 13d-3 and 13d-5 under the Securities Act of 1934, as in effect on
the Closing Date) shall own a greater percentage of the voting and/or
economic interest in the Capital Stock of Holdings than that owned by the
Permitted Investors or (ii) the Board of Directors of Holdings shall cease
to consist of a majority of Continuing Directors;
(e) Holdings shall cease to own directly 100% of the economic and voting
interest in the Borrower's Capital Stock on a fully diluted basis, free and
clear of all Liens (except Liens permitted by Section 7.3(h)); or
(f) a "Change of Control" as defined in the Senior Note Indenture shall occur.
"Chase": The Chase Manhattan Bank.
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"Closing Date": the date on which the conditions precedent set
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forth in Section 5.1 shall have been satisfied, which date is August 6, 1999.
"Co-Agents": as defined in the preamble hereto.
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"Code": the Internal Revenue Code of 1986, as amended from time
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to time.
"Collateral": all property of the Loan Parties, now owned or
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hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
"Commitment": as to any Lender, the obligation of such Lender, if
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any, to make Loans and participate in Letters of Credit in an aggregate
principal and/or face amount not to exceed the amount set forth under the
heading "Commitment" opposite such Lender's name on Schedule 1.1A or in the
Assignment and Acceptance pursuant to which such Lender became a party hereto,
as the same may be changed from time to time pursuant to the terms hereof. The
original amount of the Total Commitments is $20,000,000.
"Commitment Fee Rate": 0.50% per annum; provided, that on and
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after February 6, 2000, the Commitment Fee Rate will be determined pursuant to
the Pricing Grid.
"Commitment Period": the period from and including the Closing
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Date to the Termination Date.
"Commonly Controlled Entity": an entity, whether or not
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incorporated, that is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
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Responsible Officer substantially in the form of Exhibit B.
"Consolidated Current Assets": at any date, all amounts (other
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than cash and Cash Equivalents and deferred taxes to the extent included in
current assets) that would, in conformity with
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GAAP, be set forth opposite the caption "total current assets" (or any like
caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at
such date.
"Consolidated Current Liabilities": at any date, all amounts that
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would, in conformity with GAAP, be set forth opposite the caption "total current
liabilities" (or any like caption) on a consolidated balance sheet of the
Borrower and its Subsidiaries at such date, but excluding (a) any liabilities of
the Borrower and its Subsidiaries that are the current portion of any
Indebtedness classified as long term liabilities in conformity with GAAP, (b)
without duplication of clause (a) above, all Indebtedness consisting of Loans to
the extent otherwise included therein, and (c) deferred taxes to the extent
otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income
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for such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the sum
of (a) income tax expense, (b) interest expense, amortization or writeoff of
debt discount and debt issuance costs and commissions, discounts and other fees
and charges associated with Indebtedness (including the Loans), (c) depreciation
and amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, (i) items classified as cumulative
effect accounting change items, (ii) whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period,
losses on sales of assets outside of the ordinary course of business and
(iii) restructuring costs, severance and relocation costs and any one-time
expenses relating to (or resulting from) any merger, recapitalization or
acquisition permitted by this Agreement), (f) any other non-cash charges,
(g) all management fees paid to the Sponsor and/or its Control Investment
Affiliates pursuant to Section 7.10, (h) all transaction fees paid to the
Sponsor or any of its Control Investment Affiliates pursuant to Section 7.10,
(i) one-time compensation charges, including any arising from any
recapitalization of the Borrower's bonus program or existing stock options,
performance share or restricted stock plans resulting from any merger or
recapitalization transaction expended in any period prior to the consummation of
the transactions contemplated by the Recapitalization Documentation, (j) all
cost savings directly attributable to any Permitted Acquisition that (i) are
recognized by Regulation S-X of the Securities and Exchange Act of 1934, as
amended, (ii) result from the sourcing of mattress sales within Holdings and its
Subsidiaries or under the Sealy Supply Agreement, or (iii) (x) are implemented
within six months of such Permitted Acquisition, (y) are confirmed by the board
of directors of the Borrower and (z) do not, in the aggregate, exceed an amount
equal to 5% of the consolidated EBITDA (calculated in a manner comparable to the
manner in which Consolidated EBITDA is calculated hereunder) of the relevant
Permitted Acquired Person, in each case with respect to clauses (i), (ii) and
(iii) as certified in reasonable detail by the Chief Financial Officer of the
Borrower to the Administrative Agent and (k) any payments related to (i)
addressing the Borrower and any of its Subsidiaries' Year 2000 Problems
expressed in accordance with GAAP or (ii) reengineering efforts relating to the
installation of the Borrower's point of sale system expensed in accordance with
GAAP and pursuant to the Financial Accounting Standards Board's (FASB) Emerging
Issues Task Force Issue No. 97-13, provided that the aggregate amount of
payments pursuant to clauses (i) and (ii) shall not exceed $2,400,000 and shall
be made on or prior to December 31, 2001, and minus, to the extent included in
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the statement of such Consolidated Net Income for such period, the sum of
(a) interest income, (b) any extraordinary, unusual or non-recurring income or
gains (including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (c) any other non-cash
income (other than non-cash income resulting from the Borrower's accrual method
of accounting in accordance with past practice), all as determined on a
consolidated basis.
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For purposes of this Agreement, Consolidated EBITDA for the fiscal
quarters ended February 28, 1999 (or March 31, 1999, as applicable) and May 31,
1999 (or June 30, 1999, as applicable) shall be deemed to be $6,340,000 and
$8,090,000, respectively.
For the purposes of calculating Consolidated EBITDA for any period
of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any
determination of the Consolidated Total Debt Ratio, (i) if at any time during
such Reference Period the Borrower or any Subsidiary shall have made any
Disposition, the Consolidated EBITDA for such Reference Period shall be reduced
by an amount equal to the Consolidated EBITDA (if positive) attributable to the
property that is the subject of such Disposition for such Reference Period or
increased by an amount equal to the Consolidated EBITDA (if negative)
attributable thereto for such Reference Period and (ii) if during such Reference
Period the Borrower or any Subsidiary shall have made an Acquisition,
Consolidated EBITDA for such Reference Period shall be calculated after giving
pro forma effect thereto as if such Acquisition occurred on the first day of
such Reference Period. As used in this definition, "Acquisition" means any
acquisition of property or series of related acquisitions of property that
constitutes assets comprising all or substantially all of an operating unit of a
business or constitutes all or substantially all of the common stock of a
Person.
"Consolidated Interest Coverage Ratio": for any period, the ratio
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of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense
for such period.
"Consolidated Interest Expense": for any period, total cash
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interest expense (including that attributable to Capital Lease Obligations) of
the Borrower and its Subsidiaries for such period with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries (including
commitment fees accrued under Section 2.3, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Hedge Agreements in respect of interest rates to
the extent such net costs are allocable to such period in accordance with GAAP).
"Consolidated Net Income": for any period, the consolidated net
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income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Total Debt": at any date, the aggregate principal
-----------------------
amount of all Indebtedness of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt Ratio": as of the last day of any
-----------------------------
period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated
EBITDA for such period.
"Consolidated Working Capital": at any date, the excess of
----------------------------
Consolidated Current Assets on such date over Consolidated Current Liabilities
on such date.
8
"Continuing Directors": the directors of Holdings on the Closing
--------------------
Date, after giving effect to the Recapitalization and the other transactions
contemplated hereby, and each other director, if, in each case, such other
director's nomination for election to the board of directors of Holdings is
recommended by at least a majority of the then Continuing Directors or such
other director receives the vote of the Permitted Investors in his or her
election by the shareholders of Holdings.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control Investment Affiliate": as to any Person, any other
----------------------------
Person that (a) directly or indirectly, is in control of, is controlled by, or
is under common control with, such Person and (b) is organized primarily for the
purpose of making equity or debt investments in one or more companies. For
purposes of this definition, "control" of a Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
"Default": any of the events specified in Section 8, whether or
-------
not any requirement for the giving of notice, the lapse of time, or both, has
been satisfied, including, in any event, a "Default" under and as defined in the
Senior Note Indenture.
"Disposition": with respect to any property, any sale, lease,
-----------
sale and leaseback, assignment, conveyance, transfer or other disposition
thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.
------- -----------
"Dollars" and "$": dollars in lawful currency of the United
------- -
States.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
-------------------
under the laws of any jurisdiction within the United States.
"ECF Percentage": 50%; provided that the ECF Percentage shall be
--------------
reduced to 25% if the Consolidated Total Debt Ratio as of the last day of the
relevant fiscal year is not greater than 3.50 to 1.0.
"Environmental Laws": any and all foreign, Federal, state, local
------------------
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment, as now or may at
any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
---------------------------------
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
9
"Eurodollar Base Rate": with respect to each day during each
--------------------
Interest Period pertaining to a Eurodollar Loan, the rate per annum determined
on the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Dow Xxxxx Markets screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Dow Xxxxx Markets screen (or
otherwise on such screen), the "Eurodollar Base Rate" shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.
"Eurodollar Loans": Loans the rate of interest applicable to
----------------
which is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar
------------------
Loans the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied, including, in any event, an "Event of Default" under
and as defined in the Senior Note Indenture.
"Excess Cash Flow": for any fiscal year of the Borrower, the
----------------
excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net
Income for such fiscal year, (ii) an amount equal to the amount of all non-cash
charges (including depreciation and amortization) deducted in arriving at such
Consolidated Net Income, (iii) decreases in Consolidated Working Capital for
such fiscal year, and (iv) an amount equal to the aggregate net non-cash loss on
the Disposition of property by the Borrower and its Subsidiaries during such
fiscal year (other than sales of inventory in the ordinary course of business),
to the extent deducted in arriving at such Consolidated Net Income over (b) the
sum, without duplication, of (i) an amount equal to the amount of all non-cash
credits included in arriving at such Consolidated Net Income, (ii) Capital
Expenditures made pursuant to Section 7.7(a) (net of any proceeds of any related
debt or equity financings with respect to such Capital Expenditures) plus the
amount for such fiscal year to be carried forward to the next fiscal year and
paid in cash pursuant to Section 7.7(a) less the amount (if any) for the
preceding fiscal year carried forward to the current fiscal year pursuant to
Section 7.7(a), (iii) the aggregate amount of all prepayments of Loans during
such fiscal year to the extent accompanying permanent optional reductions of the
Commitments or made pursuant to Section 2.6(g), (iv) the aggregate amount of all
regularly scheduled principal payments of Funded Debt of the Borrower and its
Subsidiaries made during such fiscal year (other than in respect of any
revolving credit facility to the extent there is not an equivalent permanent
reduction in commitments thereunder), (v) increases in Consolidated Working
Capital for such fiscal year, (vi) an amount equal to the aggregate net non-cash
10
gain on the Disposition of property by the Borrower and its Subsidiaries during
such fiscal year (other than sales of inventory in the ordinary course of
business), to the extent included in arriving at such Consolidated Net Income,
(vii) non-cash charges added in calculating Consolidated EBITDA in a prior
period to the extent such non-cash charges are paid in cash in the current
period, (viii) fees and expenses associated with any exchange of the Senior
Notes contemplated under the terms of the Senior Note Indenture, (ix) to the
extent not otherwise deducted in determining Excess Cash Flow, 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
Permitted Acquisitions, and (x) to the extent not otherwise deducted in
determining Consolidated Net Income, Restricted Payments and Investments made in
cash pursuant to Section 7.6 or 7.8 made during such period (net of any proceeds
of any related debt or equity financings (other than proceeds of equity
financing constituting Excess Proceeds Amounts) used to fund any such Restricted
Payments or Investments).
"Excess Cash Flow Application Date": as defined in
---------------------------------
Section 2.6(e).
"Excess Proceeds Amount" means, initially, $0, which amount shall
----------------------
be (a) increased (i) on the date of delivery in any fiscal year of an officer's
---------
certificate setting forth the calculation of Excess Cash Flow for the preceding
fiscal year pursuant to Section 2.6(e), so long as any prepayment required
pursuant to Section 2.6(e) has been made, by an amount equal to 50% or 75%, as
the case may be, of such Excess Cash Flow, and (ii) on the date of the receipt
by the Borrower of any Net Cash Proceeds from the issuance of Capital Stock of
the Borrower, so long as any Commitment reduction and prepayment required
pursuant to Section 2.6(b) has been made, by an amount equal to such Net Cash
Proceeds which are not applied to reduce the Commitments, and (b) reduced (i) on
each Excess Cash Flow Application Date where Excess Cash Flow for the
immediately preceding fiscal year is a negative number, by such amount, (ii) at
the time any Capital Expenditures are made pursuant to Section 7.7(c), by the
amount of such Capital Expenditure and (iii) at the time an Investment is made
pursuant to Section 7.8(m) with an amount attributable to the Excess Proceeds
Amount, by the portion of the Investment made with the Excess Proceeds Amount,
it being understood that the Excess Proceeds Amount may be reduced to an amount
below $0 after giving effect to the reductions enumerated in clause (b)(i)
above.
"Excluded Foreign Subsidiary": any Foreign Subsidiary in respect
---------------------------
of which either (a) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would,
in the good faith judgment of the Borrower, result in adverse tax consequences
to the Borrower.
"Extensions of Credit": as to any Lender at any time, an amount
--------------------
equal to the sum of (a) the aggregate principal amount of all Loans held by such
Lender then outstanding and (b) such Lender's Percentage of the L/C Obligations
then outstanding.
"Federal Funds Effective Rate": for any day, the weighted average
----------------------------
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by Chase from three federal
funds brokers of recognized standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not
------------------
a Domestic Subsidiary.
11
"Funded Debt": as to any Person, all Indebtedness of such Person
-----------
that matures more than one year from the date of its creation or matures within
one year from such date but is renewable or extendible, at the option of such
Person, to a date more than one year from such date or arises under a revolving
credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including all
current maturities and current sinking fund payments in respect of such
Indebtedness whether or not required to be paid within one year from the date of
its creation and, in the case of the Borrower, Indebtedness in respect of the
Loans.
"Funding Office": the office of the Administrative Agent
--------------
specified in Section 10.2 or such other office as may be specified from time to
time by the Administrative Agent as its funding office by written notice to the
Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United
----
States as in effect from time to time, except that for purposes of Section 7.1,
GAAP shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered pursuant to Section 4.1(b). In the event
that any "Accounting Change" (as defined below) shall occur and such change
results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrower and the Administrative
Agent agree to enter into negotiations in order to amend such provisions of this
Agreement so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating the Borrower's financial condition shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. Until such time as such an amendment shall have been executed and
delivered by the Borrower, the Administrative Agent and the Required Lenders,
all financial covenants, standards and terms in this Agreement shall continue to
be calculated or construed as if such Accounting Changes had not occurred.
"Accounting Changes" refers to changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants or, if applicable, the SEC.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and
----------------------------------
Collateral Agreement to be executed and delivered by Holdings, the Borrower and
each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same
may be amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
-------------------- ------------
person"), any obligation of (a) the guaranteeing person or (b) another Person
------
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, dividends or other obligations (the "primary obligations") of any
-------------------
other third Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, including any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
12
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include standard
contractual indemnities, endorsements of instruments for deposit or collection
in the ordinary course of business. The amount of any Guarantee Obligation of
any guaranteeing person shall be deemed to be the lower of (a) an amount equal
to the stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for which
such guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by the Borrower in good faith.
"Guarantors": the collective reference to Holdings and the
----------
Subsidiary Guarantors.
"Hedge Agreements": all interest rate swaps, caps or collar
----------------
agreements or similar arrangements dealing with interest rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.
"Holdings": as defined in the preamble hereto.
--------
"Indebtedness": of any Person at any date, without duplication,
------------
(a) all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services (other than
current trade payables, accrued expenses or deferred rent incurred in the
ordinary course of such Person's business), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though 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),
(e) all Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party under acceptances, letters
of credit, surety bonds or similar arrangements, (g) the liquidation value of
all redeemable preferred Capital Stock of such Person, (h) all Guarantee
Obligations of such Person in respect of obligations of the kind referred to in
clauses (a) through (g) above, (i) all obligations of the kind referred to in
clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including accounts and contract rights) owned by such Person,
whether or not such Person has assumed or become liable for the payment of such
obligation, and (j) for the purposes of Sections 7.2 and 8(e) only, all
obligations of such Person in respect of Hedge Agreements. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in such
entity, except to the extent the terms of such Indebtedness expressly provide
that such Person is not liable therefor.
"Insolvency": with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to xxx at law or in
equity for any
13
infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
---------------------
each March, June, September and December to occur while such Loan is outstanding
and the final maturity date of such Loan, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such Interest
Period, (c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day that is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such Interest Period
and (d) as to any Loan (other than, unless otherwise provided herein, any Loan
that is an ABR Loan), the date of any repayment or prepayment made in respect
thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
---------------
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three, six or, if available
to all Lenders, such other periods as the Borrower may request, as selected by
the Borrower in its notice of borrowing or notice of conversion, as the case may
be, given with respect thereto; and (b) thereafter, each period commencing on
the last day of the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three, six or, if available to all Lenders, such other
periods as the Borrower may request, as selected by the Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto; provided
that, all of the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period that
would extend beyond the Termination Date;
(iii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Investments": as defined in Section 7.8.
-----------
"Issuing Lender": Chase, or any affiliate thereof, in its
--------------
capacity as issuer of any Letter of Credit.
"L/C Commitment": $5,000,000.
--------------
"L/C Fee Payment Date": the last day of each March, June,
--------------------
September and December and the last day of the Commitment Period.
14
"L/C Obligations": at any time, an amount equal to the sum of
---------------
(a) the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters of
Credit that have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": the collective reference to all the Lenders
----------------
other than the Issuing Lender.
"Lenders": as defined in the preamble hereto.
-------
"Letters of Credit": as defined in Section 3.1(a).
-----------------
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Security Documents and the
--------------
Notes.
"Loan Parties": Holdings, the Borrower and each Subsidiary of the
------------
Borrower that is a party to a Loan Document.
"Loans": as defined in Section 2.1(a).
-----
"Management Notes": as defined in Section 7.2(m).
----------------
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
Recapitalization, (b) the business, property, operations or financial condition
of the Borrower and its Subsidiaries taken as a whole or (c) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Mortgaged Properties": the real properties listed on
--------------------
Schedule 1.1B, as to which the Administrative Agent for the benefit of the
Lenders shall be granted a Lien pursuant to the Mortgages.
"Mortgages": each of the mortgages and deeds of trust made by any
---------
Loan Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, substantially in the form of Exhibit D (with such
changes thereto as shall be advisable under the law of the jurisdiction in which
such mortgage or deed of trust is to be recorded), as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan that is a multiemployer plan as
------------------
defined in Section 4001(a)(3) of ERISA.
15
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
-----------------
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash
proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"Non-Excluded Taxes": as defined in Section 2.14(a).
------------------
"Non-U.S. Lender": as defined in Section 2.14(d).
---------------
"Notes": the collective reference to any promissory note
-----
evidencing Loans.
"Obligations": the unpaid principal of and interest on (including
-----------
interest accruing after the maturity of the Loans and Reimbursement Obligations
and interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent or to any Lender (or, in
the case of Hedge Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document, the Letters of Credit, any Hedge Agreement
entered into with any Lender or any affiliate of any Lender or any other
document made, delivered or given in connection herewith or therewith, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Percentage": as to any Lender at any time, the percentage which
----------
such Lender's Commitment then constitutes of the Total Commitments (or, at any
time after the Commitments shall have expired or terminated, the percentage
which the aggregate principal amount of such Lender's Loans then outstanding
constitutes of the aggregate principal amount of the Loans then outstanding).
16
"Permitted Acquired Person": any Person acquired in connection
-------------------------
with a Permitted Acquisition.
"Permitted Acquisition": any acquisition by Holdings, the Borrower
---------------------
or any Wholly Owned Subsidiary Guarantor of all of the Capital Stock of, or all
or substantially all of the assets of, or of a business, unit or division of,
any Person; provided that (a) the Borrower shall be in compliance, on a pro
-------- ---
forma basis after giving effect to such acquisition, with the covenants
-----
contained in Section 7.1, in each case recomputed as at the last day of the most
recently ended fiscal quarter of the Borrower for which the relevant information
is available as if such acquisition had occurred on the first day of each
relevant period for testing such compliance (as demonstrated in a certificate of
a Responsible Officer delivered to the Administrative Agent not later than three
Business Days prior to such acquisition), (b) no Default or Event of Default
shall have occurred and be continuing, or would occur after giving effect to
such acquisition, (c) the Capital Stock and the other property so acquired (but
only to the extent required by Section 6.9) shall constitute Collateral, (d) in
the case of the acquisition of any Capital Stock, neither the relevant Permitted
Acquired Person nor any of its Subsidiaries shall be an Excluded Foreign
Subsidiary other than an Excluded Foreign Subsidiary incorporated under the laws
of Canada (provided, that after giving pro forma effect to such Permitted
Acquisition as if such Permitted Acquisition had been consummated on the first
day of the most recent period of four consecutive fiscal quarters for which the
relevant financial information is available, the portion of Consolidated EBITDA
for such period contributed by all Excluded Foreign Subsidiaries acquired
pursuant to Permitted Acquisitions shall not exceed 25%), (e) any such
acquisition shall have been approved by the Board of Directors or comparable
governing body of the relevant Person, and (f) the conditions set forth in
Section 5.3 shall have been satisfied with respect to such acquisition.
"Permitted Acquisition Date": with respect to each Permitted
--------------------------
Acquisition, the date on which the conditions precedent set forth in Section 5.3
shall have been satisfied.
"Permitted Investors": the collective reference to the Sponsor,
-------------------
Chase, BankBoston, N.A., Canadian Imperial Bank of Commerce, Harvard Private
Capital Holdings, Inc., Xxxxxxxx Street Partners and their respective Control
Investment Affiliates.
"Person": an individual, partnership, corporation, limited
------
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan": at a particular time, any employee benefit plan that is
----
covered by Section 3(2) of ERISA and in respect of which the Borrower or a
Commonly Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Pricing Grid": the pricing grid attached hereto as Annex A.
------------
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
-----------------------
"Projections": as defined in Section 6.2(c).
-----------
"Properties": as defined in Section 4.17(a).
----------
"Recapitalization": as defined in Section 5.1(b)(i).
----------------
17
"Recapitalization Agreement": the Transaction Agreement among
--------------------------
Xxxxxx-Xxxxxx Company, Xxxxxx-Xxxxxx Associates, Inc. and MD Acquisition
Corporation dated as of May 28, 1999.
"Recapitalization Documentation": collectively, the
------------------------------
Recapitalization Agreement and all schedules, exhibits and annexes thereto and
all side letters and agreements affecting the terms thereof or entered into in
connection therewith, in each case as amended, supplemented or otherwise
modified from time to time in accordance with Section 7.16.
"Recovery Event": any settlement of or payment in respect of any
--------------
property or casualty insurance claim or any condemnation proceeding relating to
any asset of Holdings, the Borrower or any of their respective Subsidiaries.
"Register": as defined in Section 10.6(d).
--------
"Regulation U": Regulation U of the Board as in effect from time
------------
to time.
"Reimbursement Obligation": the obligation of the Borrower to
------------------------
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
----------------------------
Event, the aggregate Net Cash Proceeds received by Holdings, the Borrower or any
of their respective Subsidiaries in connection therewith that are not applied to
reduce the Commitments pursuant to Section 2.6(c) or (d) as a result of the
delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect
------------------
of which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
-------------------
Officer stating that no Event of Default has occurred and is continuing and that
the Borrower (directly or indirectly through a Subsidiary) intends and expects
to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or
Recovery Event to acquire assets useful in its business.
"Reinvestment Prepayment Amount": with respect to any
------------------------------
Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any
amount expended prior to the relevant Reinvestment Prepayment Date to acquire
assets useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
----------------------------
Event, the earlier of (a) the date occurring one year after such Reinvestment
Event and (b) the date on which the Borrower shall have determined not to, or
shall have otherwise ceased to, acquire assets useful in the Borrower's business
with all or any portion of the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section
----------------
4043(c) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of
PBGC Reg. (S) 4043.
18
"Required Lenders": at any time, the holders of more than 50% of
----------------
the Total Commitments then in effect or, if the Commitments have been
terminated, the Total Extensions of Credit then outstanding.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, president,
-------------------
vice president, secretary, vice president of finance or chief financial officer
of the Borrower, but in any event, with respect to financial matters, the chief
financial officer or vice president of finance of the Borrower.
"Restricted Payments": as defined in Section 7.6.
-------------------
"Sealy Supply Agreement": as defined in Schedule 7.10.
----------------------
"SEC": the Securities and Exchange Commission, any successor
---
thereto and any analogous Governmental Authority.
"Security Documents": the collective reference to the Guarantee
------------------
and Collateral Agreement, the Mortgages and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any property
of any Person to secure the obligations and liabilities of any Loan Party under
any Loan Document.
"Seller": Xxxxxx-Xxxxxx Company.
------
"Senior Note Indenture": the Indenture entered into by the
---------------------
Borrower and certain of its Subsidiaries in connection with the issuance of the
Senior Notes, together with all instruments and other agreements entered into by
the Borrower or such Subsidiaries in connection therewith, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
Section 7.9.
"Senior Notes": the notes of the Borrower issued on the Closing
------------
Date together with any Exchange Notes (as defined in the Senior Note Indenture)
issued in exchange for such notes pursuant to the Senior Note Indenture.
"Single Employer Plan": any Plan that is covered by Title IV of
--------------------
ERISA, but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as
-------
of any date of determination, (a) the amount of the "present fair saleable
value" on a going concern basis of the assets of such Person will, as of such
date, exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in accordance
with applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value on a going concern
basis of the assets of such Person will, as of such date, be greater than the
amount that will be required to pay the liability of such Person on its debts as
such debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to
19
payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (y) right to an equitable remedy for
breach of performance if such breach gives rise to a right to payment, whether
or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.
"Sponsor": Xxxx Capital, Inc., a Delaware corporation.
-------
"Subordinated Debt": any unsecured Indebtedness of Holdings or the
-----------------
Borrower (other than the Senior Notes), provided, that (a) no part of the
principal of such Indebtedness is stated to be payable or is required to be paid
(whether by way of mandatory sinking fund, mandatory redemption, mandatory
prepayment or otherwise) prior to August 7, 2006; (b) the payment of the
principal of and interest on such Indebtedness and other obligations of Holdings
or the Borrower, as the case may be, in respect thereof are subordinated to the
prior payment in full of the principal of and interest (including post-petition
interest) on the Loans and all other obligations and liabilities of Holdings or
the Borrower, as the case may be, to the Administrative Agent and the Lenders
under the Loan Documents to which it is a party on the terms set forth in
Exhibit H; (c) such Indebtedness otherwise contains terms, covenants and
conditions (other than the applicable interest rate) which are either (i) no
less favorable to the Lenders than those contained in the Senior Note Indenture
or (ii) reasonably satisfactory in form and substance to the Required Lenders as
evidenced by their prior written approval thereof; (d) (i) if such Indebtedness
does not require payment of interest in cash prior to August 7, 2006, such
interest may not accrue at a rate in excess of 17% per annum or (ii) if such
Indebtedness does require payment of interest in cash prior to August 7, 2006
("Cash Pay Subordinated Debt"), the applicable interest rate shall not exceed
14%; (e) the Net Cash Proceeds of such Indebtedness are applied to make
Investments; and (f) no Default or Event of Default shall have occurred and be
continuing on a pro forma basis after giving effect thereto.
"Subordinated Seller Notes": the subordinated notes of Holdings
-------------------------
issued on the Closing Date to the Seller.
"Subsidiary": as to any Person, a corporation, partnership,
----------
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other
--------------------
than any Excluded Foreign Subsidiary.
"Tax Sharing Agreement": the Tax Sharing Agreement among Mattress
---------------------
Discounters Holding L.L.C., Holdings, the Borrower, TJB, Bedding Experts and
Comfort Source Mattress Company, dated as of August 6, 1999.
"Termination Date": August 6, 2005.
----------------
"TJB": T.J.B., Inc., a Maryland corporation.
---
20
"Total Commitments": at any time, the aggregate amount of the
-----------------
Commitments then in effect.
"Total Extensions of Credit": at any time, the aggregate amount
--------------------------
of the Extensions of Credit of the Lenders outstanding at such time.
"Transferee": any Assignee or Participant.
----------
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
----
Loan.
"United States": the United States of America.
-------------
"Wholly Owned Subsidiary": as to any Person, any other Person all
-----------------------
of the Capital Stock of which (other than directors' qualifying shares and/or
other nominal amounts of shares, each as required by law) is owned by such
Person directly and/or through other Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor
---------------------------------
that is a Wholly Owned Subsidiary of the Borrower.
"Year 2000 Problems": limitations in the capacity or readiness to
------------------
handle date information (including, without limitation, calculations based on
date information) for the Year 1999 or years beginning January 1, 2000 of any of
the hardware, firmware or software systems ("Systems") associated with
information processing and delivery, operations or services (e.g., security and
alarms, elevators, communications and HVAC), including, without limitation,
equipment containing embedded microchips, in each case necessary to the business
or operations of Holdings, the Borrower and their respective Subsidiaries taken
as a whole.
1.2 Other Definitional Provisions. (a) Unless otherwise
-----------------------------
specified therein, all terms defined in this Agreement shall have the defined
meanings when used in the other Loan Documents or any certificate or other
document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
(i) accounting terms relating to Holdings, the Borrower and their respective
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings given
to them under GAAP, (ii) the words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation", (iii) the word
"incur" shall be construed to mean incur, create, issue, assume, become liable
in respect of or suffer to exist (and the words "incurred" and "incurrence"
shall have correlative meanings), and (iv) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, Capital
Stock, securities, revenues, accounts, leasehold interests and contract rights.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
21
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. (a) Subject to the terms and conditions hereof,
-----------
each Lender severally agrees to make revolving credit loans ("Loans") to the
Borrower from time to time during the Commitment Period in an aggregate
principal amount at any one time outstanding which, when added to such Lender's
Percentage of the L/C Obligations then outstanding, does not exceed the lesser
of (a) such Lender's Commitment and (b) such Lender's Percentage of the
Borrowing Base then in effect; provided that the Borrower may not borrow Loans
in an amount exceeding $6,000,000 on the Closing Date. During the Commitment
Period the Borrower may use the Commitments by borrowing, prepaying the Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof. The Loans may from time to time be Eurodollar Loans or ABR
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.7.
(b) The Borrower shall repay all outstanding Loans on the
Termination Date.
2.2 Procedure for Loan Borrowing. The Borrower may borrow
----------------------------
under the Commitments during the Commitment Period on any Business Day, provided
--------
that the Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 12:00 Noon, New
York City time, (a) three Business Days prior to the requested Borrowing Date,
in the case of Eurodollar Loans, or (b) on the requested Borrowing Date, in the
case of ABR Loans), specifying (i) the amount and Type of Loans to be borrowed,
(ii) the requested Borrowing Date and (iii) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest Period therefor. Each borrowing under the Commitments shall be
in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple
thereof (or, if the then aggregate Available Commitments are less than $100,000,
such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a
whole multiple of $100,000 in excess thereof. Upon receipt of any such notice
from the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
--- ----
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
2.3 Commitment Fees, etc. (a) The Borrower agrees to pay to the
--------------------
Administrative Agent for the account of each Lender a commitment fee for the
period from and including the Closing Date to the last day of the Commitment
Period, computed at the Commitment Fee Rate on the average daily amount of the
Available Commitment of such Lender during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September and
December and on the Termination Date, commencing on the first of such dates to
occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent the
fees in the amounts and on the dates previously agreed to in writing by the
Borrower and the Administrative Agent.
2.4 Termination or Reduction of Commitments. The Borrower shall
---------------------------------------
have the right, upon not less than three Business Days' (or such shorter time as
the Administrative Agent shall agree to) notice to the Administrative Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments; provided that no such termination or reduction of Commitments shall
--------
be permitted if,
22
after giving effect thereto and to any prepayments of the Loans made on the
effective date thereof, the Total Extensions of Credit would exceed the Total
Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a
whole multiple thereof, and shall reduce permanently the Commitments then in
effect.
2.5 Optional Prepayments. The Borrower may at any time and from
--------------------
time to time prepay the Loans, in whole or in part, without premium or penalty,
upon irrevocable notice delivered to the Administrative Agent at least three
Business Days prior thereto in the case of Eurodollar Loans and at least one
Business Day prior thereto in the case of ABR Loans, which notice shall specify
the date and amount of prepayment and whether the prepayment is of Eurodollar
Loans or ABR Loans; provided, that if a Eurodollar Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto, the Borrower
shall also pay any amounts owing pursuant to Section 2.15. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with (except in the
case of Loans that are ABR Loans) accrued interest to such date on the amount
prepaid. Partial prepayments of Loans shall be in an aggregate principal amount
of $1,000,000 or a whole multiple thereof.
2.6 Mandatory Prepayments and Commitment Reductions. (a) If any
-----------------------------------------------
Indebtedness shall be incurred by Holdings, the Borrower or any of their
respective Subsidiaries (excluding any Indebtedness incurred in accordance with
Section 7.2), an amount equal to 100% of the Net Cash Proceeds thereof shall be
applied on the date of such incurrence toward the reduction of the Commitments.
(b) If any Capital Stock shall be issued by Holdings, the
Borrower or any of their respective Subsidiaries, an amount equal to 50% of the
Net Cash Proceeds thereof (excluding such Net Cash Proceeds received (i) from
intercompany capital contributions made by Holdings, the Borrower or any of
their respective Subsidiaries, (ii) from the Permitted Investors (other than
Xxxxxxxx Street Partners except to the extent its contribution is made on a pro
rata basis), (iii) by Holdings, the Borrower or any of their respective
Subsidiaries as payment for any shares of Capital Stock of Holdings, the
Borrower or any of their respective Subsidiaries purchased by, or the exercise
price under any option for any shares of Capital Stock of Holdings, the Borrower
or any of their respective Subsidiaries held by, any officer, director or
employee or consultant of Holdings, the Borrower or any of their respective
Subsidiaries and (iv) by Holdings or the Borrower as consideration for shares of
Capital Stock issued in connection with a Permitted Acquisition, provided that
the aggregate Net Cash Proceeds which may be excluded under this Agreement
pursuant to clause (iv) shall not exceed $20,000,000) shall be applied on the
date of such issuance toward the reduction of the Commitments; provided, that
--------
such percentage shall be reduced to 25% if the Consolidated Total Debt Ratio
immediately prior to giving effect to such application (determined as at the end
of the most recent period of four consecutive fiscal quarters for which the
relevant financial information is available) is not greater than 3.50 to 1.0.
(c) If on any date Holdings, the Borrower or any of their
respective Subsidiaries shall receive Net Cash Proceeds from any Asset Sale
then, unless a Reinvestment Notice shall be delivered in respect thereof, such
Net Cash Proceeds shall be applied on such date toward the reduction of the
Commitments; provided that, notwithstanding the foregoing, (i) the aggregate Net
--------
Cash Proceeds of Asset Sales that may be excluded from the foregoing requirement
pursuant to a Reinvestment Notice shall not exceed $750,000 in any fiscal year
of the Borrower and (ii) on each Reinvestment Prepayment Date, an amount equal
to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment
Event shall be applied toward the reduction of the Commitments.
23
(d) If on any date Holdings, the Borrower or any of their
respective Subsidiaries shall receive Net Cash Proceeds from any Recovery Event
then, unless a Reinvestment Notice shall be delivered in respect thereof, such
Net Cash Proceeds shall be applied on such date toward the reduction of the
Commitments; provided that, notwithstanding the foregoing, (i) the aggregate Net
--------
Cash Proceeds of Recovery Events that may be excluded from the foregoing
requirement pursuant to a Reinvestment Notice shall not exceed $1,500,000 in any
fiscal year of the Borrower and (ii) on each Reinvestment Prepayment Date, an
amount equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the reduction of the Commitments.
(e) If, for any fiscal year of the Borrower commencing with
the fiscal year ending December 31, 2000 (or, if the Borrower has not changed
its fiscal year pursuant to Section 7.12 by such date, February 28, 2001) there
shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow
Application Date, prepay the Loans in an amount equal to the ECF Percentage of
such Excess Cash Flow. Each such prepayment shall be made on a date (an "Excess
------
Cash Flow Application Date") no later than five days after the earlier of
--------------------------
(i) the date on which the financial statements of the Borrower referred to in
Section 6.1(a), for the fiscal year with respect to which such prepayment is
made, are required to be delivered to the Lenders and (ii) the date such
financial statements are actually delivered.
(f) Any Commitment reductions made pursuant to Section 2.6
shall be permanent and shall be accompanied by prepayment of the Loans to the
extent, if any, that the Total Extensions of Credit exceed the amount of the
Total Commitments as so reduced, provided that if the aggregate principal amount
--------
of Loans then outstanding is less than the amount of such excess (because L/C
Obligations constitute a portion thereof), the Borrower shall, to the extent of
the balance of such excess, replace outstanding Letters of Credit and/or deposit
an amount in cash in a cash collateral account established with the
Administrative Agent for the benefit of the Lenders on terms and conditions
reasonably satisfactory to the Administrative Agent.
(g) If on any date the Total Extensions of Credit exceed the
lesser of (i) the Borrowing Base then in effect and (ii) the Total Commitments,
the Borrower shall on such date prepay the Loans in an amount equal to the
amount of such excess, provided that if the aggregate principal amount of Loans
--------
then outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Borrower shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established with the Administrative Agent
for the benefit of the Lenders on terms and conditions reasonably satisfactory
to the Administrative Agent.
(h) The application of any prepayment pursuant to this
Section 2.6 shall be made, first, to ABR Loans and, second, to Eurodollar Loans.
----- ------
Each prepayment of the Loans under this Section 2.6 shall be accompanied by
accrued interest to the date of such prepayment on the amount prepaid.
2.7 Conversion and Continuation Options. (a) The Borrower may
-----------------------------------
elect from time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable (subject to
Sections 2.11 and 2.13) notice of such election, provided that any such
--------
conversion of Eurodollar Loans may only be made on the last day of an Interest
Period with respect thereto. The Borrower may elect from time to time to convert
ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three
Business Days' prior irrevocable (subject to Sections 2.11 and 2.13) notice of
such election (which notice shall specify the length of the initial Interest
Period therefor), provided that no ABR Loan may be converted into a Eurodollar
Loan when any Event of Default has occurred and is continuing and the
Administrative Agent or the Required Lenders have determined in its
24
or their sole discretion not to permit such conversions. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof.
(b) Any Eurodollar Loan may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving irrevocable (subject to Sections 2.11 and 2.13) notice to the
Administrative Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in Section 1.1, of the length of the next Interest
Period to be applicable to such Loans, provided that no Eurodollar Loan may be
continued as such when any Event of Default has occurred and is continuing and
the Administrative Agent has or the Required Lenders have determined in its or
their sole discretion not to permit such continuations, and provided, further,
-------- -------
that if the Borrower shall fail to give any required notice as described above
in this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Loans shall be automatically converted to ABR Loans on
the last day of such then expiring Interest Period. Upon receipt of any such
notice the Administrative Agent shall promptly notify each relevant Lender
thereof.
2.8 Limitations on Eurodollar Tranches. Notwithstanding anything
----------------------------------
to the contrary in this Agreement, all borrowings, conversions and continuations
of Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that, (a)
after giving effect thereto, the aggregate principal amount of the Eurodollar
Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole
multiple of $100,000 in excess thereof and (b) no more than ten Eurodollar
Tranches shall be outstanding at any one time.
2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan
or Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum equal to (x) in the case of the Loans, the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
Section plus 2% or (y) in the case of Reimbursement Obligations, the rate
----
applicable to ABR Loans plus 2%, and (ii) if all or a portion of any interest
----
payable on any Loan or Reimbursement Obligation or any commitment fee or other
amount payable hereunder shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum equal to the rate then applicable to ABR Loans plus 2%, in
----
each case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
2.10 Computation of Interest and Fees. (a) Interest and fees
--------------------------------
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to ABR Loans the rate of
interest on which is calculated on the basis of the Prime Rate, the interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
25
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.9(a).
2.12 Inability to Determine Interest Rate. If prior to the
------------------------------------
first day of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period, the Administrative Agent shall
give telecopy or telephonic notice thereof to the Borrower and the Lenders as
soon as practicable thereafter, whereupon (i) no Loans may be made or continued
as, or converted to, Eurodollar Loans, until such time as the Administrative
Agent notifies the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist (such notification not to be unreasonably
withheld or delayed) and (ii) any notice of borrowing, conversion or
continuation given by the Borrower with respect to the Loans in respect of which
such determination was made shall be deemed to be rescinded by the Borrower.
2.1 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee and any reduction of the Commitments of the Lenders shall be
made pro rata according to the respective Percentages of the Lenders.
--- ----
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Loans shall be made pro rata
--- ----
according to the respective outstanding principal amounts of the Loans then held
by the Lenders.
(c) All payments (including prepayments) to be made by the
Borrower hereunder, whether on account of principal, interest, fees or
otherwise, shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Funding Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day. If any payment on a Eurodollar Loan becomes
due and payable on a day other than a Business Day, the maturity thereof shall
be extended to the next succeeding
26
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day. In the case of any extension of any payment
of principal pursuant to the preceding two sentences, interest thereon shall be
payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans, on demand, from the Borrower. Notwithstanding
anything contained in this Section 2.12(d), if the Administrative Agent demands
repayment pursuant to the preceding sentence the Borrower shall not be required
to pay any amount pursuant to Section 2.15 in connection with such repayment.
(e) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment being made hereunder
that the Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective pro rata shares
of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days of such required date, the
Administrative Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such amount with interest thereon at the rate per annum equal to the daily
average Federal Funds Effective Rate. Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.
2.13 Requirements of Law. (a) If the adoption of or any change
-------------------
in any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-
Excluded Taxes covered by Section 2.14 and changes in the rate of tax on
the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of
27
funds by, any office of such Lender that is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
within 15 Business Days of the receipt of its demand accompanied by
documentation supporting such reimbursement request, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable. If any Lender becomes entitled to claim any additional amounts
pursuant to this paragraph, it shall promptly notify the Borrower (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled.
(b) If any Lender shall have determined that the adoption of or
any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this paragraph for any amounts incurred more than six months prior to the
date that such Lender notifies the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if the circumstances giving
-------- -------
rise to such claim have a retroactive effect, then such six-month period shall
be extended to include the period of such retroactive effect.
(c) A certificate as to any additional amounts payable pursuant
to this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.14 Taxes. (a) All payments made by the Borrower under this
-----
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Administrative Agent or any Lender as a result
of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any other Loan Document). If any such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld
------------------
from any amounts payable to the Administrative Agent or any Lender
28
hereunder, the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes and Other Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement, provided, however, that the Borrower shall
-------- -------
not be required to increase any such amounts payable to any Lender with respect
to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to
comply with the requirements of paragraph (d) or (e) of this Section or
(ii) that are United States withholding taxes imposed on amounts payable to such
Lender at the time the Lender becomes a party to this Agreement, except to the
extent that such Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for its own account or for the account of the relevant
Lender, as the case may be, a certified copy of an original official receipt
received by the Borrower showing payment thereof. If the Borrower fails to pay
any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
---------------
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit G and a Form W-8, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by
29
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such
Lender is legally entitled to complete, execute and deliver such documentation
and in such Lender's judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
(f) If Administrative Agent or any Lender receives a refund in
respect of any amounts paid by the Borrower pursuant to this Section 2.14, which
refund in the sole judgment of the Administrative Agent or such Lender is
allocable to such payment, it shall promptly notify the Borrower and shall,
within 15 Business Days after receipt, repay such refund to the Borrower net of
all out-of-pocket expenses of the Administrative Agent or such Lender; provided,
that the Borrower, upon the request of the Administrative Agent or any Lender,
agrees to promptly repay, within 15 Business Days of the receipt of demand
therefor accompanied by documentation supporting such request, the amount paid
over to the Administrative Agent or such Lender in the event the Administrative
Agent or such Lender is required to repay such refund to the relevant tax
authority.
(g) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.15 Indemnity. The Borrower agrees to indemnify each Lender and to
---------
hold each Lender harmless from any loss or expense that such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment of or conversion
from Eurodollar Loans after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day that is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal
to the excess, if any, of (i) the amount of interest that would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market. A certificate as to any amounts payable
pursuant to this Section submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.16 Change of Lending Office. Each Lender agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 2.13 or 2.14(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
--------
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
-------- -------
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.13 or 2.14(a).
2.17 Replacement of Lenders. The Borrower shall be permitted to
----------------------
replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.13 or 2.14(a), (b) defaults in its
30
obligation to make Loans hereunder, with a replacement financial institution or
(c) fails to comply with a proposed change, waiver, discharge or termination
under the Loan Documents otherwise approved by the Required Lenders (it being
understood that no such failure shall be deemed to arise solely from the failure
of such Lender to vote in favor of such change, waiver, discharge or
termination); provided that (i) such replacement does not conflict with any
--------
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) prior to any such replacement,
such Lender shall have taken no action under Section 2.16 so as to eliminate the
continued need for payment of amounts owing pursuant to Section 2.13 or 2.14(a),
(iv) the replacement financial institution shall purchase, at par, all Loans and
other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) unless clause (b) above is applicable, the Borrower shall be
liable to such replaced Lender under Section 2.15 if any Eurodollar Loan owing
to such replaced Lender shall be purchased other than on the last day of the
Interest Period relating thereto, (vi) the replacement financial institution, if
not already a Lender, shall be reasonably satisfactory to the Administrative
Agent, (vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 10.6 (provided that the Borrower shall
be obligated to pay the registration and processing fee referred to therein),
(viii) until such time as such replacement shall be consummated, the Borrower
shall pay all additional amounts (if any) required pursuant to Section 2.13 or
2.14(a), as the case may be, and (ix) any such replacement shall not be deemed
to be a waiver of any rights that the Borrower, the Administrative Agent or any
other Lender shall have against the replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
--------------
the Issuing Lender, in reliance on the agreements of the other Lenders set forth
in Section 3.4(a), agrees to issue letters of credit ("Letters of Credit") for
-----------------
the account of the Borrower on any Business Day during the Commitment Period in
such form as may be approved from time to time by the Issuing Lender; provided
--------
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the Total Extensions of Credit would exceed the
lesser of (x) the Total Commitments and (y) the Borrowing Base then in effect.
Each Letter of Credit shall (i) be denominated in Dollars, (ii) have a face
amount of at least $100,000 (unless otherwise agreed by the Issuing Lender) and
(iii) expire no later than the earlier of (x) the first anniversary of its date
of issuance and (y) the date that is five Business Days prior to the Termination
Date, provided that any Letter of Credit with a one-year term may provide for
the renewal thereof for additional one-year periods (which shall in no event
extend beyond the date referred to in clause (y) above).
(b) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may
------------------------------------------
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may request. Upon receipt of any Application, the Issuing Lender
will process such Application and the certificates, documents and other papers
and information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue any
Letter of Credit earlier than three Business Days after its receipt of the
Application therefor and all such other certificates, documents and
31
other papers and information relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by
the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of
such Letter of Credit to the Borrower promptly following the issuance thereof.
The Issuing Lender shall promptly furnish to the Administrative Agent, which
shall in turn promptly furnish to the Lenders, notice of the issuance of each
Letter of Credit (including the amount thereof).
3.3 Fees and Other Charges. (a) The Borrower will pay a fee on all
----------------------
outstanding Letters of Credit at a per annum rate equal to the Applicable Margin
then in effect with respect to Eurodollar Loans, shared ratably among the
Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the
issuance date. In addition, the Borrower shall pay to the Issuing Lender for
its own account a fronting fee of 0.25% per annum on the undrawn and unexpired
amount of each Letter of Credit, payable quarterly in arrears on each L/C Fee
Payment Date after the Issuance Date.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees
------------------
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Percentage in the Issuing Lender's obligations and rights under
each Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Lender that, if a draft is paid under any Letter of
Credit for which the Issuing Lender is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Lender upon demand at the Issuing Lender's address for notices
specified herein an amount equal to such L/C Participant's Percentage of the
amount of such draft, or any part thereof, that is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Lender under any Letter of Credit is paid to
the Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to the
Issuing Lender, times (ii a fraction the numerator of which is the number of
days that elapse during such period and the denominator of which is 360. If any
such amount required to be paid by any L/C Participant pursuant to Section
3.4(a) is not made available to the Issuing Lender by such L/C Participant
within three Business Days after the date such payment is due, the Issuing
Lender shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans. A certificate of the Issuing Lender submitted to any
L/C Participant with respect to any amounts owing under this Section shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with
32
Section 3.4(a), the Issuing Lender receives any payment related to such Letter
of Credit (whether directly from the Borrower or otherwise, including proceeds
of collateral applied thereto by the Issuing Lender), or any payment of interest
on account thereof, the Issuing Lender will distribute to such L/C Participant
its pro rata share thereof; provided, however, that in the event that any such
-------- -------
payment received by the Issuing Lender shall be required to be returned by the
Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
----------------------------------------
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Each such payment shall be made
to the Issuing Lender at its address for notices specified herein in lawful
money of the United States and in immediately available funds. Interest shall
be payable on any and all amounts remaining unpaid by the Borrower under this
Section from the date such amounts become payable (whether at stated maturity,
by acceleration or otherwise) until payment in full at the rate set forth in (i)
until the second Business Day following the date of the applicable drawing,
Section 2.9(b) and (ii) thereafter, Section 2.9(c).
3.6 Obligations Absolute. The Borrower's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower's
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions resulting from the bad faith, gross negligence or willful misconduct
of the Issuing Lender. The Borrower agrees that any action taken or omitted by
the Issuing Lender under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of bad faith, gross
negligence or willful misconduct and in accordance with the standards of care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on the Borrower and shall not result in any liability of the Issuing
Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
-------------------------
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any
------------
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
33
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, Holdings and the Borrower hereby jointly and severally represent and
warrant to the Administrative Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma combined
------------------- --- -----
balance sheet of the Borrower as at February 28, 1999 (including the notes
thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been
-----------------------
furnished to each Lender, has been prepared giving effect (as if such events had
occurred on such date) to (i) the consummation of the Recapitalization, (ii) the
Loans to be made and the Senior Notes to be issued on the Closing Date and the
use of the proceeds thereof and (iii) the payment of fees and expenses in
connection with the foregoing. The Pro Forma Balance Sheet presents fairly in
all material respects on a pro forma basis the estimated financial position of
--- -----
Borrower as at February 28, 1999, assuming that the events specified in the
preceding sentence had actually occurred at such date.
(b) The audited combined balance sheets of the Borrower as at
December 28, 1996, February 28, 1998 and February 28, 1999, and the related
combined statements of income and of cash flows for the fiscal periods ended on
such dates, reported on by and accompanied by an unqualified report from the
relevant firm of accountants, present fairly in all material respects the
combined financial condition of the Borrower as at such date, and the combined
results of its operations and its combined cash flows for the respective fiscal
periods then ended. The audited combined balance sheet of the Borrower as at
July 1, 1997, and the related combined statements of income and of cash flows
for the six-month period ended on such date, present fairly in all material
respects the combined financial condition of the Borrower as at such date, and
the combined results of its operations and its combined cash flows for such
period. The audited combined balance sheet of Bedding Experts as at July 1,
1997, and the related combined statements of income and of cash flows for the
six-month period ended on such date, present fairly in all material respects the
combined financial condition of Bedding Experts as at such date, and the
combined results of its operations and its combined cash flows for such period.
The unaudited combined balance sheet of the Borrower as at May 31, 1999, and the
related unaudited combined statements of income and cash flows for the three-
month period ended on such date, present fairly in all material respects the
combined financial condition of the Borrower as at such date, and the combined
results of its operations and its combined cash flows for the three-month period
then ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as discussed therein, the absence of footnotes for all
unaudited periods and, in the case of audited financial statements, as approved
by the relevant firm of accountants). Holdings, the Borrower and their
respective Subsidiaries do not have any material Guarantee Obligations,
contingent liabilities and liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any interest rate or foreign
currency swap or exchange transaction or other obligation in respect of
derivatives, that are not reflected in the most recent financial statements
referred to in this paragraph. During the period from February 28, 1999 to and
including the date hereof there has been no Disposition by Holdings, the
Borrower or any of their respective Subsidiaries of any material part of its
business or property.
4.2 No Change. Since February 28, 1999, there has been no
---------
development or event that has had or could reasonably be expected to have a
Material Adverse Effect.
34
4.3 Corporate Existence; Compliance with Law. Each Loan Party (a) is
----------------------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged
except for any consents needed to transfer leases required as a result of the
Recapitalization the failure to obtain which could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, (c) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification except as could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect and (d) is
in compliance with all Requirements of Law except to the extent that the failure
to comply therewith could not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Recapitalization except consents, authorizations, filings
and notices (i) which have been obtained or made and are in full force and
effect or (ii) the failure to obtain which could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any of the Loan Documents, except
(i) consents, authorizations, filings and notices which have been obtained or
made and are in full force and effect and (ii) the filings referred to in
Section 4.19. Each Loan Document has been duly executed and delivered on behalf
of each Loan Party party thereto. This Agreement constitutes, and each other
Loan Document upon execution will constitute, a legal, valid and binding
obligation of each Loan Party party thereto, enforceable against each such Loan
Party in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of Holdings, the Borrower or
any other Loan Party and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents).
4.6 Litigation. No litigation, investigation or proceeding of or
----------
before any arbitrator or Governmental Authority is pending or, to the knowledge
of Holdings or the Borrower, threatened by or against Holdings, the Borrower or
any of their respective Subsidiaries or against any of their respective
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
35
4.7 No Default. Neither Holdings, the Borrower nor any of their
----------
respective Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect that could reasonably be expected to have
a Material Adverse Effect.
4.8 Ownership of Property. Each of Holdings, the Borrower and each
---------------------
other Loan Party has title in fee simple to, or a valid leasehold interest in,
all its real property, and good title to, or a valid leasehold interest in, all
its other property.
4.9 Intellectual Property. Holdings, the Borrower and each of their
---------------------
respective Subsidiaries owns, or is licensed to use, all material Intellectual
Property necessary for the conduct of its business as currently conducted. No
material claim has been asserted and is pending by any Person challenging or
questioning the use of any Intellectual Property or the validity or
effectiveness of any Intellectual Property, nor does Holdings or the Borrower
know of any valid basis for any such material claim. To the best knowledge of
the Borrower, the use of Intellectual Property by Holdings, the Borrower and
their respective Subsidiaries in the conduct of their business as currently
conducted does not infringe on the rights of any Person in any material respect.
4.10 Taxes. Except as set forth on Schedule 4.10, each of Holdings,
-----
the Borrower and each of their respective Subsidiaries has filed or caused to be
filed all Federal, material state and other material tax returns that are
required to be filed and has paid all material taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any the amount or validity of that are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of Holdings, the Borrower or their respective Subsidiaries, as the case
may be); no material tax Lien has been filed, and, to the knowledge of Holdings
and the Borrower, no material claim is being asserted, with respect to any such
tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will
-------------------
be used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1, as applicable, referred to in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not
-------------
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against Holdings, the Borrower or any of their
respective Subsidiaries pending or, to the knowledge of Holdings or the
Borrower, threatened; (b) hours worked by and payment made to employees of
Holdings, the Borrower and their respective Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters; and (c) all payments due from Holdings, the
Borrower or any of their respective Subsidiaries on account of employee health
and welfare insurance have been paid or accrued as a liability on the books of
Holdings, the Borrower or the relevant Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to
36
any Plan, and each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. No termination of a Single Employer
Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by a material amount. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial
withdrawal from any Multiemployer Plan that has resulted or could reasonably be
expected to result in a material liability under ERISA, and neither the Borrower
nor any Commonly Controlled Entity would become subject to any material
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan 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. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board and Requirements of Law of the type referred to in the
exception contained in the last sentence of Section 4.4) that limits its ability
to incur Indebtedness.
4.15 Subsidiaries. Except as disclosed to the Administrative Agent
------------
by the Borrower in writing from time to time after the Closing Date, (a)
Schedule 4.15 sets forth the name and jurisdiction of incorporation of each
Subsidiary and, as to each such Subsidiary, the percentage of each class of
Capital Stock owned by any Loan Party and (b) there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than stock options granted to employees or directors and
directors' qualifying shares) of any nature relating to any Capital Stock of the
Borrower or any Subsidiary, except as created by the Loan Documents.
4.16 Use of Proceeds. The proceeds of the Loans and the Letters of
---------------
Credit shall be used for general corporate purposes of the Borrower and the
Subsidiaries (including, without limitation, to provide working capital and
finance Permitted Acquisitions).
4.17 Environmental Matters. Except as, in the aggregate, could not
---------------------
reasonably be expected to result in a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by
Holdings, the Borrower or any of their respective Subsidiaries (the
"Properties") do not contain, and have not previously contained, any Materials
of Environmental Concern in amounts or concentrations or under circumstances
that constitute or constituted a violation of, or could give rise to liability
under, any Environmental Law;
(b) neither Holdings, the Borrower nor any of their respective
Subsidiaries has received any written notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Properties or the business operated by Holdings, the Borrower or any of their
respective Subsidiaries (the "Business"), nor does Holdings or the Borrower
have knowledge that any such notice will be received or is being threatened;
37
(c) Materials of Environmental Concern have not been transported or
disposed of or from the Properties in violation of, or in a manner or to a
location that could reasonably be expected to give rise to liability under,
any Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Holdings and the Borrower, threatened,
under any Environmental Law to which Holdings, the Borrower or any Subsidiary
is or will be named as a party with respect to the Properties or the Business,
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to the
Properties or the Business;
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of Holdings, the Borrower or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of
Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws; and
(g) neither Holdings, the Borrower nor any of their respective
Subsidiaries has retained or contractually assumed any liability of any other
Person under Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the
Administrative Agent or the Lenders, or any of them, for use in connection with
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished, any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which such information was
furnished. The projections and pro forma financial information contained in the
--- -----
materials referenced above are based upon good faith estimates and assumptions
believed by management of the Borrower to be reasonable at the time made, it
being recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. As of the date
hereof, the representations and warranties of Holdings and, to the knowledge of
Holdings, the Seller contained in the Recapitalization Documentation are true
and correct in all material respects. There is no fact known to any Loan Party
that could reasonably be expected to have a Material Adverse Effect that has not
been expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Administrative Agent and
the Lenders for use in connection with the transactions contemplated hereby and
by the other Loan Documents.
4.19 Security Documents. (a) The Guarantee and Collateral Agreement
------------------
is effective to create in favor of the Administrative Agent, for the benefit of
the Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the
38
Guarantee and Collateral Agreement, when stock certificates representing such
Pledged Stock are delivered to the Administrative Agent, and in the case of the
other Collateral described in the Guarantee and Collateral Agreement, when
financing statements and other filings specified on Schedule 4.19(a) in
appropriate form are filed in the offices specified on Schedule 4.19(a), the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Obligations (as
defined in the Guarantee and Collateral Agreement), in each case prior and
superior in right to any other Person (except, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 7.3 and, with respect to
Collateral consisting of Pledged Stock, nonconsensual Liens permitted by Section
7.3(a)).
(b) Each of the Mortgages is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable Lien on the Mortgaged Properties described therein and proceeds
thereof, and when the Mortgages are filed in the offices specified on Schedule
4.19(b), each such Mortgage shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Mortgaged Properties and the proceeds thereof, as security for the Obligations
(as defined in the relevant Mortgage), in each case prior and superior in right
to any other Person (except for Liens permitted by Section 7.3(a), (b), (e), (k)
and (m)).
(c) Schedule 4.19(c) lists each parcel of real property in the United
States owned in fee simple by the Borrower or any of its Subsidiaries as of the
Closing Date.
4.20 Solvency. Each Loan Party is, and after giving effect to the
--------
Recapitalization and the incurrence of all Indebtedness and obligations being
incurred in connection herewith and therewith will be and will continue to be,
Solvent.
4.21 Senior Indebtedness. The obligations of Holdings under the
-------------------
Guarantee and Collateral Agreement constitute "Senior Debt" of Holdings under
and as defined in the Subordinated Seller Notes.
4.22 Year 2000 Matters. Holdings and the Borrower reasonably believe
-----------------
that, as relating to Holdings, the Borrower and each of their respective
Subsidiaries, taken as a whole, (a) the assessment and correction of any Year
2000 Problems, in each case, which, individually or in the aggregate, if not
corrected could reasonably be expected to have a Material Adverse Effect, will
be substantially completed on or prior to September 30, 1999, (b) a Material
Adverse Effect will not occur as a result of any Year 2000 Problem, and (c) the
aggregate costs and expenses incurred and reasonably expected to be incurred in
connection with the assessment and correction of Year 2000 Problems, including,
without limitation, a plan of correction, with respect to any Year 2000
problems, and the testing and monitoring of all Systems and the correction of
Year 2000 Problems, could not reasonably be expected to have a Material Adverse
Effect.
4.23 Regulation H. No Mortgage encumbers improved real property that
------------
is located in an area that has been identified by the Secretary of Housing and
Urban Development as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act of
1968.
39
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
-----------------------------------------
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction (or waiver), prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
(a) Credit Agreement; Guarantee and Collateral Agreement. The
----------------------------------------------------
Administrative Agent shall have received (i) this Agreement, executed and
delivered by the Administrative Agent, Holdings, the Borrower and each Person
listed on Schedule 1.1A, (ii) the Guarantee and Collateral Agreement, executed
and delivered by Holdings, the Borrower and each Subsidiary Guarantor and
(iii) an Acknowledgement and Consent in the form attached to the Guarantee and
Collateral Agreement, executed and delivered by each Issuer (as defined
therein), if any, that is not a Loan Party.
In the event that this Agreement has not been duly executed and
delivered by each Person listed on Schedule 1.1A on the date scheduled to be
the Closing Date, the condition referred to in clause (i) above shall
nevertheless be deemed satisfied if on such date the Borrower and the
Administrative Agent shall have designated one or more Persons (the
"Designated Lenders") to assume, in the aggregate, all of the Commitments that
would have been held by the Persons listed on Schedule 1.1A (the "Non-
Executing Persons") which have not so executed and delivered this Agreement
(subject to each such Designated Lender's consent and its execution and
delivery of this Agreement). Schedule 1.1A shall automatically be deemed to
be amended to reflect the respective Commitments of the Designated Lenders and
the omission of the Non-Executing Persons as Lenders hereunder.
(b) Recapitalization, etc. The following transactions shall have
---------------------
been consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders:
(i) the Seller shall have contributed all issued and outstanding
shares of Capital Stock of the Borrower, TJB and Bedding Experts to
Xxxxxx-Xxxxxx Associates ("HMA"); immediately thereafter HMA shall
have merged with MD Acquisition Corp. and HMA, as the surviving
corporation, shall have changed its name to Mattress Discounters
Holding Corporation (collectively, the "Recapitalization");
(ii) all of the issued and outstanding shares of Capital Stock of
TJB and Bedding Experts shall have been contributed to the Borrower;
(iii) Holdings shall have received at least $82,175,000 from the
proceeds of common equity issued by Holdings to funds managed by the
Sponsor and other investors reasonably satisfactory to the
Administrative Agent, provided that up to 8% of such amount may be in
the form of rollover equity of the Seller;
(iv) the Borrower shall have received at least $125,290,000 in
gross cash proceeds from the issuance of the Senior Notes;
(v) Holdings shall have issued the Subordinated Seller Notes in a
principal amount not exceeding $17,500,000;
40
(vi) With the exception of Indebtedness listed on Schedule
7.2(d), (i) the Administrative Agent shall have received reasonably
satisfactory evidence that all material existing Indebtedness of
Holdings, the Borrower and their respective Subsidiaries shall have
been repaid in full and (ii) reasonably satisfactory arrangements
shall have been made for the termination of all Liens granted in
connection therewith; and
(vii) the Recapitalization shall have been consummated for an
aggregate purchase price not exceeding $227,675,000 (excluding related
fees and expenses, which shall not exceed $13,000,000).
(c) Pro Forma Balance Sheet; Financial Statements. The
---------------------------------------------
Administrative Agent shall have received (i) the Pro Forma Balance Sheet, in
form and substance reasonably satisfactory to the Administrative Agent;
(ii) the financial statements referred to in Section 4.1(b); and (iii) an
unaudited monthly combined balance sheet of the Borrower as at June 30, 1999
and the related combined statement of income, provided that a combined
statement of cash flows for the monthly period ended on such date shall not be
required so long as the financial statements so delivered shall include
sufficient information to enable the Administrative Agent to construct a
statement of cash flows; provided further, that all such financial statements
shall, except in the case of audited financial statements, be reasonably
satisfactory to the Administrative Agent.
(d) Approvals. All governmental and third party approvals
---------
necessary in connection with the Recapitalization and the transactions
contemplated hereby shall have been obtained and be in full force and effect
except approvals the failure of which to obtain could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, and all applicable
waiting periods shall have expired without any action being taken or
threatened by any competent authority that would restrain, prevent or
otherwise impose adverse conditions on the Recapitalization or the financing
contemplated hereby.
(e) Lien Searches. The Administrative Agent shall have received
-------------
the results of a recent lien search in each of the jurisdictions where assets
of the Loan Parties are located, and such search shall reveal no liens on any
of the assets of Holdings, the Borrower or their respective Subsidiaries
except for liens permitted by Section 7.3 or discharged on or prior to the
Closing Date pursuant to documentation reasonably satisfactory to the
Administrative Agent.
(f) Environmental Audit. The Administrative Agent shall be
-------------------
reasonably satisfied with an environmental due diligence review with respect
to the owned Mortgaged Properties and any other real properties of the
Borrower and its Subsidiaries.
(g) Fees. The Lenders and the Administrative Agent shall have
----
received all fees required to be paid, and all expenses for which invoices
have been presented (including the reasonable fees and expenses of legal
counsel), on or before the Closing Date. All such amounts will be paid with
proceeds of Loans made on the Closing Date and will be reflected in the
funding instructions given by the Borrower to the Administrative Agent on or
before the Closing Date.
(h) Closing Certificate. The Administrative Agent shall have
-------------------
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C, with
appropriate insertions and attachments.
41
(i) Legal Opinions. The Administrative Agent shall have received
--------------
the following executed legal opinions:
(i) the legal opinion of Xxxxxxxx & Xxxxx, counsel to the
Borrower and its Subsidiaries, substantially in the form of Exhibit F;
(ii) to the extent consented to by the relevant counsel, each
legal opinion delivered in connection with the Recapitalization
Agreement authorizing reliance thereon by the Lenders; and
(iii) the legal opinion of local counsel in each of Alabama,
California and Virginia.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(j) Pledged Stock; Stock Powers; Pledged Notes. The Administrative
------------------------------------------
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral Agreement,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the pledgor thereof and (ii) each
promissory note (if any) pledged to the Administrative Agent pursuant to the
Guarantee and Collateral Agreement endorsed (without recourse) in blank (or
accompanied by an executed transfer form in blank) by the pledgor thereof.
(k) Filings, Registrations and Recordings. Each document
-------------------------------------
(including any Uniform Commercial Code financing statement) required by the
Security Documents or under law or reasonably requested by the Administrative
Agent to be filed, registered or recorded in order to create in favor of the
Administrative Agent, for the benefit of the Lenders, a perfected Lien on the
Collateral described therein, prior and superior in right to any other Person
(other than with respect to Liens expressly permitted by Section 7.3), shall
be in proper form for filing, registration or recordation.
(l) Mortgages, etc. (i) The Administrative Agent shall have
---------------
received a Mortgage with respect to each Mortgaged Property, executed and
delivered by a duly authorized officer of each party thereto.
(ii) If requested by the Administrative Agent, the Administrative
Agent shall have received, and the title insurance company issuing the policy
referred to in clause (iii) below (the "Title Insurance Company") shall have
-----------------------
received, maps or plats of an as-built survey of the sites of the Mortgaged
Properties certified to the Administrative Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date reasonably
satisfactory to the Administrative Agent and the Title Insurance Company by an
independent professional licensed land surveyor satisfactory to the
Administrative Agent and the Title Insurance Company, which maps or plats and
the surveys on which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (A) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines; (B) the lines of
42
streets abutting the sites and width thereof; (C) all access and other
easements appurtenant to the sites; (D) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded, apparent from a physical inspection of
the sites or otherwise known to the surveyor; (E) any encroachments on any
adjoining property by the building structures and improvements on the sites;
(F) if the site is described as being on a filed map, a legend relating the
survey to said map; and (G) the flood zone designations, if any, in which the
Mortgaged Properties are located.
(iii) The Administrative Agent shall have received in respect of
each Mortgaged Property a mortgagee's title insurance policy (or policies) or
marked up unconditional binder for such insurance. Each such policy shall (A)
be in an amount reasonably satisfactory to the Administrative Agent; (B) be
issued at ordinary rates; (C) insure that the Mortgage insured thereby creates
a valid first Lien on such Mortgaged Property free and clear of all defects
and encumbrances, except as disclosed therein; (D) name the Administrative
Agent for the benefit of the Lenders as the insured thereunder; (E) be in the
form of ALTA Loan Policy - 1970 (Amended 10/17/70 and 10/17/84) (or equivalent
policies), if available in the applicable jurisdictions; (F) contain such
endorsements and affirmative coverage as the Administrative Agent may
reasonably request and (G) be issued by title companies reasonably
satisfactory to the Administrative Agent (including any such title companies
acting as co-insurers or reinsurers, at the option of the Administrative
Agent). The Administrative Agent shall have received evidence reasonably
satisfactory to it that all premiums in respect of each such policy, all
charges for mortgage recording tax, and all related expenses, if any, have
been paid.
(iv) If reasonably requested by the Administrative Agent, the
Administrative Agent shall have received (A) a policy of flood insurance that
(1) covers any parcel of improved real property that is encumbered by any
Mortgage (2) is written in an amount not less than the outstanding principal
amount of the indebtedness secured by such Mortgage that is reasonably
allocable to such real property or the maximum limit of coverage made
available with respect to the particular type of property under the National
Flood Insurance Act of 1968, whichever is less, and (3) has a term ending not
later than the maturity of the Indebtedness secured by such Mortgage and (B)
confirmation that the Borrower has received the notice required pursuant to
Section 208(e)(3) of Regulation H of the Board.
(v) The Administrative Agent shall have received a copy of all
recorded documents referred to, or listed as exceptions to title in, the title
policy or policies referred to in clause (iii) above and a copy of all other
material documents affecting the Mortgaged Properties.
(m) Insurance. The Administrative Agent shall have received
---------
insurance certificates satisfying the requirements of Section 5.2(b) of the
Guarantee and Collateral Agreement.
(n) Solvency Opinion. The Administrative Agent shall have received
----------------
a reasonably satisfactory solvency opinion from Xxxxxx, Xxxxxx & Co. which
shall document the solvency of the Borrower and its Subsidiaries on a
consolidated basis after giving effect to the Recapitalization, the financing
thereof and the other transactions contemplated hereby.
(o) Sealy Supply Agreement. After giving effect to the
----------------------
Recapitalization, the Sealy Supply Agreement shall provide the Borrower with
substantially the same economic terms with Sealy Mattress Company as those to
which it was entitled immediately prior to the Recapitalization for a period
terminating no earlier than June 1, 2004.
43
(p) Borrowing Base Certificate. The Administrative Agent shall
--------------------------
have received a Borrowing Base Certificate setting forth the Borrowing Base as
of June 30, 1999.
5.2 Conditions to Each Extension of Credit. The agreement of each
--------------------------------------
Lender to make any extension of credit requested to be made by it on any date
(including its initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the representations
------------------------------
and warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct in all material respects on and as of such date as
if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(c) Borrowing Base Certificate. If the Borrower has not delivered
--------------------------
a Borrowing Base Certificate pursuant to Section 6.2(e) for the most recent
month ending on or after 30 days prior to the date on which the extension of
credit is requested to be made, the Administrative Agent shall have received a
Borrowing Base Certificate setting forth the Borrowing base as of the last
days of such month.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
5.3 Conditions to Permitted Acquisitions. The Borrower may enter
------------------------------------
into a Permitted Acquisition pursuant to Section 7.8(f) upon the satisfaction
(or waiver) of the following conditions precedent:
(a) After giving effect to such Permitted Acquisition and any
borrowings made in connection therewith, the Borrower shall have the ability
to borrow at least $5,000,000 of Loans pursuant to Section 2.1(a).
(b) All consents or authorizations of, filings with, notices to or
other acts by or in respect of, any Governmental Authority or any other Person
which are required in connection with such Permitted Acquisition and the
related borrowings hereunder shall have been obtained or made and shall be in
full force and effect, except for those consents, authorizations, filings,
notices or acts the failure of which to obtain or undertake could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(c) The Administrative Agent shall have received copies of all
material documentation governing the Permitted Acquisition.
(d) The Administrative Agent shall have received documentation in
form and substance reasonably satisfactory to it regarding compliance with
Section 6.9.
(e) No Default or Event of Default shall have occurred and be
continuing on the Permitted Acquisition Date or after giving effect to such
Permitted Acquisition, including, on a pro forma basis, pursuant to Section
7.1, as certified in reasonable detail to the Administrative Agent by the
Chief Financial Officer of the Borrower.
44
SECTION 6. AFFIRMATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, each of Holdings and the Borrower shall and
shall cause each of their respective Subsidiaries to:
6.1 Financial Statements. Furnish to the Administrative Agent:
--------------------
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the end
of such year and the related audited consolidated statements of income and of
cash flows for such year, setting forth in each case in comparative form the
figures for the previous year (provided, that if the Borrower changes its
fiscal year end to December 31, 1999, then prior to the delivery of audited
financial statements for the fiscal year ended December 31, 2001 the Borrower
shall only be required to use its reasonable efforts to provide comparisons to
the previous fiscal year), reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by PricewaterhouseCoopers LLP or other independent certified public
accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous year
(provided, that if the Borrower changes its fiscal year end to December 31,
1999, then prior to the delivery of the financial statements for the fiscal
quarter ended March 31, 2001 the Borrower shall only be required to use its
reasonable efforts to provide comparisons to the relevant prior period),
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments and the absence of
footnotes); and
(c) as soon as available, but in any event not later than 35 days
after the end of each month occurring during each fiscal year of the Borrower
(other than the third, sixth, ninth and twelfth such month), the unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as at the end
of such month and the related unaudited consolidated statements of income and
of cash flows for such month and the portion of the fiscal year through the
end of such month, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit adjustments
and the absence of footnotes).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
45
6.2 Certificates; Other Information. Furnish to the Administrative
-------------------------------
Agent (or, in the case of clause (i), to the relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default pursuant to Section 7.1, except as specified in
such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that such Responsible Officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate and (ii) in the case
of quarterly or annual financial statements, (x) a Compliance Certificate
containing all information and calculations necessary for determining
compliance by Holdings, the Borrower and their respective Subsidiaries with
the provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of the Borrower, as the case may be, and (y) to
the extent not previously disclosed to the Administrative Agent, a listing of
any county or state within the United States where any Loan Party keeps
inventory or equipment and of any Intellectual Property acquired by any Loan
Party since the date of the most recent list delivered pursuant to this clause
(y) (or, in the case of the first such list so delivered, since the Closing
Date);
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a detailed consolidated
budget for the following fiscal year (including a projected consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of the
following fiscal year, the related consolidated statements of projected cash
flow, projected changes in financial position and projected income and a
description of the underlying assumptions applicable thereto), and, as soon as
available, significant revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the "Projections"), which
-----------
Projections shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on reasonable
estimates, information and assumptions and that such Responsible Officer has
no reason to believe that such Projections are incorrect or misleading in any
material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition and
results of operations of the Borrower and its Subsidiaries for such fiscal
quarter and for the period from the beginning of the then current fiscal year
to the end of such fiscal quarter, as compared to the portion of the
Projections covering such periods (in which case no narrative discussion will
be required as long as the historical and projected numbers are presented in
comparative form) and to the comparable periods of the previous year;
(e) within 30 days after the end of each month, a Borrowing Base
Certificate substantially in the form of Exhibit K (each, a "Borrowing Base
--------------
Certificate") setting forth the Borrowing Base as of the last day of such
-----------
month, provided that the Borrower shall not be required to deliver a Borrowing
--------
Base Certificate if there are no Extensions of Credit outstanding at the end
of such month;
(f) no later than 5 Business Days prior to the effectiveness
thereof, copies of substantially final drafts of any proposed amendment,
supplement, waiver or other modification
46
with respect to the Senior Note Indenture, any Subordinated Seller Note, any
Subordinated Debt, the Recapitalization Documentation, the Xxxx Advisory
Services Agreement, the Sealy Supply Agreement or the Tax Sharing Agreement;
(g) within five days after the same are sent, copies of all
financial statements and reports that Holdings or the Borrower sends to the
holders of any class of its debt securities or public equity securities (in
their capacity as debt or equity security holders) and, within five days after
the same are filed, copies of all financial statements and reports that
Holdings or the Borrower may make to, or file with, the SEC;
(h) at least five Business Days prior to the expected consummation
thereof, notice of any Permitted Acquisition; and
(i) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Except as could not, in the aggregate,
----------------------
reasonably be expected to have a Material Adverse Effect, pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its material obligations of whatever nature, except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of Holdings, the Borrower or their
respective Subsidiaries, as the case may be.
6.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew
------------------------------------
and keep in full force and effect its corporate existence (except as permitted
by Section 7.5) and (ii) take all reasonable action to maintain all rights,
privileges and franchises necessary in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 7.4 and except, in the
case of clause (ii) above, to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (b) comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property
----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear and damage by casualty or condemnation excepted and (b)
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
Keep proper books of records and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of the Administrative Agent or any Lender to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of Holdings, the Borrower and their respective Subsidiaries with
officers and employees of Holdings, the Borrower and their respective
Subsidiaries and with its independent certified public accountants; provided
--------
that, unless an Event of Default has occurred, no single Lender (other than the
Administrative Agent) shall be entitled to more than one inspection during any
twelve month period.
47
6.7 Notices. Promptly give notice to the Administrative Agent of:
-------
(a) the occurrence of any Default or Event of Default;
(b) any litigation, investigation or proceeding that may exist at
any time between Holdings, the Borrower or any of their respective Subsidiaries
and any Governmental Authority, that in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and
(d) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Holdings, the Borrower or the relevant
Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. Except as, in the aggregate, could not
------------------
reasonably be expected to have a Material Adverse Effect, (a) comply with, and
make reasonable efforts to ensure compliance by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and (b) obtain and comply with and
maintain, and make reasonable efforts to ensure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws.
6.9 Additional Collateral, etc. (a) With respect to any property
---------------------------
acquired after the Closing Date by Holdings, the Borrower or any of their
respective Subsidiaries (other than (x) any property described in paragraph (b),
(c) or (d) below, (y) any property subject to a Lien expressly permitted by
Section 7.3(g) and (z) property acquired by any Excluded Foreign Subsidiary) as
to which the Administrative Agent, for the benefit of the Lenders, does not have
a perfected Lien, promptly (i) execute and deliver to the Administrative Agent
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent may reasonably request to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in
such property and (ii) take all actions necessary or reasonably requested by the
Administrative Agent to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first priority (subject to Liens permitted under
Section 7.3) security interest in such property, including the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required by
the Guarantee and Collateral Agreement or by law or as may be reasonably
requested by the Administrative Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $1,000,000 acquired after
the Closing Date by Holdings, the Borrower or any of their respective
Subsidiaries (other than (x) any such real property subject to a Lien expressly
48
permitted by Section 7.3(g) and (y) real property acquired by any Excluded
Foreign Subsidiary), promptly (i) execute and deliver a first priority (subject
to Liens permitted under Section 7.3) Mortgage, in favor of the Administrative
Agent, for the benefit of the Lenders, covering such real property, (ii) if
requested by the Administrative Agent, provide the Lenders with (x) title and
extended coverage insurance covering such real property in an amount at least
equal to the purchase price of such real property (or such other amount as shall
be reasonably specified by the Administrative Agent) as well as a current ALTA
survey thereof, together with a surveyor's certificate and (y) any consents or
estoppels reasonably requested by the Administrative Agent in connection with
such mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent and (iii) if requested by
the Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance reasonably satisfactory to the Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by Holdings, the
Borrower or any of their respective Subsidiaries (which, for the purposes of
this paragraph (c), shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary), promptly (i) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
as the Administrative Agent reasonably requests to grant to the Administrative
Agent, for the benefit of the Lenders, a perfected first priority (subject to
Liens permitted under Section 7.3) security interest in the Capital Stock of
such new Subsidiary that is owned by Holdings, the Borrower or any of their
respective Subsidiaries, (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of
Holdings, the Borrower or such Subsidiary, as the case may be, (iii) cause such
new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement,
(B) to take such actions necessary or reasonably requested by the Administrative
Agent to grant to the Administrative Agent for the benefit of the Lenders a
perfected first priority (subject to Liens permitted under Section 7.3) security
interest in the Collateral described in the Guarantee and Collateral Agreement
with respect to such new Subsidiary, including the filing of Uniform Commercial
Code financing statements in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be requested by the
Administrative Agent and (C) to deliver to the Administrative Agent a
certificate of such Subsidiary, substantially in the form of Exhibit C, with
appropriate insertions and attachments, and (iv) if requested by the
Administrative Agent, deliver to the Administrative Agent legal opinions
relating to the matters described above, which opinions shall be in form and
substance reasonably satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by Holdings, the Borrower or any of their
respective Subsidiaries, promptly (i) execute and deliver to the Administrative
Agent such amendments to the Guarantee and Collateral Agreement as the
Administrative Agent reasonably requests to grant to the Administrative Agent,
for the benefit of the Lenders, a perfected first priority security interest in
the Capital Stock of such new Subsidiary that is owned by Holdings, the Borrower
or any of their respective Subsidiaries (provided that in no event shall more
than 65% of the total outstanding Capital Stock of any such new Subsidiary be
required to be so pledged), (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of
Holdings, the Borrower or such Subsidiary, as the case may be, and take such
other action as may be necessary or reasonably requested by the Administrative
Agent to perfect the Administrative Agent's security interest therein, and (iii)
if requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance reasonably satisfactory to the Administrative Agent.
49
6.10 Payment of Obligations Relating to Alabama Mortgage. Reimburse
---------------------------------------------------
the Administrative Agent for all recording taxes and obligations paid by the
Administrative Agent in connection with any Mortgage executed with respect to
real property located within the State of Alabama (including the property
located at 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxx) which are reasonably
necessary to preserve the full benefits granted pursuant to such Mortgage,
including recording taxes payable by the Administrative Agent in September of
every year based on Total Extensions of Credit made during the twelve months
preceding the date of such payment.
SECTION 7. NEGATIVE COVENANTS
Holdings and the Borrower hereby jointly and severally agree that, so
long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, each of Holdings and the Borrower shall not, and
shall not permit any of their respective Subsidiaries to, directly or
indirectly:
7.1 Financial Condition Covenants.
-----------------------------
(a) Consolidated Total Debt Ratio. Permit the Consolidated Total
-----------------------------
Debt Ratio as at the last day of any period of four consecutive fiscal quarters
of the Borrower (or, if less, the number of full fiscal quarters subsequent to
the Closing Date) ending with any fiscal quarter set forth below, as applicable,
to exceed the ratio set forth below opposite such fiscal quarter:
Old New Consolidated
Fiscal Quarters Fiscal Quarters Total Debt Ratio
--------------- --------------- ----------------
November 30, 1999 December 31, 1999 6.15 to 1.0
February 29, 2000 March 31, 2000 6.15 to 1.0
May 31, 2000 June 30, 2000 6.15 to 1.0
August 31, 2000 September 30, 2000 6.00 to 1.0
November 30, 2000 December 31, 2000 5.75 to 1.0
February 28, 2001 March 31, 2001 5.75 to 1.0
May 31, 2001 June 30, 2001 5.50 to 1.0
August 31, 2001 September 30, 2001 5.00 to 1.0
November 30, 2001 December 31, 2001 5.00 to 1.0
February 28, 2002 March 31, 2002 4.75 to 1.0
May 31, 2002 June 30, 2002 4.50 to 1.0
August 31, 2002 September 30, 2002 4.50 to 1.0
November 30, 2002 December 31, 2002 4.25 to 1.0
February 28, 2003 March 31, 2003 4.25 to 1.0
May 31, 2003 June 30, 2003 4.00 to 1.0
August 31, 2003 September 30, 2003 4.00 to 1.0
November 30, 2003 December 31, 2003 4.00 to 1.0
February 29, 2004 March 31, 2004 3.75 to 1.0
May 31, 2004 June 30, 2004 3.75 to 1.0
August 31, 2004 September 30, 2004 3.75 to 1.0
November 30, 2004 December 31, 2004 3.50 to 1.0
February 28, 2005 March 31, 2005 3.50 to 1.0
May 31, 2005 June 30, 2005 3.25 to 1.0
50
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
------------------------------------
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to the
Closing Date) ending with any fiscal quarter set forth below, as applicable, to
be less than the ratio set forth below opposite such fiscal quarter:
Consolidated
Old New Interest
Fiscal Quarter Fiscal Quarter Coverage Ratio
--------------- --------------- ----------------
November 30, 1999 December 31, 1999 1.25 to 1.0
February 29, 2000 March 31, 2000 1.25 to 1.0
May 31, 2000 June 30, 2000 1.25 to 1.0
August 31, 2000 September 30, 2000 1.30 to 1.0
November 30, 2000 December 31, 2000 1.35 to 1.0
February 28, 2001 March 31, 2001 1.35 to 1.0
May 31, 2001 June 30, 2001 1.45 to 1.0
August 31, 2001 September 30, 2001 1.50 to 1.0
November 30, 2001 December 31, 2001 1.55 to 1.0
February 28, 2002 March 31, 2002 1.55 to 1.0
May 31, 2002 June 30, 2002 1.70 to 1.0
August 31, 2002 September 30, 2002 1.75 to 1.0
November 30, 2002 December 31, 2002 1.75 to 1.0
February 28, 2003 March 31, 2003 1.75 to 1.0
May 31, 2003 June 30, 2003 1.95 to 1.0
August 31, 2003 September 30, 2003 1.95 to 1.0
November 30, 2003 December 31, 2003 2.00 to 1.0
February 29, 2004 March 31, 2004 2.00 to 1.0
May 31, 2004 June 30, 2004 2.00 to 1.0
August 31, 2004 September 30, 2004 2.20 to 1.0
November 30, 2004 December 31, 2004 2.25 to 1.0
February 28, 2005 March 31, 2005 2.25 to 1.0
May 31, 2005 June 30, 2005 2.25 to 1.0
; provided, that for the purposes of determining the ratio described above for
the fiscal quarters of the Borrower ending November 30, 1999, February 28, 2000
and May 31, 2000 (or December 31, 1999, March 31, 2000 and June 30, 2000, as
applicable), Consolidated Interest Expense for the relevant period shall be
deemed to equal Consolidated Interest Expense for such fiscal quarter (and, in
the case of the latter two such determinations, each previous fiscal quarter
commencing after the Closing Date) multiplied by 4, 2 and 4/3, respectively.
7.2 Indebtedness. Create, issue, incur, assume, become liable in
------------
respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
(c) Guarantee Obligations incurred in the ordinary course of
business (i) by the Borrower or any
51
Subsidiary Guarantor of obligations of the Borrower or any Wholly Owned
Subsidiary Guarantor or (ii) by any Excluded Foreign Subsidiary of any
obligation of any other Excluded Foreign Subsidiary;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(d) and any refinancings, refundings, renewals or extensions
thereof (without increasing, or shortening the maturity of, the principal
amount thereof);
(e) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $2,000,000 at any one time outstanding;
(f) (i) Indebtedness of the Borrower in respect of the Senior Notes
in an aggregate principal amount not to exceed $140,000,000 and (ii) Guarantee
Obligations of any Subsidiary Guarantor in respect of such Indebtedness;
(g) Indebtedness of Holdings in respect of the Subordinated Seller
Notes in an aggregate principal amount not to exceed $17,500,000;
(h) Hedge Agreements in respect of Indebtedness otherwise permitted
hereby that bears interest at a floating rate, so long as such agreements are
not entered into for speculative purposes;
(i) Indebtedness of the Borrower to Holdings having the terms set
forth on Exhibit I "Borrower/Holdings Subordinated Debt");
-----------------------------------
(j) Indebtedness of the Borrower and its Subsidiaries in respect of
letters of credit securing performance of leases and payments under insurance
policies in an aggregate undrawn and unexpired amount of up to $2,000,000;
(k) Indebtedness of Foreign Subsidiaries under lines of credit
extended to any such Foreign Subsidiary by Persons other than the Borrower or
any or its Subsidiaries, the proceeds of which Indebtedness are used for such
Foreign Subsidiary's working capital purposes; provided that the aggregate
principal amount of all such Indebtedness outstanding at any time for all such
Foreign Subsidiaries shall not exceed $1,000,000;
(l) Indebtedness of Holdings or the Borrower with respect to
Subordinated Debt, provided that the aggregate amount of all Subordinated Debt
outstanding under this clause (l) shall not exceed $20,000,000 at any one time
outstanding, of which not more than $7,500,000 may be in the form of Cash Pay
Subordinated Debt;
(m) Indebtedness of Holdings owed to former officers or employees
of Holdings, the Borrower or any of their respective Subsidiaries incurred by
Holdings in connection with the repurchase of Holdings' common stock or common
stock options upon the death, disability or termination of employment of such
officer or employee having the terms set forth on Exhibit J ("Management
----------
Notes");
-----
(n) Indebtedness of any Subsidiary of the Borrower acquired
pursuant to a Permitted Acquisition existing at the time of consummation of
the Permitted Acquisition; provided that (i) such Indebtedness was not
--------
incurred in connection with or in anticipation of such Permitted
52
Acquisition, (ii) such Indebtedness does not constitute debt for borrowed
money (other than debt for borrowed money incurred in connection with
industrial revenue or industrial development bond or similar financings), it
being understood and agreed that Capital Lease Obligations shall not
constitute debt for borrowed money for purposes of this clause (n), and (iii)
the aggregate outstanding principal amount of Indebtedness incurred pursuant
to this paragraph (n) shall not exceed $2,000,000; and
(o) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $5,000,000 at any one time outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of its property, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
--------
thereto are maintained on the books of the Borrower or its Subsidiaries, as
the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlords' or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that are
being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the
aggregate, are not substantial in amount and that do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Borrower
or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule
7.3(f), securing Indebtedness permitted by Section 7.2(d), provided that no
such Lien is spread to cover any additional property after the Closing Date
and that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(e) to finance the acquisition of
fixed or capital assets, provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Security Documents;
(i) any interest or title of a lessor under any lease entered into
by the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased;
53
(j) any attachment or judgment Lien not constituting an Event of
Default under Section 8(h);
(k) leases or subleases granted to others in the ordinary course of
business consistent with past practices and not interfering in any material
respect with the ordinary conduct of the business or operations of Holdings,
the Borrower or any of their respective Subsidiaries;
(l) bankers' liens and rights of setoff with respect to customary
depository arrangements entered into in the ordinary course of business;
(m) any zoning or similar law or right reserved to or vested in any
Governmental Authority to control or regulate the use of any real property;
(n) licenses of patents, trademarks and other intellectual property
rights granted by Holdings, the Borrower or any of their respective
Subsidiaries in the ordinary course of business and not interfering in any
material respect with the ordinary conduct of the business of Holdings, the
Borrower or such Subsidiary;
(o) Liens securing any Indebtedness permitted pursuant to Section
7.2(n); provided that such Liens only encumber the assets acquired in the
related Permitted Acquisition and; provided further that such Liens were not
-------- -------
granted in contemplation of the related Permitted Acquisition; and
(p) Liens not otherwise permitted by this Section so long as the
aggregate outstanding principal amount of the obligations secured thereby does
not exceed (as to the Borrower and all Subsidiaries) $2,500,000 at any one
time.
7.4 Fundamental Changes. Enter into any merger, consolidation or
-------------------
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (provided that the Borrower shall be the continuing
--------
or surviving corporation) or with or into any Wholly Owned Subsidiary
Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the
--------
continuing or surviving corporation);
(b) any Excluded Foreign Subsidiary may be merged or consolidated
with or into any other Excluded Foreign Subsidiary;
(c) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any Wholly
Owned Subsidiary Guarantor;
(d) any Excluded Foreign Subsidiary may Dispose of any or all of
its assets (upon voluntary liquidation or otherwise) to any other Excluded
Foreign Subsidiary;
(e) mergers with any other Person pursuant to investments permitted
by Section 7.8(i) (provided that the Borrower or the applicable Wholly Owned
--------
Subsidiary Guarantor shall be the continuing or surviving corporation); and
54
(f) sales of all or substantially all of the property or business
of any Subsidiary to the extent permitted by Section 7.5.
7.5 Disposition of Property. Dispose of any of its property, whether
-----------------------
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(c) and (d);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(e) the sale or discount of accounts receivable in connection with
the collection or compromise thereof undertaken in the ordinary course of
business;
(f) the exchange of equipment or other personal property, including
intellectual property, for the functional equivalent thereof in the ordinary
course of business;
(g) the leasing or licensing of real or personal property,
including intellectual property, in the ordinary course of business; and
(h) the Disposition of other property having a fair market value
not to exceed $1,000,000 in the aggregate for any fiscal year of the Borrower,
provided that at least 75% of the proceeds received in connection with any
--------
such Disposition be in the form of cash.
7.6 Restricted Payments. Declare or pay any dividend (other than
-------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of Holdings, the Borrower or any Subsidiary or
any Management Notes, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of Holdings, the Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the Borrower or
any Wholly Owned Subsidiary Guarantor;
(b) so long as no Default or Event of Default shall have occurred
and be continuing, the Borrower may pay dividends to Holdings to permit
Holdings to (i) purchase Holdings' common stock or common stock options from
present or former officers or employees of Holdings, the Borrower or any
Subsidiary upon the death, disability or termination of employment of such
officer or employee or pay principal and interest on Management Notes,
provided, that the aggregate amount of cash payments under this clause (i)
after the date hereof (net of any proceeds received by Holdings and
contributed to the Borrower after the date hereof in connection with resales
of any common stock or common stock options so purchased) shall not
55
exceed $4,000,000 and (ii) pay management fees and expenses expressly
permitted by the last sentence of Section 7.10; and
(c) the Borrower may pay dividends to Holdings to permit Holdings
to (i) pay corporate overhead expenses incurred in the ordinary course of
business not to exceed $250,000 in any fiscal year and (ii) pay any taxes that
are due and payable by Holdings and the Borrower as part of a consolidated
group.
7.7 Capital Expenditures. Make or commit to make any Capital
--------------------
Expenditure, except:
(a) Capital Expenditures of the Borrower and its Subsidiaries in the
ordinary course of business not exceeding in the aggregate for the Borrower
and its Subsidiaries during any fiscal year of the Borrower set forth below,
as applicable, the amount (the "Base Amount") set forth opposite such fiscal
year below:
Old New Capital
Fiscal Year Fiscal Year Expenditures
------------------ ----------------- ------------
February 29, 2000 December 31, 1999 $6,000,000
February 28, 2001 December 31, 2000 6,500,000
February 28, 2002 December 31, 2001 6,500,000
February 28, 2003 December 31, 2002 6,500,000
February 29, 2004 December 31, 2003 6,500,000
February 28, 2005 December 31, 2004 6,500,000
; provided, that (i) the Base Amount set forth above for each fiscal year during
--------
and after which a Permitted Acquisition occurs shall be increased by an amount
equal to 15% of the consolidated EBITDA of the Permitted Acquired Person
(calculated in a manner comparable to the manner in which Consolidated EBITDA is
calculated hereunder) for the most recent period of four consecutive fiscal
quarters for which the relevant information is available for the Permitted
Acquired Person; (ii) up to 50% of the Base Amount, if not so expended in the
fiscal year for which it is permitted, may be carried over for expenditure in
the next succeeding fiscal year; and (iii) Capital Expenditures made pursuant to
this clause (a) during any fiscal year shall be deemed made, first, in respect
-----
of amounts permitted for such fiscal year as provided above and, second, in
respect of amounts carried over from the prior fiscal year pursuant to subclause
(ii) above;
(b) Capital Expenditures made with the proceeds of any Reinvestment
Deferred Amount; and
(c) In addition to the Capital Expenditures made pursuant to the
Section 7.7(a) or (b), the Borrower may make additional Capital Expenditures
not in excess of the Excess Proceeds Amount;
; provided, that, for purposes of this Section 7.7, Capital Expenditures shall
--------
not be deemed to include any expenditures made by Holdings, the Borrower or any
of their respective Subsidiaries to acquire in a Permitted Acquisition the
business, property or assets of any Permitted Acquired Person, or the stock or
other evidence of beneficial ownership of any Permitted Acquired Person that, as
a result of such Permitted Acquisition, becomes a Subsidiary of the Borrower.
56
7.8 Investments. Make any advance, loan, extension of credit (by way
-----------
of guaranty or otherwise) or capital contribution to, or purchase any Capital
Stock, bonds, notes, debentures or other debt securities of, or any assets
constituting a business unit of, or make any other investment in, any Person
(all of the foregoing, "Investments"), except:
-----------
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2(c);
(d) loans and advances to employees of Holdings, the Borrower or
any Subsidiary of the Borrower in the ordinary course of business (including
for travel, entertainment and relocation expenses) in an aggregate amount for
Holdings, the Borrower or any Subsidiary of the Borrower not to exceed
$500,000 at any one time outstanding;
(e) the Recapitalization;
(f) any Permitted Acquisitions;
(g) Investments in assets useful in the business of the Borrower
and its Subsidiaries made by the Borrower or any of its Subsidiaries with the
proceeds of any Reinvestment Deferred Amount;
(h) intercompany Investments by Holdings, the Borrower or any of
their respective Subsidiaries in the Borrower or any Person that, prior to
such investment, is a Wholly Owned Subsidiary Guarantor;
(i) the Borrower and its Subsidiaries may make and own Investments
consisting of notes received in connection with any Disposition permitted
under Section 7.5(h);
(j) Holdings may make non-cash loans to employees, officers,
executives or consultants of Holdings or the Borrower for the purpose of
purchasing Capital Stock of Holdings so long as such loans are used in their
entirety to purchase such Capital Stock;
(k) the Borrower and its Subsidiaries may make and own Investments
consisting of notes received in the ordinary course of business from suppliers
or customers in connection with the collection of accounts receivable;
(l) advances made in connection with deposits on leases in the
ordinary course of business; and
(m) in addition to Investments otherwise expressly permitted by
this Section, Investments by the Borrower or any of its Subsidiaries in an
aggregate amount (valued at cost) not to exceed $5,000,000 plus up to
$2,500,000 in Excess Proceeds Amounts during the term of this Agreement.
For purposes of this Section 7.8, consideration paid in connection with any
Investment shall be deemed to include the principal amount of any Indebtedness
assumed in connection therewith.
57
7.9 Payments and Modifications of Certain Debt Instruments. (a)
------------------------------------------------------
Make or offer to make any payment, prepayment, repurchase or redemption in
respect of or defease or segregate funds with respect to the Senior Notes, any
Subordinated Debt, any Borrower/Holdings Subordinated Debt, or any Subordinated
Seller Note, other than scheduled interest payments in respect of the Senior
Notes and any Cash Pay Subordinated Debt and liquidated damages payable pursuant
to the Registration Rights Agreement (as defined in the Senior Note Indenture)
with respect to the Senior Notes (it being understood that no interest payments
pursuant to the Subordinated Seller Notes and the Borrower/Holdings Subordinated
Debt shall be permitted) or (b) amend, modify, waive or otherwise change, or
consent or agree to any amendment, modification, waiver or other change to, any
of the terms of the Senior Note Indenture, the Senior Notes, any Subordinated
Debt or any Subordinated Seller Note (other than any such amendment,
modification, waiver or other change that (i) (x) would extend the maturity or
reduce the amount of any payment of principal thereof or reduce the rate or
extend any date for payment of interest thereon or (y) would not be adverse to
the interests of the Lenders and (ii) does not involve the payment of a consent
fee).
7.10 Transactions with Affiliates. Except as set forth on Schedule
----------------------------
7.10, enter into any transaction, including any purchase, sale, lease or
exchange of property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than Holdings,
the Borrower or any Subsidiary) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of
Holdings, the Borrower or such Subsidiary, as the case may be, and (c) upon fair
and reasonable terms no less favorable to Holdings, the Borrower or such
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person that is not an Affiliate; provided that the
--------
foregoing restriction shall not apply to (i) reasonable and customary fees paid
to members of the boards of directors of Holdings, the Borrower and its
Subsidiaries, (ii) issuance of Capital Stock to employees and consultants of the
Borrower pursuant to employment or consulting arrangements and (iii) employment
and consulting arrangements entered into in the ordinary course of business.
Notwithstanding the foregoing, pursuant to the Xxxx Advisory Services Agreement
approved by the board of directors of the Borrower, the Borrower and its
Subsidiaries may pay to the Sponsor and its Control Investment Affiliates (x)
the transaction fees in connection with the Recapitalization as set forth on
Schedule 7.10 and (y) the advisory fees and transaction fees described in the
Xxxx Advisory Services Agreement, provided in no event shall any such fees be
paid (but they may accrue) under the Xxxx Advisory Services Agreement at any
time an Event of Default under Section 8.1(a) or (f) shall have occurred and be
continuing.
7.11 Sales and Leasebacks. Enter into any arrangement with any
--------------------
Person providing for the leasing by Holdings, the Borrower or any Subsidiary of
real or personal property that has been or is to be sold or transferred by
Holdings, the Borrower or such Subsidiary to such Person or to any other Person
to whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of Holdings, the Borrower or such
Subsidiary.
7.12 Changes in Fiscal Periods. Permit the fiscal year of the
-------------------------
Borrower to end on a day other than the last day of February or change the
Borrower's method of determining fiscal quarters, provided that a one-time
change of fiscal year to December 31 will be permitted so long as (i) the fiscal
quarters are changed to March 31, June 30 and September 30 and (ii) such change
is made in a manner that results in audited financial statements of the Borrower
becoming available for the ten-month period ended December 31, 1999 in
accordance with Section 6.1(a).
7.13 Negative Pledge Clauses. Enter into or suffer to exist or
-----------------------
become effective any agreement that prohibits or limits the ability of Holdings,
the Borrower or any of their respective
58
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property or revenues, whether now owned or hereafter acquired, other than
(a) this Agreement and the other Loan Documents, (b) any agreements governing
any purchase money Liens or Capital Lease Obligations otherwise permitted hereby
(in which case, any prohibition or limitation shall only be effective against
the assets financed thereby), (c) applicable law, (d) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of Holdings, the Borrower or any of their respective Subsidiaries, (e) customary
provisions restricting assignment of any licensing agreement entered into by
Holdings, the Borrower or any of their respective Subsidiaries in the ordinary
course of business, (f) any document or instrument evidencing Foreign Subsidiary
working capital Indebtedness permitted under Section 7.2 so long as such
encumbrance or restriction only applies to the Foreign Subsidiary incurring such
Indebtedness, (g) the Senior Note Indenture and (h) customary provisions
contained in joint venture agreements entered into in the ordinary course of
business so long as such encumbrance or restriction only applies to the relevant
joint venture governed by such agreement.
7.14 Clauses Restricting Subsidiary Distributions. Enter into or
--------------------------------------------
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in
respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness
owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or
advances to, or other Investments in, the Borrower or any other Subsidiary of
the Borrower or (c) transfer any of its assets to the Borrower or any other
Subsidiary of the Borrower, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant
to an agreement that has been entered into in connection with the Disposition of
all or substantially all of the Capital Stock or assets of such Subsidiary,
(iii) applicable law, (iv) in the case of clause (c) above, customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of Holdings, the Borrower or any of their respective Subsidiaries, (v) in the
case of clause (c) above, customary provisions restricting assignment of any
licensing agreement entered into by Holdings, the Borrower or any of their
respective Subsidiaries in the ordinary course of business, (vi) any document or
instrument evidencing Foreign Subsidiary working capital Indebtedness permitted
under Section 7.2 so long as such encumbrance or restriction only applies to the
Foreign Subsidiary incurring such Indebtedness, (vii) the Senior Note Indenture
and (viii) customary provisions contained in joint venture agreements entered
into in the ordinary course of business so long as such encumbrance or
restriction only applies to the relevant joint venture governed by such
agreement.
7.15 Lines of Business. Enter into any business, either directly or
-----------------
through any Subsidiary, except for businesses which are the same or reasonably
similar, ancillary or related to, or a reasonable extension, development or
expansion of, the businesses in which the Borrower and its Subsidiaries are
engaged on the date of this Agreement.
7.16 Amendments to Certain Agreements. (a) Amend, supplement or
--------------------------------
otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of
the indemnities and licenses furnished to the Borrower or any of its
Subsidiaries pursuant to the Recapitalization Documentation such that after
giving effect thereto such indemnities or licenses shall be materially less
favorable to the interests of the Loan Parties or the Lenders with respect
thereto, (b) otherwise amend, supplement or otherwise modify the other terms and
conditions of the Recapitalization Documentation except for any such amendment,
supplement or modification that (i) becomes effective after the Closing Date and
(ii) could not reasonably be expected to have a Material Adverse Effect, or (c)
amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the
terms and conditions of the Xxxx Advisory Services Agreement or the Tax Sharing
Agreement in any manner that is materially adverse to the Lenders.
59
7.17 Sealy Supply Agreement. (a) Terminate the Sealy Supply
----------------------
Agreement for any reason other than (i) by the mutual agreement of Sealy
Mattress Company and the Borrower, provided that the Borrower shall concurrently
enter into a substantially similar supply agreement on terms which are at least
as favorable overall to the Lenders as those contained in the Sealy Supply
Agreement or (ii) the breach thereof by Sealy Mattress Company, provided that
--------
the Borrower shall thereafter use commercially reasonable efforts to promptly
enter into a substantially similar supply agreement on terms which are at least
as favorable overall to the Lenders as those contained in the Sealy Supply
Agreement.
(b) Amend, supplement or otherwise modify (pursuant to a waiver or
otherwise) the terms and conditions of the Sealy Supply Agreement except for any
such amendment, supplement or modification that could not reasonably be expected
to have a Material Adverse Effect.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes due
in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or as
of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance
of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to Holdings and the Borrower only), Section 6.7(a) or Section 7 of
this Agreement or Sections 5.5 and 5.7(b) of the Guarantee and Collateral
Agreement; or
(d) any Loan Party shall default in the observance or performance
of any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days after notice to
the Borrower from the Administrative Agent or the Required Lenders; or
(e) Holdings, the Borrower or any of their respective Subsidiaries
shall (i) default in making any payment of any principal of any Indebtedness
(including any Guarantee Obligation, but excluding the Loans) on the scheduled
or original due date with respect thereto; or (ii) default in making any
payment of any interest on any such Indebtedness beyond the period of grace,
if any, provided in the instrument or agreement under which such Indebtedness
was created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a
60
trustee or agent on behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or (in the case of any such Indebtedness constituting a
Guarantee Obligation) to become payable; provided, that a default, event or
--------
condition described in clause (i), (ii) or (iii) of this paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or
more defaults, events or conditions of the type described in clauses (i), (ii)
and (iii) of this paragraph (e) shall have occurred and be continuing with
respect to Indebtedness the outstanding principal amount of which exceeds in
the aggregate $2,500,000; or
(f) (i) Holdings, the Borrower or any of their respective
Subsidiaries shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
an order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or Holdings, the Borrower or any of their
respective Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Holdings, the Borrower or
any of their respective Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against Holdings, the Borrower or any of their respective
Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets that results in the entry of an order for
any such relief that shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) Holdings,
the Borrower or any of their respective Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
Holdings, the Borrower or any of their respective Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(g) (i) any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of
the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Required Lenders is likely to,
incur any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such
events or conditions, if any, could, in the sole judgment of the Required
Lenders, reasonably be expected to have a Material Adverse Effect; or
61
(h) one or more judgments or decrees shall be entered against
Holdings, the Borrower or any of their respective Subsidiaries involving in
the aggregate a liability (not paid or fully covered by insurance) of
$2,500,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal within 30 days from the
entry thereof; or
(i) any of the Security Documents shall cease, for any reason, to
be in full force and effect, or any Loan Party or any Affiliate of any Loan
Party shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority purported to
be created thereby; or
(j) the guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so assert;
or
(k) a Change of Control shall occur; or
(l) Holdings shall (i) conduct, transact or otherwise engage in, or
commit to conduct, transact or otherwise engage in, any business or operations
other than those incidental to its ownership of the Capital Stock of the
Borrower, the maintenance of its corporate existence, and activities relating
to accounting, legal and financial matters concerning Holdings, the Borrower
and their respective Subsidiaries collectively, (ii) incur, create, assume or
suffer to exist any Indebtedness or other liabilities or financial
obligations, except (w) Subordinated Debt, (x) nonconsensual obligations
imposed by operation of law, (y) pursuant to the Loan Documents to which it is
a party and (z) obligations with respect to its Capital Stock or any
Management Notes issued by it, or (iii) own, lease, manage or otherwise
operate any properties or assets (including cash (other than cash received in
connection with dividends made by the Borrower in accordance with Section 7.6
pending application in the manner contemplated by said Section) and cash
equivalents) other than (x) the ownership of shares of Capital Stock of the
Borrower and (y) Investments expressly permitted by Section 7.8 to be made by
Holdings; or
(m) any Subordinated Seller Note, any Borrower/Holdings
Subordinated Debt or any Subordinated Debt shall cease, for any reason, to be
validly subordinated to the Obligations or the obligations of the relevant
Guarantors under the Guarantee and Collateral Agreement, as the case may be,
as provided pursuant to the terms of such Indebtedness, or any Loan Party, any
Affiliate of any Loan Party or the holder of any such Indebtedness shall so
assert;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other
62
amounts owing under this Agreement and the other Loan Documents (including all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Administrative Agent an amount equal
to the aggregate then undrawn and unexpired amount of such Letters of Credit.
Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents. After
all such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the other Loan Documents shall have been paid
in full, the balance, if any, in such cash collateral account shall be returned
to the Borrower (or such other Person as may be lawfully entitled thereto).
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived by the Borrower.
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 Delegation of Duties. The Administrative Agent may execute any
--------------------
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
----------------------
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform
63
its obligations hereunder or thereunder. The Agents shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
9.4 Reliance by Administrative Agent. The Administrative Agent shall
--------------------------------
be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to Holdings or the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
9.5 Notice of Default. The Administrative Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender,
Holdings or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders (or, if so specified by this
Agreement, all Lenders); provided that unless and until the Administrative Agent
--------
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
----------------------------------------
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and
64
creditworthiness of the Loan Parties and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of any Loan Party or any affiliate
of a Loan Party that may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in
---------------
its capacity as such (to the extent not reimbursed by Holdings or the Borrower
and without limiting the obligation of Holdings or the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in effect
on the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by such Agent under or in connection with any of the foregoing; provided
--------
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements that are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from such Agent's
gross negligence or willful misconduct. The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With
respect to its Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent may
------------------------------
resign as Administrative Agent upon 10 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent
under this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 8(a) or Section
8(f) with respect to the Borrower shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. If no successor
agent has accepted appointment as Administrative Agent by the date that is 10
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After any
65
retiring Administrative Agent's resignation as Administrative Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Loan Documents.
9.10 Co-Agents. No Co-Agent shall have any duties or
---------
responsibilities hereunder in its capacity as such.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
-------- -------
supplement or modification shall (i) forgive or reduce the principal amount or
extend the final scheduled date of maturity of any Loan, reduce the stated rate
of any interest or fee payable hereunder or extend the scheduled date of any
payment thereof, or increase the amount or extend the expiration date of any
Lender's Commitment, in each case without the written consent of each Lender
directly affected thereby; (ii) eliminate or reduce the voting rights of any
Lender under this Section 10.1 with respect to any matter covered by this
Section 10.1 without the written consent of such Lender; (iii) reduce any
percentage specified in the definition of Required Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or substantially
all of the Collateral or release Holdings or, except in connection with a
transaction permitted by Section 7.4 or Section 7.5, all or substantially all of
the Subsidiary Guarantors from their obligations under the Guarantee and
Collateral Agreement, in each case without the written consent of all Lenders;
(iv) amend, modify or waive any provision of Section 9 without the written
consent of the Administrative Agent and, in the case of Section 9.10, each of
the Co-Agents; or (v) amend, modify or waive any provision of Section 3 without
the written consent of the Issuing Lender. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the Lenders
and shall be binding upon the Loan Parties, the Lenders, the Administrative
Agent and all future holders of the Loans. In the case of any waiver, the Loan
Parties, the Lenders and the Administrative Agent shall be restored to their
former position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
For the avoidance of doubt, this Agreement may be amended (or amended
and restated) with the written consent of the Required Lenders, the
Administrative Agent and the Borrower (a) to add one or more additional credit
facilities to this Agreement and to permit the extensions of credit from time to
time outstanding thereunder and the accrued interest and fees in respect thereof
(collectively, the "Additional Extensions of Credit") to share ratably in the
benefits of this Agreement and the other Loan Documents with the Extensions of
Credit and the accrued interest and fees in respect thereof and (b) to
66
include appropriately the Lenders holding such credit facilities in any
determination of the Required Lenders.
10.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:
Holdings: Mattress Discounters Holding Corporation
c/o Bain Capital, Inc.
Two Xxxxxx Place
Boston, Massachusetts 02116
Attention: Xxxxxxx Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
The Borrower: Mattress Discounters Corporation
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
with a copy to each of: Xxxx Capital, Inc.
Two Xxxxxx Place
Boston, Massachusetts 02116
Attention: Xxxxxxx Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
The Administrative Agent: The Chase Manhattan Bank
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
67
with a copy to each of: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Xxxxxxxxx Xxxxx, 0/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
Chase Manhattan Bank Delaware
c/o The Letter of Credit Department
0000 Xxxxxx Xxxxxx, 0/xx/ Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Telecopy: (000) 000-0000 or (000) 000-0000
Telephone: (000) 000-0000
provided that any notice, request or demand to or upon the Administrative Agent
--------
or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
-----------------------------
or reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents (requested by or on behalf of the Loan Parties) and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including reasonable expenses incurred in connection with inspections
pursuant to Section 6.6, the reasonable fees and disbursements of counsel to the
Administrative Agent and filing and recording fees and expenses, with statements
with respect to the foregoing to be submitted to the Borrower prior to the
Closing Date (in the case of amounts to be paid on the Closing Date) and from
time to time thereafter on a quarterly basis or such other periodic basis as the
Administrative Agent shall reasonably deem appropriate, (b) to pay or reimburse
each Lender and the Administrative Agent for all its reasonable costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel to the Administrative
Agent and not more than one additional firm of counsel to the Lenders, (c) to
pay, indemnify, and hold each Lender and the Administrative Agent harmless from,
any and all recording and filing fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other taxes, if
any, that may be
68
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender and
the Administrative Agent and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an "Indemnitee") harmless from
----------
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of Holdings, the
Borrower any of their respective Subsidiaries or any of the Properties and the
reasonable fees and expenses of legal counsel in connection with claims, actions
or proceedings by any Indemnitee against any Loan Party under any Loan Document
(all the foregoing in this clause (d), collectively, the "Indemnified
-----------
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
----------- --------
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities result from the bad faith, gross negligence or willful
misconduct of such Indemnitee. Without limiting the foregoing, and to the extent
permitted by applicable law, the Borrower agrees not to assert and to cause its
Subsidiaries not to assert, and hereby waives and agrees to cause its
Subsidiaries to so waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. All amounts due under this Section 10.5 shall
be payable promptly after written demand therefor. Statements payable by the
Borrower pursuant to this Section 10.5 shall be submitted to the Chief Financial
Officer (Telephone No. 000-000-0000) (Telecopy No. 301-856-6755), at the address
of the Borrower set forth in Section 10.2, or to such other Person or address as
may be hereafter designated by the Borrower in a written notice to the
Administrative Agent. The agreements in this Section 10.5 shall survive
repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a)
------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of Holdings, the
Borrower, the Lenders, the Administrative Agent, all future holders of the Loans
and their respective successors and assigns, except that the Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
(b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would (i) reduce the principal of, or interest on, the Loans or any fees
payable hereunder in which the Participant shares, (ii) postpone any date fixed
for any payment of principal or interest with respect to the Loans in which the
Participant shares, or (iii) release all or
69
substantially all of the Collateral except (x) as contemplated by the terms of
any Loan Document or (y) in exchange for substitute collateral of equal or
greater value. The Borrower agrees that if amounts outstanding under this
Agreement and the Loans are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
--------
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if it were a Lender
hereunder. The Borrower also agrees that each Participant shall be entitled to
the benefits of Sections 2.13, 2.14 and 2.15 with respect to its participation
in the Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.14, such Participant shall have
--------
complied with the requirements of said Section and provided, further, that no
-------- -------
Participant shall be entitled to receive any greater amount pursuant to any such
Section than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable
--------
law, at any time and from time to time assign to any Lender, any affiliate of
any Lender or any Approved Fund or, with the consent of the Borrower and the
Administrative Agent (which, in each case, shall not be unreasonably withheld or
delayed), to an additional bank, financial institution or other entity (an
"Assignee") all or any part of its rights and obligations under this Agreement
--------
pursuant to an Assignment and Acceptance, executed by such Assignee, such
Assignor and any other Person whose consent is required pursuant to this
paragraph, and delivered to the Administrative Agent for its acceptance and
recording in the Register; provided that, except in the case of an assignment of
all of a Lender's interests under this Agreement, unless otherwise agreed by the
Borrower and the Administrative Agent, no such assignment to an Assignee (other
than any Lender, any affiliate of any Lender or any Approved Fund) shall (i) be
in an aggregate principal amount of less than $2,500,000 or (ii) cause the
Assignor to have Aggregate Exposure of less than $2,500,000. For purposes of
the proviso contained in the preceding sentence, the amounts described therein
shall be aggregated in respect of each Lender and its related Approved Funds, if
any. Any such assignment need not be ratable as among the Facilities. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment and/or Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such Assignor shall cease to be a party hereto).
Notwithstanding any provision of this Section 10.6, the consent of the Borrower
shall not be required for any assignment that occurs when an Event of Default
pursuant to Section 8(f) shall have occurred and be continuing with respect to
the Borrower.
(d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the "Register") for the
--------
recordation of the names and addresses of the Lenders and the Commitment of, and
the principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, each other Loan Party, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of the Loans and any Notes evidencing the Loans recorded therein for all
purposes of this Agreement. Any assignment of any Loan, whether or not
evidenced by a Note, shall be effective only
70
upon appropriate entries with respect thereto being made in the Register (and
each Note shall expressly so provide). Any assignment or transfer of all or part
of a Loan evidenced by a Note shall be registered on the Register only upon
surrender for registration of assignment or transfer of the Note evidencing such
Loan, accompanied by a duly executed Assignment and Acceptance, and thereupon
one or more new Notes shall be issued to the designated Assignee.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor, an Assignee and any other Person whose consent is required by Section
10.6(c), together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) record the information contained therein
in the Register on the effective date determined pursuant thereto.
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 10.6 concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests, including any pledge or
assignment by a Lender of any Loan or Note to any Federal Reserve Bank in
accordance with applicable law.
(g) The Borrower, upon receipt of written notice from the relevant
Lender, agrees to issue Notes to any Lender requiring Notes to facilitate
transactions of the type described in paragraph (f) above.
10.7 Adjustments; Set-off. (a) Except to the extent that this
--------------------
Agreement expressly provides for payments to be allocated to a particular
Lender, if any Lender (a "Benefitted Lender") shall receive any payment of all
-----------------
or part of the Obligations owing to it, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 8(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of the Obligations owing to such other Lender, such
Benefitted Lender shall purchase for cash from the other Lenders a participating
interest in such portion of the Obligations owing to each such other Lender, or
shall provide such other Lenders with the benefits of any such collateral, as
shall be necessary to cause such Benefitted Lender to share the excess payment
or benefits of such collateral ratably with each of the Lenders; provided,
--------
however, that if all or any portion of such excess payment or benefits is
-------
thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to Holdings or the
Borrower, any such notice being expressly waived by Holdings and the Borrower to
the extent permitted by applicable law, upon any amount becoming due and payable
by Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise), to set off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of Holdings or the Borrower,
as the case may be. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the validity of
--------
such setoff and application.
71
10.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of Holdings, the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each of Holdings and
-----------------------------------
the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State
of New York, the courts of the United States for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action
or proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to Holdings or the
Borrower, as the case may be at its address set forth in Section 10.2 or at
such other address of which the Administrative Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to xxx in any other jurisdiction; and
72
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
10.13 Acknowledgements. Each of Holdings and the Borrower hereby
----------------
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to Holdings or the Borrower arising out of
or in connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand, and
Holdings and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among Holdings, the Borrower and the Lenders.
10.14 Releases of Guarantees and Liens. (a) Notwithstanding
--------------------------------
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 10.1) to take any action requested by the Borrower having the effect
of releasing any Collateral or guarantee obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document or
that has been consented to in accordance with Section 10.1 or (ii) under the
circumstances described in paragraph (b) below.
(b) At such time as the Loans, the Reimbursement Obligations and the
other obligations under the Loan Documents (other than obligations under or in
respect of Hedge Agreements or contingent indemnification obligations for which
requests for payment have not been submitted) shall have been paid in full, the
Commitments have been terminated and no Letters of Credit shall be outstanding,
the Collateral shall be released from the Liens created by the Security
Documents, and the Security Documents and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Loan Party under the Security Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.
10.15 Confidentiality. Each of the Administrative Agent and each
---------------
Lender agrees to keep confidential all non-public information provided to it by
any Loan Party pursuant to this Agreement that is designated by such Loan Party
as confidential; provided that nothing herein shall prevent the Administrative
--------
Agent or any Lender from disclosing any such information (a) to the
Administrative Agent, any other Lender, any affiliate of any Lender or any
Approved Fund, (b) to any Transferee or prospective Transferee that agrees to
comply with the provisions of this Section, (c) to its employees, directors,
agents, attorneys, accountants and other professional advisors or those of any
of its affiliates involved in this financing, (d) or to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty's
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions of
this Section 10.15), (e) upon the request or demand of any Governmental
Authority, (f) in response to any order of any court or other Governmental
Authority or as may otherwise be required pursuant to any Requirement
73
of Law, (g) if requested or required to do so in connection with any litigation
or similar proceeding, (h) that has been publicly disclosed, (i) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a
Lender's investment portfolio in connection with ratings issued with respect to
such Lender, or (j) in connection with the exercise of any remedy hereunder or
under any other Loan Document.
10.16 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE
---------------------
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
74
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
MATTRESS DISCOUNTERS HOLDING
CORPORATION
By: /s/ Jordan Hitch
------------------------------------
Name: Jordan Hitch
Title: Vice President
MATTRESS DISCOUNTERS CORPORATION
By: /s/ Jordan Hitch
------------------------------------
Name: Jordan Hitch
Title: Vice President
THE CHASE MANHATTAN BANK, as Administrative
Agent and as a Lender
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
CANADIAN IMPERIAL BANK OF COMMERCE, as
Co-Agent
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Executive Director
CIBC INC., as a Lender
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Executive Director
BANKBOSTON, N.A., as Co-Agent and as a Lender
By: /s/ Xxxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
Annex A
-------
PRICING GRID
=========================================================================================
Applicable
Margin Applicable
Consolidated Total for Eurodollar Margin for ABR Commitment Fee
Debt Ratio Loans Loans Rate
-----------------------------------------------------------------------------------------
Greater than 4.00 to 1.0 3.00% 2.00% 0.500%
-----------------------------------------------------------------------------------------
Less than or equal to 4.00 to 1.0, 2.75% 1.75% 0.500%
and greater than 3.00 to 1.0
-----------------------------------------------------------------------------------------
Less than or equal to 3.00 to 1.0 2.50% 1.50% 0.375%
=========================================================================================
Changes in the Applicable Margin resulting from changes in the Consolidated
Total Debt Ratio shall become effective on the date (the "Adjustment Date") on
---------------
which financial statements are delivered to the Lenders pursuant to Section 6.1
(but in any event not later than the 45th day after the end of each of the first
three quarterly periods of each fiscal year or the 90th day after the end of
each fiscal year, as the case may be) and shall remain in effect until the next
change to be effected pursuant to this paragraph; provided that the initial
--------
change in the Applicable Margin may become effective on or after February 6,
2000 upon the delivery by the Borrower of a certificate of the Chief Financial
Officer which (a) demonstrates in reasonable detail the Consolidated Total Debt
Ratio based (i) in the case of Consolidated EBITDA, on the most recent financial
statements delivered to the Administrative Agent pursuant to Section 6.1(c), and
(ii) in the case of Consolidated Total Debt, the amount thereof as of the date
of such certificate and (b) certifies that since the date of such financial
statements there has been no development or event that has had or could
reasonably be expected to have a Material Adverse Effect. If any financial
statements referred to above are not delivered within the time periods specified
above, then, until such financial statements are delivered, the Consolidated
Total Debt Ratio as at the end of the fiscal period that would have been covered
thereby shall for the purposes of this definition be deemed to be greater than
4.00 to 1.0. In addition, at all times while an Event of Default shall have
occurred and be continuing, the Consolidated Total Debt Ratio shall for the
purposes of this definition be deemed to be greater than 4.00 to 1.0. Each
determination of the Consolidated Total Debt Ratio pursuant to this pricing grid
shall be made as at the end of the period of four consecutive fiscal quarters of
the Borrower ending at the end of the period covered by the relevant financial
statements.
SCHEDULE 1.1A
-------------
COMMITMENTS
Lender Commitment
------ ----------
The Chase Manhattan Bank $ 8,000,000
BankBoston, N.A. 6,000,000
CIBC Inc. 6,000,000
-----------
TOTAL $20,000,000
===========
