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CONFORMED COPY
EXHIBIT 10.87
SECOND WAIVER AGREEMENT
TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND WAIVER AGREEMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT (the "Waiver") dated as of July 24, 2001 is to that Third Amended and
Restated Credit Agreement dated as of June 30, 2000, (as may be subsequently
amended and modified from time to time, the "Credit Agreement"; terms used but
not otherwise defined herein shall have the meanings provided in the Credit
Agreement), by and among SLEEPMASTER L.L.C., a New Jersey limited liability
company (the "Borrower"), SLEEPMASTER HOLDINGS L.L.C., a New Jersey limited
liability company (the "Parent") and those Domestic Subsidiaries of the Borrower
as may from time to time become party thereto (together with the Parent,
collectively, the "Guarantors"), the several banks and other financial
institutions identified therein (the "Lenders") and FIRST UNION NATIONAL BANK,
as administrative agent for the Lenders thereunder (in such capacity, the
"Agent").
W I T N E S S E T H:
WHEREAS, the Lenders have established a credit facility for the benefit
of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower has advised the Agent that it failed to comply
with certain covenants and requirements set forth in the Credit Agreement and
requests that the Required Lenders waive the Defaults or Events of Default
resulting from such noncompliance; and
WHEREAS, the Required Lenders have agreed to waive such covenants and
requirements, and such Defaults and Events of Default resulting from such
noncompliance, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. Waiver. The Borrower has informed the Agent and the Lenders that it
has, or may have, failed to comply with certain covenants and requirements of
the Credit Agreement as the Borrower has set forth on the Schedule A attached
hereto (the "Specified Covenants"), which failures have, or would, constitute
Defaults or Events of Default under the Credit Agreement. Subject to the terms
and conditions of this Waiver, the Required Lenders hereby grant a waiver of
compliance with the Specified Covenants and of any Defaults or Events of Default
resulting from such noncompliance; provided, however, this Waiver shall be
effective only to and including September 30, 2001 (the
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"Second Waiver Period"), after which time the Waiver shall be of no further
force and effect and shall, without further notice, be terminated.
B. Revolving Loans. Subject to the terms and conditions hereof and
provided the Borrower is otherwise in compliance with the terms and conditions
of the Credit Agreement, other than with respect to the Specified Covenants,
during the Second Waiver Period the Borrower may, and the Required Lenders
hereby agree to permit the Borrower to, incur Revolving Loans up to an aggregate
outstanding amount not exceeding $33,742,270 (which is the total amount of
Revolving Loans and LOC Obligations outstanding as of the date of this Waiver)
plus $1,500,000 (the sum of which shall be referred to as the "Permitted
Outstandings"); provided, that the amount of Permitted Outstandings shall be
reduced on a dollar-for-dollar basis by an amount equal to the Net Cash Proceeds
of any Asset Disposition applied to reduce the Revolving Loans.
C. Application of Proceeds; Default Interest. As a result of the
existence of certain Defaults and Events of Default prior to the effectiveness
of this Waiver, each of the Borrower and the Required Lenders acknowledge and
agree that: (i) the Net Cash Proceeds from the disposition of the Ohio facility
owned by Xxxx Xxxxx Corporation shall be applied according to the terms and
conditions set forth in Section 2.13(b) of the Credit Agreement, provided that
notwithstanding anything to the contrary in the Credit Agreement, that portion
of the Net Cash Proceeds allocated to the Revolving Loans and LOC Obligations
shall be paid to those Lenders who have made Revolving Loans in reduction of the
outstanding Revolving Loans, and no portion of same shall be held as cash
collateral; (ii) notwithstanding anything in the Credit Agreement to the
contrary, interest on the Loans shall be payable in arrears on the last day of
each month; and (iii) the default rate of interest of two percent (2%) ("Default
Interest") greater than the rate which would otherwise be applicable, as
provided in Section 2.10 of the Credit Agreement, shall apply and be payable
with respect to the Loans for the period from and including July 1, 2001 through
and including September 30, 2001; provided, however, that the amount equal to
the Default Interest shall accrue and be payable in cash on September 30, 2001.
D. Letters of Credit. (i) To replace U.S. Bank National Association
(the "Existing Iowa LOC Bank") as the issuer of the letter of credit dated as of
November 15, 1999 (the "U.S. Bank Letter of Credit") issued for the benefit of
U.S. Bank National Association, as Trustee (the "Iowa IRB Trustee") in
connection with Tax-Exempt Adjustable Mode Industrial Development Revenue Bonds
(Xxxxx Bedding Company Project) Series 1995, the Issuing Lender, at the
Borrower's request, may, and the Required Lenders hereby agree to permit the
Issuing Lender to, issue a Letter of Credit (the "Replacement Letter of Credit")
for the benefit of the Iowa IRB Trustee, up to an amount equal to $3,262,500;
provided, however, promptly following issuance of such Letter of Credit, the
Borrower and the Issuing Lender shall (a) cause the termination of the U.S. Bank
Letter of Credit, and (b) cause the termination of the Letter of Credit dated as
of July 6, 2000, issued by the Issuing Lender for the benefit of the Existing
Iowa LOC Bank.
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(ii) The Borrower may, and the Required Lenders hereby agree to permit
the Borrower and the Issuing Lender to extend for a period of not more than
twelve (12) months from its scheduled date of expiration, the Letter of Credit
previously issued for the benefit of Fifth Third Bank, as Trustee in connection
with the County of Hamilton Ohio Economic Development Revenue Refunding Bonds;
and
(iii) The Borrower hereby agrees that it shall not request the issuance
of any Letters of Credit under the Credit Agreement during the Second Waiver
Period except for the Replacement Letter of Credit and the extension of the
Letter of Credit described in Section D(ii) of this Waiver.
E. Deposits. The Borrower hereby covenants and agrees that it shall
promptly provide E & Y Capital Advisors LLC and Xxxxxx, Xxxxx & Xxxxxxx LLP,
advisors to the Agent, with deposits, each in the amount of $100,000, as
advances for professional services to be rendered by such advisors.
F. Reports. The Borrower hereby covenants and agrees that: (i) it shall
provide the Agent and each of the Lenders, as soon as possible, but in any event
within fifteen (15) days after the end of each month, a statement of its
consolidated EBITDA as of the last day of each month;
(ii) by the Tuesday of each week, it shall provide the Agent and each
of the Lenders with a report of actual sales of the Borrower and its
Subsidiaries concluded during the immediately preceding week; and
(iii) as soon as possible, but in any event by September 7, 2001, it
shall deliver to the Agent, (x) a detailed copy of the Borrower's business plan
for fiscal years 2001 and 2002, and (y) a review prepared by Zolfo Xxxxxx of the
Borrower's business plans for fiscal years 2001 and 2002, in each case the form,
scope and substance of such review to be satisfactory to the Agent.
G. Further Assurances. (i) Each Credit Party hereby covenants and
agrees that it shall take such action at its own expense as requested by the
Agent to ensure that the Agent has a first priority perfected Lien in the
Collateral, subject to Permitted Liens, to secure the Credit Party Obligations;
(ii) The Borrower hereby covenants and agrees that it shall deliver to
the Agent and the Lenders a certificate of a Responsible Officer of the Borrower
certifying that any Extensions of Credit requested shall be used only for
ordinary and necessary business purposes, which certificate shall be accompanied
by such supporting documentation as may be reasonably requested by the Agent or
any Lender; and
(iii) Notwithstanding the waiver by the Required Lenders of the
covenant set forth in Section 5.14(f) of the Credit Agreement (Schedule A(G)),
the Borrower hereby covenants and agrees that it shall use its best efforts
during the Waiver Period to comply
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with Section 5.14(f) of the Credit Agreement in establishing a sweep account as
provided in such section of the Credit Agreement.
H. This Waiver shall become effective when it is executed by a duly
authorized officer of the Borrower, the Guarantors, the Required Lenders and the
Agent.
I. The Guarantors acknowledge and consent to all of the terms and
conditions of this Waiver and agree that this Waiver and all documents executed
in connection herewith do not operate to reduce or discharge the Guarantors'
obligations under the Credit Agreement or the other Credit Documents. The
Guarantors further acknowledge and agree that the Guarantors have no claims,
counterclaims, offsets, or defenses to the Credit Documents and the performance
of the Guarantors' obligations thereunder or if the Guarantors did have any such
claims, counterclaims, offsets or defenses to the Credit Documents or any
transaction related to the Credit Documents, the same are hereby waived,
relinquished and released in consideration of the Required Lenders' execution
and delivery of this Waiver.
J. This Waiver may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Waiver to produce or account for more
than one such counterpart.
K. This Waiver and the Credit Agreement shall be deemed to be contracts
made under, and for all purposes shall be construed in accordance with the laws
of the State of North Carolina.
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Waiver to be duly executed and delivered as of the date and
year first above written.
BORROWER: SLEEPMASTER L.L.C.,
a New Jersey limited liability company
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
GUARANTORS: SLEEPMASTER HOLDINGS L.L.C.,
a New Jersey limited liability company
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
LOWER ROAD ASSOCIATES, L.L.C.,
a New Jersey limited liability company
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
PALM BEACH BEDDING COMPANY,
a Florida corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
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XXXX MANUFACTURING COMPANY,
a Pennsylvania corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
SLEEPMASTER FINANCE CORPORATION,
a Delaware corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
XXXX XXXXX CORPORATION,
a Delaware corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
SIMON MATTRESS MANUFACTURING CO.
a California corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
CRESCENT SLEEP PRODUCTS COMPANY
a Delaware corporation
By: /s/ Xxx Xxxxxxxx
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Name: Xxx Xxxxxxxx
Title: Chief Financial Officer
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AGENTS AND LENDERS: FIRST UNION NATIONAL BANK,
as Administrative Agent and as a Lender
By:/s/ X.X. Xxxxxxx
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Name: X.X. Xxxxxxx
Title: Senior Vice President
SUNTRUST BANK
By:/s/ T. Xxxxxxx Xxxxx
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Name: T. Xxxxxxx Xxxxx
Title: Managing Director
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
XXXXX XXXXX SENIOR INCOME TRUST
By: Xxxxx Xxxxx Management
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
XXXXX XXXXX INSTITUTIONAL SENIOR LOAN FUND
By: Xxxxx Xxxxx Management
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
OXFORD STRATEGIC INCOME FUND
By: Xxxxx Xxxxx Management
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
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XXXXX XXXXX CDO II, LTD.
By: Xxxxx Xxxxx Management
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
XXXXX XXXXX CDO III, LTD.
By: Xxxxx Xxxxx Management
as Investment Advisor
By:/s/ Xxxxxx Xxxxxxxxx
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Name: Xxxxxx Xxxxxxxxx
Title: Vice President
ANTARES CAPITAL CORPORATION
By:/s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Director
CHASE MANHATTAN BANK,
As Trustee of the Antares Funding Trust
created under the Trust Agreement dated
as of November 30, 1999
By:/s/ Xxxxxx Xxxxxxxx
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Name: Xxxxxx Xxxxxxxx
Title: Vice President
BLACK DIAMOND INTERNATIONAL FUNDING, LTD.
By:/s/ Xxxx X. Xxxxxxxxx
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Name: Xxxx X. Xxxxxxxxx
Title: Director
BLACK DIAMOND CLO 2000-1 LTD.
By:/s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Director
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BLACK DIAMOND CLO 1998-1 LTD.
By:/s/ Xxxx X. Xxxxxxxxx
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Name: Xxxx X. Xxxxxxxxx
Title: Director
GMAC BUSINESS CREDIT, LLC.
By:/s/ Xxxx Xxxxxxxx
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Name: Xxxx Xxxxxxxx
Title: Director
AIMCO CDO SERIES 2000-A
By:/s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: Authorized Signatory
By: /s/ Xxxxxxxx Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: Authorized Signatory
ALLSTATE LIFE INSURANCE COMPANY
By:/s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: Authorized Signatory
By: /s/ Xxxxxxxx Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
Title: Authorized Signatory
WACHOVIA BANK, N.A.
By:/s/ Xxxxxx Xxxx
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Name: Xxxxxx Xxxx
Title: Risk Manager
XXXXXX FINANCIAL, INC.
By:/s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
Title: Assistant Vice President
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FIRSTRUST BANK
By:/s/ Xxxx Xxxxxx
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Name: Xxxx Xxxxxx
Title: Vice President
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SCHEDULE A
SPECIFIED COVENANTS
AS PROVIDED BY BORROWER
A. The Borrower has been unable to comply with the following financial
covenants:
1. The Interest Coverage Ratio requirement set forth in Section
5.9(b) of the Credit Agreement, as amended.
2. The Fixed Charge Coverage Ratio requirement set forth in
Section 5.9(c) of the Credit Agreement, as amended.
3. The Senior Leverage Ratio requirement set forth in Section
5.9(e) of the Credit Agreement, as amended.
4. The Minimum Consolidated EBITDA requirement set forth in
Section 5.9(g) of the Credit Agreement, as amended.
B. The Borrower has entered into the following agreement which may violate
the Transactions with Affiliates Covenant set forth in Section 6.7 of
the Credit Agreement, as amended.
1. Severance Agreement and Waiver, dated as of December 13, 2000,
by and among the Borrower, Xxxxxxx Xxxxxxxxxx, and Sleep
Investor L.L.C.
2. Severance Agreement and Waiver, dated as of December 13, 2000,
by and among the Borrower, Xxxxx X. Xxxxxxx, and Sleep
Investor L.L.C.
3. Severance Agreement and Waiver, dated as of March 22, 2001, by
and among the Borrower, Xxxxxxx X. Xxxxx, and Sleep Investor
L.L.C.
4. Severance Agreement and Waiver, dated as of June 5, 2001, by
and among the Borrower, Xxx Xxxxxxxx, and Sleep Investor
L.L.C.
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C. The Borrower is in the process of entering into the following
agreements which agreements will be in substantially the same form as
provided to the Agent on July 25, 2000 when finalized and requests a
consent and waiver from the Required Lenders of the Transactions with
Affiliates Covenant set forth in Section 6.7 of the Credit Agreement,
as amended with respect to such agreements.
1. Consulting Agreement and Release, dated as of July ___, 2001,
by and among the Borrower, the Parent, Sleep Investor L.L.C.,
Citicorp Venture Capital, Ltd., and Xxxxxxx Xxxxxxxxxx.*
2. Severance Agreement, dated as of July ___, 2001, by and
between the Borrower and Xxxx X. Xxxxx.
D. The Borrower and the Agent have determined that it will be in the best
interest of all parties to extend the time to comply with the
requirement to negotiate and determine the liquidity levels on or
before July 16, 2001, as set forth in the Waiver Agreement to Third
Amended and Restated Credit Agreement, dated as of June 29, 2001, by
and among the Borrower, the Parent, the Guarantors and the Agent. The
Borrower requests that requirement to negotiate and determine the
liquidity levels be extended to September 30, 2001.
E. The Borrower has been unable to deliver the Borrower's business plan
for fiscal years 2001 and 2002 as required in Section 5.14(b) of the
Credit Agreement, as amended.
F. The Borrower has been unable to deliver a review prepared by Zolfo
Xxxxxx of the Borrower's business plans for fiscal years 2001 and 2002
as required in Section 5.14(c) of the Credit Agreement, as amended.
G. The Borrower has not established sweep accounts as required in Section
5.14(f) of the Credit Agreement, as amended.
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* No severance will be paid under the Severance Agreement listed under B1
if the Consulting Agreement and Release is executed.
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